Datasets:

shipWr3ck

/

gov_report_test_cleaned

like 0

crs_R45910

crs_R45910_0

Over the past decade, Google, Amazon, Facebook, and Apple collectively known as the "Big Four" or "Big Tech" have revolutionized the internet economy and affected the daily lives of billions of people worldwide. Google operates a search engine that processes over 3.5 billion searches a day (Google Search), runs the biggest online video platform (YouTube), licenses the world's most popular mobile operating system (Android), and is the largest seller of online advertising. Amazon is a major online marketplace, retailer, logistics network, cloud-storage host, and television and film producer. Facebook boasts 2.4 billion monthly active users worldwide, meaning more people use the social network than follow any single world religion. Apple popularized the smartphone, making the device so ubiquitous that consumers have grown accustomed to carrying a supercomputer in their pocket. Collectively, the Big Four generated over $690 billion in revenue in 2018 a sum larger than the annual GDPs of most national economies. While these companies are responsible for momentous technological breakthroughs and massive wealth creation, they have also received scrutiny related to their privacy practices, dissemination of harmful content and misinformation, alleged political bias, and as relevant here potentially anticompetitive conduct. In June 2019, the Wall Street Journal reported that the Department of Justice (DOJ) and Federal Trade Commission (FTC) the agencies responsible for enforcing the federal antitrust laws agreed to divide responsibility over investigations of the Big Four's business practices. Under these agreements, the DOJ reportedly has authority over investigations of Google and Apple, while the FTC will look into Facebook and Amazon. The following month, the DOJ announced a potentially broader inquiry into Big Tech. Specifically, the Justice Department's Antitrust Division revealed that it intends to examine possible abuses of market power by unnamed "market-leading online platforms" an announcement that has led some to speculate that a number of the Big Four may face investigations from both agencies despite the previously reported agreements. Big Tech's business practices have also attracted congressional interest. In May 2019, the Senate Judiciary Committee held a hearing to investigate privacy and competition issues in the digital advertising industry. And in June and July, the House Judiciary Committee held two separate hearings examining the market power of online platforms. This report provides an overview of antitrust issues involving the Big Four. The report begins with a general outline of the aspects of antitrust doctrine that are most likely to play a central role in the DOJ and FTC investigations specifically, the case law surrounding monopolization and mergers. Next, the report discusses the application of this doctrine to each of the Big Four. Finally, the report concludes by examining policy options related to the promotion of digital competition. <1. Legal Background> <1.1. General Principles> Contemporary antitrust doctrine reflects a commitment to the promotion of economic competition, which induces businesses to cut costs, improve their productivity, and innovate. These virtues of competition are often illustrated with the stylized hypothetical of a "perfectly competitive" market with homogenous products, a large number of well-informed buyers and sellers, low entry barriers, and low transaction costs. In such a market, businesses must price their products at marginal cost to avoid losing their customers to competitors. However, real-world markets almost always deviate from this textbook model of perfect competition. When one or more of the structural conditions identified above is absent, individual firms may have market power the ability to profitably raise their prices above competitive levels. At the extreme, a market can be monopolized when a single firm possesses significant and durable market power. According to standard justifications for antitrust law, the exercise of significant market power harms consumers by requiring them to pay higher prices than they would pay in competitive markets, purchase less desirable substitutes, or go without certain goods and services altogether. Moreover, significant market power harms society as a whole by reducing output and eliminating value that would have been enjoyed in a competitive market. Contemporary antitrust doctrine is focused on preventing these harms by prohibiting exclusionary conduct by dominant firms and anticompetitive mergers and acquisitions. The following subsections discuss these prohibitions in turn. <1.2. Section 2 of the Sherman Act: Monopolization> Section 2 of the Sherman Antitrust Act of 1890 makes it unlawful to monopolize, attempt to monopolize, or conspire to monopolize "any part of the trade or commerce among the several States, or with foreign nations." However, the statute itself does not define what it means to "monopolize" trade or commerce, leaving the courts to fill out the meaning of that concept through common law decisionmaking. Consistent with this approach, the Supreme Court's interpretation of Section 2 has evolved in response to changes in economic theory and business practice. In its monopolization case law, the Court has made clear that the possession of monopoly power and charging of monopoly prices do not by themselves constitute Section 2 violations. Instead, the Court has held that a company engages in monopolization if and only if it (1) possesses monopoly power, and (2) engages in exclusionary conduct to achieve, maintain, or enhance that power. <1.2.1. Monopoly Power> To prevail in a Section 2 case, plaintiffs must show that a defendant possesses monopoly power. While the Supreme Court has explained that a firm has market power if it can profitably charge supra-competitive prices, the Court has described monopoly power as "the power to control prices or exclude competition," which requires "something greater" than market power. Lower federal courts have held that a firm possesses monopoly power if it possesses a high degree of market power. A Section 2 plaintiff can establish that a defendant possesses monopoly power in two ways. First, plaintiffs can satisfy this requirement with direct evidence of monopoly power that is, evidence that the defendant charges prices significantly exceeding competitive levels. However, such evidence is typically difficult to adduce because of complications in determining appropriate measures of a firm's costs, among other things. As a result, plaintiffs generally attempt to establish that a defendant has monopoly power with indirect evidence showing that the defendant (1) possesses a large share of a relevant market, and (2) is protected by entry barriers. <1.2.1.1. Market Share> To demonstrate that a defendant possesses a dominant market share, plaintiffs must define the scope of the market in which the defendant operates. Predictably, antitrust plaintiffs typically argue that a defendant operates in a narrow market with few competitors, while defendants ordinarily contend that they operate in a broad market with many rivals. Because the size of the market in which a defendant operates (the denominator in a market-share calculation) is generally harder to determine than its sales or revenue (the numerator in such a calculation), parties in antitrust litigation often vigorously contest the issue of market definition so much, in fact, that more antitrust cases hinge on that question than on "any other substantive issue" in competition law. Market Definition: Substitutability and the SSNIP Test . In analyzing market definition, the Supreme Court has explained that a relevant antitrust market consists of the product at issue in a given case and all other products that are "reasonably interchangeable" with it. According to the Court, whether one product is "reasonably interchangeable" with another product depends on demand substitution that is, the extent to which an increase in one product's price would cause consumers to purchase the other product instead. The Court has further explained that a variety of "practical indicia" are relevant to an assessment of whether goods and services are reasonable substitutes, including 1. industry or public recognition of separate markets; 2. a product's peculiar characteristics and uses; 3. unique production facilities; 4. distinct customers; 5. distinct prices; 6. sensitivity to price changes; and 7. specialized vendors. These criteria are sometimes called the " Brown Shoe " factors based on the name of the 1962 decision in which the Court identified them. In addition to the Brown Shoe factors, the DOJ and FTC have provided specific market-definition guidance in their Horizontal Merger Guidelines. The 2010 version of the Guidelines endorses the "hypothetical monopolist" test for defining markets, which like the Court's case law principally focuses on demand substitution. Under this test, a group of products qualifies as a relevant antitrust market if a hypothetical monopolist selling those products would find it profitable to raise their price notwithstanding buyers' incentives to substitute other goods and services in response. Specifically, the test asks whether a hypothetical monopolist would be able to profitably impose a "small but significant and non-transitory increase in price" (SSNIP) generally, a 5% increase. If buyer substitution to other products would make such a price increase unprofitable, then the candidate market must be expanded until a hypothetical monopolist would benefit from such a strategy. One popular antitrust treatise illustrates the SSNIP test's application by comparing proposed markets consisting of Ford passenger cars and all passenger cars . Because Ford which has a "monopoly" over the sale of Ford passenger cars would likely be unable to profitably raise its prices by 5% because of the business it would lose to other car companies, Ford passenger cars are unlikely to qualify as a properly defined antitrust market. However, because a hypothetical firm with a monopoly over passenger cars likely could profit from such a price increase, passenger cars likely qualify as a distinct antitrust market. Market Definition and Big Tech: The Challenge of Zero-Price Markets. The SSNIP test's application to certain technology markets raises difficult issues. In a number of technology markets, firms do not charge customers for access to certain services like online search and social networking. The difficulty with applying the SSNIP test to such markets is clear: as one commentator notes, there is "no sound way" to analyze a 5% increase in a price of zero because such an increase would result in a price that remains zero . The SSNIP test as traditionally administered is accordingly "inoperable" in a number of zero-price technology markets. Some courts and commentators have responded to this difficulty in applying the SSNIP test to zero-price markets by concluding that such markets are categorically exempt from antitrust scrutiny. In Kinderstart.com, LLC v. Google, Inc. , for example, a federal district court dismissed allegations that Google monopolized the market for online search on the grounds that Google does not charge customers to use its search engine. Several commentators have echoed the general line of reasoning behind the Kinderstart decision and questioned whether the provision of free services can result in the type of consumer harm that antitrust law is intended to remedy. However, others have rejected this argument and maintain that antitrust law has an important role to play in zero-price markets. Some of these commentators have argued that zero-price transactions are not in fact "free" to consumers, and that consumers ultimately "pay" for putatively "free" goods and services with both their attention and personal data. According to this line of argument, many of these consumers may actually be overpaying . That is, some observers have argued that certain "free" products and services may have negative equilibrium prices under competitive conditions, meaning that firms in the relevant markets would pay consumers for their attention and the use of their data if faced with sufficiently robust competition. Other commentators have argued that firms offering zero-price products and services can compete on a variety of nonprice dimensions such as quality and privacy, and that antitrust law can promote consumer welfare in zero-price markets by ensuring that companies engage in these types of nonprice competition. This argument appears to have persuaded regulators at the DOJ. In a February 2019 speech, Makan Delrahim the head of the Justice Department's Antitrust Division contended that antitrust law applies "in full" to zero-price markets because firms offering "free" products and services compete on a variety of dimensions other than price. While many observers accordingly agree that zero-price markets are not categorically immune from antitrust scrutiny, the optimal approach to defining the scope of such markets remains open to debate. Some commentators have argued that regulators should modify the SSNIP test to account for quality-adjusted prices, creating a new methodology called the "small but significant and non-transitory decrease in quality" (SSNDQ) test. According to these academics, decreases in the quality of "free" services (e.g., a decline in the privacy protections offered by a social network) are tantamount to increases in the quality-adjusted prices of those services. Under the SSNDQ test, then, a firm offering "free" goods or services would possess monopoly power if it had the ability to profitably raise its quality-adjusted prices significantly above competitive levels. In contrast, other analysts have proposed that courts and regulators evaluate the scope of zero-price markets by engaging in qualitative assessments of the degree to which various digital products and services are "reasonably interchangeable." For example, in a 2019 European Commission report on digital competition, a group of commentators proposed a "characteristics-based" approach to market definition for zero-price industries under which regulators would compare the functions of relevant digital services. This type of qualitative method for defining relevant product markets has some support in U.S. antitrust doctrine. As discussed, under Brown Shoe 's "practical indicia" approach, a product's "peculiar characteristics and uses" are relevant factors in determining the appropriate scope of an antitrust market. While lower courts have described such informal methods as "old school" in light of the sophisticated econometric evidence typically produced in contemporary antitrust litigation, they have also recognized that Brown Shoe remains good law and have employed its "practical indicia" approach despite its somewhat anachronistic status. As a result, regulators may engage in qualitative comparisons of the functions of various digital services in assessing the scope of certain zero-price markets. Regulators could plausibly supplement such inquiries with surveys or other empirical evidence evaluating which products consumers regard as "reasonably interchangeable" with the product at issue in a given case. Finally, a number of courts employing the Brown Shoe criteria have emphasized "industry recognition" of the scope of certain markets. Specifically, these courts have relied on corporate conduct, internal strategy documents, and expert testimony to determine the types of companies that a defendant regards as competitors. Accordingly, courts and regulators may be able to rely on these types of qualitative evidence to determine the scope of certain zero-price digital markets. Market Shares: How Much Is Enough? Once a Section 2 plaintiff has defined a relevant antitrust market, it must show that the defendant occupies a dominant share of that market. Courts have recognized that there is no fixed market-share figure that conclusively establishes that a defendant-company has monopoly power. However, the Supreme Court has never held that a party with less than 75% market share has monopoly power. Lower court decisions provide a number of other useful data points. In the U.S. Court of Appeals for the Second Circuit's influential decision in United States v. Aluminum Co. of America , Judge Learned Hand reasoned that (1) a 90% market share can be sufficient to establish a prima facie case of monopoly power, (2) a 60% or 64% share is unlikely to be sufficient, and (3) a 33% share is "certainly" insufficient. Similarly, the Tenth Circuit has explained that courts generally require a market share between 70% and 80% to establish monopoly power. And the Third Circuit has reasoned that a defendant's market share must be "significantly larger" than 55%, while holding that a share between 75% and 80% is "more than adequate" to establish a prima facie case of monopoly power. <1.2.1.2. Entry Barriers> Several courts have held that proof that a defendant occupies a large market share is insufficient on its own to establish that the defendant has monopoly power. Instead, these courts have concluded that a defendant must also be insulated from potential competitors by significant entry barriers to possess the type of durable monopoly power necessary for a Section 2 case. Courts and commentators generally use the concept of entry barriers to refer to long-run costs facing new entrants but not incumbent firms, including (1) legal and regulatory requirements, (2) control of an "essential or superior resource," (3) "entrenched buyer preferences for established brands," (4) "capital market evaluations imposing higher capital costs on new entrants," and (5) in certain circumstances, economies of scale. The significance of any entry barriers shielding Big Tech companies is a fact-intensive question that will depend on the specific evidence that the DOJ and FTC uncover. However, commentators have identified a number of plausible entry barriers in certain digital markets, including: Network Effects . A digital platform benefits from network effects when its value to customers increases as more people use it. A platform exhibits "direct" or "same-side" network effects when its value to users on one side of the market increases as the number of users on that side of the market increases. Social networks arguably exhibit this category of network effects because their value to users is dependent on the number of other users that they are able to attract. In contrast, a platform exhibits "indirect" or "cross-side" network effects when its value to users on one side of the market increases as the number of users on the other side of the market increases. Search engines arguably benefit from indirect network effects because they become more valuable to advertisers as they attract additional users who can be targeted with ads. Some courts and commentators have concluded that both categories of network effects represent entry barriers that make it difficult for small firms to meaningfully compete with larger incumbents in certain digital markets. The Advantages of Big Data . A number of commentators have argued that the significant volume of user data generated by certain digital platforms confers important advantages on established companies. According to this theory, large firms with access to significant amounts of data can use that data to improve the quality of their products and services (e.g., by increasing the accuracy of a search engine, improving targeted advertising, or offering targeted discounts) a process that attracts additional customers, who in turn generate more data. Some commentators have accordingly argued that access to "big data" can result in a feedback loop that reinforces the dominance of large firms. Costs of Switching and Multi-Homing . Some commentators have argued that consumers in certain digital markets are unlikely to switch from one platform to another or use multiple platforms simultaneously a phenomenon that advantages large established companies. These "lock-in" effects can have a variety of causes. A digital platform's customers may be dissuaded from switching to another platform by the prospect of losing their photos, contacts, search history, apps, or other personal data. To similar effect, technology companies may "tie" various products or services together through contractual requirements or technical impediments that prevent customers from simultaneously using competing products or services. Finally, some consumers may exhibit behavioral biases that render their initial choice of a platform "sticky," making them unlikely to switch platforms even when presented with superior alternatives. All of these factors can create a powerful "first-mover advantage" for incumbent firms that deters potential competitors. In contrast, others have questioned whether digital markets exhibit significant entry barriers. For example, Google has repeatedly denied the claim that it is insulated from rivals, arguing that consumers incur low costs in switching to alternative search engines because competition is only "one click away." Similarly, other commentators have argued that the history of upstart rivals supplanting once-dominant technology companies suggests that any monopoly power in dynamic technology markets is unlikely to be durable. <1.2.2. Exclusionary Conduct> In addition to establishing that a defendant possesses monopoly power, Section 2 plaintiffs must demonstrate that the defendant engaged in exclusionary conduct to achieve, maintain, or enhance that power. While the Supreme Court has developed tests for evaluating whether specific categories of behavior qualify as prohibited exclusionary conduct, it has not endorsed a general standard for distinguishing such conduct from permissible commercial activities. However, courts have made clear that exclusionary conduct must involve harm to the competitive process and not simply harm to a defendant's competitors . The following subsections discuss how courts have evaluated specific categories of behavior under Section 2. <1.2.2.1. Predatory Pricing> A monopolist can violate Section 2 by pricing its products below cost to eliminate competitors a practice commonly known as "predatory pricing." However, because price cutting ordinarily benefits consumers, the Supreme Court has "carefully limited" the circumstances in which charging low prices qualifies as impermissible exclusionary conduct. Specifically, under the so-called Brooke Group test, a plaintiff bringing predatory-pricing claims must show that a monopolist (1) priced the relevant product below an appropriate measure of cost, and (2) had a "dangerous probability" of recouping its losses by raising prices upon the elimination of its competitors. The Court has defended Brooke Group 's safe harbor for above-cost pricing on the grounds that courts cannot identify anticompetitive above-cost prices without chilling legitimate price competition. Similarly, the Court has explained that a "dangerous probability" of recoupment is necessary to state a predatory-pricing claim because without recoupment, low prices enhance consumer welfare. Some commentators have suggested that there may be cognizable affirmative defenses to predatory-pricing allegations even when the two Brooke Group requirements are satisfied. Specifically, firms accused of predatory pricing may be able to defend such charges on the grounds that certain below-cost pricing practices are procompetitive. For example, in a DOJ lawsuit targeting collusion in the e-book industry, regulators explained their decision not to pursue predatory-pricing charges against Amazon on the grounds that the company charged below-cost prices for certain categories of e-books because it intended those books to be "loss leaders." Unlike a firm that engages in predatory pricing which charges below-cost prices for certain products with an eye towards recouping its losses by charging monopoly prices for those products upon the elimination of competitors a firm that sells a loss-leader charges below-cost prices to induce consumers to purchase other goods or services at above-cost prices. Similarly, some commentators have suggested that below-cost prices that are intended to be promotional in nature or develop the type of user base necessary to realize network effects should not be condemned under Section 2. The application of predatory-pricing doctrine to Big Tech markets is discussed in greater detail in " Amazon " infra . <1.2.2.2. Refusals to Deal and Essential Facilities> Refusals to Deal . The Supreme Court has explained that companies are generally free to choose their business partners and counterparties. However, the Court has held that Section 2 requires monopolists to do business with their rivals in certain limited circumstances. In its key modern refusal-to-deal decision, Aspen Skiing Co. v. Aspen Highlands Skiing Co. , the Court affirmed a jury verdict holding a dominant ski-service operator liable under Section 2 for refusing to do business with a competitor. The defendant in Aspen Skiing a ski-service operator that owned three of the four mountains in a popular skiing area terminated a joint venture with the owner of the fourth mountain under which the companies offered a combined four-mountain ski pass. The defendant also refused to sell its daily ski tickets to the competitor to prevent the competitor from creating an alternative ticket package that functionally replicated the previous offering. In affirming the verdict finding the dominant ski operator liable under Section 2, the Court explained that the jury could have reasonably concluded that the defendant elected to forgo short-term benefits from the joint venture and ticket sales to eliminate its rival from the market. According to the Court, this conclusion was reasonable because the defendant had (1) ceased what was presumably a profitable course of dealing, (2) refused to sell its tickets to the competitor at prevailing retail prices, and (3) failed to offer a plausible efficiency-based justification for its conduct. However, the Court has subsequently construed Aspen Skiing narrowly. In Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP , the Court rejected the argument that Section 2 required a monopolist in the market for wholesale local telephone service to offer adequate interconnection services to its downstream rivals in the market for retail phone service. In reaching this conclusion, the Court characterized its previous decision in Aspen Skiing as "at or near the outer boundary" of Section 2 liability. The Court then distinguished that case on the grounds that unlike the dominant ski-service operator in Aspen Skiing , the wholesale telephone-service monopolist had not ceased a previous course of dealing with its competitors. The Court also observed that unlike the defendant in Aspen Skiing , the monopolist in Trinko did not refuse to sell its competitors a product that it offered to the public another factor that can suggest an anticompetitive intent to forgo short-term profits to eliminate rivals. In the absence of these factors, the Court explained, Section 2 did not require the telephone monopolist to do business with its competitors. Essential Facilities . A number of lower courts have recognized a subset of cases in which monopolists have a duty to deal with rivals under what has been called the "essential-facilities" doctrine. In developing this doctrine, lower courts have relied principally on the Supreme Court's decisions in United States v. Terminal Railroad Association of St. Louis and Otter Tail Power Co. v. United States . In Terminal Railroad Association of St. Louis , the Court held that a consortium of railroads that controlled the facilities necessary to carry traffic across the Mississippi River in St. Louis violated Section 2 by refusing to grant other railroads access to those facilities. Similarly, in Otter Tail Power Co. , the Court held that a vertically integrated power company violated Section 2 by refusing to transmit wholesale power to municipalities seeking to operate their own retail distribution systems. According to the leading formulation of the essential-facilities doctrine that has been derived from these decisions, a plaintiff bringing an essential-facilities claim must show that (1) a monopolist controls access to an "essential" facility, (2) competitors cannot "practically or reasonably" duplicate that facility, (3) the monopolist has denied access to the facility to a competitor, and (4) the monopolist can feasibly share access to the facility. In applying this test, courts have held that a facility need not be "indispensable" to qualify as "essential." Rather, essential-facilities plaintiffs need only establish that duplication of the facility would be "economically infeasible," and that the denial of its use "inflicts a severe handicap on potential market entrants." However, plaintiffs must show more than mere "inconvenience" to prevail on an essential-facilities cause of action, and courts have accordingly rejected Section 2 claims when plaintiffs had reasonable alternatives to the relevant facility. In assessing the third element of the essential-facilities test which asks whether a dominant firm has denied access to an essential facility courts have held that although monopolists need not allow competitors "absolute equality of access," an offer to deal with competitors "only on unreasonable terms and conditions" may violate Section 2 by amounting to "a practical refusal to deal." Finally, in assessing the "feasibility" requirement for essential-facilities claims, several courts have held that the viability of sharing an essential facility must be assessed in the context of a company's "normal business operations," and that monopolists accordingly need not share such facilities if they can identify "legitimate business reasons" for refusing access. The application of the refusal-to-deal and essential-facilities doctrines to specific Big Tech companies is discussed in greater detail in " Google Search: Refusals to Deal and Essential Facilities " and " Amazon " infra . <1.2.2.3. Tying and Exclusionary Product Design> In certain circumstances, "tying" separate products together that is, selling one product (the "tying" product) on the condition that buyers also purchase another product (the "tied" product) can violate Section 2. Firms can tie products together in a variety of ways. In a "bundled tie," a company simultaneously sells two or more products, one of which it does not sell separately. In contrast, "contractual ties" often involve a requirement that a buyer purchase different products at different times. And firms engage in "technological ties" when they physically integrate different products that are not sold separately or design their products in a way that makes them incompatible with products offered by other firms. According to the Supreme Court, certain tying arrangements can harm competition by allowing a firm with monopoly power in the market for the tying product to extend its dominance into the market for the tied product. Some commentators have also argued that tying arrangements can allow a monopolist to maintain its monopoly in the tying-product market by requiring potential rivals to enter both that market and the market for the tied product, which can act as a formidable entry barrier. Under contemporary tying doctrine, a plaintiff can establish that a defendant engaged in per se illegal tying if it can demonstrate (1) the existence of two separate products, (2) that the defendant conditioned the sale of one product on the purchase the other product, (3) that the arrangement affects a "substantial volume" of interstate commerce, and (4) that the defendant has market power in the market for the tying product. However, plaintiffs can also prevail on tying claims even if they cannot make these showings. When one or more of these conditions is absent, courts evaluate tying claims under a totality-of-the-circumstances approach known as the Rule of Reason. Under this three-step burden-shifting framework, the plaintiff bears the initial burden of establishing that a challenged tying arrangement harms competition. If the plaintiff makes this showing, the burden shifts to the defendant to rebut the plaintiff's case with evidence that the challenged tying arrangement has procompetitive benefits. And if the defendant succeeds in rebutting the plaintiff's prima facie case, the factfinder must weigh the procompetitive benefits of a challenged tying arrangement against its anticompetitive harms. In addition to these general principles of tying doctrine, lower courts have developed a separate body of case law concerning technological ties a category of conduct that is sometimes described as "exclusionary product design." The standard exclusionary-design claim alleges that a monopolist changed a product's design in a way that makes the product difficult or impossible to use with complementary products sold by other firms, thereby extending its dominance into the market for the complementary products in a manner that is broadly similar to the effects of other sorts of tying arrangements. One commentator has described the case law on exclusionary design as "somewhat tangled," but certain broad principles can be distilled from the relevant decisions. Generally courts are "very skeptical" about exclusionary-design claims out of fear that expansive liability for design decisions will chill innovation. In California Computer Products v. IBM Corp. , for example, the Ninth Circuit rejected claims that a dominant computer manufacturer violated Section 2 by introducing a new line of computers that were integrated with certain "peripherals" (e.g., disks and memory devices) and incompatible with peripherals sold by other companies. The court rejected this argument on the grounds that the manufacturer's integration of the peripherals lowered its costs and improved the computers' performance. The Second Circuit adopted a standard that is even more deferential toward exclusionary-design defendants in Berkey Photo, Inc. v. Eastman Kodak Co. , where it held that a dominant camera manufacturer had not violated Section 2 by launching a new camera and film that were incompatible with products sold by a rival. In that decision, the court held that the defendant had not engaged in exclusionary conduct even when faced with conflicting evidence as to whether the new camera was superior to previous versions. In the face of this evidence, the court opted to defer to market forces, explaining that consumers should be left to determine whether they preferred the new product. However, the D.C. Circuit's landmark 2001 decision in United States v. Microsoft Corp . marked a departure from previous exclusionary-design cases. In that case, the court evaluated Microsoft's integration of its internet-browser software (Internet Explorer) with its dominant personal-computer operating system (Windows OS). Microsoft had effectuated this integration in three ways: by (1) excluding Internet Explorer programs from Windows OS's "Add/Remove Programs" function, (2) programming Windows to sometimes override users' choice to set browsers other than Internet Explorer as their default browsers, and (3) commingling Internet Explorer's code with Windows code so that any attempt to delete Internet Explorer would cripple the operating system. The government alleged that this conduct harmed competition in the market for internet browsers by deterring consumers from using browsers other than Internet Explorer. In evaluating Microsoft's product design, the D.C. Circuit employed the Rule of Reason. At the first step of that inquiry, the court concluded that the government had made a prima facie case that each of the challenged practices harmed competition in the market for internet browsers, shifting the burden to Microsoft to identify procompetitive justifications for its actions. The D.C. Circuit proceeded to conclude that Microsoft successfully rebutted the government's case against the second category of challenged conduct programming Windows to sometimes override default browser choices because the company proffered valid technical reasons for its programming decisions. However, the court held that because Microsoft failed to establish that the remaining categories of conduct had procompetitive benefits, that conduct violated Section 2. In contrast, some post- Microsoft decisions from other federal circuits have been more favorable to exclusionary-design defendants. In Allied Orthopedic Appliances, Inc. v. Tyco Health Care Group LP , the Ninth Circuit eliminated the third step of the Rule-of-Reason test and refused to "balance" a challenged design's procompetitive benefits against its anticompetitive harms. Instead, the court rejected exclusionary-design claims on the grounds that it was "undisputed" that the new product had improved upon previous versions in certain respects. In such cases, the court explained, a monopolist's design change is "necessarily tolerated by the antitrust laws" irrespective of its anticompetitive effects. The lower federal courts are accordingly split on the proper analytical approach to exclusionary-design claims. The application of tying and exclusionary-design doctrine to specific Big Tech companies is discussed in greater detail in " Android: Tying and Exclusive Dealing " and " Apple " infra . <1.2.2.4. Exclusive Dealing> In certain circumstances, a monopolist can violate Section 2 by entering into "exclusive-dealing" agreements with its customers or suppliers that is, agreements in which a buyer agrees to purchase certain goods or services only from the monopolist or a seller agrees to sell certain goods and services only to the monopolist for a certain time period. Such agreements can be anticompetitive when they allow a monopolist to harm competition by "foreclosing" potential sources of supply or distribution. For example, if a dominant widget manufacturer enters into exclusive-dealing arrangements with a significant number of large widget retailers, other widget manufacturers may be unable to secure an adequate distribution network. However, exclusive-dealing arrangements can also be procompetitive. For example, some exclusive-dealing agreements allow manufacturers to overcome free-rider problems by enabling them to train their distributors without fearing that the distributors will use that training to sell rival products. In other cases, exclusive-dealing arrangements may serve the procompetitive objective of allowing a company to guarantee a secure source of supply or distribution. Lower federal courts evaluate exclusive-dealing agreements under the Rule of Reason and accordingly weigh their anticompetitive harms against their procompetitive benefits. In conducting this analysis, courts have required plaintiffs to demonstrate that a challenged exclusivity provision resulted in "substantial foreclosure" of supply or distribution. The exclusive-dealing case law does not provide definitive guidance on the degree of foreclosure that qualifies as "substantial," as courts have varied considerably in the degree of foreclosure that they consider unlawful. However, an author of the leading antitrust treatise has argued that single-firm foreclosure of less than 30% is unlikely to harm competition. In addition to requiring that plaintiffs demonstrate substantial foreclosure, courts have evaluated a range of other factors in exclusive-dealing cases, including the duration of specific exclusivity provisions, the strength of the defendant's procompetitive justification for the provisions, whether the defendant has engaged in coercive behavior, and the use of exclusive-dealing agreements by the defendant's competitors. The application of exclusive-dealing doctrine to Big Tech markets is discussed in greater detail in " Android: Tying and Exclusive Dealing " and " Google AdSense: Exclusive Dealing " infra . <1.3. Section 7 of the Clayton Act: Mergers and Acquisitions> While Section 2 of the Sherman Act is concerned with unilateral exclusionary conduct, Section 7 of the Clayton Antitrust Act of 1914 prohibits mergers and acquisitions that may "substantially lessen" competition. Section 7 applies to both "horizontal" mergers between competitors in the same market and "vertical" mergers between companies at different levels of a distribution chain. In evaluating horizontal mergers, the DOJ and FTC typically evaluate the merged firm's market share and the resulting level of concentration in the relevant market, in addition to any efficiencies that the combined company will likely realize as a result of the proposed merger. In contrast, vertical mergers may raise competition concerns when they involve a firm with significant power in one market entering an adjacent market, which may foreclose potential sources of supply or distribution and raise entry barriers by requiring the firm's potential competitors to enter both markets to be competitive. For example, if a dominant widget manufacturer acquires a widget retailer, it may have incentives to discriminate against competing widget retailers by charging them higher prices or refusing to deal with them altogether. As a result of this vertical discrimination, such a merger may force prospective widget retailers to also enter widget manufacturing to be competitive, raising entry barriers in the retail market. Despite these potential concerns with certain vertical mergers, the DOJ and FTC police such mergers far less aggressively than horizontal mergers, largely on the basis of academic work suggesting that vertical integration can result in significant efficiencies and only rarely threatens competition. However, whether the antitrust agencies should scrutinize vertical mergers more closely remains a subject of ongoing debate. The DOJ and FTC apply Section 7 by reviewing large proposed mergers before they are finalized, though the agencies also have the authority to unwind consummated mergers. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act), parties to certain large mergers and acquisitions must report their proposed transactions to the antitrust agencies and wait for approval before closing. If the agencies determine that a proposed merger threatens to "substantially lessen" competition, they can sue to block the merger or negotiate conditions with the companies to safeguard competition. Section 7 of the Clayton Act also gives the agencies the authority to challenge previously closed mergers that "substantially lessen" competition, though lawsuits to unwind consummated mergers have been "rare" since the enactment of the HSR Act. The application of Section 7 to Big Tech markets is discussed in greater detail in " Facebook " infra . <2. Antitrust and Big Tech: Possible Cases Against the Big Four> Applying the general legal principles discussed above to specific technology companies is a highly fact-intensive enterprise that will depend on the specific evidence that the DOJ and FTC uncover during their investigations. Moreover, the agencies have yet to publicly release details on the categories of conduct that they are evaluating in the course of their Big Tech inquiries, making it difficult to confidently assess the strength of antitrust cases against the relevant companies. With these caveats in mind, the following subsections discuss certain categories of conduct that the antitrust agencies may be investigating at each of the Big Four. <2.1. Google> Google is no stranger to antitrust scrutiny. The technology giant which runs Google Search, licenses the Android mobile operating system, and owns a major online ad-brokering platform (AdSense) has found itself in the crosshairs of competition authorities several times over the past decade. In 2013, the FTC concluded a wide-ranging investigation into the company's business practices, including its alleged discrimination against vertical rivals, copying of content from other websites, restrictions on advertisers' ability to do business with competing search engines, and exclusivity agreements with websites that used AdSense. While agency staff had recommended that the FTC bring a lawsuit challenging some of these activities, the Commission unanimously declined to pursue such an action after Google committed to make certain changes to its business practices. In contrast, European antitrust authorities have pursued three separate investigations of Google that have each resulted in large fines. In June 2017, the European Commission (EC) fined Google 2.4 billion euros for antitrust violations related to Google Search's preferential treatment of the company's comparison-shopping service, Google Shopping. The EC later levied an additional 4.3 billion-euro penalty in July 2018 for tying and exclusive-dealing arrangements related to Android. And in March 2019, the EC imposed a further 1.49 billion-euro penalty for exclusive- and restrictive-dealing agreements involving AdSense. While the focus of the DOJ's inquiry into Google's conduct remains somewhat obscure, the investigation is likely to implicate some of the same practices that have occupied the attention of European antitrust authorities. The subsections below discuss these issues in turn. <2.1.1. Google Search: Refusals to Deal and Essential Facilities> Google Search's allegedly preferential treatment of Google content has long been the subject of government investigations and academic discussion. The basic concern of these "search bias" allegations is the familiar worry about vertically integrated monopolists harming competition by discriminating against rivals who depend on a monopolized input or distribution channel. According to some critics, Google Search has monopoly power in the market for general-purpose ("horizontal") online search power that Google has used to harm competition in the markets for various forms of specialized ("vertical") search by privileging its own vertical properties over those of its downstream competitors. The FTC evaluated these "search bias" complaints during its 2011-2013 investigation, which examined whether Google unfairly promoted its own vertical properties like Google Maps, Google Local, and Google Trips over competitors like MapQuest, Yelp, and Expedia. Specifically, these complaints alleged that Google Search privileged Google's vertical content by (1) introducing a "Universal Search" box that prominently displayed that content above rival websites, and (2) manipulating its search algorithms to demote vertical competitors in its search results. However, the FTC ultimately declined to pursue a lawsuit related to these practices after concluding that Google's "primary goal" in privileging its own content was to quickly answer users' search queries and improve the quality of its search results. In contrast, the EC concluded in June 2017 that Google's preferential treatment of Google Shopping violated EU antitrust law by harming competition in the market for comparison-shopping services. If the DOJ were to reevaluate Google's alleged search bias, it would face the threshold question of whether Google in fact possesses monopoly power in the market for horizontal search. During the FTC's previous investigation, agency staff concluded that horizontal search "likely" constituted a properly defined antitrust market and that Google had monopoly power in that market in light of its 71% market share. More recent estimates place Google's share of the horizontal search-engine market even higher. Moreover, certain academic reports on digital competition suggest that Google Search may be protected by significant entry barriers in the form of high fixed costs and access to the "big data" necessary to develop accurate search algorithms. However, several commentators have disputed the proposition that Google Search has monopoly power. Some of these observers have argued that the relevant market in an antitrust lawsuit based on Google's alleged "search bias" would be larger than the market for horizontal search, because users of horizontal search engines have reasonable alternatives to obtain information on the internet, including websites like Facebook, Twitter, and Amazon. Some skeptics have also argued that even if horizontal search is a properly defined antitrust market, Google's large share of that market does not necessarily give it monopoly power. According to these commentators, the low costs that consumers incur in switching to alternative search engines and the ability of those competing search engines to immediately increase "output" cast doubt on the claim that Google has monopoly power. If the DOJ could establish that Google has monopoly power, it would then need to show that Google's allegedly preferential treatment of its vertical properties represents an anticompetitive abuse of that power. Such a showing may be difficult under existing monopolization doctrine. In Aspen Skiing , the Supreme Court held that a monopolist's refusal to deal with a competitor can violate Section 2 where the evidence suggests that the refusal was motivated by a desire to sacrifice short-term profits in order to eliminate the competitor from the market. In that case, the Court held that a jury could have reasonably found such a desire because the defendant had terminated what was presumably a profitable course of dealing with its rival and refused to sell its daily ski tickets to the rival at prevailing retail prices. However, in Trinko , the Court narrowly construed Aspen Skiing , describing it as "at or near the outer boundary" of Section 2 liability. The Trinko Court proceeded to reject refusal-to-deal claims because the defendant in that case had not ceased a previous course of dealing or refused to sell its competitors a product that it sold to the public. The Court's decision in Trinko makes a refusal-to-deal case against Google difficult for several reasons. First, Google did not have previous courses of dealing with the websites that received high placement in its search results before the company implemented its allegedly discriminatory policies. While Google's search algorithm ranked these websites highly before this alleged discrimination, the websites did not pay Google for their high placement. Moreover, even if Google's relationships with these websites qualify as established courses of dealing, it is unlikely that Google's termination of those dealings involved a sacrifice of short-term profits that the company intends to recoup with long-term monopoly prices. Instead, Google's decision to give its own content premium placement likely maximizes the company's short-term profits by generating more user clicks, even if such actions also harm its vertical competitors. As a result, the factors that Trinko appears to have identified as necessary conditions for a refusal-to-deal claim would likely be absent in a case challenging Google's alleged search bias. A lawsuit challenging Google's vertical discrimination would also face difficulties under the essential-facilities doctrine. First, it is unclear whether high placement in Google's search results represents an "essential" facility. One court has held that a facility can qualify as "essential" when the denial of its use "inflicts a severe handicap on potential market entrants." However, plaintiffs must show more than mere "inconvenience" in order to prevail on an essential-facilities cause of action, and courts have accordingly rejected Section 2 claims when plaintiffs had reasonable alternatives to the relevant facility. While premium placement in Google's search results was likely an important benefit for some of Google's vertical rivals, it is uncertain whether such placement would qualify as "essential" under these standards given the other ways in which vertical search engines can reach potential customers. Moreover, it is unlikely that a plaintiff could demonstrate that Google can "feasibly" share this allegedly essential facility. As one commentator has argued, only one website can receive the highest ranking in Google's search results, meaning that Google cannot give top placement to its own vertical properties and their competitors. Finally, Google may be able to identify legitimate business reasons for giving its own content premium placement. After its 2011-2013 investigation of Google's search bias, the FTC declined to pursue a lawsuit on the grounds that the company's use of the "Universal Search" box and privileging of its own content were motivated by a desire to quickly answer users' search queries. Google is therefore likely to rely on similar arguments in any actions challenging its search practices. <2.1.2. Android: Tying and Exclusive Dealing> In addition to evaluating Google's alleged search bias, the DOJ may follow the lead of European antitrust authorities in investigating the company's practices involving its Android mobile operating system. In a July 2018 press release announcing a record-setting antitrust fine, the EC concluded that Google occupied a dominant position in three markets related to the Commission's Android investigation. First, the EC concluded that Google occupied a dominant position in the market for "general licensable smart mobile operating systems" through Android. Second, the EC determined that Google occupied a dominant position in the market for "app stores for the Android operating system" through its app store Google Play. Finally, the EC concluded that Google occupied a dominant position in the market for "general Internet search" through Google Search. After identifying these markets in which Google is dominant, the EC determined that Google had abused its monopoly positions by engaging in three separate categories of behavior: First , the EC concluded that Google illegally "tied" the Google Search app and Google Chrome web browser to the Google Play store. Specifically, the EC determined that Google harmed competition in the online-search market by requiring mobile device manufacturers who pre-install Google Play to also pre-install Google Search and Google Chrome (which uses Google Search as its default search engine). According to the EC, this type of mandated pre-installation can create a "status quo bias" that discourages consumers from downloading competing search engines and web browsers. Second , the EC concluded that Google made illegal payments to certain large device manufacturers in exchange for their agreement to exclusively pre-install Google Search on all of their Android devices. Third , the EC concluded that Google illegally obstructed the development and distribution of competing Android operating systems by requiring that device manufacturers who pre-install Google Play and Google Search refrain from selling any devices that ran alternative versions of Android that Google had not approved ("Android forks"). Google is currently appealing the EC's decision. Tying. A DOJ lawsuit targeting Google's "tying" of Google Search and Google Chrome to Google Play would raise a number of complex issues. First, a court evaluating such a lawsuit would have to determine whether this conduct is per se illegal or instead subject to Rule-of-Reason scrutiny. As discussed, plaintiffs can establish a per se tying violation by demonstrating (1) the existence of two separate products, (2) that the defendant conditioned the sale of one product on the purchase the other product, (3) that the arrangement affects a "substantial volume" of interstate commerce, and (4) that the defendant has market power in the market for the tying product. However, courts have applied these requirements narrowly, and the D.C. Circuit held in Microsoft that the unique features of software platforms makes per se liability inappropriate for ties involving such platforms and related products. The general trend away from per se tying liability and the D.C. Circuit's Microsoft decision suggest that a court would likely evaluate Google's tying arrangements under the Rule of Reason. As an initial matter, it is unclear whether mandatory pre-installation of the relevant apps represents the type of "forced sale" necessary to trigger per se liability under the relevant case law. During its Android enforcement action, the EC contended that mandatory pre-installation had significant effects on consumer behavior by discouraging Android users from downloading alternative search engines and web browsers. However, this allegation is an empirical claim about a relatively novel business practice, and the Supreme Court has explained that per se antitrust liability is appropriate only when courts have sufficient experience with a challenged practice to conclude that it lacks significant redeeming virtues. Limited judicial experience with the effects of mandatory pre-installation (as opposed to conditional sales ) may accordingly counsel against per se liability for Google's Android ties. Moreover, this hesitance to extend per se antitrust rules to novel business arrangements caused the D.C. Circuit to conclude in Microsoft that ties involving software-platform products are subject to Rule-of-Reason scrutiny. While Google's Android ties differ from the ties at issue in Microsoft in certain respects, commentators have observed that a tying case against Google would raise issues that are "very similar" to those the D.C. Circuit confronted roughly two decades ago. As a result, a court evaluating Google's tying of Google Search and Google Chrome to Google Play may follow the D.C. Circuit and evaluate such conduct under the Rule of Reason. In balancing the anticompetitive harms of these ties against their procompetitive benefits under the Rule of Reason, courts will likely focus on the general concern that motivated the EC's enforcement action namely, the worry that Android users who find Google Search and Google Chrome pre-installed on their devices are unlikely to download and use alternative search engines. The magnitude of this concern is a fact-intensive question that will depend on the specific evidence concerning the effects of pre-installation that the DOJ can uncover. If the DOJ produces evidence that Google's tying arrangements harm competition, a Section 2 case will depend on the strength of the company's procompetitive justifications for these practices. During the EC litigation, Google argued that the relevant ties ultimately benefitted consumers because the revenue the company derived from increased use of Google Search by Android users allowed it to license Android to device makers for free. However, the EC rejected this claim and concluded that Google can monetize its investment in Android by other means. U.S. regulators and courts have the benefit of additional information on this issue. After the EC's decision, Google announced that instead of offering a suite of apps to device makers for free, it will charge manufacturers licensing fees for Google Play and certain other apps to make up for the revenue it previously earned as a result of the challenged tying arrangements. Some commentators have argued that this development raises questions about whether the EC's decision will ultimately benefit consumers, who may face higher device prices because of the new licensing fees. But the legal relevance of this argument that a decision attempting to promote competition in one market (online search) will harm consumers in another market (mobile devices) remains open to debate. In horizontal-restraint and merger cases, some courts have rejected the proposition that competitive harms in one market can be balanced against competitive benefits in another market. However, other courts have taken a different approach, concluding that it is appropriate to consider such cross-market tradeoffs in certain instances, including tying cases. Antitrust commentators also continue to debate whether and in what circumstances courts should balance harms in one market against benefits in another. As a result, it is difficult to predict whether a court would accept the argument that any harm caused by Google's tying arrangements in the market for online search should be balanced against benefits in the market for mobile devices. Antitrust regulators, by contrast, may engage in such balancing in deciding whether to bring a case, whether or not cross-market tradeoffs would be relevant during subsequent litigation. Exclusive Dealing. Like a potential tying case, a challenge to Google's exclusivity agreements with device manufacturers would depend on the specific facts the DOJ uncovers during its investigation. In evaluating any payments Google has made to U.S. device makers in exchange for their agreement to pre-install only Google Search, a court would likely assess the impact of pre-installation on consumer behavior, the share of the market "foreclosed" by such agreements, the ability of competing search engines to offer such payments, and the strength of Google's procompetitive justifications for the payments. Similarly, a court evaluating Google's requirement that device manufacturers who pre-install Google Play and Google Search refrain from selling any devices that run Android forks would apply the Rule of Reason and balance the anticompetitive harms of that restriction against its procompetitive benefits. On the "harm" side of the ledger, U.S. regulators might follow the EC in arguing that such a restriction obstructs the development of Android forks, which may serve as important channels for the distribution of search engines and other apps that compete with Google products. In contrast, Google may respond (as it argued in the EC litigation) that this restriction is necessary to prevent a "fragmentation" of the Android ecosystem in which consumers would impute the poor technical standards of nonapproved Android forks to Android. However, the EC rejected this argument after concluding that Google failed to produce evidence suggesting that Android forks would suffer from serious technical problems. U.S. antitrust regulators may also be able to rebut this "fragmentation" argument by demonstrating that Google could brand Android in a way that would adequately distinguish it from Android forks and thereby achieve the relevant procompetitive benefit by less restrictive means. <2.1.3. Google AdSense: Exclusive Dealing> Finally, the DOJ may be investigating Google's agreements with websites that use its ad-brokering platform AdSense, which connects advertisers with "publisher" websites seeking ad revenue. During the FTC's 2011-2013 investigation, agency staff concluded that clauses in these agreements that prohibited or restricted publisher websites from doing business with competing ad-brokering platforms violated Section 2. However, the FTC did not address this issue in announcing its unanimous decision not to charge Google with antitrust violations. In contrast, the EC concluded in March 2019 that similar clauses in Google's agreements with publisher websites violated EU antitrust law. In a press release announcing its conclusions, the EC identified three factual findings from its investigation: First , the EC found that from 2006-2009, some of Google's agreements with publisher websites contained "exclusivity" clauses prohibiting the websites from doing business with competing ad-brokering platforms. Second , the EC found that after 2009, Google began to replace these "exclusivity" clauses with "Premium Placement" clauses that required publisher websites to reserve the most visited and profitable spaces on their search results pages for ads brokered by AdSense. Third , the EC found that after 2009, some of Google's agreements with publisher websites required the websites to seek Google's written approval before making changes to the way that ads brokered by rival platforms were displayed, allowing Google to control how attractive those ads would be. The EC concluded that by engaging in these practices, Google used its dominant position in the market for "online search advertising intermediation" to illegally suppress competition. Google is currently appealing the EC's decision. The analysis of these sorts of agreements in a U.S. antitrust case would involve the same type of inquiry as an analysis of the Android exclusivity provisions discussed above. That is, in evaluating a challenge to these types of provisions, a court would likely assess the share of the market "foreclosed" by such agreements, the duration of the agreements, whether competing ad-brokering platforms enter into these types of contracts with publisher websites, and the strength of Google's procompetitive justifications for the challenged provisions. <2.2. Amazon> Commentators have identified a variety of competition-related issues surrounding Amazon. However, most of the antitrust discussion involving the e-commerce giant has concerned two general categories of conduct: discrimination against vertical rivals and predatory pricing. In addressing Amazon's alleged vertical discrimination, a number of analysts have focused on the company's dual role as both the operator of Amazon Marketplace a platform on which merchants can sell their products directly to consumers and as a merchant that sells its own private-label products on the Marketplace. Some commentators have alleged that Amazon exploits this dual role by implementing policies that privilege its own products over competing products offered by other sellers. According to a 2016 ProPublica investigation, for example, Amazon has designed its Marketplace ranking algorithm which determines the order in which products appear to consumers to favor its own products and products sold by companies that buy Amazon's fulfillment services. Similarly, certain merchants have complained that Amazon has revoked their ability to use its Marketplace after deciding to move into the relevant markets with its own private-label products or products it distributes on behalf of other companies. Some observers have also raised the possibility that Amazon may engage in predatory pricing by selling certain products at below-cost prices to eliminate rivals. A number of these allegations involve Amazon's 2010 acquisition of Quidsi the parent company of the online baby-products retailer Diapers.com and several other online-retail subsidiaries. According to some commentators, Amazon aggressively cut its prices for baby products after Quidsi rebuffed its initial offer to purchase the company. When Amazon's below-cost prices began to impede Quidsi's growth, the company ultimately accepted Amazon's subsequent acquisition offer. And after the Quidsi acquisition, Amazon allegedly raised its prices for baby products. Other predatory-pricing allegations leveled against Amazon concern the company's sale of certain e-books. Specifically, some observers have argued that when it entered the e-book market in 2007, Amazon priced some categories of e-books below cost to eliminate potential competitors, ultimately securing 90% of the market by 2009. A monopolization case grounded in Amazon's alleged discrimination against third-party merchants would raise several issues. As a threshold matter, regulators bringing such a case would need to show that Amazon possesses monopoly power. While Amazon is significantly larger than its e-commerce rivals, most estimates place its share of the U.S. online retail market at below 50%. However, the company's share of a narrower market for online marketplaces connecting third-party merchants with consumers may be considerably larger. Moreover, reports indicate that Amazon has very large shares of the markets for online sales of certain categories of products, including home-improvement tools, batteries, skin-care products, and (as discussed) e-books. If regulators could show that Amazon has monopoly power in a properly defined antitrust market, they would then need to establish that Amazon used that power to harm competition. Such a showing may be difficult under existing refusal-to-deal doctrine for some of the reasons discussed above in connection with Google's alleged search bias. As discussed, in Trinko , the Supreme Court rejected Section 2 claims where it was unable to infer that a monopolist's refusal to deal with a competitor involved a desire to sacrifice short-term profits to eliminate the competitor from the market. Specifically, the Court was unable to discern such an intent because the monopolist in Trinko (unlike its counterpart in Aspen Skiing ) had not terminated a previous course of dealing with the competitor or refused to sell the competitor a product that it offered to the public. The Court's reasoning in Trinko suggests that one type of refusal-to-deal claim against Amazon for its alleged vertical discrimination would be unlikely to succeed. If such a claim concerned Amazon's preferential ranking of its own private-label products on its Marketplace, it would be difficult to demonstrate that the challenged practice involves a sacrifice of short-term profits. Rather, just as Google likely maximizes its short-term profits by ranking its own vertical properties above those of competing websites, Amazon likely maximizes its short-term profits by giving its private-label products premium placement. A claim targeting this type of vertical discrimination is also unlikely to be viable under the essential-facilities doctrine, because Amazon cannot feasibly share access to the allegedly "essential" facility of top placement in its Marketplace product rankings. In contrast, a refusal-to-deal claim premised on Amazon's decision to revoke certain merchants' ability to use its Marketplace altogether may present courts with a closer question. Such an action could involve termination of a previously profitable course of dealing, which can suggest an intent to sacrifice short-term profits in order to eliminate competitors. This conduct may also provide the basis for an essential-facilities claim, as one commentator has argued that Amazon's Marketplace is dominant enough in certain online-retail markets to justify the conclusion that it qualifies as "essential" under the case law. While a court's assessment of this argument would depend on a fact-intensive evaluation of the alternatives available to specific categories of third-party sellers, it is conceivable that lack of access to Amazon's Marketplace would inflict a "severe handicap" on merchants in at least some online-retail markets. As a result, Amazon's outright termination of profitable relationships with certain third-party merchants may raise harder questions about the application of Section 2 doctrine. Amazon may also be vulnerable to predatory-pricing claims. To the extent that commentators have accurately characterized the conduct surrounding the company's acquisition of Quidsi, Amazon may have engaged in below-cost pricing and exhibited a "dangerous probability" of recouping its losses by eliminating a key competitor from the market for online sales of certain baby products. However, other predatory-pricing allegations against Amazon may raise more complicated issues. Amazon may be able to defend certain predatory-pricing charges on the grounds that the company intended certain products to be "loss leaders" that induced customers to purchase other products at above-cost prices. A court's assessment of this defense would depend on a fact-intensive inquiry into the motivations behind Amazon's pricing of specific products. <2.3. Facebook> Most of the antitrust commentary directed toward Facebook has focused on its acquisitions of potential competitors in particular, its 2012 acquisition of the photo-sharing service Instagram and its 2014 acquisition of the messaging service WhatsApp. In a March 2019 letter to the FTC, the Chairman of the House Antitrust Subcommittee urged the Commission to examine whether these acquisitions which according to some estimates have resulted in Facebook owning three of the top four and four of the top eight social media applications violated Section 7 of the Clayton Act. Other legislators and commentators have echoed calls for regulators to unwind these acquisitions. The FTC appears to be taking these arguments seriously. In August 2019, the Wall Street Journal reported that Facebook's acquisition practices are a "central component" of the agency's investigation of the company. In addition to potentially focusing on the Instagram and WhatsApp deals, the Journal reported that the FTC could also be evaluating Facebook's 2013 acquisition of Onavo Mobile Ltd. a mobile-analytics company that may have allowed Facebook to identify fast-growing social media companies and purchase them before they became competitive threats. Depending on the evidence that the FTC uncovers, Facebook's general acquisition strategy could plausibly serve as the basis for a Section 2 monopolization case to the extent that it suppressed competition. The success of a case to unwind some of Facebook's acquisitions may depend on an assessment of the relevant market in which Facebook competes. Because Facebook does not charge users of its social network, this inquiry would require regulators to confront difficult conceptual issues with defining zero-price markets. If the FTC views "social networks" or "social media platforms" as the relevant market in an action to unwind Facebook's key acquisitions, the strength of the agency's case would likely depend on the other companies that are included in the relevant market and the appropriate methodology for calculating market shares. Because estimates of Facebook's dominance vary widely based on differences in each of these factors, the company's market share would likely be vigorously litigated in an action to unwind its major acquisitions. However, regulators may seek to sidestep this process with direct evidence that the relevant acquisitions harmed competition. As discussed, while antitrust plaintiffs typically rely on indirect market-share evidence to show that a defendant has monopoly power, several courts have held that plaintiffs can also establish monopoly power with direct evidence of supra-competitive prices. One commentator has sketched a general outline of the form such direct evidence might take, arguing that Facebook began to "degrade" user privacy only after the disappearance of major rivals. While there is little case law on direct proof of monopoly power, such evidence of quality degradation abruptly following the elimination of key competitors could plausibly serve as the type of "natural experiment" that allows regulators to establish that Facebook has monopoly power without defining the precise boundaries of the market in which it operates. If the FTC could establish that Facebook's acquisitions had anticompetitive effects either directly or indirectly, a court would then need to weigh those harms against any merger-specific efficiencies that Facebook can identify. In defending an enforcement action, Facebook might argue that its large post-acquisition investments in the relevant companies have improved their performance and accordingly benefited consumers. However, the FTC may be able to rebut such a defense with evidence that these companies could have secured adequate funding through the capital markets or by showing that the anticompetitive harms of the acquisitions outweigh any investment-related benefits. <2.4. Apple> Like Google, Apple has faced antitrust claims related to its mobile-device software. Specifically, the iPhone maker has faced separate class-action lawsuits related to its design of the device's operating system, iOS. In these lawsuits, classes of customers who purchased iPhone apps through the company's App Store and app developers claim that Apple has illegally monopolized the market for iPhone apps by designing iOS as a closed system and installing security measures to prevent customers from purchasing apps outside of the App Store. In May 2019, the Supreme Court rejected Apple's contention that App Store customers lacked standing to challenge this conduct, allowing their lawsuit to proceed. While these cases will accordingly continue to work their way through the courts, the DOJ may also be contemplating a similar action challenging Apple's design of iOS. The outcome of these exclusionary-design cases against Apple will depend on the specific findings that emerge over the course of litigation. Like the Microsoft case, these lawsuits involve a fact pattern that appears to suggest strong prima facie evidence of anticompetitive harm. If "iPhone apps" represent a properly defined antitrust market, Apple's decision to design iOS in a manner that requires users to purchase apps only from the App Store limits competition in that market to one seller/distributor. Section 2 claims challenging this conduct would accordingly depend on Apple's procompetitive justification for its design choices and the proper standard for evaluating that justification. If a court were to follow the D.C. Circuit's approach to these questions, it would balance the anticompetitive harms of Apple's product-design choices against their procompetitive benefits. In contrast, a court following the more deferential standards applied by the Ninth Circuit in Tyco Health Care Group or the Second Circuit in Berkey Photo would likely side with Apple as long as the company could identify a plausible reason to conclude that the challenged design choices represent product improvements. Such a justification may involve claims that the relevant security measures improve iPhone users' overall experience by preventing them from downloading technically unsound apps from non-App Store sources. However, the precise form that this type of argument would take remains to be seen. The current circuit split on the appropriate analytical framework for exclusionary-design claims may be a factor that prompts the DOJ to bring its own lawsuit challenging Apple's design of iOS. Both of the pending lawsuits have been brought in the Ninth Circuit, which will presumably follow its defendant-friendly precedent in Tyco Health Care Group . If the DOJ were to pursue litigation against Apple, regulators may accordingly choose to sue in a different circuit with more favorable case law. Although it is still early days, a DOJ lawsuit that further entrenches the circuit split surrounding exclusionary-design analysis may ultimately cause the Supreme Court to step in and clarify the doctrine. <3. Options for Congress> While the antitrust action surrounding the Big Four is currently concentrated in the executive branch and the courts, digital competition issues have also attracted the interest of Congress, which may pursue legislation to address anticompetitive conduct by large technology companies. Such legislation could take two general forms. First, some commentators have proposed that Congress enact certain changes to existing antitrust doctrine to promote digital competition. Second, a number of lawmakers and academics have advocated legislation that would impose sector-specific competition regulation on large technology companies. The subsections below discuss each category of potential legislation in turn. <3.1. Changes to Antitrust Law> A number of commentators have proposed that Congress adopt certain changes to existing antitrust doctrine to promote competition in technology markets. These proposals include: Changes to Predatory-Pricing Doctrine . Some observers have proposed changes to predatory-pricing doctrine with an eye toward addressing the pricing practices of dominant technology firms like Amazon. Specifically, one commentator has criticized Brooke Group 's "recoupment" requirement on the grounds that it does not adequately deter predatory pricing by dominant online platforms. According to this line of criticism, Brooke Group 's requirement that plaintiffs demonstrate a "dangerous probability" of recoupment fails to account for dominant platforms' unique ability to persist in charging below-cost prices for years and employ difficult-to-detect recoupment strategies like price discrimination among different categories of customers. As a result, this commentator has advocated a presumption that below-cost pricing by dominant platforms qualifies as prohibited exclusionary conduct. Other academics have criticized the first Brooke Group requirement, which demands that predatory-pricing plaintiffs show that a monopolist charged below-cost prices. These commentators argue that pricing-cutting can be anticompetitive even when a firm prices its products above cost, especially in cases where a monopolist aggressively cuts prices in order to prevent a new rival from recovering its entry costs or realizing economies of scale. To address this concern, these observers contend that courts should evaluate whether challenged price-cutting strategies exclude potential entrants without screening predation claims with a price-cost test. Congress could accordingly remedy this alleged defect in current predatory-pricing doctrine with legislation eliminating the first Brooke Group requirement. Enhanced Merger Review for Dominant Technology Companies . Some commentators have advocated stricter scrutiny for mergers and acquisitions by dominant technology companies, including a rebuttable presumption that mergers and acquisitions between certain monopolist technology companies and their potential competitors are unlawful. A number of academics have also suggested that because promising technology startups often fall below the minimum-size thresholds that trigger DOJ and FTC review under the HSR Act, Congress should consider lowering or eliminating those thresholds for deals involving dominant technology companies. Enhanced Scrutiny of Product Design Decisions . Finally, some observers have argued that courts should be less deferential toward defendants' justifications of allegedly exclusionary product designs, arguing that product-design decisions are often "key elements" of large technology companies' business strategies. Congress could accordingly consider legislation to clarify the appropriate standards for evaluating exclusionary-design claims, perhaps by making clear that such claims are subject to full Rule-of-Reason scrutiny rather than the more permissive tests adopted by certain lower federal courts. <3.2. Sector-Specific Regulation> As discussed, academic commentators have argued that certain digital markets possess structural characteristics that advantage large incumbent firms. In some cases, dominant firms in these markets can enhance such entry barriers by making it difficult for consumers to "multi-home" or use complementary products offered by competitors, and courts evaluating challenges to these product-design choices hesitate to hold companies liable under existing antitrust doctrine. Moreover, vertically integrated technology monopolists do not face general nondiscrimination rules requiring them to deal evenhandedly with rivals in adjacent markets. Some analysts have accordingly argued that large technology platforms require sector-specific regulations to address these competition concerns. These proposed regulations include "data mobility" rules giving consumers greater ability to control their data and move it to competing platforms, "interoperability" standards requiring companies to minimize technical impediments to the use of complementary products, and nondiscrimination requirements prohibiting vertically integrated technology monopolists from discriminating against rivals who use their platforms. Congress could legislate such requirements, direct an existing federal agency to develop them through rulemaking, or create a new agency tasked with regulating the technology industry. A number of lawmakers and academics have also argued that the infrastructure-like features of certain digital services justify separation regimes prohibiting monopolists that provide those services from entering adjacent markets. Such separation regimes are not without precedent. Historically, Congress and federal regulators have imposed a variety of structural prohibitions limiting the lines of business in which certain categories of firms including railroads, banks, television networks, and telecommunications companies can engage. Commentators have justified these separation regimes on the grounds that they eliminate conflicts of interest that lead companies in key infrastructure-like sectors to discriminate against their vertical rivals. While the nondiscrimination requirements discussed above represent one means of addressing this concern, categorical separation rules are an alternative to such requirements that may prove easier to administer. In March 2019, Senator Elizabeth Warren proposed one type of separation regime for dominant technology companies, arguing that large "platform utilities" including "online marketplaces," "exchanges," and "platforms for connecting third parties" should be prohibited from owing companies that participate on their platforms. The Chairman of the House Antitrust Subcommittee has also expressed support for similar separation requirements. Congress may also be interested in broader separation regimes prohibiting dominant technology platforms from entering other types of markets. Specifically, many lawmakers have expressed concern about Facebook's announcement that it intends to develop a new cryptocurrency. These worries have generated a legislative proposal to prevent any large technology platform from entering the financial industry, with Members on the House Financial Services Committee circulating draft legislation titled the Keep Big Tech Out of Finance Act. This draft bill would prohibit "large platform utilities" from (1) affiliating with financial institutions, or (2) establishing, maintaining, or operating digital assets intended to be "widely used as a medium of exchange, store or value, or any other similar function."

Over the past decade, Google, Amazon, Facebook, and Apple ("Big Tech" or the "Big Four") have revolutionized the internet economy and affected the daily lives of billions of people worldwide. While these companies are responsible for momentous technological breakthroughs and massive wealth creation, they have also received scrutiny related to their privacy practices, dissemination of harmful content and misinformation, alleged political bias, and—as relevant here—potentially anticompetitive conduct. In June 2019, the Wall Street Journal reported that the Department of Justice (DOJ) and Federal Trade Commission (FTC)—the agencies responsible for enforcing the federal antitrust laws—agreed to divide responsibility over investigations of the Big Four's business practices. Under these agreements, the DOJ reportedly has authority over investigations of Google and Apple, while the FTC will look into Facebook and Amazon. The DOJ and FTC investigations into Big Tech will likely involve inquiries into whether the relevant companies have illegally monopolized their respective markets or engaged in anticompetitive mergers or acquisitions. Under Section 2 of the Sherman Act, it is illegal for a company with monopoly power to engage in exclusionary conduct to maintain or enhance that power. And under Section 7 of the Clayton Act, companies may not engage in mergers or acquisitions that "substantially lessen" competition. The scope of the market in which a defendant-company operates is a key question in both monopolization and merger cases. The Supreme Court has identified certain qualitative factors that courts may consider in defining the scope of relevant antitrust markets. The DOJ and FTC have also adopted a quantitative market-definition inquiry known as the "hypothetical monopolist" or "SSNIP" test, according to which a relevant antitrust market consists of the smallest grouping of products for which a hypothetical monopolist could profitably impose a 5% price increase. The application of this quantitative inquiry to certain zero-price technology markets may present courts and regulators with important issues of first impression. However, commentators have proposed a variety of methods by which regulators could assess the scope of the markets in which the Big Four operate. In addition to demonstrating that a defendant-company possesses monopoly power in a properly defined market, monopolization plaintiffs must show that the defendant engaged in exclusionary conduct to maintain or enhance that power. In investigating allegedly exclusionary behavior by the Big Four, antitrust regulators may be evaluating Google Search's alleged discrimination against Google's vertical rivals, certain tying and exclusive-dealing arrangements related to the company's Android mobile operating system, and exclusive and restrictive-dealing arrangements related to the company's ad-brokering platform; Amazon's alleged predatory pricing and discrimination against third-party merchants on its online marketplace; Facebook's allegedly anticompetitive pattern of acquiring promising potential competitors, including its acquisitions of the photo-sharing service Instagram and the messaging service WhatsApp; and Apple's decision to design its mobile-operating system to prevent customers from downloading iPhone apps from any source other than the company's App Store. While the antitrust action surrounding Big Tech is currently concentrated in the executive branch and the courts, digital competition issues have also attracted the interest of Congress, which may pursue legislation to address anticompetitive conduct by large technology companies. Specifically, some commentators have proposed that Congress adopt changes to certain elements of antitrust law to promote competition in technology markets, including modifications to predatory-pricing doctrine, exclusionary-design law, and merger review. In contrast, other commentators have advocated sector-specific competition regulation for large technology companies that would include data-portability rules, interoperability standards, nondiscrimination requirements, and separation regimes.

crs_R46266

crs_R46266_0

<1. Introduction> Coal mining and production in the United States during in the 20 th century contributed to the nation meeting its energy requirements and left a legacy of unreclaimed lands. Prior to the enactment of the Surface Mining Control and Reclamation Act in 1977 (SMCRA; P.L. 95-87 ), no federal law had authorized reclamation requirements for coal mining operators to restore lands and waters affected by mining practices. Title IV of SMCRA established the Abandoned Mine Lands (AML) program to address the public health, safety, and environmental hazards at these legacy abandoned coal mining sites. The objective of reclamation under Title IV of SMCRA is to restore lands or waters adversely affected by past coal mining to a condition that would mitigate potential hazards to public health, safety, and the environment. The actions necessary to attain these objectives may vary from site to site depending on the nature of the hazards and the technical or engineering feasibility of reclamation alternatives to mitigate the hazards. The severity of the hazard would also determine the prioritization of funding for reclamation. Examples of reclamation activities include removing or stabilizing coal mining waste piles, re-contouring and re-vegetating affected lands, mitigating the potential for subsidence, filling voids or sealing tunnels, and treating acid mine drainage. The costs to complete reclamation at a particular site would depend on the scope and nature of actions necessary to mitigate the potential hazards and any technical or engineering challenges to implement the selected actions. The Abandoned Mine Reclamation Fund, established under Section 401 of SMCRA, provides funding to eligible states and tribes for the reclamation of surface mining impacts associated with historical mining of coal. Title IV of SMCRA applies only to sites that were abandoned or left unreclaimed prior to the enactment of SMCRA on August 3, 1977, and for which there is no continuing reclamation responsibility under other federal or state law. SMCRA also established the Office of Surface Mining Reclamation and Enforcement (OSMRE) in the Department of the Interior. OSMRE is the federal office responsible for administering SMCRA in coordination with eligible states and tribes. The balance of the Abandoned Mine Reclamation Fund is provided by fees collected on coal mining operators in coal producing states. The fee rates in current law are based on a per-ton fee for the volume of coal produced at a mine annually or the percentage value of the coal produced at a mine, whichever is less each year as determined by the Secretary of the Interior. SMCRA authorizes annual grants to eligible states and tribes for the reclamation of abandoned coal mining sites. SMCRA also authorizes two sources of federal financial assistance to three United Mine Workers of America (UMWA) coal mineworker health benefits plans and the UMWA pension plan. These federal payments augment employer contributions to these plans. Interest transfers from the Abandoned Mine Reclamation Fund have supported the UMWA health benefit plans since FY1996, supplemented by payments from the General Fund of the U.S. Treasury since FY2008. As amended in the 116 th Congress, SMCRA authorizes additional General Fund payments to support the UMWA pension plan. The coal reclamation fee collection authorization is set to expire at the end of FY2021 absent the enactment of legislation extending the sunset date. If the authority to collect reclamation fees is not reauthorized, SMCRA directs the remaining balance of the fund to be distributed among states and tribes receiving grants from the Abandoned Mine Reclamation Fund based on the FY2022 grant amounts. The FY2022 grant amounts would depend on the fees collected in FY2021, and payments from the fund would begin in FY2023, continuing annually until the balance has been expended. Given that scenario, reclamation grants to eligible states would continue for some years. This report discusses funding for eligible states and tribes, reclamation priorities, annual receipts and appropriations, reauthorization issues, and other related bills that would authorize the use of the existing balance of the fund. This report does not discuss issues associated with Title V of SMCRA, which authorized the regulation of coal mining sites operating after the law's enactment. SMCRA requires coal mining operators regulated under Title V to be responsible for providing financial assurance for completing site reclamation. Coal mining sites regulated under SMCRA after August 3, 1977, are ineligible for grants from the Abandoned Mine Reclamation Fund. If financial assurances are inadequate to meet reclamation needs, the availability of federal funding to pay reclamation costs would be subject to the enactment of legislation. <2. Abandoned Mine Reclamation Fund> Section 401 of SMCRA established the Abandoned Mine Reclamation Fund as a trust fund within the U.S. Treasury. As enacted in 1977, SMCRA originally did not authorize the Abandoned Mine Reclamation Fund as an interest-bearing trust fund. The Abandoned Mine Reclamation Act of 1990 amended SMCRA for various purposes and authorized the investment of the unexpended balance of the Abandoned Mine Reclamation Fund in U.S. Treasury securities. The portion of the balance available for investment in U.S. Treasury securities is the amount that the Secretary of the Interior determines is not needed to meet current withdrawals. Interest began accruing on the invested balance in FY1992. <2.1. Coal Reclamation Fees> Receipts credited to the Abandoned Mine Reclamation Fund are sourced from fees collected from coal mining operators based on coal production. The coal reclamation fee rates are authorized in Section 402 of SMCRA. The fees are specified in current law and based on a per-ton fee for the amount of coal produced at a mine annually or the percentage value of the coal produced annually at a mine, whichever is less each year as determined by the Secretary of the Interior. The fees are 28 cents per ton of coal produced by surface mining, 12 cents per ton of coal produced by underground mining, or 10% of the value of the coal, whichever is less. The fee for lignite coal is different from non-lignite coal and is 8 cents per ton or 2% of the value of the coal, whichever is less. Congress decreased the fee rates authorized in the original enactment of SMCRA to these fee rates in the 2006 amendments to SMCRA. Annual receipts credited to the Abandoned Mine Reclamation Fund from these fees therefore depend on the fee rates applied to the amount or value of coal production each year. SMCRA does not set or guarantee any particular amount of receipts on an annual basis. Regardless of the fee rates, this framework may result in receipts fluctuating annually with changes in the amount or value of coal production in the United States. Coal reclamation fees generally increased until FY2007, after which the trend in fee revenue decreased from FY2008 to FY2019. During these years, coal reclamation fees collected by OSMRE decreased by approximately 49% in nominal dollars (i.e., without adjusting for inflation) ( Figure 1 ). U.S. coal production declined during that same time period by approximately 34%. While the nominal coal reclamation fees collected peaked in FY2007, the inflation-adjusted value of the coal reclamation fees have generally decreased since FY1979. The extent to which the reduced fee rates in 2006 contributed to the decline in fee receipts during this time period would depend on whether the fee receipts were based on the tonnage or value of coal produced. <2.2. Eligible Lands and Waters> Section 404 of SMCRA limits eligible lands and waters affected by coal mining to those left abandoned or unreclaimed prior to August 3, 1977, and for which there is no continuing reclamation responsibility under other federal or state laws. U.S. territories, states, and tribes without such lands and waters are excluded from eligibility for grants from the Abandoned Mine Reclamation Fund. The reclamation and regulatory programs authorized in SMCRA apply only to coal production states and tribal lands, and coal has not been mined in all states, U.S. territories, and tribal lands. States and tribes with lands on which coal was mined prior to the enactment of SMCRA on August 3, 1977, with an OSMRE-approved reclamation program are eligible for grants from the Abandoned Mine Reclamation Fund pursuant to Section 401 of SMCRA. <2.3. Reclamation Priorities> SMCRA describes differing types and priorities of AML reclamation projects eligible for reclamation funding from the Abandoned Mine Reclamation Fund. Examples of eligible AML projects include the reclamation of land subsidence, vertical openings, hazardous equipment and facilities, dangerous highways, and acid mine drainage (AMD) that originated from historical coal mining operations. Section 403 of SMCRA directs the prioritization of AML reclamation projects under a tier of three categories: 1. Priority 1 projects involve the reclamation of lands and waters to protect public health, safety, and property from extreme danger. 2. Priority 2 projects involve the reclamation of lands and waters to protect public health and safety from adverse effects of coal mining practices. 3. Priority 3 projects involve the reclamation of lands and waters previously degraded by adverse effects of coal mining practices for the conservation and development of soil, water (excluding channelization), woodland, fish and wildlife, recreation resources, and agricultural productivity. The reclamation of Priority 2 projects may be similar in scope and nature as Priority 1 projects but generally present a lesser degree of danger. In some instances, the proximity of hazards and risks of AML lands to communities may elevate the risks to public health and safety in a way that similar circumstances would merit a lower priority if they occurred at a more isolated and remote location. However, proximity alone is not necessarily an indicator of risk if contamination may migrate from the mining site to an affected community. The geographic scope of the site may be larger than where the coal was mined, because it includes all the affected lands and waters. AMD causes persistent water quality impairment when minerals within coal are exposed to atmospheric oxygen and water, which causes a reaction generating sulfuric acid. The production of acid creates low-pH conditions in the water, enhancing the solubility of iron, sulfate, and other trace metals from the exposed ore. Those dissolved constituents may discharge to downgradient streams and water bodies and may generate secondary minerals within the stream and on the stream beds. Streams and other ecosystems impacted by AMD can become functionally impaired. States may consider reclamation projects to abate AMD water quality issues as a higher priority if that impaired water could pose a risk to public health. Section 402 allows states receiving grants from the Abandoned Mine Reclamation Fund to deposit up to 30% of their annual grants into an acid mine drainage abatement fund. The state may establish an acid mine drainage abatement fund in accordance with that state's law, and the monies in the fund are not subject to SMCRA's three-year limitation on expenditure and may accrue interest. SMCRA allows states to expend monies in their abatement fund without a time limit because water quality issues associated with AMD may persist for decades or longer. <2.4. State and Tribal Reclamation Programs> States and tribes with lands on which coal is mined may be eligible for annual grants from the Abandoned Mine Reclamation Fund to support the reclamation of abandoned coal mining sites within their respective jurisdictions. To be eligible for these federal funds, pursuant to Section 405 of SMCRA, states and tribes first must obtain OSMRE approval of their reclamation programs. OSMRE approval of a reclamation program depends upon the state or tribe demonstrating that it has developed its own requirements that do not conflict with the federal requirements but may be more stringent and that it has the ability to carry out these requirements in lieu of the federal government. OMSRE has approved mine reclamation programs for 25 states and three tribes. <2.4.1. State Certification> Pursuant to Section 411 of SMCRA, OSMRE may certify a state or tribe with an OSMRE-approved state reclamation program once it demonstrates that it has reclaimed all of its priority abandoned coal mining sites identified pursuant to Section 403. States and tribes may apply to OSMRE for certification, and the final determination is subject to notice in the Federal Register and public comment. Certified states and tribes may use annual grants for the reclamation of abandoned non-coal sites and other uses. Section 411 includes certain limitations. SMCRA prohibits certified states and tribes from spending annual payments on sites remediated under the Uranium Mill Tailings Radiation Control Act of 1978, as amended, and sites designated for remedial action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (CERCLA). To date, OSMRE has certified five states and three tribes as having reclaimed all of their priority coal mining sites that were abandoned or unreclaimed prior to the enactment of SMCRA on August 3, 1977. A state with an OSMRE-approved state reclamation program that has not reclaimed all of its priority abandoned coal mining sites is an uncertified state . OSMRE provides annual grants to uncertified states from the Abandoned Mine Reclamation Fund for the reclamation of the priorities described under Section 403. <2.5. Grants to Eligible States and Tribes> For uncertified states, OSMRE administers grants from the Abandoned Mine Reclamation Fund. For certified states and tribes, OSMRE administers annual payments from the General Fund in lieu of the Abandoned Mine Reclamation Fund. OSMRE administers grants among eligible states and tribes based on a statutory formula to calculate their respective shares of annual coal reclamation fee receipts. OSMRE publishes grant distribution summaries on an annual basis. OSMRE administered grants to states and tribes for FY2019 are presented in Table 1 and Table 2 . The following sections describe the grants administered to eligible states and tribes. The Surface Mining Control and Reclamation Act Amendments of 2006 ( P.L. 109-432 , Division C, Title II, of the Tax Relief and Health Care Act of 2006) authorized General Fund payments to certified states and tribes beginning in FY2008 to focus the expenditure of coal reclamation fees on the reclamation of abandoned coal mining sites. The 2006 amendments also authorized permanent appropriations of coal reclamation fees for mine reclamation grants in FY2008 and subsequent fiscal years. <2.5.1. Uncertified States> Just over 80% of annual coal reclamation fee collections since FY2008 are authorized as permanent (mandatory) appropriations that are distributed to eligible uncertified states during the fiscal year following their collection. Section 402 of SMCRA authorizes the distribution of the fee collections credited to the Abandoned Mine Reclamation Fund based on a statutory formula that allocates to uncertified states: Uncertified State Share: shares of 50% of the coal reclamation fees collected within that state. Historic Coal Funds: shares of 30% of the fee collections based on historic coal production prior to the enactment of SMCRA on August 3, 1977. The historic coal payments are based on the total coal tonnage produced by each respective state prior to enactment. Coal reclamation fees collected in certified states and on tribal lands therefore affect the amount available in the Abandoned Mine Reclamation Fund for annual reclamation grants to uncertified states. Fees collected in certified states and on tribal lands are distributed to uncertified states as part of their historic coal payment. Minimum Program Make Up Funds: additional shares of the fee collections if necessary to guarantee that each uncertified state receives an annual grant of at least $3 million if its 50% state share payment and historic coal payment combined would not equal this threshold. The formula leaves 20% of the annual fee collections available for the minimum program make up funds and discretionary spending through annual appropriations to fund the activities of OSMRE to oversee and assist state mine reclamation programs and to administer the Abandoned Mine Reclamation Fund. Under Section 402, any amount of the 50% state share grant to an uncertified state not expended within three years of the date when the grant was awarded would become redistributed as historic coal payments, with the exception of the AMD abatement funds discussed earlier. The formula does not allocate any of the fee collections to support the UMWA health or pension benefit plans. The interest that accrues on the invested balance of the Abandoned Mine Reclamation Fund via an intergovernmental transfer from the General Fund is available to support UMWA health benefit plans. Direct payments from the General Fund supplement the interest for the UMWA health benefit plans. Additionally, the UMWA pension plan is eligible for General Fund payments, but it is not eligible to receive payments from the Abandoned Mine Reclamation Fund. See the discussion in "Federal Financial Assistance for UMWA Health and Pension Benefit Plans" later in this report. Section 401(f)(5)(B) of SMCRA authorized a four year "phase-in" period during FY2008-FY2011 for the newly established mandatory payments to uncertified states for their state share, historic coal, and minimum make up grants. During this period, grants to uncertified states were reduced by 50% for FY2008 and FY2009 and 25% for FY2010 and FY2011. <2.5.2. Certified States and Tribes> Section 411(h)(2) of SMCRA authorized certified states and tribes to receive annual payments from the General Fund equivalent to 50% of annual coal reclamation fees collected within their jurisdictions. The fees collected from coal mining operations in certified states, and on lands of certified tribes, are credited to the Abandoned Mine Reclamation Fund. However, as authorized in Section 411 of SMCRA, certified states and tribes receive their payments from the General Fund of the U.S. Treasury in lieu of the Abandoned Mine Reclamation Fund and may use these funds for addressing the impacts of non-coal mineral development. Unlike uncertified states, certified states and tribes are not eligible to receive historic coal payments or minimum program make up funds. Section 411(h)(3)(B) of SMCRA authorized a three-year "phase-in" period between FY2009 and FY2011 for annual payments to certified states and tribes. During those fiscal years, annual state and tribal share payments were reduced to 25% in FY2009, 50% in FY2010, and 75% in FY2011. OSMRE paid the total amount reduced during the three-year phase-in period to certified states and tribes in two equal payments from the General Fund in FY2018 and FY2019. Certified states and tribes would no longer receive these payments in FY2020 and subsequent fiscal years because they have been fully paid out. In 2012, Congress amended Section 411(h) of SMCRA to place an annual $15 million cap on payments to each certified state or tribe. The cap applied to both in lieu payments and prior balance payments (described below) to certified states and tribes. Congress increased the cap to $28 million for FY2014 and $75 million for FY2015 by amending Section 411(h) of SMCRA again in 2013. Wyoming was the only state whose payments were reduced in FY2013 and FY2014 because of the caps. The higher cap in FY2015 did not affect Wyoming's payment. No other certified state or tribe exceeded caps for any of these fiscal years. In 2015, Congress removed these caps on payments to certified states and tribes by amending Section 411(h) of SMCRA. This amendment also authorized a retroactive payment for amounts that were reduced under the caps. Wyoming received a one-time retroactive payment of approximately $242 million in FY2016. This retroactive payment was included in the total payment to Wyoming in FY2016 as reported in the FY2018 Office of Management and Budget (OMB) budget in addition to the annual in lieu payments to certified states and tribes for FY2016. <2.5.3. Prior Balance Payments> The majority of the unappropriated balance of the Abandoned Mine Reclamation Fund accumulated prior to the 2006 amendments. Prior to the enactment of the 2006 amendments to SMCRA, OSMRE distributed payments to both certified and uncertified states and tribes from the Abandoned Mine Reclamation Fund subject to annual appropriations. Annual appropriations were generally lower than annual coal reclamation fees collected by OSMRE prior to the 2006 amendments, resulting in an accumulation in the unappropriated balance of the Abandoned Mine Reclamation Fund. Section 411(h)(1) of SMCRA authorized "Prior Balance" payments equivalent to state and tribal share of the unappropriated balance of past coal reclamation fee receipts through annual federal payments to both uncertified and certified states and tribes from FY2008 through FY2014 from the General Fund of the U.S. Treasury. The Prior Balance payments were fully paid out by the end of FY2014, with the exception of the state of Wyoming (discussed above), which received a retroactive payment in FY2016 for amounts owed to the state because of statutory caps that were lifted. States and tribes no longer receive these prior balance payments. The accumulated balance of past coal reclamation fees collected prior to the 2006 amendments has remained credited to the Abandoned Mine Reclamation Fund and continues to accrue interest annually from investments in U.S. Treasury securities. <3. Unfunded Reclamation Cost Estimates> States and tribes report site specific information to OSMRE about the reclamation of eligible AML projects. OSMRE hosts the Abandoned Mine Land Inventory System (AMLIS) database that presents information on total eligible mine reclamation costs by state and tribe, which may be categorized by unfunded, funded, and completed costs. The costs to complete reclamation at a particular site would depend on the scope and nature of actions necessary to mitigate the potential hazards and any technical or engineering challenges to implement the selected actions. OSMRE tracks AML reclamation project costs under three separate categories to identify the costs of completed projects and to estimate funding needs for future projects: 1. "Unfunded Costs" are based on estimates by states and tribes to implement projects for which funding is not available or has not been approved by OSMRE. 2. "Funded Costs" are based on estimates by states and tribes to implement projects for which funding is available and for which OSMRE has approved the funds. 3. "Completed Costs" are the actual costs of projects upon completion that states or tribes report to OSMRE. According to AMLIS, the total unfunded costs for uncertified and certified states and tribes was approximately $12.4 billion as of January 21, 2020. Of that total amount, the total unfunded cost estimates for uncertified states were approximately $12 billion, representing roughly 97% of the remaining unfunded reclamation needs. Unfunded reclamation cost estimates depend on the number of unreclaimed sites and on the severity of the reclamation problems as defined by the "Priority" level, per Section 403, for each unclaimed site in the state ( Table 1 ). Uncertified states reported Priority 2 costs as approximately $7.5 billion, or approximately 62% of the total uncertified unfunded reclamation costs. The remaining 38% of the unfunded costs for uncertified states are associated with Priority 1 and Priority 3 issues. Uncertified states reported Priority 1 issues as the smallest portion of unfunded cost estimates, but these sites generally represent the most severe hazards and most urgent priorities. Uncertified states reported the total unfunded reclamation cost for Priority 1 sites as roughly $1.8 billion. Two states, Pennsylvania and West Virginia, reported combined unfunded reclamation costs as $8.4 billion, representing approximately 66% of the total unfunded reclamation costs reported for all uncertified states. Pennsylvania reported the highest unfunded reclamation costs of any state, as reclamation cost estimates exceed $5 billion. OSMRE periodically updates funding estimates for sites in the AMLIS inventory. Thus, the number of priority sites in each funding category may change periodically. Future funding requirements may change as unforeseen contamination and remediation may be discovered or arise. Recent congressional hearing testimony by a Pennsylvania state official describes the challenges state programs face when attempting to catalog AML issues: Identifying and categorizing AML sites was among the first objectives for the AML program at its outset, and many of the cost estimates contained in the federal eAMLIS inventory were developed when the sites were initially inventoried in the early to mid-1980s. With time, the scale and depth of the AML problem has become better understood. However, it is in the nature of AML's that previously unknown sites will continue to manifest (particularly those associated with abandoned underground mines) and that known sites will continue to degrade, both of which increase the number of sites and the total cost to complete remaining AML reclamation work. With advancements in technology, the collection of more complete maps and mining records, and increased awareness and identification of these sites by local residents, many additional AML hazards have been and will continue to be identified and added to the AML inventory. Annual reclamation grants to states and tribes are based on the statutory formula described previously, and these grants are not based on reclamation needs. For example, several uncertified states reported similar unfunded reclamation costs: Indiana, Illinois, Oklahoma, and Missouri. The FY2020 grants received by those states, however, varied between $2.82 million and $11.7 million. Comparing FY2020 grants to the total unfunded reclamation costs suggests that some states or tribes may require annual grants for additional years or decades to completely fund reclamation needs. For example, Kansas reported $810 million in unfunded reclamation costs while receiving the minimum program make up fund amount of $2.82 million in FY2020. States and tribes may identify additional reclamation needs post-certification ( Table 2 ). A Wyoming state official described the ongoing reclamation challenges that the state continues to manage under their AML program. According to his written testimony, he described the state's awareness of AML issues as improved since the state achieved certification in 1984: Wyoming became a certified state under Title IV on May 25, 1984. Wyoming became certified on the basis of the best available information at the time. Early work to develop the inventory was essentially done through "boots on the ground." As our understanding of historic mining in the state has improved our AML inventory has continued to grow. <4. Federal Financial Assistance for UMWA Health and Pension Benefit Plans> Eligible UMWA members (including family members) receive post-retirement health and pension benefits from one of three multiemployer health benefit plans and one multiemployer pension plan. These plans include the Combined Benefit Fund, the 1992 Benefit Plan, the 1993 Benefit Plan, and the 1974 UMWA pension plan. These plans are funded by premiums paid by employer contributions and two sources of federal financial assistance authorized under SMCRA. Section 402(h) authorizes transfers of interest from the Abandoned Mine Reclamation Fund to the UMWA health plans on an annual basis if the annual contributions from employers are not sufficient to cover liabilities for benefit coverage each year. Section 402(i) also authorizes supplemental payments from the General Fund of the U.S. Treasury on an annual basis if the interest that accrues on the balance of the Abandoned Mine Reclamation Fund is not sufficient to ensure benefit coverage each year. General Fund payments to the UMWA plans and to certified states and tribes combined are subject to a statutory cap of $750 million per year. Each of these sources is authorized in SMCRA as permanent appropriations that result in direct federal spending (i.e., mandatory spending not subject to discretionary spending controlled through annual appropriations acts). Figure 2 shows the transfers of monies from the Abandoned Mine Reclamation Fund and the General Fund to eligible states and tribes for AML reclamation projects and other uses and to the UMWA plans. <4.1. Interest Transfers from the Abandoned Mine Reclamation Fund> In response to rising concern in the early 1990s about the potential insolvency of UMWA health benefit plans, the Coal Industry Retiree Health Benefit Act of 1992 ( P.L. 102-486 , Title XIX, Subtitle C of the Energy Policy Act of 1992) authorized the annual transfer of interest from the Abandoned Mine Reclamation Fund to three UMWA health benefit plans beginning in FY1996. Like other federal trust funds invested in U.S. Treasury securities, the interest that accrues on the invested balance of the Abandoned Mine Reclamation Fund is derived from the General Fund of the U.S. Treasury through an intergovernmental transfer. Receipts from coal reclamation fees invested in U.S. Treasury securities serve as the basis for calculating the interest that accrues to the Abandoned Mine Reclamation Fund. However, the fees do not function as "principal" in the same manner as private investments. Because the interest is sourced from existing receipts in the General Fund, the interest does not increase total receipts in the U.S. Treasury. The interest payments to the UMWA health plans are supplemented by payments from the General Fund if the interest is insufficient. The General Fund is therefore the source of receipts within the federal budget for both the interest and the supplemental payments to support the UMWA health and pension benefit plans. The General Fund consists of receipts from individual and corporate income taxes and other miscellaneous receipts not dedicated to other accounts of the U.S. Treasury. None of the coal reclamation fees credited to the Abandoned Mine Reclamation Fund are available to fund the UMWA benefit plans in current law. <4.2. Supplemental Payments from the General Fund of the U.S. Treasury> If employer contributions and the interest accrued to the Abandoned Mine Reclamation Fund are not sufficient to ensure UMWA health benefit coverage each year, the 2006 amendments to SMCRA authorized permanent appropriations for supplemental payments from the General Fund to pay the balance of benefits that would otherwise not be covered. The amendments authorized permanent appropriations for these General Fund supplemental payments beginning in FY2008 and "each fiscal year thereafter" without a termination date. The supplemental payments from the General Fund have become the larger source of federal funding to help ensure health benefit coverage under the UMWA plans (see Figure 3 and Figure 4 ), as the benefit obligations of the plans have exceeded the availability of interest that annually accrues on the invested balance of the Abandoned Mine Reclamation Fund. <4.3. Bipartisan American Miners Act of 2019> In the 116 th Congress, the Bipartisan American Miners Act of 2019 ( P.L. 116-94 ; Further Consolidated Appropriations Act, 2020, Division M) increased the availability of federal financial assistance to address the solvency of the UMWA health and pension benefit plans, subject to a new statutory funding cap to control federal direct spending for this purpose. The act amended Section 402(h) of SMCRA to expand the eligibility of the UMWA health benefit plans for interest transfers from the Abandoned Mine Reclamation Fund and General Fund supplemental payments. The act also amended Section 402(i) of SMCRA to authorize General Fund payments for the 1974 UMWA pension plan and increased the total spending cap on Title IV General Fund payments from $490 million to $750 million annually to help fund the UMWA pension plan. The 2006 amendments to SMCRA authorized General Fund supplemental payments for the UMWA health benefit plans beginning in FY2008 but no federal funding for the 1974 UMWA pension plan. The 2006 amendments limited the eligibility of the UMWA health benefit plans for federal funding based on beneficiaries enrolled to receive health benefits as December 31, 2006. Funding needs for the 1993 UMWA health benefit plan continued to increase after this cut-off date as additional beneficiaries enrolled in that plan in later years. Certain coal mining company bankruptcies after 2006 also affected health benefit coverage for other retirees. Subsequent amendments to SMCRA in the 114 th and 115 th Congresses expanded the populations of beneficiaries who could be eligible for federal payments to the UMWA health benefit plans. Prior to the Bipartisan American Miners Act, Section 402(h)(2)(C) of SMCRA limited General Fund supplemental payments for the 1993 UMWA health benefit plan based on funding needs to cover beneficiaries enrolled in that plan as of May 5, 2017 (with coverage retroactive to January 1, 2017) and retirees whose benefits were denied or reduced as a result of coal mining company bankruptcies commenced in 2012 and 2015. Since that time, funding needs to cover health benefits for additional populations of retirees have increased. The Bipartisan American Miners Act amended Section 402(h)(2)(C) of SMCRA again to expand the eligibility of the 1993 UMWA health benefit plan for General Fund supplemental payments to cover beneficiaries eligible as of January 1, 2019, and retirees whose benefits were denied or reduced as a result of coal mining company bankruptcies commenced in 2018 and 2019. This expansion of eligibility for federal funding to ensure health benefit coverage for these additional populations of beneficiaries may lead to increases in General Fund supplemental payments to the UMWA health benefit plans. The Bipartisan American Miners Act of 2019 also authorized annual General Fund payments to the 1974 UMWA pension plan to address the solvency of that plan. The act established a new cap of $750 million annually on the aggregate amount of General Fund payments to certified states and tribes, UMWA health benefit plans, and the UMWA pension plan combined. The cap serves as a mechanism to control federal direct spending from the U.S. Treasury. After in lieu payments to certified states and tribes and supplemental payments to the UMWA health benefit plans each fiscal year, the act authorizes any remaining amount within the $750 million annual cap to be transferred to the UMWA pension plan. If the aggregate annual certified state and tribal payments and the supplemental payment for the UMWA health plans would exceed $750 million in a fiscal year, the UMWA health plans would be reduced to the cap, and the UMWA pension plan would not receive a federal payment that fiscal year. SMCRA gives funding priority to certified state and tribal payments that would not be reduced by the $750 million annual cap unless the amount for this purpose alone otherwise would exceed the cap. Given that certified state and tribal payments are based on shares of coal reclamation fees, these payments would not reach the cap unless coal production in certified state and tribal lands were to rise several fold compared to recent fiscal years. Supplemental payments to UMWA health plans may vary depending on the availability of interest accrued on the unappropriated balance of the Abandoned Mine Reclamation Fund, the annual funding needs of the plans, and the amount available within the $750 million annual cap for supplemental payments. General Fund payments to the 1974 UMWA pension plan would also depend on how much funding is remaining each year within the $750 million annual cap after certified state and tribal payments and the supplemental payment to the UMWA health benefit plans. <5. Title IV SMCRA Appropriations: FY2008-FY2020> Appropriations from the Abandoned Mine Reclamation Fund include uncertified state shares, historic coal funds, minimum program make up funds, interest transfers to UMWA health benefit plans, and OSMRE administrative program funding ( Figure 3 and Figure A-1 ). Annual grants to uncertified states from the Abandoned Mine Reclamation Fund are permanent appropriations except for the OSMRE program funding, which Congress provides to OSMRE through annual appropriations. Total appropriations from the Abandoned Mine Reclamation Fund from FY2008 to FY2020 have totaled approximately $3.1 billion ( Table 3 ). Permanent appropriations from the General Fund of the U.S. Treasury include in lieu state share payments to certified states and tribes and UMWA supplemental payments. The General Fund also provided prior balance payments to certified states and tribes and uncertified states in several installments from FY2008 through FY2014, with a retroactive payment to the state of Wyoming in FY2016 (See the discussion of "Prior Balance Payments" earlier in this report). From FY2008 to FY2020, General Fund payments authorized in Title IV of SMCRA totaled approximately $6.0 billion ( Table 3 ). Appropriations vary from year to year based on statutory requirements (such as the phase-in reductions and payments), the amount of coal fees collected in a given year (which determine the amount available for state and tribal payments), and the amount of supplement payments required for UMWA health benefit plans ( Figure 4 ). The Bipartisan American Miners Act of 2019 authorized annual payments from the General Fund to the UMWA pension plan retroactively back to FY2017 and subsequent fiscal years, among other provisions. The FY2020 payment of $1.6 billion to the UMWA pension plan included cumulative payments from FY2017 through FY2020. The amount available for each of these fiscal years was subject to the $750 million annual cap and was based on the remainder within the cap after the certified state and tribal payments and the supplemental payments for the UMWA health benefit plans. The $1.6 billion payment to the UMWA pension plan in FY2020 was the largest annual General Fund payment authorized under Title IV of SMCRA ( Figure 4 ). For FY2021 and subsequent fiscal years, General Fund payments to certified states and tribes and the UMWA health and pension benefit plans will remain subject to the $750 million annual cap. Certified state and tribal payments would cease after FY2022 in current law absent the reauthorization of coal reclamation fees upon which these payments are based. Since FY2008, supplemental payments to UMWA health benefit plans from the General Fund have contributed a greater amount than have interest transfers from the Abandoned Mine Reclamation Fund ( Table 3 ). Absent reauthorization of the coal reclamation fees, as the balance from the Abandoned Mine Reclamation Fund is paid down after FY2023, the interest payments would continue to have a relatively smaller contribution to UMWA health plans. Thus, the supplemental payments from the General Fund for the UMWA health plans would continue to contribute a larger share of contributions to the plans as the amount of interest payments decrease. From FY2008 to FY2020, UMWA health and pension plans received approximately $3.91 billion of the total $6.04 billion in General Fund payments authorized in Title IV of SMCRA ( Table 3 ). That amount was nearly twice the total amount of grants paid to uncertified states from the Abandoned Mine Reclamation Fund (approximately $2.03 billion from the aggregate of the uncertified state shares, historic coal funds, and minimum program make up funds for FY2008 to FY2020) for the reclamation of abandoned coal mining sites during that same time period. Whereas funding for reclamation grants is dependent on coal reclamation fee collections, most of the UMWA plan funding is tied to the $750 million annual cap on General Fund payments, which are not financed with these fees. OMB estimates that coal reclamation fee receipts would continue to decline through FY2021, after which time the fee collection authority expires in current law. The Budget Control Act of 2011 provides a measure to control federal spending by placing a percent reduction on permanent appropriations to remain within prescribed caps. The percent reduction may vary each year depending on how much of a reduction is needed to remain within the cap. Sequestration reductions apply to permanent appropriations from General Fund and Abandoned Mine Reclamation Fund permanent appropriations as of FY2013. Congress has also appropriated monies from the General Fund for the Abandoned Mine Land Reclamation Economic Development Pilot Program. These appropriations have been authorized in annual appropriations and are not authorized in Title IV of SMCRA. <6. Reauthorization Issues and Related Legislation> Congress previously reauthorized the fee under the Surface Mining Control and Reclamation Act Amendments of 2006, and that authorization is set to expire at the end of FY2021. Some Members of Congress have introduced legislation in the 116 th Congress that would reauthorize the coal reclamation fee and authorize funds from the existing balance of the Abandoned Mine Reclamation Fund for economic and community development. Various issues are discussed in the following sections. <6.1. Fee Reauthorization> Given that the balance of the Abandoned Mine Reclamation Fund is less than 20% of the estimated unfunded reclamation needs, Congress may consider whether and how to fund the remaining coal reclamation needs. Abandoned coal mining sites that remain unreclaimed are expected to continue to pose hazards to public health, safety, and the environment. If the coal reclamation fees are not reauthorized beyond FY2021, Section 401 of SMCRA directs the unappropriated balance of the Abandoned Mine Reclamation Fund to be distributed among eligible states over a series of fiscal years beginning in FY2023 based on what the state received in FY2022 as its share of fee collections from the prior year. Those payments would continue in that same amount each fiscal year thereafter until the balance of the fund is expended. In FY2020, OSMRE reported that the unappropriated balance of the Abandoned Mine Reclamation Fund was approximately $2.2 billion. Reclamation grants to eligible states therefore would likely continue for some years, even if coal reclamation fees were not reauthorized after FY2021. If the fee collection is not reauthorized, the fees collected in FY2022 will dictate the annual rate of grants to eligible states starting in FY2023 until the unappropriated balance is expended. Those amounts are based on coal production or the value of the coal produced in FY2022, whichever is less. If the coal reclamation fees are not reauthorized, one potential option for Congress would be to appropriate from the General Fund to meet remaining needs after the balance of the Abandoned Mine Reclamation Fund is expended. Congress was faced with a similar issue in the debate over the reauthorization of Superfund excise taxes for the Superfund Trust Fund under CERCLA ( P.L. 96-510 ). From the enactment of CERCLA in 1980 through FY1995, the balance of the Superfund Trust Fund was provided by revenues from the collection of a Superfund excise tax on petroleum, chemical feedstocks, corporate income, transfers from the General Fund, and other receipts. The authority to collect those Superfund excise taxes expired in FY1995, leaving revenues from the General Fund as the primary source of money to the Superfund Trust Fund. <6.1.1. Reauthorizing Legislation> The Abandoned Mine Land Reclamation Fee Extension Act ( S. 1193 ), introduced in the 116 th Congress, would amend Section 402(b) of SMCRA, extending the fee collection authorization date until September 30, 2036. As introduced, S. 1193 would authorize OSMRE to collect coal reclamation fees under Section 402, and OSMRE would begin fixed payments from the unappropriated balance on the Abandoned Mine Reclamation Fund to uncertified states beginning in FY2023 based upon their FY2022 grants, according to Section 401(f)(2)(B). The Surface Mining Control and Reclamation Act Amendments of 2019 ( H.R. 4248 ) would amend Section 402(b) of SMCRA and Section 401(f) of SMCRA. This bill would extend the fee collection authorization date until September 30, 2036, and grants to eligible states and tribes would continue to be paid out annually according to the statutory formula until after FY2037. The bill would also increase the minimum payments to uncertified states from $3 million to $5 million and authorize compensation to uncertified states from the Abandoned Mine Reclamation Fund for the total amount reduced by sequestration between FY2013 and FY2018. In FY2020, 11 uncertified states together received approximately $21.9 million in minimum program make up funds, and 3 other uncertified states received less than $5 million. Raising the cap would increase payments to uncertified states receiving less than the current $3 million cap and may change the number of uncertified states eligible for minimum program make up funds. The extent to which more uncertified states become eligible would depend on future coal production in that state, coal production in certified states contributing to historic payments, and the value of coal generated. In the event the Congress enacts legislation reauthorizing the coal reclamation fee, the adequacy of those receipts to pay for the remaining unfunded reclamation costs would depend on domestic coal production, the duration of fee extension, and the emergence of additional reclamation needs. Given that the unfunded reclamation costs may be updated or subject to change based on the discovery or the occurrence of new health and safety or environmental issues, predicting the duration to reauthorize the fees to fund the remaining unfunded reclamation costs is challenging. Additionally, eligible states and tribes continuously update unfunded costs estimates as new problems are discovered or arise. <6.2. Economic and Community Development> Other legislation introduced in the 116 th Congress would use a portion of the unappropriated balance of the Abandoned Mine Reclamation Fund to provide funding for AML reclamation projects that promote economic and community development, as well as the purposes and priorities of reclamation described in Section 403 of SMCRA. However, some have argued expending funding for AML projects to prioritize economic and community development deviates from the original congressional intent of prioritizing the reclamation of lands and waters impacted by historic coal mining sites to address health and safety issues. <6.2.1. Abandoned Mine Land Reclamation Economic Development Pilot Program> Congress authorized the Abandoned Mine Land Reclamation Economic Development Pilot Program (AML Pilot Program) in the Consolidated Appropriations Act, 2016 to determine the feasibility of reclaiming abandoned coal mining sites to facilitate economic and community development. Congress provides funding for the AML pilot program through annual appropriations from the General Fund of the U.S. Treasury, not from the Abandoned Mine Reclamation Fund financed with coal reclamation fees. From FY2016 to FY2020, Congress has appropriated a total $540 million from the General Fund to the AML pilot program. For states and tribes that receive discretionary appropriations for the AML pilot program, those funds are in addition to the permanent appropriations as reclamation grants to eligible states and tribes from the Abandoned Mine Reclamation Fund. Annual appropriations have limited the use of AML pilot program grants to fund reclamation projects only in Appalachian counties of eligible states in areas where the project would have the potential to facilitate economic or community development. SMCRA authorizes the broader use of grants from the Abandoned Mine Reclamation Fund to fund reclamation projects in any counties within an eligible state. <6.2.2. RECLAIM Act> In the 116 th Congress, House and Senate versions of the Revitalizing the Economy of Coal Communities by Leveraging Local Activities and Investing More Act of 2019 (RECLAIM Act) have been introduced ( H.R. 2156 and S. 1232 ). Those bills would authorize $1 billion over five years from the existing unappropriated balance of the Abandoned Mine Reclamation Fund for the reclamation of abandoned coal mining sites as a means to facilitate economic and community development in states and tribes with eligible reclamation programs under Title IV of SMCRA. The RECLAIM Act would distribute $195 million annually to uncertified states based on historic payments and averaged state share grants. House and Senate versions of the RECLAIM Act differ by the allocation of these funds to uncertified states. For uncertified states to obligate RECLAIM monies on AML projects, the state would be required to demonstrate that those projects satisfy the reclamation priorities described in Section 403 and would contribute to future economic or community development. Both introduced versions of the RECLAIM Act would provide $5 million annually to certified states and tribes. Certified states and tribes would submit an application for funds, and OSMRE would determine the distribution of those funds based on the demonstration of needs. Neither introduced version of the RECLAIM Act would reauthorize the collection of the coal reclamation fees. RECLAIM grants to eligible states and tribes would be in addition to the annual grants paid to states and tribes. If the RECLAIM Act were enacted and the fee collection authority were not reauthorized, the unappropriated balance of the Abandoned Mine Reclamation Fund would be paid out sooner compared to a scenario where neither RECLAIM nor fee reauthorization legislation were enacted. Both House and Senate versions of the RECLAIM Act would increase the minimum program make up funds to uncertified states from the Abandoned Mine Reclamation Fund from $3 million to $5 million annually. <6.2.2.1. Appendix.>

Coal mining and production in the United States during the 20 th century contributed to the nation meeting its energy requirements and left a legacy of unreclaimed lands. Title IV of the Surface Mining Control and Reclamation Act of 1977 (SMCRA, P.L. 95-87 ) established the Abandoned Mine Reclamation Fund. The Office of Surface Mining Reclamation and Enforcement (OSMRE) administers grants from the Abandoned Mine Reclamation Fund to eligible states and tribes to reclaim affected lands and waters resulting from coal mining sites abandoned or otherwise left unreclaimed prior to the enactment of SMCRA. Title IV of SMCRA authorized the collection of fees on the production of coal, which are credited to the Abandoned Mine Reclamation Fund. The use of this funding is limited to the reclamation of coal mining sites abandoned or unreclaimed as of August 3, 1977 (the date of SMCRA enactment). Title V of SMCRA authorized the regulation of coal mining sites operating after the law's enactment. Coal mining sites regulated under Title V are ineligible for grants from the Abandoned Mine Reclamation Fund. The balance of the Abandoned Mine Reclamation Fund is provided by fees collected from coal mining operators based on the volume or value of coal produced, whichever is less. The coal reclamation fee collection authorization in Title IV expires at the end of FY2021. If Congress does not reauthorize the collection of reclamation fees, SMCRA directs the remaining balance of the Abandoned Mine Reclamation Fund to be distributed among states and tribes receiving grants from the fund based on the FY2022 grant amounts. The FY2022 grant amounts would depend on the fees collected in FY2021, and payments from the fund would begin in FY2023, continuing annually until the balance has been expended. As of November 11, 2018, OSMRE reported that the unappropriated balance of the Abandoned Mine Reclamation Fund was approximately $2.3 billion. Reclamation grants to eligible states and tribes receiving grants from the Abandoned Mine Reclamation Fund would continue for some years until the balance is expended if coal reclamation fees are not reauthorized. The balance of the Abandoned Mine Reclamation Fund is several times less than the estimated unfunded reclamation costs. OSMRE recently reported estimates of the unfunded reclamation costs as $12.4 billion. Congress may consider whether and how to fund the remaining unfunded coal reclamation needs. If the fees are reauthorized, the adequacy of those receipts to pay the remaining unfunded reclamation needs would depend in part on decisions made by Congress (e.g., source of funds, duration of the fee extension, and fee rate). Additional factors include the status of domestic coal production, upon which the fees are based, and the potential emergence of additional reclamation needs. As introduced, H.R. 4248 and S. 1193 would amend SMCRA to extend the fee collection authorization at the current fee rates until September 30, 2036. SMCRA also authorizes federal financial assistance to United Mine Workers of America (UMWA) health and pension benefit plans for retired coal miners and family members who are eligible to be covered under those plans. Two sources of federal financial assistance to UMWA plans include interest transfers from the Abandoned Mine Reclamation Fund and supplemental payments from the General Fund of the U.S. Treasury. Should Congress not reauthorize the coal reclamation fees, as the balance from the Abandoned Mine Reclamation Fund is paid down, the interest transfers from the Abandoned Mine Reclamation Fund would make a relatively smaller contribution to the UMWA plans, increasing the reliance on General Fund payments for these plans. In the 116 th Congress, House and Senate versions of the RECLAIM Act ( H.R. 2156 and S. 1232 ) would authorize $1 billion over five years from the unappropriated balance of the Abandoned Mine Reclamation Fund for the reclamation of abandoned coal mining sites as a means of facilitating economic and community development in coal production states. Either of these bills would accelerate the expenditure of the remaining balance of the fund but would not reauthorize the reclamation fee.

crs_R46330

crs_R46330_0

<1. Introduction> Throughout U.S. history, Congress has created advisory commissions to assist in the development of public policy. Among other contexts, commissions have been used following crisis situations, including the September 11, 2001, terrorist attacks and the 2008 financial crisis. In such situations, advisory commissions may potentially provide Congress with a high-visibility forum to assemble expertise that might not exist within the legislative environment; allow for the in-depth examination of complex, cross-cutting policy issues; and lend bipartisan credibility to a set of findings and recommendations. As Congress considers its range of responses to the coronavirus pandemic, the creation of one or more congressional advisory commissions is an option that could provide a platform for evaluating various pandemic-related policy issues over time. Past congressional advisory commissions have retrospectively evaluated policy responses, brought together diverse groups of experts, and supplemented existing congressional oversight mechanisms. Policymakers may determine that creating an advisory commission is unnecessary and instead prefer to utilize existing congressional oversight structures, such as standing or select committees, or already established oversight entities. This report provides a comparative analysis of five proposed congressional advisory commissions that would investigate various aspects of the COVID-19 pandemic. The five proposed commissions are found in H.R. 6429 (the National Commission on COVID-19 Act, sponsored by Representative Stephanie Murphy), H.R. 6431 (the Made in America Emergency Preparedness Act, sponsored by Representative Brian Fitzpatrick), H.R. 6440 (the Pandemic Rapid Response Act, sponsored by Representative Rodney Davis), H.R. 6455 (the COVID-19 Commission Act, sponsored by Representative Bennie Thompson), and H.R. 6548 (the National Commission on the COVID-19 Pandemic in the United States Act, sponsored by Representative Adam Schiff). The overall structures of each of the proposed commissions are similar in many respects, both to each other and to previous independent advisory entities established by Congress. Specifically, the proposed commissions would (1) exist temporarily; (2) serve in an advisory capacity; and (3) report a work product detailing the commission's findings, conclusions, and recommendations. That said, each particular proposed commission has distinctive elements, particularly concerning its membership structure, appointment structure, and time line for reporting its work product to Congress. This report compares the (1) membership structure, (2) appointment structure, (3) rules of procedure and operation, (4) duties and reporting requirements, (5) powers of the commission, (6) staffing issues, and (7) funding for each of the proposed COVID-19 commissions. Table 1 (at the end of this report) provides a side-by-side comparison of major provisions of the five proposals. <2. Membership Structure> Several matters related to a commission's membership structure might be considered. They include the size of a commission, member qualifications, compensation of commission members, and requirements for partisan balance. <2.1. Size of Commission> In general, there is significant variation in the size of congressional advisory commissions. Among 155 identified congressional commissions created between the 101 st Congress and the 115 th Congress, the median size was 12 members, with the smallest commission having 5 members and the largest 33 members. The membership structure of each of the five proposed commissions is similar to previous independent advisory entities created by Congress. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would each create a 10-member entity. H.R. 6455 would create a 25-member entity. <2.2. Qualifications> Past legislation creating congressional commissions has often required or suggested that commission members possess certain substantive qualifications. Such provisions arguably make it more likely that the commission is populated with genuine experts in the policy area, which may improve the commission's final work product. H.R. 6455 would provide that commissioners "shall be a United States person with significant expertise" in a variety of fields related to public health and public administration. H.R. 6440 , H.R. 6429 , H.R. 6431 , and H.R. 6548 would provide "the sense of Congress" that commission members should be "prominent U.S. citizens" who are nationally recognized experts in a variety of fields relevant to the pandemic and response efforts. In addition, H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 all prohibit the appointment of federal, state, and local government employees and officers. H.R. 6455 would prohibit federal employees from being commission members. <2.3. Compensation of Commission Members> Some congressional commissions have compensated their members. For example, the National Commission on Terrorist Attacks Upon the United States (9/11 Commission) and the Financial Crisis Inquiry Commission provided that commission members could be compensated at a daily rate of basic pay. Nearly all have reimbursed members for travel expenses. Those that have provided for commissioner compensation most frequently provided compensation at the daily equivalent of level IV of the Executive Schedule. Each of the five proposals would provide that commission members be compensated at a rate "not to exceed the daily equivalent of the annual rate of basic pay" for level IV of the Executive Schedule, "for each day during which that member is engaged in the actual performance of duties of the Commission." Members of three proposed commissions would receive travel expenses, including a per diem. <2.4. Partisan Limitations> Each proposal provides a limit on the number of members appointed from the same political party. H.R. 6455 would provide that not more than 13 of its 25 members may be from the same party. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would provide that not more than 5 (of 10) members are from the same party. Most previous advisory entities created by Congress do not impose formal partisan restrictions on the membership structure. It may also be difficult to assess the political affiliation of potential members, who may have no formal affiliation (voter registration, for example) with a political party. Instead, most past advisory commissions usually achieve partisan balance through the appointment structure; for instance, by providing equal (or near-equal) numbers of appointments to congressional leaders of each party. <3. Appointment Structure> Past congressional commissions have used a wide variety of appointment structures. Considerations regarding appointment structures include partisan balance, filling vacancies, and the time line for making commission appointments. The statutory scheme may directly designate members of the commission, such as a specific cabinet official or a congressional leader. In other cases, selected congressional leaders, often with balance between the parties, appoint commission members. A third common statutory scheme is to have selected leaders, such as committee chairs and ranking members, recommend candidates for appointment to a commission. These selected leaders may act either in parallel or jointly, and the recommendation may be made either to other congressional leaders, such as the Speaker of the House and President pro tempore of the Senate, or to the President. Each of the five commission proposals would delegate most or all appointment authority to congressional leaders (including chamber, party, and committee leaders; see Table 1 for details). Additionally, H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 provide for one appointment to be made by the President. H.R. 6429 , H.R. 6431 , and H.R. 6548 would have the President appoint the commission's chair. H.R. 6455 has its membership appointed by the chairs and ranking members of designated House and Senate committees, and the Joint Economic Committee. H.R. 6455 does not provide any executive branch appointments. Attention to the proper balance between the number of members appointed by congressional leaders and by other individuals (such as the President), or to the number of Members of Congress required to be among the appointees, or to the qualifications of appointees, can be significant factors in enabling a commission to fulfill its congressional mandate. In general, a commission's appointment scheme can impact both the commission's ability to fulfill its statutory duties and its final work product. For instance, if the scheme provides only for the appointment of Members of Congress to the commission, it arguably might not have the technical expertise or diversity of knowledge to complete its duties within the time given by statute. Similarly, if the appointment scheme includes qualifying provisos so specific that only a small set of private citizens could serve on the panel, the commission's final work product may arguably only represent a narrow range of viewpoints. None of the proposed COVID-19 commissions specify whether Members of Congress may serve on the commission. <3.1. Partisan Balance in Appointment Authority> Most previous congressional advisory commissions have been structured to be bipartisan, with an even (or near-even) split of appointments between leaders of the two major parties. By achieving a nonpartisan or bipartisan character, congressional commissions may make their findings and recommendations more politically acceptable to diverse viewpoints. The bipartisan or nonpartisan arrangement can give recommendations strong credibility, both in Congress and among the public, even when dealing with divisive public policy issues. Similarly, commission recommendations that are perceived as partisan may have difficulty gaining support in Congress. In some cases, however, bipartisanship also can arguably impede a commission's ability to complete its mandate. In situations where a commission is tasked with studying divisive or partisan issues, the appointment of an equal number of majority and minority commissioners may serve to promote partisanship within the commission rather than suppress it, raising the possibility of deadlock where neither side can muster a majority to act. Each of the five proposals employs a structure where leaders in both the majority and minority parties in Congress would make appointments. H.R. 6429 , H.R. 6431 , and H.R. 6548 would provide for five majority and five minority appointments, including one for the President. H.R. 6440 would include two each by the Senate majority leader, the Senate minority leader, and the Speaker of the House, with one appointment by the House minority leader and one by the President, and the chair appointed by the Speaker and vice chair appointed by the Senate majority leader. H.R. 6455 would have 12 majority and 12 minority appointments made by the 12 committee chairs and ranking members and one member jointly appointed by the chair and vice chair of the Joint Economic Committee. <3.2. Vacancies> All five proposals provide that vacancies on the commission will not affect its powers and would be filled in the same manner as the original appointment. <3.3. Deadline for Appointments> Three of the bills propose specific deadlines for the appointment of commissioners. H.R. 6429 and H.R. 6548 provide that appointments are made between specific dates in January or February 2021. Further, H.R. 6429 provides that commission members could be appointed in September 2020, if there is no longer a COVID-19 public health emergency in effect as determined by the Secretary of Health and Human Services as of August 31, 2020. H.R. 6440 would require all appointments be made by December 15, 2020. H.R. 6455 would require appointments to be made within 45 days after enactment. H.R. 6429 , H.R. 6440 , and H.R. 6548 would start the commission's work in early 2021, as the commission cannot operate without the appointment of members. H.R. 6429 , however would provide that the proposed commission's work would begin no later than October 31, 2020, if members are appointed in September 2020. H.R. 6431 does not specify a deadline for the appointment of members. Typically, deadlines for appointment can range from several weeks to several months. For example, the deadline for appointments to the Antitrust Modernization Commission was 60 days after the enactment of its establishing act. The deadline for appointment to the Commission on Wartime Contracting in Iraq and Afghanistan was 120 days from the date of enactment. The deadline for appointment to the 9/11 Commission was December 15, 2002, 18 days after enactment of the act. <4. Rules of Procedure and Operations> While most statutes that authorize congressional advisory commissions do not provide detailed procedures for how the commission should conduct its business, the statutory language may provide a general structure, including a mechanism for selecting a chair and procedures for creating rules. None of the five COVID-19 commission proposals contain language that directs the process for potentially adopting rules of procedure. For a comparison of each proposed commission's specified rules of procedures and operations, see Table 1 . <4.1. Chair Selection> Each bill provides for the selection of a chair and/or vice chair of the commission. H.R. 6429 , H.R. 6431 , and H.R. 6548 would have the chair appointed by the President and the vice chair appointed by congressional leaders of the political party opposite the President. H.R. 6440 would have the chair appointed by the Speaker of the House (in consultation with the Senate majority leader and the House minority leader) and the vice chair appointed by the Senate majority leader (in consultation with the Speaker of the House and the Senate minority leader). H.R. 6455 would have the chair and vice chair chosen from among commission members by a majority vote of the commission, and would require the chair and vice chair to have "significant experience" in areas to be studied by the commission. <4.2. Initial Meeting Deadline> As with the timing of commission appointments, some authorizing statutes are prescriptive in when the commission's first meeting should take place. Three of the bills analyzed here provide specific time lines for the commission's first meeting. H.R. 6429 would require the first meeting to be no later than March 15, 2021, unless members are appointed in September 2020 (if no public health emergency exists). H.R. 6455 would require the first meeting within 45 days after the appointment of all commission members, which is given the 45-day deadline for appointment effectively a maximum of 90 days after enactment. H.R. 6548 would direct the commission to hold its initial meeting "as soon as practicable," but not later than March 5, 2021. H.R. 6431 and H.R. 6440 do not provide for an initial meeting deadline. Instead, they direct the commission to meet "as soon as practicable." <4.3. Quorum> Most commission statutes provide that a quorum will consist of a particular number of commissioners, usually a majority, but occasionally a supermajority. All five bills would provide for a quorum requirement. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would define a quorum as 6 (of 10) members. H.R. 6455 would provide that a quorum is 18 of 25 members (72%). <4.4. Public Access> All five commission bills would require commission meetings to be open to the public. Each bill would also require that reports be made publicly available. <4.5. Formulating Other Rules of Procedure and Operations> Absent statutory guidance (eithe r in general statutes or in individual statutes authorizing commissions), advisory entities vary widely in how they adopt their rules of procedure. In general, three models exist: formal written rules, informal rules, and the reliance on norms. Any individual advisory entity might make use of all three of these models for different types of decisionmaking. The choice to adopt written rules or rely on informal norms to guide commission procedure may be based on a variety of factors, such as the entity's size, the frequency of meetings, member preferences regarding formality, the level of collegiality among members, and the amount of procedural guidance provided by the entity's authorizing statute. Regardless of how procedural issues are handled, protocol for decisionmaking regarding the following operational issues may be important for the commission to consider at the outset of its existence: eligibility to vote and proxy rules; staff hiring, compensation, and work assignments; hearings, meetings, and field visits; nonstaff expenditures and contracting; reports to Congress; budgeting; and procedures for future modification of rules. None of the five COVID-19 commission proposals specify that the proposed commission must adopt written rules. <4.6. FACA Applicability> The Federal Advisory Committee Act (FACA) mandates certain structural and operational requirements, including formal reporting and oversight procedures, for certain federal advisory bodies that advise the executive branch. Three proposals ( H.R. 6429 , H.R. 6431 , and H.R. 6548 ) specifically exempt the proposed commission from FACA. Of the remaining two, FACA would also likely not apply to the commission proposed in H.R. 6455 because it would be appointed entirely by Members of Congress, although it only specifies that its final report is public, not whether it is specifically sent to Congress and/or the President. It is not clear that FACA would apply to the commission proposed in H.R. 6440 . Although it includes a presidential appointment and its report would be sent to both Congress and the President, its establishment clause specifies that the commission "is established in the legislative branch," and a super-majority of its members would be appointed by Congress. <5. Duties and Reporting Requirements> Most congressional commissions are generally considered policy commissions temporary bodies that study particular policy problems and report their findings to Congress or review a specific event. <5.1. General Duties> All five of the proposed commissions would be tasked with duties that are analogous to those of past policy commissions. While the specific mandates differ somewhat, all proposed commissions are tasked with investigating aspects of the COVID-19 pandemic and submitting one or more reports that include the commission's findings, conclusions, and recommendations for legislative action. H.R. 6440 would specifically require the commission to avoid unnecessary duplication of work being conducted by the Government Accountability Office (GAO), congressional committees, and executive branch agency and independent commission investigations. <5.2. Reports> Each proposed commission would be tasked with issuing a final report detailing its findings, conclusions, and recommendations. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 would provide that the commission "may submit" interim reports to Congress and the President, but do not provide time lines on when those reports might be submitted. In each case, the interim report would need to be agreed to by a majority of commission members. H.R. 6431 would also require the commission to submit a report on actions taken by the states and a report on essential products, materials, ingredients, and equipment required to fight pandemics. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 also specify that final reports shall be agreed to by a majority of commission members. H.R. 6455 does not specify a vote threshold for approval of its report. None of the bills make specific provisions for the inclusion of minority viewpoints. Presumably this would leave each commission with discretion on whether to include or exclude minority viewpoints. Past advisory entities have been proposed or established with a variety of statutory reporting conditions, including the specification of majority or super-majority rules for report adoption and provisions requiring the inclusion of minority viewpoints. In practice, advisory bodies that are not given statutory direction on these matters have tended to work under simple-majority rules for report adoption. <5.3. Report Deadlines> H.R. 6429 would require a final report one year after the commission's initial meeting. H.R. 6431 and H.R. 6440 would require a final report not later than 18 months after enactment. H.R. 6455 would require a final report to be published not later than 18 months after the commission's first meeting. H.R. 6548 would require a final report by October 15, 2021. This deadline could be extended by 90 days upon a vote of no fewer than 8 (out of 10) commission members. The commission could vote to extend its final report deadline up to three times, and would be required to notify Congress, the President, and the public of any such extension. While such a deadline would potentially give the commission a defined period of time to complete its work, setting a particular date for report completion could potentially create unintended time constraints. Any delay in the passage of the legislation or in the appointment process would reduce the amount of time the commission has to complete its work, even with the opportunity for the commission to extend its own deadline up to three times. The length of time a congressional commission has to complete its work is arguably one of the most consequential decisions when designing an advisory entity. If the entity has a short window of time, the quality of its work product may suffer or it may not be able to fulfill its statutory mandate on time. On the other hand, if the commission is given a long period of time to complete its work, it may undermine one of a commission's primary legislative advantages, the timely production of expert advice on a current matter. A short deadline may also affect the process of standing up a new commission. The selection of commissioners, recruitment of staff, arrangement of office space, and other logistical matters may require expedited action if short deadlines need to be met. <5.4. Report Submission> Of the five proposed commissions, four ( H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6548 ) are directed to submit their reports to both Congress and the President. H.R. 6455 requires that the report is made public. Most congressional advisory commissions are required to submit their reports to Congress, and sometimes to the President or an executive department or agency head. For example, the National Commission on Severely Distressed Public Housing's final report was submitted to both Congress and the Secretary of Housing and Urban Development. <5.5. Commission Termination> Congressional commissions are usually statutorily mandated to terminate. Termination dates for most commissions are linked to either a fixed period of time after the establishment of the commission, the selection of members, or the date of submission of the commission's final report. Alternatively, some commissions are given fixed calendar termination dates. All five commission proposals would provide for the commission to terminate within a certain period of time following submission of its final report. H.R. 6429 , H.R. 6431 , H.R. 6440 , and H.R. 6455 would each direct the commission to terminate 60 days after the submission; H.R. 6548 specifies a time line of 90 days after submission. <6. Commission Powers> Each of the five proposals would provide the proposed commission with certain powers to carry out its mission (see Table 1 for specifics). One general issue for commissions is who is authorized to execute such powers. In some cases, the commission itself executes its powers, with the commission deciding whether to devise rules and procedures for the general use of such power. In other cases, the legislation specifically authorizes the commission to give discretionary power to subcommittees or individual commission members. Finally, the legislation itself might grant certain powers to individual members of the commission, such as the chair. <6.1. Hearings and Evidence> All five bills would provide the proposed commission with the power to hold hearings, take testimony, and receive evidence. All five commissions would also be provided the power to administer oaths to witnesses. <6.2. Subpoenas> Four of the bills would provide the commission with subpoena power. H.R. 6440 would not provide subpoena power to the commission. H.R. 6429 , H.R. 6431 , and H.R. 6548 would provide that subpoenas could only be issued by either (1) agreement of the chair and vice chair, or (2) the affirmative vote of 6 (of 10) commission members. H.R. 6455 would require that a subpoena could only be issued by either agreement of the chair and vice chair or an affirmative vote of 18 (of 25) commission members. All four bills that would provide subpoena power contain substantially similar judicial methods of subpoena enforcement. <6.3. Administrative Support> All five of the bills would provide that the commission receive administrative support from the General Services Administration (GSA). The GSA provides administrative support to dozens of federal entities, including congressional advisory commissions. Each of the five bills would provide that GSA be reimbursed for its services by the commission. Each bill also provides that other departments or agencies may provide funds, facilities, staff, and other services to the commission. <6.4. Other Powers> Without explicit language authorizing certain activities, commissions often cannot gather information, enter into contracts, use the U.S. mail like an executive branch entity, or accept donations or gifts. All five bills direct that federal agencies provide information to the commission upon request. H.R. 6429 , H.R. 6431 , and H.R. 6548 would also provide that the commission could use the U.S. mails in the same manner as any department or agency, enter into contracts, and accept gifts or donations of services or property. <7. Staffing> The proposed COVID-19 commissions contain staffing provisions commonly found in congressional advisory commission legislation. Congressional advisory commissions are usually authorized to hire staff. Most statutes specify that the commission may hire a lead staffer, often referred to as a "staff director," "executive director," or another similar title, in addition to additional staff as needed. Rather than mandate a specific staff size, many commissions are instead authorized to appoint a staff director and other personnel as necessary, subject to the limitations of available funds. Most congressional commissions are also authorized to hire consultants, procure intermittent services, and request that federal agencies detail personnel to aid the work of the commission. <7.1. Director and Commission Staff> Four of the bills provide that the commission may hire staff without regard to certain laws regarding the competitive service; H.R. 6440 does not specifically exempt the commission from such laws. Four bills ( H.R. 6429 , H.R. 6431 , H.R. 6455 , and H.R. 6548 ) would authorize, but not require, the commission to hire a staff director and additional staff, as appropriate. Four proposals would limit staff salaries to level V of the executive schedule. Three of the bills would specifically designate staff as federal employees for the purposes of certain laws, such as workman's compensation, retirement, and other benefits. <7.2. Detailees> When authorized, some commissions can have federal agency staff detailed to the commission. All five bills would provide that federal employees could be detailed to the commission. Four bills would provide that the detailee would be without reimbursement to his or her home agency. H.R. 6440 would allow detailees on a reimbursable basis. <7.3. Experts and Consultants> All five bills would provide the commission with the authority to hire experts and consultants. Four of the bills limit the rate of pay for consultants to level IV of the Executive Schedule. H.R. 6440 does not specify a specific limit. <7.4. Security Clearances> Four bills would provide that federal agencies and departments shall cooperate with the commission to provide members and staff appropriate security clearances. H.R. 6440 does not contain a security clearance provision. <8. Funding and Costs> Commissions generally require funding to help meet their statutory goals. When designing a commission, therefore, policymakers may consider both how the commission will be funded, and how much funding the commission will be authorized to receive. Four of the five proposals specify a funding mechanism for the commission. How commissions are funded and the amounts that they receive vary considerably. Several factors can contribute to overall commission costs. These factors might include the cost of hiring staff, contracting with outside consultants, and engaging administrative support, among others. Additionally, most commissions reimburse the travel expenditures of commissioners and staff, and some compensate their members. The duration of a commission can also significantly affect its cost; past congressional commissions have been designed to last anywhere from several months to several years. <8.1. Costs> It is difficult to estimate or predict the potential overall cost of any commission. Annual budgets for congressional advisory entities range from several hundred thousand dollars to millions of dollars annually. Overall expenses for any individual advisory entity depend on a variety of factors, the most important of which are the number of paid staff and the commission's duration and scope. Some commissions have few full-time staff; others employ large numbers, such as the National Commission on Terrorist Attacks Upon the United States, which had a full-time paid staff of nearly 80. Secondary factors that can affect commission costs include the number of commissioners, how often the commission meets or holds hearings, whether or not the commission travels or holds field hearings, and the publications the commission produces. <8.2. Authorized Funding> Three of the bills ( H.R. 6429 , H.R. 6440 , and H.R. 6548 ) would authorize the appropriation of "such sums as may be necessary" for the commission, to be derived in equal amounts from the contingent fund of the Senate and the applicable accounts of the House of Representatives. H.R. 6429 and H.R. 6548 would provide that funds are available until the commission terminates. H.R. 6455 would authorize the appropriation of $4 million for the commission, to remain available until the commission terminates. H.R. 6431 does not include an authorization of appropriations. <9. Comparison of Proposals to Create a COVID-19 Commission> Table 1 provides a side-by-side comparison of major provisions of the five proposals. For each bill, the membership structure, appointment structure, rules of procedure and operation, duties and reporting requirements, proposed commission powers, staffing provisions, and funding are compared.

Throughout U.S. history, Congress has created advisory commissions to assist in the development of public policy. Among other contexts, commissions have been used following crisis situations, including the September 11, 2001, terrorist attacks and the 2008 financial crisis. In such situations, advisory commissions may potentially provide Congress with a high-visibility forum to assemble expertise that might not exist within the legislative environment; allow for the in-depth examination of complex, cross-cutting policy issues; and lend bipartisan credibility to a set of findings and recommendations. Others may determine that the creation of an advisory commission is unnecessary and instead prefer to utilize existing congressional oversight structures, such as standing or select committees. This report provides a comparative analysis of five congressional advisory commissions proposed to date that would investigate various aspects of the COVID-19 outbreak, governmental responses, governmental pandemic preparedness, and the virus's impact on the American economy and society. The overall structures of each of the proposed commissions are similar in many respects, both to each other and to previous independent advisory commissions established by Congress. Specifically, the proposed commissions would (1) exist temporarily; (2) serve in an advisory capacity; and (3) report a work product detailing the commission's findings, conclusions, and recommendations. That said, each proposed commission has unique elements, particularly concerning its membership structure, appointment structure, and time line for reporting to Congress. Specifically, this report compares and discusses the (1) membership structure, (2) appointment structure, (3) rules of procedure and operation, (4) duties and reporting requirements, (5) commission powers, (6) staffing, and (7) funding of the five proposed commission structures. The five proposals are found in H.R. 6429 (the National Commission on COVID-19 Act), H.R. 6431 (the Made in America Emergency Preparedness Act), H.R. 6440 (the Pandemic Rapid Response Act), H.R. 6455 (the COVID-19 Commission Act), and H.R. 6548 (the National Commission on the COVID-19 Pandemic in the United States Act).

crs_R45926

crs_R45926_0

For more than a decade, federal agencies have grappled with how to address climate change effects when implementing the Endangered Species Act of 1973 (ESA, or the Act). The ESA aims to protect threatened and endangered fish, wildlife, and plants from extinction. As set forth by Congress, one of the main purposes of the ESA is to "provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved." To conserve threatened and endangered species, the Act seeks to identify threatened or endangered species, facilitate recovery and conservation of these species, and minimize the effect of federal and private actions on these species and their habitats. The Supreme Court has stated that "[t]he plain intent of Congress in enacting this statute was to reverse the trend toward species extinction, whatever the cost." To achieve that purpose, Congress declared that "all Federal departments and agencies shall seek to conserve endangered species and threatened species and shall utilize their authorities" to further the ESA purposes. Under the ESA, two federal agencies the U.S. Fish and Wildlife Service (FWS) within the Department of the Interior and the National Marine Fisheries Service (NMFS) within the Department of Commerce (collectively, the Services) are primarily responsible for implementing the ESA. According to the Services, over 1,500 species of plants and animals receive some type of protection under the ESA. Since the early 21st century, some Members of Congress have urged the Services to factor in climate change effects when implementing the ESA. The Services, along with scholars and scientists, have acknowledged that the changing climate may threaten the survival of and habitat for some species. As noted by courts and legal scholars, the ESA does not expressly require the Services to consider the effect of climate change in their ESA decisions. However, the ESA and its implementing regulations (1) direct the Services to consider "natural or manmade factors affecting [a species'] continued existence" when determining whether a species should be protected under the ESA; and (2) require the Services to analyze cumulative effects on a species' survival when analyzing whether federal actions jeopardize a species protected under the Act. The courts and the Services have interpreted these provisions as requiring the Services to consider climate change effects into the ESA decisionmaking process. Various lawsuits have challenged the Services' interpretation of complex scientific data or models that predict short- and long-term effects from a changing global climate on specific species and their habitats. These lawsuits typically focus on two main issues: (1) when the Services should list, delist, or reclassify a species as threatened or endangered because of climate change effects; and (2) whether the Services can or should regulate activities that affect the climate to protect the species. Judicial review has helped to ensure that the Services consider projected climate change effects on species in their ESA decisions, but the courts have not required the Services to curb activities that may contribute to climate change to protect threatened or endangered species. This report analyzes the courts' role in shaping how the Services have factored climate change effects into ESA decisions and recent regulatory developments that seek to clarify how the Services consider and address climate change in their ESA decisions. <1. Judicial Review Under the ESA> In general, stakeholders challenge the Services' ESA actions or inactions under the Administrative Procedure Act (APA). The APA authorizes reviewing courts to "hold unlawful and set aside agency actions, findings, and conclusions found to be arbitrary, capricious, [or] an abuse of discretion." Under the arbitrary and capricious standard, courts must determine whether the agency "examine[d] the relevant data and articulate[d] a satisfactory explanation for its action, including a 'rational connection between the facts found and the choice made,'" but the standard prohibits courts from "substitut[ing] its judgment for that of the agency." Under this deferential standard, courts have generally deferred to the Services' decisions related to climate change. However, courts have not deferred to the Services when the court concludes that the record does not support the Services' decision or the Services failed to consider climate change adequately. The sections below offer selected examples, drawn from various court decisions, legal documents, and regulatory developments, to illustrate the range of issues that the Services and the courts have addressed related to the ESA and climate change. Each section of the report reviews the applicable legal framework and discusses the relevant regulatory revisions finalized by the Trump Administration in August 2019. This report does not aim to provide a comprehensive or representative preview of all the judicial decisions that have addressed this area. <2. Listing Decisions Under the ESA> Many legal challenges involving the ESA and climate change have centered on whether to list a species as endangered or threatened under the ESA. To trigger protections and prohibitions under the ESA, the Services must first list a species as threatened or endangered. Under ESA Section 4, the Services list a species as endangered or threatened based on assessments of the risk of their extinction. The Act defines an "endangered species" as a species "in danger of extinction throughout all or a significant portion of its range." A "threatened species" is a species "likely to become endangered within the foreseeable future in all or a significant portion of its range." For listing decisions, the ESA requires the Services to determine whether the species "is a threatened or endangered species because of any of the following factors: (A) the present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence." When listing a species, the Services must make their decision "solely on the basis of the best scientific and commercial data available . . . after conducting a review of the status of the species," taking into account any state's or foreign nation's actions to protect such species. Courts have consistently held that the Services must consider climate change as a factor in their listing decisions if it may affect the survival of the species. However, stakeholders have disputed the extent to which climate change affects species and the science underpinning listing decisions. Some stakeholders have sought through petitions and legal challenges to compel the Services to list species whose survival has been or may be threatened by climate change effects. Other stakeholders have challenged the listing of species or petitioned the Service to delist a species, questioning whether model-based climate predictions constitute the "best scientific and commercial data available" on which to base ESA listing decisions. Scientific uncertainty and undefined terms in the ESA have opened the door to litigation challenging the Services' interpretation of ambiguous terms and their assessment of the climate science that supports their listing decisions. Courts often uphold the Services' interpretation of ambiguous terms because judicial review of agency decisions is narrow and highly deferential; the court will not set aside an ESA listing decision so long as it is rational and reasonably based on supporting evidence. However, courts have faulted the Services for inadequately considering climate change effects or relying on the scientific uncertainty of climate modeling to deny a petition to list a species. The two sections below discuss various court decisions that have reviewed how the Services (1) interpret the undefined "foreseeable future" in their listing decisions, and (2) address the scientific uncertainty of climate change effects. <2.1. Foreseeability of Climate Change Effects in Listing Decisions> Legal challenges to Services' decisions to list or not to list a species as threatened highlight the difficulty in predicting whether a species is likely to be endangered "within the foreseeable future" because of climate change effects. Neither the ESA nor the implementing regulations define the term foreseeable future . Under their interpretation of the term, the Services determine foreseeability on a case-by-case basis for listing decisions, and the foreseeable future time frame can vary considerably based on the species and its habitat. For species affected by climate change, the Services' decisions on foreseeability of a species' survival often depend on their assessment of predictive modeling of climate threats to a species and its habitat. How a Service defines a species' foreseeable future could affect its ESA listing decision. For example, a species is less likely to be listed for protection under the ESA if the Services adopt a shorter time frame for the foreseeable future, thereby limiting their consideration of longer-term projections of climate change effects on a species and its habitat. The legal challenges to FWS's listing of the polar bear ( Ursus maritimus ) illustrate how courts have applied this narrow and deferential standard of review and interpreted the ESA standards for the best available data in the climate change context. In 2013, in Safari Club International v. Salazar (In re Polar Bear Endangered Species Act Listing and Section 4(d) Rule Litigation) (hereinafter In re Polar Bear ), the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) upheld FWS's listing of polar bears as a threatened species under the ESA based in part on projected climate change effects to the species and its habitat. FWS based its decision on three main conclusions: (1) that the polar bear is dependent on sea ice for its survival; (2) that sea ice is declining; and (3) that climate change will likely continue to reduce the extent and quality of arctic sea ice gravely enough to endanger the polar bear population. The D.C. Circuit held that the challenges to FWS's scientific assessment and conclusions "'amount to nothing more than competing views about policy and science,' on which we defer to the agency." The court also rejected arguments that climate science was too uncertain to support listing the polar bear as a species that is likely to become endangered in the "foreseeable future," defined by FWS in this case as 45 years in the future. The court concluded that FWS's reliance on climate projections was "justifiable[,] clearly articulated[,] . . . sufficient to support their definition of foreseeability." The Supreme Court declined to review the case. In 2016, the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) similarly deferred to the NMFS's foreseeable future analysis in upholding the listing of two populations of Arctic bearded seals ( Erignathus barbatus nauticus ) in Alaska Oil & Gas Association v. Pritzker . NMFS listed the seals as threatened in 2012 based on climate change models that predicted that sea ice the seals depend on for birthing and mating would mostly disappear by 2095. In rejecting the plaintiffs' claim that the models used in the listing decision could not reliably predict climate change effects on the seals beyond 2050, the Ninth Circuit concluded that NMFS may base its listing decision on such models and long-term projections because the record included a reasonable explanation for its decision. The court explained that the ESA does not require NMFS to base its decision on ironclad evidence when it determines that a species is likely to become endangered in the foreseeable future; it simply requires the agency to consider the best and most reliable scientific and commercial data and to identify the limits of that data when making a listing determination. Soon after the bearded seal decision, the Ninth Circuit reversed an Alaska federal district court's decision to vacate NMFS's decision to list the Arctic subspecies of the ringed seal ( Phoca hispida hispida ) as threatened under the ESA. Bound by the precedent set in Pritzker , the Ninth Circuit concluded that the district court erred when it required more "definitive quantitative data about the Arctic ringed seal population and an extinction threshold" to list the species as threatened under the ESA. The court determined that NMFS's reliance on climate change models that project until 2100 was not arbitrary or capricious because NMFS "provided a reasonable and scientifically supported methodology for addressing volatility in its long-term climate projections, and it represented fairly the shortcomings of those projections that is all the ESA requires." Courts have also deferred to NMFS's decisions not to list species when it reasonably demonstrated that long-term predictive climate models were unreliable to support a listing decision. For example, a federal district court in California upheld NMFS's decision not to list the ribbon seal ( Histriophoca fasciata ) as threatened or endangered despite a "likely" population decline related to sea ice loss and ocean acidification. The court held that NMFS reasonably relied on a 40-year time horizon, from 2010 to 2050, to project negative effects from climate change on the sea ice habitat because it determined the models beyond 2050 were unreliable. The court deferred to NMFS's expertise in upholding NMFS's determination that, based on this time frame, the ribbon seal was not likely to become endangered or in danger of extinction in the foreseeable future because the seal is resilient and adaptable to climate change effects on its habitat. The court concluded that NMFS did not err when it determined that climate models after 2050 were "unreliable" and "too divergent" to use in assessing future threats to the ribbon seal. NMFS determined that the climate models were "too heavily dependent" on estimated greenhouse gas (GHG) emissions from different types of future regulatory controls. These foreseeability cases highlight the courts' willingness to defer to the Services' interpretation of climate modeling data and the foreseeability of climate change effects if the record for the listing decision includes a reasonable explanation for their decision that acknowledges limits or uncertainty in the data. As such, the Services continue to evaluate the foreseeability on a case-by-case basis. <2.1.1. Defining "Foreseeable Future" in ESA Regulations> In August 2019, the Services finalized revisions to the ESA regulations to define the "foreseeable future" as extending "only so far into the future as the Services can reasonably determine that both the future threats and the species' responses to those threats are likely." Prior to this final rule, neither the ESA nor the implementing regulations defined the term foreseeable future . In the final rule, the Services emphasized that it would continue to evaluate the range of uncertainty and probabilities associated with the best available science and projected data on climate change effects to individual species and their habitat. It is unclear whether these changes will (1) affect how the Services evaluate long-term projections of climate change effects on species, or (2) promote greater uniformity and consistency within and between FWS and NMFS in their listing evaluations. Some stakeholders noted that the final rule merely codified the Services' existing practice in determining the foreseeable future for species. Other stakeholders expressed concerns that this definition of foreseeable future would limit consideration of long-term projected threats from climate change. In their lawsuit challenging the final rule, plaintiffs claim that demanding that both threats and responses to threats be "likely" in the foreseeable future imposes an "increased certainty requirement" that will deny protection under the ESA for species from the future effects of climate change. <2.2. Scientific Uncertainty in Listing Decisions> The legal challenges to the Services' foreseeable future determinations highlight how scientific uncertainty plays a large role in evaluating climate change effects. Similar to the foreseeability cases, courts have faulted the Services for claiming scientific uncertainty without adequate explanation when declining to list a species. This section discusses some examples where stakeholders have challenged FWS's approach to scientific uncertainty in its decisions to not list a species or delist a species under the ESA. To delist a species under the ESA, the Services must determine that none of the five factors considered in listing the species (i.e., destruction or modification of its habitat or range; overutilization for commercial, recreational, scientific, or educational purposes; disease or predation; inadequate existing regulatory protections; and other factors affecting its continued existence) threatens or endangers the species. Delisting determinations must be made "solely on the basis of the best available scientific and commercial information regarding a species' status, without reference to possible economic or other impacts of such determination." Similar to judicial review of listing decisions discussed above, courts have generally deferred to FWS's decisions regarding scientific uncertainty of climate data unless FWS fails to justify why such uncertainty supports its listing decision. For example, in 2011, the Ninth Circuit in Greater Yellowstone Coalition Inc. v. Servheen vacated and remanded FWS's delisting of the Yellowstone grizzly bear ( Ursus arctos horribilis ) as a threatened species, partly because FWS failed to justify why declines in whitebark pine a primary source of food for grizzlies due to climate change were not likely to threaten the Yellowstone grizzly bear population. While acknowledging that courts generally defer to the Services' expertise, the Ninth Circuit refused to defer to FWS's "arbitrary" and unsupported claims of scientific uncertainty regarding the effect that declining food supplies resulting from climate change may have on grizzly bears. Relying on evidence that climate change reduced available whitebark pine seeds, increased grizzly bear mortality, and decreased grizzly bear reproduction, the court concluded that overall declines in the grizzly bear's food source from climate change effects in the Yellowstone region would logically have a "negative effect on its grizzly bear population." In 2018, the Ninth Circuit similarly rejected FWS's decision not to list the Upper Missouri River Valley distinct population segment of Arctic grayling ( Thymallus arcticus ) as endangered or threatened. In Center for Biological Diversity v. Zinke , the court held that FWS acted arbitrarily and capriciously when it failed to explain why the uncertainty of climate change effects on the Arctic grayling supported not listing it. The court faulted FWS for (1) refusing to make any projections with respect to the synergistic effects of climate change "simply because of uncertainty," and (2) disregarding the additive effects of climate change in considering the effects of low stream flows and high water temperatures on the species. Other courts have similarly faulted FWS for requiring a greater level of scientific certainty or evidence than the ESA requires with respect to climate change effects on a species in its listing determination. In Defenders of Wildlife v. Jewell , a federal district court in Montana held that FWS's 2014 decision to withdraw the proposed listing of the North American wolverine ( Gulo gulo luscus ) as threatened was arbitrary and capricious. In reversing its position on the proposed listing, FWS attempted to discredit certain scientific studies on climate change effects that it had relied on previously to propose listing the wolverine as a threatened species. FWS claimed that FWS needed greater certainty and refinement in the climate change data before listing the wolverine. The court concluded that FWS "cannot demand a greater level of scientific certainty than has been achieved in the field to date the 'best scientific data available' . . . standard does not require that the [FWS] act only when it can justify its decision with absolute confidence, and 'the ESA accepts agency decisions in the face of uncertainty.'" After the court decision, in 2016, FWS reopened the public comment period on its previous proposal to list the wolverine as threatened under the ESA. FWS has not made a final listing determination after closing the comment period. Relatedly, courts have faulted FWS for requiring more evidence of climate change effects to delist a species than what is required under the ESA. In 2019, a federal district court in Texas held that FWS had acted arbitrarily and capriciously when it denied a petition to delist the Bone Cave harvestman spider ( Texella reyesi ) as an endangered species. In American Stewards of Liberty v. Department of the Interior , the court concluded that FWS did not deny the petition based on the best available data but instead based its denial on the absence of "admittedly unavailable" evidence of climate change effects on the species and its habitat. The court did not defer to FWS's conclusion that delisting of the spider was not warranted because the petition failed, in part, to include a "trend analysis to indicate that this species can withstand the threats associated with development or climate change over the long term." In its decision denying the petition to delist, FWS claimed that the petitioners did not present enough data to determine if the spider's population will continue to decline from such threats. The court held that FWS "committed clear error" by requiring the petition to present "conclusive evidence about the harvestman's population trends more evidence than the Service admits is available or attainable." The court concluded that the petition met the threshold for a finding that delisting may be warranted and remanded to FWS for further consideration. To date, FWS has not issued a new finding regarding the delisting petition. Although it is not possible to have complete certainty of future climate change effects, these court decisions illustrate that the Services cannot rely solely on scientific uncertainty to make listing or delisting decisions without adequate justification. In the 2019 revised ESA regulations, the Services noted that "the requirement to use the 'best available' data means that we cannot insist that information must be free from all uncertainty, and further agree that the Act's protections should not be withheld until a species' status has declined to the point that the future risk of extinction is certain." <3. Designating Critical Habitat> The Services have also considered climate change effects in designating critical habitat. When listing a species as threatened or endangered, the ESA requires the Services to "designate any habitat of such species which is then considered to be critical habitat." As a threshold matter, as made clear by the Supreme Court's 2018 decision in Weyerhauser Co. v. FWS , an area must be "habitat" for a species for the Services to consider whether it is "critical habitat." Under the ESA, the Services may designate two types of habitat as critical habitat: (1) specific areas within the geographical area occupied by the species, which contain the "physical or biological features essential to the conservation of the species" and may require special management protections (occupied habitat); and (2) areas outside the geographical areas occupied by the species if the Secretary determines that such unoccupied areas are "essential for the conservation of the species" (unoccupied habitat). Once an area is designated as critical habitat, federal agencies may not (unless exempted) authorize, fund, or carry out actions that are likely to "result in the destruction or adverse modification" of critical habitat. The Services face unique challenges when designating critical habitat based on modeled habitat shifts for species affected by climate change. The legal challenges to FWS's designation of the polar bear's critical habitat show how a court deferred to the FWS's interpretation of climate change data and models to determine whether unoccupied areas are "essential for the conservation of the species." In a 2016 decision, Alaska Oil & Gas Association v. Jewell , the Ninth Circuit upheld FWS's designation of 187,000 square miles as critical habitat for the polar bear. FWS based its critical habitat designation in part on long-term projections of habitat destruction from climate change. FWS designated three areas on Alaska's coast and in its waters that contain elements essential to the polar bear: a sea ice habitat, a terrestrial denning habitat, and a barrier island habitat. For two of the designated areas, the district court concluded that FWS failed to provide evidence that the two areas included all of the elements required for the survival of the polar bear. The district court asked FWS to establish that polar bears currently use those two areas as habitat. The Ninth Circuit disagreed with the lower court's narrow interpretation of the ESA critical habitat requirements. The court rejected the lower court's finding that the ESA required FWS to limit the critical habitat designation to specific areas that are currently used by polar bears, explaining that "[n]o such limitation to existing use appears in the ESA, and such a narrow construction of critical habitat runs directly counter to the Act's conservation purposes. The Act is concerned with protecting the future of the species, not merely the preservation of existing bears. And it requires use of the best available technology, not perfection." The court concluded that FWS properly relied on climate science and sea ice data in designating habitat that has the elements required to sustain and preserve the polar bear population. Similar to cases regarding foreseeability and scientific uncertainty, the court appeared to defer to FWS's reasoned consideration of climate change effects based on evidence in the record. <3.1. Revised ESA Critical Habitat Regulations> The 2019 final rule clarified when the Secretary may designate unoccupied areas as critical habitat. Under the ESA, unoccupied areas must be essential to the conservation of the species to be critical habitat. Under the revised regulations, to determine if an unoccupied area is essential, the Services must find that the occupied habitat of the species at the time of listing is inadequate to ensure the conservation of the species. The Services must also determine that there is a "reasonable certainty" that the area will (1) contribute to the conservation of the species, and (2) contains one or more of those physical or biological features essential to the conservation of the species. The final rule explains that this revision "better reflects the need for high confidence that an area designated as unoccupied critical habitat will actually contribute to the conservation of the species." How the revised regulations will affect the designation of unoccupied critical habitat will likely depend on the threshold the Services set for "reasonable certainty" that the unoccupied habitat will contribute to the conservation of the species. Some stakeholders are concerned that these changes to the critical habitat regulations may limit the Services' ability to protect species that move because of climate-change-related habitat loss. In the litigation challenging the 2019 final rules, the plaintiffs argue that, by imposing an "elevated certainty requirement" on the Services' determination of what areas are "essential," the new rules would preclude the Services from designating currently unoccupied areas to which species may need to move because of climate change as critical habitat. In contrast, other stakeholders see the regulatory changes as complying with the Supreme Court's decision in Weyerhauser Co. v. FWS that an area must be "habitat" before the Services may consider whether it is "critical habitat." These stakeholders assert that reasonable certainty that an area has at least one of the essential features necessary to conserve the species ensures that the area is habitat for the species. In addition, landowners claim that these changes remove potential regulatory burdens that critical habitat designations cause, such as requirements that, when issuing permits that may adversely affect critical habitat, federal agencies consult with stakeholders. <4. Protecting Endangered or Threatened Species> If FWS or NMFS bases its listing decision on climate change effects, FWS or NMFS must also determine whether federal actions that contribute to climate change jeopardize the species under ESA Section 7 or whether an entity that may contribute to climate change is "taking" the species in violation of ESA Section 9. The Services may tailor the Section 9 "take" prohibitions for species listed as threatened under the ESA by using Section 4(d) rules. This section reviews how the Services address climate change effects when protecting listed species under ESA Sections 4(d), 7, and 9. <4.1. Prohibiting "Take" Under Sections 9 and 4(d)> ESA Section 9 prohibitions on "taking" a listed species differ for threatened and endangered species. ESA Section 9(a)(1) prohibits the unauthorized "take" of an endangered species. Take is defined as an act "to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect or to attempt to engage in any such conduct." In contrast, the ESA does not prohibit the taking of a threatened species unless FWS or NMFS decides to extend the Section 9 take prohibitions to the threatened species through a Section 4(d) rule. For threatened species, ESA Section 4(d) requires FWS or NMFS to issue regulations it "deems necessary and advisable to provide for the conservation of such species." In 1978, FWS issued a "blanket 4(d) rule" that extends most of the Section 9 take prohibitions to all threatened species listed by FWS, unless it adopts a specific rule for a particular species. As discussed below, the 2019 revisions to the ESA regulations rescinded FWS's blanket 4(d) rule for newly listed or reclassified species, aligning it with NMFS's practice of issuing species-specific 4(d) rules for threatened species. <4.2. Climate Change and Section 4(d) Rules for Threatened Species> A frequent debate among legal scholars and stakeholders is whether the take prohibitions should extend to GHG-emitting activities that contribute to climate change. Stakeholders seeking greater protection for species argue that sources of GHG emissions cause an unlawful "take" under ESA Section 9 because GHG emissions contribute to climate change, which harms the species. However, the Services and critics of this approach assert that the Section 9 take prohibitions can apply only if GHG-emitting activity directly and intentionally takes the species or negatively affects its habitat. In the litigation challenging the polar bear's 4(d) rule, the federal court's decision highlighted the challenges in applying the take prohibitions to GHG-emitting activities. Plaintiffs challenged FWS's 4(d) rule that specified prohibitions necessary to conserve the threatened polar bear species. The rule, among other things, did not prohibit activities outside the species' current range that may incidentally affect polar bears, such as GHG-emitting activities that may contribute to the loss of sea ice habitat. Plaintiffs claimed that the rule was arbitrary and capricious and violated the ESA by failing to address threats to the polar bear from GHG emissions and the loss of potential sea ice habitat outside the polar bears' range. In rejecting this argument, the court concluded FWS had a rational basis not to extend the ESA's take prohibitions because there was insufficient evidence to suggest that regulating offsite GHG-producing activities would produce direct conservation benefits to the polar bear. FWS explained that the best available science and climate modeling could not identify an individual GHG emission source as the cause of a specific adverse effect on the polar bear or its habitat. The court acknowledged that it cannot "decide based upon its own independent assessment" "whether the ESA is an effective or appropriate tool to address the threat of climate change . . . . The answer to that question will ultimately be grounded in science and policy determinations that are beyond the purview of this Court." Based on this judicial opinion, it seems unlikely that the Services will use Section 4(d) rules to prohibit GHG-emitting activities without further advances in science that can establish a causal connection between the individual GHG emission source and the specific adverse effect on the species or its habitat. <4.2.1. Rescinding FWS's Blanket 4(d) Rule> In 2019, FWS rescinded the "blanket 4(d) rule" for newly listed or reclassified threatened species, and will now adopt species-specific 4(d) rules. Because the rescission applies prospectively, the blanket 4(d) rule continues to prohibit the take of threatened species covered by the blanket 4(d) rule that FWS listed prior to the effective date of the rescission. This species-specific approach aligns with NMFS's practice of establishing specific 4(d) rules for each threatened species. How the rescission of FWS's blanket 4(d) rule may affect the protection of species threatened by climate change effects depends on its implementation. While some stakeholders are concerned that the rescission will "weaken" protections for threatened species because of delays in issuing species-specific 4(d) rules, it may have little effect on whether GHG-emitting activities are prohibited. FWS has not adopted a 4(d) rule that prohibited GHG-emitting activities that could affect threatened species and their habitats, prohibiting only actions that directly and intentionally take threatened species. For threatened species affected by climate change, legal scholars argue that such "limited" 4(d) rules have "no real effect on the activities that are causing climate change, the acknowledged primary factor contributing to [the] species' decline." <4.3. Section 7 Consultation> Some stakeholders and legal scholars view the ESA Section 7 consultation requirement as a potentially powerful tool to limit GHG-emitting activities that may further jeopardize threatened or endangered species that were listed, at least in part, because of climate change effects. In practice, the Services and the courts have acknowledged that climate change should be considered during the consultation process. However, the courts have not required the Services to curb activities that may contribute to climate change to protect threatened or endangered species. In general, ESA Section 7 requires federal agencies to "insure that any action authorized, funded, or carried out by such agency . . . is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [the critical] habitat of such species." A federal agency planning any action must consult with NMFS or FWS if the federal agency determines that its action "may" jeopardize a listed species or adversely affect its habitat. The ESA and its implementing regulations specify the types of consultation (e.g., informal versus formal consultation), when each type of consultation is required, and the procedures the agency proposing the action and the Services must follow. After the consultation with an agency, the Services must issue a biological opinion (BiOp) based on "the best scientific and commercial data available" that determines whether the proposed action is likely to jeopardize the ESA-listed species or adversely modify critical habitat. If the Services determine that an agency action would likely jeopardize the listed species or its critical habitat, the agency must terminate the action, implement a Service-proposed alternative action, or seek an exemption. If the agency action is not likely to jeopardize the continued existence of the species but is nonetheless likely to result in some "incidental take" of the species, the BiOp must set forth an incidental take statement, which specifies the permissible "amount or extent" of this effect on the species. Various court decisions have faulted the Services for failing to discuss climate change effects when assessing whether federal action will jeopardize a listed species or adversely modify its habitat. In the 2007 decision, Natural Resources Defense Council v. Kempthorne , a federal district court in California held that FWS acted arbitrarily and capriciously when analyzing potential effects on the threatened delta smelt (Hypomesus transpacificus) from a large water diversion project. The court determined that the "absence of any discussion in the BiOp of how to deal with any climate change is a failure to analyze a potentially 'important aspect of the problem.'" In rejecting FWS's claim that the climate change studies did not merit analysis because they were inconclusive, the court concluded that without any meaningful discussion in the BiOp, it was "impossible" for the court to determine whether the climate studies were "rationally discounted because of [their] inconclusive nature, or arbitrarily ignored." Similarly, plaintiffs successfully challenged NMFS's BiOp that concluded that changes to a fish hatchery operation were not likely to jeopardize the species or adversely affect critical habitat for the Upper Columbia River spring Chinook salmon ( Oncorynchus tshawytscha ) or steelhead ( Oncorhynchus mykiss ). A federal district court in Washington ruled that NMFS's BiOp was arbitrary and capricious because it failed to analyze adequately climate change effects from the hatchery's modified operations and water use. The court explained that "[t]he best available science indicates that climate change will affect stream flow and water conditions throughout the Northwest" and that the lack of a model or study specifically addressing local climate change effects did not permit NMFS to ignore this factor. The court found that NMFS had included "no discussion whatsoever" of the potential effects of climate change on the hatchery's future operations and water use, and that it was not sufficient for NMFS to say that the local area at issue was less prone to climate change effects than other areas in the region. When the Services have discussed climate change effects from federal actions, some courts have scrutinized the Services' rationale in dismissing such effects when issuing a "no jeopardy" BiOp. For example, the Ninth Circuit 2017 majority opinion in Turtle Island Restoration Network v. Department of Commerce examined NMFS's BiOp that concluded that a fishery expansion would neither jeopardize the continued existence of the endangered loggerhead sea turtle ( Caretta caretta ) nor the endangered leatherback sea turtle ( Dermochelys coriacea ). For the loggerhead sea turtles, the court ruled that NMFS had acted arbitrarily and capriciously by failing to incorporate into its jeopardy analysis climate-model data that predicted that the fishery expansion would "exacerbate" loggerhead population decline due to climate change. In contrast, for the leatherback sea turtles, the majority upheld NMFS's no-jeopardy conclusion, rejecting the plaintiffs' argument that NMFS erred by limiting the "temporal scale" of its analysis to 25 years despite NMFS's determination that rising temperatures from climate change would have effects on leatherback sea turtles over the next century. Because NMFS's BiOp considered and concluded that it could not credibly predict climate change effects on the leatherback turtles, the majority held that NMFS adequately considered the climate change effects in its no-jeopardy conclusion. Despite some success challenging BiOps, neither the courts nor the Services have found that climate change effects from a proposed federal action jeopardize the species or adversely modify its habitat. Some stakeholders and legal scholars argue that when a proposed federal action contributes to climate change that may jeopardize the species or adversely modify its habitat, the agency is required to consult with the Services. If the Services determine that such actions jeopardize the species or its habitat, these stakeholders assert that the Services should use Section 7 consultation authority to limit or modify the GHG emissions from the proposed federal action. However, the Department of the Interior issued a Solicitor's Opinion explaining that Section 7 consultation is not required if no causal connection exists among the proposed federal action, a reasonably certain climate change effect, and the listed species. Therefore, without evidence of a causal connection between the proposed action and climate change effects, Section 7 consultation will not be triggered, foreclosing any opportunity for the Services to consider mitigating the climate change effects from such actions. Federal agencies and the Services have continued to use this policy to comply with their Section 7 consultation obligations. <4.3.1. Revising Section 7 Consultation Regulations> The 2019 ESA regulation revisions codified the Services' existing Section 7 climate change policy. Existing ESA Section 7 regulations require the federal agency proposing the action and the Services to evaluate the status of the listed species or critical habitat, the "effects of the action," and cumulative effects. Prior to the 2019 revisions, ESA regulations defined "effects of the action" to include both direct and indirect effects of a proposed federal action on the species or critical habitat. The 2019 ESA rule revised the definition of "effects of the action" to include all consequences to listed species or critical habitat that are caused by the proposed action. The definition specified that a consequence is "caused by the proposed action if it would not occur but for the proposed action and it is reasonably certain to occur." The Services provided a two-part test to identify a consequence: (1) whether the effect or activity would not occur but for the action and (2) whether the effect or activity is reasonably certain to result from the action. The preamble explains that "if the agency fails to take the proposed action, and the activity would still occur, there is not 'but for' causation." Some stakeholders support the revisions to the Section 7 consultation requirements, asserting that the changes will "help decrease the resources needed for federal agencies and applicants to describe the effects of their actions to listed species or critical habitat when engaged in section 7 consultation." Other stakeholders contend that the proposed changes will "unreasonably narrow" and "bar" Section 7 consultation when climate change effects do not affect immediately the geographic area of the project. <5. Potential Implications> When the ESA was enacted in 1973, Congress did not consider climate change as a significant factor in conserving endangered species. Although the Services and the courts have acknowledged that actions taken under the ESA must consider climate change effects on species and their habitats, the debate continues on whether the ESA can adequately protect and conserve species threatened by climate change effects. Stakeholders disagree on what role the ESA should play in addressing climate change, with some arguing that the ESA is not equipped to mitigate climate change effects. Other stakeholders believe that the Services can and should wield the ESA to protect species threatened by climate change and to curb activities contributing to climate change. Generally, legal scholars agree that litigation has influenced how the Services factor climate change effects into ESA decisions. Legal challenges have helped to ensure that the Services consider projected climate change effects on species in their ESA decisions. In light of the judicial deference afforded to the Services, the courts have not expanded the ESA as a tool to protect listed species by regulating activities that contribute to climate change. From the Services' viewpoint, the best available scientific and commercial data have been insufficient to determine that GHG emissions from a proposed activity cause detrimental effects on the species or its habitat. However, as climate modeling and technology advance, the Services may be able to predict the causes and effects from climate change on species with greater scientific certainty and data. Members of Congress may be interested in the implications of revising the ESA to clarify its treatment of climate change effects. Legislation could clarify whether ESA Section 9 prohibitions or Section 7 consultation requirements apply to indirect harms that contribute to climate changes that may affect a species' survival, or how the Services should address scientific uncertainty associated with projected climate change effects when making listing determinations. As legislative proposals continue to develop, legal battles over the how the Services interpret climate change effects in their ESA decisions will likely continue.

For more than a decade, federal agencies have grappled with how to address climate change effects when implementing the Endangered Species Act of 1973 (ESA). The ESA aims to protect threatened and endangered fish, wildlife, and plants from extinction. As set forth by Congress, one of the main purposes of the ESA is to "provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved." The U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) (collectively, the Services) have acknowledged that the changing climate may threaten the survival of and habitat for some species. As noted by courts and legal scholars, the ESA does not expressly require the Services to consider the effect of climate change in their ESA decisions. However, the ESA and its implementing regulations (1) direct the Services to consider "natural or manmade factors affecting [a species'] continued existence" when determining whether a species should be protected under the ESA; and (2) require the Services to analyze cumulative effects on a species' survival when analyzing whether federal actions jeopardize a species protected under the Act. The courts and the Services have interpreted these provisions as requiring the Services to consider climate change effects in the ESA decisionmaking process. Various lawsuits have challenged the Services' interpretation of complex scientific data or models that predict short- and long-term effects from a changing global climate on specific species and their habitats. Legal challenges have influenced how the Services implement the ESA when climate change affects species and their habitats. Lawsuits typically focus on two main issues: (1) when the Services should list, delist, or reclassify a species as threatened or endangered because of climate change effects; and (2) whether the Services can or should regulate activities that affect the climate to protect species and their habitat. Judicial review has helped to ensure that the Services consider projected climate change effects on species in their ESA decisions. However, the courts have not required the Services to curb activities that may contribute to climate change to protect threatened or endangered species. Stakeholders disagree on whether the ESA should play a role in addressing climate change, with some arguing that the ESA is not equipped to mitigate climate change effects. Other stakeholders believe that the Services can and should wield the ESA to protect further species threatened by climate change by curbing activities contributing to climate change. From the Services' viewpoint, the best available scientific and commercial data have been insufficient to determine whether greenhouse gas emissions from a proposed activity cause detrimental effects on a species or its habitat. In light of the judicial deference afforded to the Services, the courts have not expanded the ESA as a tool to protect listed species by regulating activities that contribute to climate change. This report analyzes the courts' role in shaping how the Services have factored climate change effects into ESA decisions and recent 2019 regulatory developments that aim to clarify how the Services consider and address climate change in their ESA decisions. In August 2019, the Services finalized revisions to the ESA implementing regulations, aiming to increase transparency and effectiveness of the ESA while easing regulatory burdens. Among those changes, the Services clarified their existing policies and practices for factoring climate change effects into their ESA decisions. As legislative proposals to revise the ESA continue to develop, legal battles over the how the Services interpret climate change effects in their ESA decisions will likely continue.

crs_R46255

crs_R46255_0

<1. Introduction> The U.S. government administers multiple international food assistance programs that aim to alleviate hunger and improve food security in other countries. Some of these programs provide emergency assistance to people affected by conflict or natural disaster. Other programs provide nonemergency assistance to address chronic poverty and hunger, such as by providing food to people during a seasonal food shortage or training communities on issues related to nutrition. U.S. international food assistance programs originated in 1954 with the Food for Peace Act (P.L. 83-480), also referred to as P.L. 480 . Historically, the United States has provided international food assistance primarily through in-kind aid , whereby U.S. commodities are shipped to countries in need. Congress typically funds in-kind food aid programs through the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act known as the Agriculture appropriations bill. The Agriculture appropriations bill funds the U.S. Department of Agriculture (USDA) except for the Forest Service. In 2010, the U.S. Agency for International Development (USAID) began providing market-based assistance to supplement in-kind aid in emergency and nonemergency situations. Market-based assistance provides cash transfers, vouchers, or local and regional procurement (LRP) food purchased in the country or region where it is to be distributed rather than purchased in the United States. Congress funds most market-based assistance through the Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations bill. The SFOPS appropriations bill funds the U.S. Department of State, USAID, and other non-defense foreign policy agencies. For FY2020, the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) provided approximately $4.091 billion for U.S. international food assistance programs. This was an 11% decrease from the $4.581 billion provided in FY2019. Division B of P.L. 116-94 provided $1.945 billion for international food assistance programs in Agriculture appropriations, including $1.725 billion for the Food for Peace (FFP) Title II program and $220 million for the McGovern-Dole International Food for Education and Child Nutrition Program. Division G of P.L. 116-94 provided an estimated $2.146 billion for international food assistance programs in SFOPS appropriations. This included an estimated $2.066 billion for the Emergency Food Security Program (EFSP) and $80 million for the Community Development Fund (CDF). This report provides an overview of accounts in the Agriculture and SFOPS appropriations bills that fund international food assistance programs. It summarizes the Trump Administration's FY2020 budget request for international food assistance. The report then details the international food assistance provisions in the FY2020 enacted Agriculture and SFOPS appropriations bills Division B and Division G of P.L. 116-94 , respectively. <2. International Food Assistance Programs> Congress funds most U.S. international food assistance programs through two annual appropriations bills the Agriculture appropriations bill and the SFOPS appropriations bill. The following sections detail each account in the Agriculture and SFOPS appropriations bills that funds international food assistance and the programs funded through these accounts. Table 1 lists each international food assistance account along with the respective appropriations bill, funded programs, primary delivery method, and implementing agency. Figure 1 depicts each U.S. international food assistance program by authorizing and appropriations committee jurisdiction and implementing agency. <2.1. Agriculture-Funded International Food Assistance Accounts> Some international food assistance programs under the jurisdiction of the Agriculture appropriations committees receive discretionary funding, while other programs receive mandatory funding. Congress authorizes discretionary funding levels in authorizing legislation. A program's receipt of any of the authorized funding then awaits congressional discretion in annual appropriations. With mandatory funding, Congress authorizes and provides funding in authorizing legislation. Thus, programs with mandatory funding do not require a separate appropriation. The Food for Peace Act (P.L. 83-480) is the primary authorizing legislation for international food assistance programs funded through agriculture appropriations. Congress reauthorizes discretionary and mandatory funding levels for these programs in periodic farm bills, most recently the Agriculture Improvement Act of 2018 (2018 farm bill; P.L. 115-334 ). Congress provides discretionary funding for international food assistance programs through three accounts in the Foreign Assistance and Related Programs title of the Agriculture appropriations bill: the Food for Peace Title I Direct Credit and Food for Progress Program account, the Food for Peace Title II Grants account, and the McGovern-Dole International Food for Education and Child Nutrition Program Grants account. Congress has periodically provided additional discretionary funding for international food assistance in the General Provisions title of the Agriculture appropriations bill. <2.1.1. Food for Peace Title I Direct Credit and Food for Progress Program Account> The Food for Peace (FFP) Title I Direct Credit and Food for Progress Program account provides administrative expenses for the FFP Title I and Food for Progress programs. FFP Title I provides concessional sales sales on credit terms below market rates (loans) of U.S. commodities to governments of developing countries and private entities. USDA administers FFP Title I. Congress has not appropriated funds for new FFP Title I sales since FY2006 but continues to appropriate funds to administer the FFP Title I loans provided before FY2006. Food for Progress donates U.S. agricultural commodities to governments or organizations to be monetized sold on local markets in recipient countries to generate proceeds for economic development projects. Congress has authorized Food for Progress to receive both mandatory and discretionary funding. This account receives annual appropriations to cover administrative expenses. Congress primarily funds programmatic activities through mandatory funding. <2.1.2. Food for Peace Title II Grants Account> The Food for Peace Title II Grants account funds the FFP Title II program. FFP Title II donates U.S. agricultural commodities to recipients in foreign countries. FFP Title II provides both emergency and nonemergency aid. Typically, the majority of FFP Title II funds support emergency aid. USAID administers FFP Title II. Congress appropriates FFP Title II funds to USDA, which then transfers the funds to USAID. Since the mid-1980s, FFP Title II has received the majority of funds appropriated to international food assistance in the Agriculture appropriations bill. FFP Title II also receives some funding for nonemergency assistance from the Community Development Fund in the SFOPS appropriations bill (see " SFOPS-Funded International Food Assistance Accounts "). <2.1.3. McGovern-Dole International Food for Education and Child Nutrition Program Grants Account> This account funds the McGovern-Dole International Food for Education and Child Nutrition Program. McGovern-Dole donates U.S. agricultural commodities to school feeding programs and pregnant or nursing mothers in qualifying countries. USDA administers McGovern-Dole. Since FY2016, Congress has set aside a portion of McGovern-Dole funds for LRP. The 2018 farm bill authorized USDA to use up to 10% of annual McGovern-Dole funds for LRP. <2.1.4. The Farmer-to-Farmer Program Set-Aside> Congress funds the Farmer-to-Farmer Program, also known as FFP Title V, through a set-aside of the total appropriation for Food for Peace Act programs. This program finances short-term placements for U.S. volunteers to provide technical assistance to farmers in developing countries. USAID administers the Farmer-to-Farmer Program. Statute sets minimum program funding as the greater of $10 million or 0.5% of annual funds for Food for Peace Act programs and maximum program funding as the greater of $15 million or 0.6% of annual funds for Food for Peace Act programs. <2.1.5. Programs with Mandatory Funding> Congress has authorized certain U.S. international food aid programs to receive mandatory funding. Food for Progress relies primarily on mandatory funding financed through USDA's Commodity Credit Corporation (CCC). Food for Progress does not typically receive discretionary funding beyond funding for administrative expenses provided by the FFP Title I account. However, in FY2019, Congress provided discretionary funding for Food for Progress in the General Provisions title of the Agriculture Appropriations Act. The Bill Emerson Humanitarian Trust (BEHT) is a reserve of funds held by the CCC. USDA can use BEHT funds to supplement FFP Title II activities, especially when FFP Title II funds alone cannot meet emergency international food needs. If USDA provides aid through BEHT, Congress may appropriate funds to the CCC in a subsequent fiscal year to reimburse the CCC for the value of the released funds. USDA did not release funds from BEHT in FY2019, and Congress did not appropriate any BEHT reimbursement funds to the CCC in FY2020. <2.2. SFOPS-Funded International Food Assistance Accounts> Congress funds international food assistance programs through two funding accounts in the SFOPS appropriation using discretionary funds. <2.2.1. International Disaster Assistance> The International Disaster Assistance (IDA) funding account provides for EFSP, which USAID first employed in FY2010 to supplement its emergency FFP Title II in-kind aid. Congress permanently authorized the program in the Global Food Security Act of 2016 ( P.L. 114-195 ). Congress does not specify the exact funding level for EFSP in its annual appropriation; rather, USAID determines the allocation of IDA funds in response to humanitarian need in any given year. Between FY2015 and FY2019, EFSP represented an average of 47% of the whole IDA appropriation. <2.2.2. Development Assistance> Congress designates funding within the Development Assistance (DA) account for CDF. CDF funds complement FFP Title II nonemergency programs. USAID first used CDF in FY2010 to reduce its reliance on monetization the practice of implementing partners selling U.S. commodities on local markets and using the proceeds to fund programs. As with EFSP, CDF offers USAID the flexibility to pursue market-based interventions including cash transfers, food vouchers, and LRP. Today, CDF continues to complement FFP Title II nonemergency programming but is no longer needed to offset monetization, as the practice is no longer a legislative requirement. Congress designates the level of CDF in its reports accompanying annual appropriations (often referred to as a "soft earmark"). For more information on CDF, see CRS Report R45879, International Food Assistance: Food for Peace Nonemergency Programs , by Emily M. Morgenstern. <3. The Administration's FY2020 Budget Request> For the third year in a row, the Trump Administration's FY2020 budget request proposed eliminating McGovern-Dole and FFP Title II. However, unlike in the FY2018 and FY2019 requests in which the President proposed shifting all funding for international food assistance to the IDA account within the SFOPS appropriations bill the President's FY2020 request proposed creating a new International Humanitarian Assistance (IHA) account. The proposed IHA account would have consolidated four humanitarian assistance accounts the IDA, Migration and Refugee Assistance, and Emergency Refugee and Migration Assistance accounts that are funded in SFOPS appropriations, along with FFP Title II within Agriculture appropriations into a single account within the SFOPS appropriations bill. The FY2020 budget request also repeated past proposals to eliminate Food for Progress and merge the DA account with the Economic Support Fund (ESF), Democracy Fund (DF), and Assistance for Europe, Eurasia, and Central Asia (AEECA) accounts to create a new Economic Support and Development Fund (ESDF) within SFOPS appropriations. Congress did not adopt the Administration's FY2020 proposals to eliminate FFP Title II, McGovern-Dole, or Food for Progress or create the new combined IHA and ESDF accounts. The following section summarizes the Administration's FY2020 budget requests for U.S. international food assistance programs in the Agriculture and SFOPS appropriations bills. <3.1. FY2020 Agriculture Funding Request> For FY2020, the Trump Administration requested discretionary funding for one international food assistance program account. The Administration requested $135,000 for the FFP Title I account to carry out existing FFP Title I loans and Food for Progress projects. This amount would have been $14,000 less than the FY2019 enacted amount for the FFP Title I account. The Administration's FY2020 budget request stated that the workload to administer FFP Title I was "significantly less than previously estimated" and that "funds were redirected to meet higher priorities." The FY2020 request also repeated the FY2018 and FY2019 proposals to eliminate FFP Title II, and McGovern-Dole and the FY2019 proposal to eliminate Food for Progress. Regarding FFP Title II, the Administration stated "To replace the inefficient food aid provided through Title II, the 2020 request includes funding for emergency food needs within the new, more efficient International Humanitarian Assistance (IHA) account." Eliminating FFP Title II would fund all emergency food assistance through the SFOPS appropriations rather than jointly between the SFOPS and Agriculture appropriations bills. Regarding the proposed elimination of McGovern-Dole, the Administration's FY2020 request stated, "In kind food aid is associated with high transportation and other costs and is inefficient compared to other types of development assistance. In addition, the McGovern Dole program has unaddressed oversight and performance monitoring challenges." Food for Progress primarily receives mandatory funding. The FY2020 request proposes to eliminate mandatory funding authority, estimating that this would result in $1.7 billion in savings over 10 years. <3.2. FY2020 SFOPS Funding Request> The FY2020 SFOPS budget proposal included a combined IHA account that would have consolidated the four humanitarian assistance accounts. According to budget documents, the IHA account would have supported "all aspects of humanitarian assistance, including shelter, protection, emergency health and nutrition, the provision of safe drinking water, livelihoods supports, emergency food interventions, rehabilitation, disaster risk reduction, and transition to development assistance programs," among other activities. The account would have been managed by the newly consolidated Humanitarian Assistance Bureau at USAID but with a "senior dual-hat leader" under the policy authority of the Secretary of State reporting to both the Secretary of State and the USAID administrator. The Administration proposed $5.97 billion for the IHA account, a 37% decrease from the combined FY2019 appropriations for IDA, FFP Title II, Migration and Refugee Assistance, and Emergency Refugee and Migration Assistance. The FY2020 SFOPS budget proposal also included a combined ESDF account that would have merged the DA, ESF, DF, and AEECA accounts. The FY2020 proposal included $5.23 billion for ESDF, a 32% decrease from the FY2019 appropriations for the four accounts combined. <3.3. Potential Implications of the FY2020 Funding Request> Moving funding from FFP Title II to a new IHA could have changed how the United States delivers food assistance to recipient countries. Statute requires that nearly all assistance distributed under FFP Title II be in-kind aid. By contrast, EFSP, which Congress currently funds through the IDA account but which the Administration proposed to fund through the new IHA, does not have a statutory requirement to provide a portion of assistance as in-kind aid. EFSP can provide in-kind aid or market-based assistance. Therefore, under current statutes, shifting international food assistance funding from FFP Title II to IHA would have meant this funding would not have needed to adhere to the FFP Title II requirement to provide in-kind aid. This could have increased the portion of food assistance provided as market-based assistance rather than in-kind aid and would have shifted implementation from USDA to USAID. Proposals to shift U.S. international food assistance funding from in-kind food aid to market-based food assistance are not new. Both the Obama and George W. Bush Administrations proposed increasing the portion of U.S. international food assistance delivered as market-based assistance. Some proponents of increasing the use of market-based assistance argue that it could improve program efficiency. However, some interested parties assert that the Trump Administration's proposed decrease in overall funding for international food assistance could offset potential efficiency gains, resulting in fewer people receiving assistance. Some opponents of increasing the share of food assistance that is market-based rather than in-kind maintain that in-kind aid ensures that the United States provides high-quality food to recipients. Certain stakeholders, such as some agricultural commodity groups, may also oppose such changes due to their implications for U.S. government purchase of U.S. commodities. In addition to the implications above, there are a number of international food assistance issues in which Members of Congress have expressed interest. These include the share of in-kind and market-based food assistance, cargo preference requirements, and congressional jurisdiction, among others. For more information on the broad range of international food assistance-related issues, see CRS Report R45422, U.S. International Food Assistance: An Overview , by Alyssa R. Casey. <4. Congressional Appropriations> The FY2020 Agriculture Appropriations Act provided funding for U.S. international food assistance programs in the Foreign Assistance and Related Programs title (Title V). This included funding for FFP Title II and McGovern-Dole. The act also provided funding for administrative expenses to manage existing FFP Title I loans that originated while the FFP Title I program was active. Unlike in FY2019, Congress did not provide discretionary funding in FY2020 for the Food for Progress program. The FY2020 SFOPS Appropriations Act provided funding for international food assistance programs in Bilateral Assistance (Title III). Figure 2 shows funding trends for international food assistance programs for FY2015-FY2020. Table 2 details appropriations for international food assistance programs for FY2018-FY2020, including proposed funding levels in the FY2020 Administration's request and House and Senate Agriculture and SFOPS appropriations bills. <4.1. FY2020 Agriculture Appropriations> The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 , Div. B) provided $1.945 billion for international food assistance programs, roughly level with the FY2019 enacted amount of $1.942 billion. The FY2020 enacted amount was less than the $2.085 billion in the House-passed Agriculture appropriations bill ( H.R. 3055 ) but more than the $1.926 billion in the Senate-passed bill ( H.R. 3055 ). Congress did not adopt the Administration's FY2020 proposal to eliminate FFP Title II, McGovern-Dole, and Food for Progress. The FY2020 act provided $1.725 billion for FFP Title II, a 0.5% increase from the $1.716 billion provided in FY2019. In FY2020, Congress provided all FFP Title II funding in the Foreign Assistance and Related Programs title (Title V) of the Agriculture appropriations bill. This was a change from FY2019, when Congress provided the majority of FFP Title II funding ($1.5 billion) in the Foreign Assistance title but provided additional funding for FFP Title II ($216 million) in the bill's General Provisions title (Title VII). The FY2020 act provided $220 million for McGovern-Dole, a 5% increase from the FY2019 enacted amount of $210. Congress directed a minimum of $20 million of McGovern-Dole funding and a maximum of 10% of total program funding ($22 million) be set aside for LRP. This was an increase from the $15 million set-aside in FY2019. The FY2020 act also provided $142,000 for FFP Title I and Food for Progress administrative expenses, equal to the FY2019 enacted amount. Unlike in FY2019, the FY2020 act did not provide discretionary appropriations for Food for Progress. Congress typically funds this program through mandatory funding. The 2018 farm bill ( P.L. 115-334 , 3302) authorized new pilot agreements within the Food for Progress program to directly fund economic development projects rather than funding the projects through monetizing commodities. The 2018 farm bill authorized $10 million per year for FY2019-FY2023 for pilot agreements, subject to annual appropriations. Congress did not appropriate funding for Food for Progress pilot agreements in FY2019 or FY2020. <4.2. FY2020 SFOPS Appropriations> Division G of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) provided funds for international food assistance programs appropriated under the SFOPS measure. The enacted IDA appropriation level grew by 0.2%, from $4.385 billion in FY2019 to $4.395 billion in FY2020. As in prior fiscal years, the measure did not determine a specific level for EFSP. IDA funds are designated to "carry out the provisions of section 491 of the Foreign Assistance Act of 1961 for international disaster relief, rehabilitation, and reconstruction assistance." Because the account is meant to respond to international emergencies, Congress tends to appropriate funds in a lump sum instead of directing funds toward specific countries or crises. As in previous fiscal years, the final FY2020 act included $80 million for CDF under DA. <5. Policy-Related Provisions> In addition to providing funding, the Agriculture and SFOPS appropriations bills may contain policy-related provisions that direct the executive branch how to spend certain funds. Provisions included in appropriations act text have the force of law but generally only for the duration of the fiscal year for which the act provides appropriations. Policy-related provisions generally do not amend the U.S. Code . Table 3 compares select policy-related provisions pertaining to U.S. international food aid programs from the Foreign Assistance and Related Programs (Title V) and General Provisions (Title VII) titles of the FY2019 and FY2020 Agriculture Appropriations Acts. There was no language from the SFOPS bills for a similar table. The explanatory statement that accompanies the appropriations act, as well as the committee reports that accompany the House and Senate committee-reported bills, can provide statements of support for certain programs or directions to federal agencies on how to spend certain funding provided in the appropriations bill. While these documents generally do not have the force of law, they can express congressional intent. The committee reports and explanatory statement may need to be read together to capture all of the congressional intent for a given fiscal year. Table 4 compares selected policy-related provisions pertaining to U.S. international food aid programs from the FY2019 and FY2020 House and Senate committee reports and explanatory statement for the FY2020 Agriculture Appropriations Act. Table 5 compares one selected policy-related provision pertaining to U.S. international food assistance programs from the FY2019 and FY2020 House and Senate committee reports and explanatory statement for the FY2020 SFOPS appropriation.

U.S. international food assistance programs provide food, or the means to purchase food, to people around the world at risk of hunger. Congress funds these programs through two appropriations bills: the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act—also known as the Agriculture appropriations bill—and the Department of State, Foreign Operations, and Related Programs (SFOPS) Appropriations Act. The Agriculture appropriations bill funds the U.S. Department of Agriculture (USDA) except for the Forest Service. The SFOPS appropriations bill funds the U.S. Department of State, U.S. Agency for International Development (USAID), and other non-defense foreign policy agencies. Both bills provide funding for U.S. international food assistance programs. Appropriations for agricultural development programs, such as Feed the Future or international agricultural exchange programs, are not considered part of food assistance spending. For FY2020, the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), provided an estimated $4.091 billion in funding for U.S. international food assistance programs. This was an 11% decrease from the $4.581 billion provided in FY2019. Division B of the act provided $1.945 billion in agriculture appropriations for international food assistance programs, including $1.725 billion for the Food for Peace (FFP) Title II program and $220 million for the McGovern-Dole International Food for Education and Child Nutrition Program. Division G of the act provided an estimated $2.146 billion for international food assistance in SFOPS appropriations. This included $80 million in the Community Development Fund and an estimated $2.066 billion for the Emergency Food Security Program (EFSP). Congress funds EFSP within the International Disaster Assistance (IDA) account but does not designate a specific amount for the program. USAID allocates IDA funds to EFSP and other non-food humanitarian response programs. The estimated FY2020 EFSP appropriation is a CRS calculation based on a five-year average of the percentage of IDA funds allocated to EFSP. In its FY2020 budget request, the Trump Administration proposed to eliminate the FFP Title II, McGovern-Dole, and Food for Progress programs, which Congress funds within Agriculture appropriations. The Administration proposed to consolidate multiple accounts, including accounts within Agriculture and SFOPS appropriations that fund international food assistance and other humanitarian assistance, into a new International Humanitarian Assistance account. Congress did not adopt these proposals. In addition to funding U.S. international food assistance programs, the FY2020 Agriculture appropriations bill included policy-related provisions that directed the executive branch how to carry out certain appropriations. The Explanatory Statement accompanying P.L. 116-94 , as well as committee reports accompanying the House and Senate Agriculture and SFOPS appropriations bills, also included policy provisions related to international food assistance. For example, one provision directed that a certain amount of the funds appropriated for the McGovern-Dole Program be used for local and regional procure ment —food assistance purchased in the country or region where it is to be distributed rather than purchased in the United States.

crs_R45933

crs_R45933_0

<1. Introduction> On August 1, 2018 , the World Health Organization (WHO) reported a new Ebola outbreak in eastern DRC, about a week after having declared the end of a separate outbreak in the west of the country. As of September 24, 2019, the WHO had reported 3,175 cases in the current outbreak, including 2,119 deaths. About 58% of all cases have been women and 28% children. The current outbreak is the 10 th on record in DRC, the largest to have occurred in the country, and the second largest ever, after the 2014-2016 Ebola outbreak in West Africa. Cases have been concentrated in North Kivu and Ituri provinces ( Figure 1 ), where long-running conflicts had already caused a protracted humanitarian crisis and are complicating Ebola control efforts. The number of new Ebola cases identified per week has fluctuated since the start of the outbreak ( Figure 2 ), but has generally trended downward slowly since peaking in April 2019. The current outbreak has coincided with a fraught political transition process in DRC. A new president, parliament, provincial-level assemblies, and governors were elected between late 2018 and mid-2019, after years of delays, gridlock, political violence, and repression of opposition voices. Election delays in the Ebola-affected areas, an opposition stronghold, heightened tensions and spurred conspiracy theories, arguably hindering Ebola response. President Felix Tshisekedi, inaugurated in January 2019, was previously an opposition figure, but the coalition of his predecessor Joseph Kabila won supermajorities in parliament and at the provincial level. Observers questioned the legitimacy of the election results, and tense negotiations between the two political blocs (Tshisekedi's and Kabila's) delayed the naming of a new cabinet until late August 2019, while complicating relations between the national and provincial/local officials. Several factors have foiled outbreak control efforts, including low Ebola awareness (early symptoms are similar to other common ailments like malaria), community distrust of health interventions, belated visits to health facilities (at which point survival prospects decline rapidly), and infection prevention control lapses in health facilities. Attacks by militia and criminal groups, political protests, health worker strikes, and security force abuses have also disrupted and impeded the response. In mid-September, for example, violent attacks in a new hotspot (Lwemba, Ituri Province) after the death of a local healthcare worker from Ebola prompted the indefinite suspension of Ebola control activities in the area. As a result, new cases continue to stem from unknown chains of transmission, and deaths continue to occur outside Ebola treatment centers. U.S. officials and other health experts have repeatedly raised concerns about broader challenges in DRC related to its health care system, political tensions, local grievances, and instability. USAID Administrator Mark Green testified to Congress in April 2019 that in DRC, "You have a failed democracy in many, many ways . It will take more than simply a medical approach. It will take a development approach to try to tackle this terrible disease and to contain its outbreak." After traveling to DRC in August 2019, Administrator Green wrote, "Decades of corrupt, authoritarian rule during which communities were denied any meaningful voice in their government have undermined the Congolese people's trust in institutions." Health experts have been troubled by reports of Ebola cases in major DRC cities (including the capital of North Kivu, Goma) and outside of DRC. Between June and August 2019, a total of four cross-border cases were detected in Uganda. Observers expressed optimism about the rapid detection and containment of these cases, but new concerns have arisen about subsequent suspected cases in Tanzania. In mid-September, WHO was informed by unofficial sources of a number of suspected Ebola cases in that country, including in the capital city of Dar es Salaam, while Tanzanian authorities asserted that there were no confirmed or suspected Ebola cases in the country. WHO has reportedly since sent personal protective equipment (PPE) and vaccination supplies to Tanzania, and recommended that the sickened patients (one of whom reportedly died) receive secondary confirmation testing at a WHO facility. As of September 21, none of the cases had received secondary confirmation. Ebola control in other neighboring countries such as South Sudan, Burundi, or Central Africa Republic, which have minimal state capacity and are affected by protracted conflicts and political crises, could be highly challenging if required. <2. The International Response> Outbreak control, treatment, and disease surveillance activities are being carried out primarily by DRC government employees (including health workers and frontline workers, who provide routine and essential services), as well as by international nongovernmental organizations, with U.N. agencies (including the WHO), other multilateral entities (including the World Bank), and foreign governments providing funding, expertise, coordination, and logistical assistance. Classic Ebola outbreak control protocol entails infection prevention control (IPC) in health care facilities; management and isolation of patients in Ebola Treatment Centers (ETCs); fever surveillance with rapid diagnosis; tracing of Ebola cases and their contacts; and community awareness and adherence to IPC protocols, safe patient and body transport, safe burials, and household and environmental decontamination. The extraordinary conditions on the ground in affected areas of eastern DRC have limited the effectiveness of conventional control measures, however, and are requiring ever-evolving strategies for containment, including aggressive vaccination campaigns (see text box below). Since the WHO declared the outbreak to be a Public Health Emergency of International Concern (PHEIC) in July 2019, it has sought to garner additional donor funds, as well as international support for addressing the political and security issues affecting Ebola control. In July 2019, the WHO and the DRC Ministry of Health (MoH) released a fourth strategic response plan to "definitively defeat" the Ebola epidemic ( Table 1 ). The strategic plan is expected to cost over $462 million, including about $288 million for the public health response portion ( Table 1 ). In July 2019, the World Bank announced that it would provide $300 million toward the plan, about half of which would support the public health response, on top of prior funding commitments (discussed below). The public health portion of the strategic plan, covering July 1 through December 31, 2019, purportedly takes into account lessons learned from the third strategic response plan (February through July 2019). This portion of the plan is based on strengthening political commitment, security, and operational support to improve acceptance of the response and access to insecure areas; deepening support for addressing the varied needs of communities affected by Ebola (beyond a single-minded focus on containment efforts), as a means toward fostering community ownership and involvement in Ebola responses; improving financial planning, monitoring and reporting; and bolstering preparedness of neighboring provinces and countries. The World Bank has urged other countries to provide additional support, and the WHO Director-General has urged donors to address disbursement delays. As of September 11, 2019, the WHO had received less than $60 million of the $288 million it sought for the current phase of the public health response. The United States is the top country donor for the public health response and has provided almost $158 million for the Ebola humanitarian response, largely supporting activities by nongovernmental organizations (NGOs), as discussed below. <2.1. DRC Government Role> DRC government employees and other Congolese nationals are the primary responders to the Ebola epidemic on the ground. As WHO Executive Director for Health Emergencies Dr. Michael Ryan noted in June 2019, "If you go into the treatment facilities now it is Congolese doctors and nurses in the front line. There may be NGO or WHO badges on the tents but the doctors and nurses are Congolese; surveillance officers are Congolese; 80% of the vaccinators in this response are Congolese." The DRC government has provided health workers and administrative personnel, hired local frontline workers, organized volunteers, and conducted information awareness campaigns. The government has also offered certain health services free of charge in selected government health facilities, with donor support (discussed below). From the start of the current outbreak, the DRC government's health responses were coordinated by the MoH, as in past Ebola outbreaks in DRC. In July 2019, however, President Tshisekedi transferred coordination responsibilities to an expert committee headed by the director of DRC's biomedical research institute, Dr. Jean-Jacques Muyembe, who reports directly to the president. Dr. Muyembe is a recognized expert on Ebola who helped investigate the first known outbreak of the disease, in DRC in 1976. Then-Health Minister Dr. Oly Ilunga resigned following Dr. Muyembe's appointment, citing a dilution of his authority as well as confusion about the coordination of DRC government Ebola responses, an insufficient focus on the health system, and opposition to utilizing the Johnson & Johnson experimental vaccine (see text box above). Ilunga was subsequently the target of scathing criticism in the leaked report of a DRC government investigative commission, which indicated, among other things, that Ilunga and his team had displayed an "aggressive and ostentatious attitude" when visiting the outbreak area and had squandered Ebola response funds on fancy cars and hotel rooms. These developments have suggested an internal power struggle over policy and control of funds for Ebola response. <2.2. U.N. and Other Multilateral Organizations> Humanitarian experts, including U.S. officials, have repeatedly asserted that broader humanitarian access and security issues have stymied outbreak control efforts, and that international response efforts require increased coordination and transparency. In response to such concerns, in May 2019 U.N. Secretary-General Ant nio Guterres appointed MONUSCO Deputy Special Representative David Gressly, a U.S. citizen, to serve as a new U.N. Emergency Ebola Response Coordinator charged with establishing a "strengthened coordination and support mechanism" for Ebola response. While the WHO is to continue to lead "all health operations and technical support activities to the government," Gressly is leading a broader U.N.-wide effort to strengthen political engagement, financial tracking, humanitarian coordination, and "preparedness and readiness planning" for Goma and surrounding countries. Gressly, who continues to report to the head of MONUSCO, portrayed his new role as a reflection of the need for "more than just a public health response." The WHO has deployed some 700 personnel to DRC since the current outbreak began. These personnel are coordinating the public health response and providing operational and technical support to DRC government personnel and other actors. Particular areas of focus include detection and rapid isolation of Ebola cases, intensification of rapid multidisciplinary public health actions for Ebola cases, community engagement, and health system strengthening. In addition, the WHO is coordinating regional readiness exercises and assessments in adjacent areas of DRC and neighboring countries. Vaccination and disease surveillance efforts have been bolstered in Uganda, Rwanda, and Burundi. The World Bank has stepped up its role in supporting the Ebola response effort since mid-2019. On July 24, the World Bank Group announced it was mobilizing up to $300 million to be financed through the Bank's International Development Association and its Crisis Response Window on top of $100 million disbursed previously through the International Development Association and the Bank's Pandemic Emergency Financing Facility (PEF). The PEF announced a further $30 million disbursement for DRC on August 23, 2019. World Bank resources have financed free health care and essential medicines in clinics in all affected areas, hazard pay for frontline health workers, handwashing stations, mobile laboratories, decontamination teams, psychosocial support teams, community engagement campaigns, and vaccination efforts. The injection of new resources aims to build on existing World Bank support to strengthen the DRC health system. The African Union (AU) Africa Centers for Disease Control and Prevention (Africa CDC) has supported international response efforts by deploying members of its voluntary response corps to DRC and neighboring countries. Africa CDC voluntary responders include epidemiologists and anthropologists, as well as communication, laboratory, and logistics experts from various African countries who are "on standby for emergency deployment." To date, these responders have trained local health workers and community volunteers, set up laboratories, supplied personal protective equipment, and trained people in port-of-entry screening. <2.3. The U.S. Government Response> USAID and the U.S. Centers for Disease Control and Prevention (CDC) deployed staff to DRC and the region when the outbreak was first detected in August 2018. The United States is also the top country donor to the Ebola response effort, as noted above. As of September 10, USAID had announced more than $148 million for direct support to the Ebola response within DRC and another $9.8 million to support preparedness and prevention activities in neighboring countries. Those funds were drawn primarily ($156.1 million) from unobligated FY2015 International Disaster Assistance (IDA) funds that Congress appropriated on an emergency basis for Ebola response during the West Africa outbreak ( P.L. 113-235 ). According to USAID, the available balance of FY2015 emergency IDA Ebola funds stood at $105.5 million as of September 9. More broadly, the United States is the top bilateral humanitarian donor to DRC and the top financial contributor to MONUSCO, which is providing logistical and security support to Ebola response efforts. USAID Administrator Green testified before Congress in April 2019 that "there is sufficient money for fighting Ebola in DRC," asserting that nonfinancial challenges posed the primary constraint to containment efforts. U.S. funding commitments have continued to grow since then, however, as the outbreak has persisted and broadened. U.S. personnel are providing technical support from Kinshasa, Goma, and neighboring Rwanda and Uganda, while implementing partners (U.N. agencies and NGOs) are administering Ebola response efforts within the outbreak zone with U.S. resources. The Administration has placed strict constraints on the movement of U.S. personnel to and within affected areas, due to security threats. In September 2018, USAID and CDC withdrew personnel from the immediate outbreak zone due to security concerns, despite CDC's stated preference to maintain staff in the field. U.S. support for outbreak control has included the following: USAID has provided grant funding to NGOs and U.N. entities carrying out Ebola response and preparedness activities, drawing primarily on IDA funds (as noted above). In October 2018, USAID deployed a Disaster Assistance Response Team (DART) to coordinate the U.S. response in support of the DRC government, the WHO, and other partners. USAID Ebola response funds have supported disease surveillance, infection prevention and control, safe and dignified burials, water and sanitation aid, prepositioning of medical supplies, humanitarian coordination, and logistics. U.S. bilateral economic and health aid funding for DRC has also supported programs that may ease humanitarian access or otherwise complement Ebola response activities. CDC personnel have provided direct technical support to the DRC government, the WHO, and USAID's DART for disease surveillance, contact tracing, data management, infection protection and control, risk communication and community engagement, laboratory strengthening, emergency management, and surveillance at points of entry. CDC staff also have supported Ebola preparedness efforts in neighboring countries. The Department of Defense has supplied laboratory training to Ugandan researchers and has partnered with them to conduct clinical Ebola vaccine trials. <3. Challenges> <3.1. Security Threats and Political Tensions> Security threats have periodically forced the temporary cessation of Ebola case management in some areas, interrupted contact tracing, and frustrated surveillance efforts in high-transmission areas. Dozens of armed groups are active in the areas most affected by the outbreak. These include an array of local militias, along with the Allied Democratic Forces (ADF), a relatively large and opaque group implicated in attacks on U.N. peacekeepers, local military forces, and civilians. Road travel is often dangerous, with frequent reports of militia attacks, armed robbery, and kidnappings. In April 2019, the Islamic State claimed responsibility for an attack on local soldiers previously attributed to the ADF, the latest in a series of signs of emerging ties between the two. State security force personnel reportedly maintain ties with armed groups and have been implicated in atrocities, including civilian massacres in Beni territory since 2014. Local mistrust of government officials and outsiders (including Congolese who are not from the immediate area) sometimes rooted in conflict dynamics, ethnic tensions, and political friction has prompted some community resistance to Ebola control efforts and led to attacks on health workers and facilities, including Ebola treatment centers. Some communities in Beni and Butembo have long opposed DRC's central government and complained of neglect and persecution. WHO officials have urged broader international support for "political mediation, engagement with opposition, and negotiated solutions," asserting that "[j]ust purely focusing on community engagement and participation will not fix what are deep seated political issues that need to be addressed at a higher level." Perceptions that outsiders are profiting financially from the outbreak, or that international intervention is driven more by fear of contagion than concern for locals' wellbeing, appear to have fueled conspiracy theories and community resistance. At a July 15 donors event on Ebola response in Geneva, WHO Director-General Dr. Tedros Adhanom Ghabreyesusi said that Congolese in the outbreak zone had asked him, "Are you here to help us, or to prevent this thing from coming to you? Are you doing this for us, or for yourself?" He added, "It embarrasses me. We should not appear to be seen as if we are parachuting in and out because of Ebola." DRC's then-Health Minister argued in the same meeting that local perceptions that the response was bringing cash into the region had fueled threats to health workers, including kidnappings. <3.2. Health System Constraints> Local perceptions that donors are more concerned with preventing the spread of Ebola to their countries than with helping Congolese communities are rooted, in part, in enduring health challenges. Maternal and infant deaths, for example, have for years regularly exceeded the current count of Ebola deaths but have received comparatively little attention. Authorities have redirected health resources in some areas for Ebola control, deepening local frustrations. Vaccination campaigns have also been interrupted in some Ebola hotspots. In Ituri province, for example, inadequate supply of measles vaccine has limited containment of a measles outbreak that began in January and has infected over 161,000 people, claiming over 3,000 lives. Health workers also are fighting a cholera outbreak that has infected over 15,000 people and killed at least 287. The WHO has reported that Ebola transmission is likely occurring in ill-equipped and understaffed health facilities. Inconsistent adherence to infection prevention and control, periodic disruptions in supply chain systems, and limited access to water for handwashing in some health facilities have complicated Ebola control efforts. In addition, some health workers have refused to wear personal protective equipment in health facilities or perform rudimentary infection prevention and control measures due to threats of violence by some members of the community. As of August 27, 2019, 156 health workers had contracted Ebola, at least 34 of whom had died. The MoH, WHO, and other partners have identified health facilities of concern and are addressing lapses in triage, case detection, and infection prevention and control. <3.3. Reported Progress> Community Engagement. The WHO and implementing partners have worked to deepen local engagement, with some reported positive results. Local Ebola committees in Butembo and Katwa (at the center of the outbreak zone in North Kivu), for example, are chaired and managed by community members who plan Ebola awareness and sensitization campaigns. Improved community engagement has reportedly contributed to increased participation in vaccine campaigns and safe and dignified burial practices. For example, the WHO reported in July 2019 that a high-risk contact in Katwa had sought vaccination and offered to bring other contacts. In an effort to reduce the risk of transmission and broaden access to Ebola treatment and case finding, the WHO also plans to establish smaller patient transit centers closer to communities. Replicating engagement activities in emergent hot spots remains a challenge, however. Ebola Therapeutics Advance. In August 2019, a clinical trial of four investigational Ebola treatments in DRC identified two "strong performers," leading the WHO to state that "these are the only drugs that future patients will be treated with." The trial, launched in late 2018, was co-sponsored by DRC's national biomedical research institute and the U.S. National Institutes of Health, and was carried out by an international research consortium coordinated by the WHO. <4. Issues for Congress> <4.1. U.S. Funding for DRC Ebola Response> In FY2015, in the context of the West Africa outbreak, Congress appropriated $5.1 billion for Ebola response and preparedness on an emergency basis, including $1.436 billion in multiyear International Disaster Assistance (IDA) funds (Title IX of Division J, P.L. 113-235 ). U.S. funding for responding to the current outbreak has drawn primarily on the unobligated balance of these IDA funds. According to USAID, $105.5 million of these funds remained available for expenditure as of September 9, 2019. Should the outbreak continue or expand in new ways, Congress may consider what funding mechanisms, if any, the United States might use to support Ebola control. At the same time, the United States remains the lead country donor to the current Ebola response effort. Members may examine the U.S. role, vis- -vis other actors (including other countries, multilateral entities, and private sources), in financing Ebola response activities, and may debate strategies for securing additional contributions from other donors. <4.2. U.S. Aid Restrictions Related to Trafficking in Persons> DRC is ranked as "Tier III" (worst) under the Trafficking Victims Protection Act (TVPA, P.L. 106-386 , as amended), which triggers prohibitions on certain types of U.S. aid absent a full or partial presidential waiver. In FY2019, in a departure from previous practice, President Trump did not partially waive the restrictions for DRC. Thus, pursuant to the TVPA, no "nonhumanitarian, nontrade-related" assistance may be provided "to the government" of DRC. IDA funds, the core source of funding for U.S. Ebola response support to date, are exempt from the TVPA restrictions (22 U.S.C. 7102[10]). The TVPA further exempts economic and development assistance "in support of programs of nongovernmental organizations." In practice, the Administration has interpreted the TVPA restrictions to apply broadly to various programs funded through the Development Assistance (DA) and Economic Support Fund (ESF) accounts, including some that would be implemented by NGOs, though it has not publicly provided a full account of affected activities. Some Members of Congress have expressed concern that some U.S. assistance that could help promote humanitarian access in Ebola-affected areas has been held up as a result. Testifying before the Senate in July 2019, a senior USAID official affirmed that some FY2018 aid resources that could help with Ebola control remained restricted in connection with the TVPA, but he and other Administration witnesses did not provide further details. Two bills introduced in the 116 th Congress ( S. 1340 , the Ebola Eradication Act of 2019, and H.R. 3085 , a House companion bill) would authorize assistance for a range of activities that could help lower community resistance or otherwise support Ebola control efforts in DRC and neighboring states, "notwithstanding" the TVPA restrictions. S. 1340 passed the Senate on September 23, 2019. Similar language was included in a draft FY2020 State, Foreign Operations Appropriations bill circulated by the Senate Appropriations Committee on September 18, 2019. That bill would also broadly provide at least $298.3 million in U.S. bilateral assistance for "stabilization, global health, and bilateral economic assistance" to DRC slightly higher than the U.S. allocation for DRC in recent years, not counting food aid "including in areas affected by, and at risk from, the Ebola virus disease." <4.3. Global Health Security> The current Ebola outbreak has prompted resumption of discussions about strengthening health systems worldwide, particularly with regard to pandemic preparedness. In 2014, during the Obama Administration, the United States and the WHO co-launched the Global Health Security Agenda (GHSA) to improve countries' ability to prevent, detect, and respond to infectious disease threats. The United States, the largest donor to this multilateral effort, pledged to support it with $1 billion from FY2015 through FY2019. The Trump Administration has built on these efforts. In May 2019, the White House released the United States Government Global Health Security Strategy , which outlined the U.S. role in extending the Global Health Security Agenda and improving global health security worldwide. Although the Trump Administration, through the strategy and public statements, has supported extending the GHSA through 2024, officials have not provided comprehensive information on what that support would entail. Members of Congress may continue to debate what role, if any, the United States should play in supporting global health system strengthening efforts to bolster global health security, and whether to adjust funding levels to meet ongoing and future infectious disease threats. Through regular appropriations, disease outbreak prevention and global health security efforts are funded through USAID pandemic influenza and CDC global health protection line items ( Table 2 ). On September 19, 2019, the House passed the Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 ( H.R. 4378 ), which would authorize the transfer to the CDC of up to $20 million for Ebola preparedness and response activities from the Infectious Disease Rapid Response Reserve Fund. Other relevant bills introduced in the 116 th Congress include H.R. 2166 , which would codify U.S. engagement in the GHSA as specified in an executive order issued by the Obama Administration, and H.R. 826 , which seeks to facilitate research and treatment of neglected tropical diseases, including Ebola.

The Ebola outbreak in the Democratic Republic of Congo (DRC) that began in August 2018 has eluded international containment efforts and posed significant challenges to local and international policymakers. The current outbreak is the 10 th and largest on record in DRC, and the world's second largest ever (after the 2014-2016 West Africa outbreak). On July 17, 2019, the World Health Organization (WHO) declared the current DRC outbreak to be a Public Health Emergency of International Concern (PHEIC) and called for increased donor funding. To date, the U.S. Agency for International Development (USAID) has announced nearly $158 million to support the response to the outbreak in DRC and neighboring countries, most of which has been funded through USAID-administered International Disaster Assistance (IDA) funds appropriated by Congress in FY2015. Challenges Broad challenges in DRC—including unresolved armed conflicts, shortfalls in the local health care system, political tensions, community grievances, and criminal activities—have hindered outbreak control. The main outbreak zone is an area of eastern DRC where long-running conflicts had already caused a protracted humanitarian crisis. In addition, the outbreak has coincided with a fraught political transition process in DRC, where a former opposition figure, Felix Tshisekedi, was inaugurated president in January 2019. The electoral process and tense negotiations over a coalition government have complicated Ebola response efforts, as well as coordination between national and provincial officials. Ebola and related response efforts have also diverted or interrupted already limited local health resources in affected areas. This phenomenon, in turn, has been linked to interruptions in routine immunization campaigns. Inadequate measles vaccine supplies have limited capacity to control a measles outbreak in DRC that began in January 2019 and has claimed more than 3,000 lives. Since June 2019, a handful of Ebola-infected individuals have been identified in the large city of Goma in eastern DRC (a staging area for humanitarian operations and U.N. peacekeeping activities in the country), in the city of Bukavu (south of the main outbreak zone), and in Uganda. Suspected cases were reported, but not confirmed, in Tanzania in mid-September 2019. Transmission outside the outbreak zone has been limited to date, which may be attributable to internationally supported surveillance and prevention efforts, as well as the use of an investigational vaccine. Concerns nevertheless persist that cases could spread to new areas and/or countries. Uganda (which borders the most affected areas in DRC) has prior experience in Ebola control, but Rwanda, Tanzania, and Burundi do not. Minimal state capacity and protracted conflict in South Sudan and the Central African Republic suggest that a coordinated disease control response in either setting could be highly challenging. Issue s for Congress A potential issue for Congress is the level of funding allocated for global health security and pandemic preparedness versus outbreak response, with funding for outbreak response to date outweighing support for global outbreak prevention. Separately, the State Department's designation of DRC as a "Tier III" (worst-performing) country under the Trafficking Victims Protection Act (TVPA, Division A of P.L. 106-386 , as amended) triggers restrictions on certain types of U.S. aid (not including IDA-funded activities). Several bills would authorize U.S. funding for programs intended to lower community resistance and otherwise support Ebola control in DRC and neighboring states, "notwithstanding" the TVPA restrictions. These include S. 1340 , the Ebola Eradication Act of 2019, which passed the Senate in September 2019; H.R. 3085 , a House companion bill; and a Senate committee draft of the FY2020 Department of State, Foreign Operations, and Related Programs appropriations bill circulated on September 18, 2019. Some Members of Congress have also monitored State Department security policies that have restricted U.S. government experts' travel to and within the outbreak zone.

crs_R45974

crs_R45974_0

<1. Status of FY2020 Agriculture Appropriations> On December 20, 2019, Congress passed and the President signed into law a full-year FY2020 appropriation the Further Consolidated Appropriations Act ( P.L. 116-94 , Committee Print 38-679 ) that included Agriculture appropriations in Division B ( Table 1 ). During the regular appropriations cycle, the House passed a five-bill minibus appropriation on June 25, 2019 ( H.R. 3055 ), and the Senate passed a four-bill minibus on October 31, 2019 ( H.R. 3055 ). In both cases, Agriculture was in Division B. To develop these bills, the House and Senate Appropriations Committees reported Agriculture subcommittee bills ( H.R. 3164 and S. 2522 , respectively) with their own more detailed reports ( H.Rept. 116-107 and S.Rept. 116-110 , respectively). See Figure 1 for a comparison of timelines and Appendix D for more details. The Administration released its budget request in two parts: an overview on March 11, 2019, and more detailed documents on March 18, 2019. In the absence of an enacted appropriation at the beginning of the fiscal year, FY2020 began with two continuing resolutions (CRs). For overall spending levels, the House set its subcommittee allocations on May 14, 2019 ( H.Rept. 116-59 ). The Senate set its subcommittee allocation on September 12, 2019 ( S.Rept. 116-104 ), after the Bipartisan Budget Act of 2019 ( P.L. 116-37 ) raised caps on discretionary spending. The discretionary total of the FY2020 Agriculture appropriations act is $23.5 billion. This is $183 million more than the comparable amount for FY2019 (+0.8%) that includes the Commodity Futures Trading Commission (CFTC). The appropriation also carries about $129 billion of mandatory spending that is largely determined in authorizing laws ( Table 2 ). <2. Scope of Agriculture Appropriations> The Agriculture appropriations bill formally known as the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act funds all of the U.S. Department of Agriculture (USDA), excluding the U.S. Forest Service. It also funds the Food and Drug Administration (FDA) in the Department of Health and Human Services and, in even-numbered fiscal years, CFTC. Jurisdiction is with the House and Senate Committees on Appropriations and their Subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies. The bill includes mandatory and discretionary spending, but the discretionary amounts are the primary focus ( Figure 2 ). Some programs are not in the authorizing jurisdiction of the House or Senate Agriculture Committees, such as FDA, Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), or child nutrition (checkered regions in Figure 2 ). The federal budget process treats discretionary and mandatory spending differently: Discretionary spending is controlled by annual appropriations acts and receives most of the attention during the appropriations process. The annual budget resolution process sets spending limits for discretionary appropriations. Agency operations (salaries and expenses) and many grant programs are discretionary. Mandatory spending is carried in the appropriation and usually advanced unchanged, since it is controlled by budget rules during the authorization process. Spending for so-called entitlement programs is determined in laws such as the 2018 farm bill and 2010 child nutrition reauthorizations. In the FY2020 appropriation ( P.L. 116-94 ), the discretionary amount is 15% ($23 billion) of the $153 billion total. Mandatory spending carried in the act comprised $129 billion, about 85% of the total, of which about $106 billion is attributable to programs in the 2018 farm bill. Within the discretionary total, the largest spending items are WIC; agricultural research; rural development; FDA; foreign food aid and trade; farm assistance loans and salaries; food safety inspection; animal and plant health programs; and technical assistance for conservation program. The main mandatory spending items are the Supplemental Nutrition Assistance Program (SNAP) and other food and nutrition act programs, child nutrition (school lunch and related programs), crop insurance, and farm commodity and conservation programs that are funded through USDA's Commodity Credit Corporation (CCC). SNAP is referred to as an "appropriated entitlement" and requires an annual appropriation. Amounts for the nutrition program are based on projected spending needs. In contrast, the CCC appropriations reimburse spending from a line of credit. <3. Recent Trends in Agriculture Appropriations> Discretionary Agriculture appropriations were at an all-time high in FY2010, declined through FY2013, and have gradually increased since then. Changes within titles have generally been proportionate to changes in the overall bill, though some areas have sustained relative increases, such as FDA and rural development. The stacked bars in Figure 3 represent the discretionary authorization for each appropriations title. The total of the positive stacked bars is the budget authority in Titles I-VI. In FY2018, USDA reorganization affected the placement of some programs between Titles I and II of the bill (most noticeably, the Farm Service Agency). In most years, the cumulative appropriation for the agencies is higher than the official discretionary total in the spending allocation (the blue line) because of the budgetary offset from negative amounts in Title VII (general provisions) and other negative scorekeeping adjustments. These negative offsets are mostly due to rescissions of prior-year unobligated funds and, before FY2018, limits placed on mandatory programs. Historical trends may be tempered by inflation adjustments, as shown in the dotted line. The inflation-adjusted totals from FY2011-FY2017 had been fairly steady until increases in the FY2018-FY2020 appropriations. <4. Action on FY2020 Appropriations> <4.1. Administration's Budget Request> The Trump Administration released a general overview of its FY2020 budget request on March 11, 2019, and a detailed budget proposal to Congress on March 18, 2019. USDA released its more detailed budget summary and justification, as did the FDA, and the independent agencies of the CFTC and the Farm Credit Administration. The Administration also highlighted separately some of its proposed reductions and eliminations. For accounts in the jurisdiction of the Agriculture appropriations bill, the Administration's budget requested $19.2 billion, a $4.1 billion reduction from FY2019 (-18%; Table 2 , Figure 3 ). The Administration released its budget request for FY2020 after Congress had enacted the omnibus FY2019 appropriation in February 2019 ( P.L. 116-6 ). Amounts in the FY2019 column of the Administration's budget documents are based on FY2018 levels, not enacted FY2019 amounts. <4.2. Discretionary Budget Caps and Subcommittee Allocations> Budget enforcement has procedural and statutory elements. The procedural elements relate to a budget resolution and are enforced with points of order. The statutory elements impose discretionary spending limits and are enforced with budget caps and sequestration. <4.2.1. Budget Resolution> Typically, each chamber's Appropriations Committee receives a top-line limit on discretionary budget authority, referred to as a "302(a)" allocation, from the Budget Committee via an annual budget resolution. The Appropriations Committees then in turn subdivide the allocation among their subcommittees, referred to as the "302(b)" allocations. For FY2020, the House did not report or pass a budget resolution. The Senate Budget Committee reported S.Con.Res. 12 , though it received no further action. <4.2.2. Budget Caps> The Budget Control Act of 2011 (BCA, P.L. 112-25 ) set discretionary budget caps through FY2021 as a way of reducing federal spending. Sequestration is an across-the-board backstop to achieve budget reductions if spending exceeds the budget caps (2 U.S.C. 901(c)). Bipartisan Budget Acts (BBAs) have avoided sequestration on discretionary spending with the exception of FY2013 by raising those caps four times in two-year increments in 2013, 2015, 2018, and 2019 ( Figure 4 ). Most recently, the BBA of 2019 ( P.L. 116-37 ) raised the cap on nondefense discretionary spending by $78 billion for FY2020 (to $621 billion) and by $72 billion for FY2021 (to $627 billion). The amount for FY2020 is 4.1% greater than the nondefense cap in FY2019. The BBA also provides language to execute (or "deem") those higher caps for the appropriations process without a budget resolution. <4.2.3. Discretionary Spending Allocations> In the absence of a budget resolution and before the BBA that occurred in August, the House Appropriations Committee on May 14, 2019, set an overall discretionary target and provided subcommittee allocations ( H.Rept. 116-59 ). The allocation for Agriculture appropriations was $24.3 billion, $1 billion greater (+4.3%) than the comparable amount for FY2019 ( Table 2 ). The Senate waited for the overall budget agreement in the BBA of 2019 before setting subcommittee allocations or proceeding to mark up appropriations bills. On September 12, 2019, the Senate Appropriations Committee set its subcommittee allocations ( S.Rept. 116-104 ). The subcommittee allocation was $23.1 billion, $0.1 billion greater (+0.3%) than FY2019. Without Congress having agreed on a joint budget resolution, different subcommittee allocations between the chambers further necessitated reconciliation in the final appropriation. <4.2.4. Budget Sequestration on Mandatory Spending> Despite the BBA agreements that raise discretionary spending caps and avoid sequestration on discretionary accounts, sequestration still impacts mandatory spending through FY2029. Sequestration on mandatory accounts began in FY2013, continues to the present, and has been extended five times beyond the original FY2021 sunset of the BCA. See Appendix C for effects. <4.3. House Action> The House Agriculture Appropriations Subcommittee marked up its FY2020 bill on May 23, 2019, by voice vote. On June 4, 2019, the full Appropriations Committee passed and reported an amended bill ( H.R. 3164 , H.Rept. 116-107 ) by a vote of 29-21. The committee adopted four amendments by voice vote. On June 25, 2019, the House passed a five-bill minibus appropriation ( H.R. 3055 ) with the Agriculture bill as Division B ( Table 1 , Figure 1 ). Under a structured rule, the Rules Committee allowed 35 amendments for floor debate (H.Res. 445, H.Rept. 116-119 ). The House considered 33 of those amendments, of which 31 were adopted and two were rejected. Of the 31 amendments that were adopted, 28 were adopted en bloc by voice vote, two were adopted by recorded votes, and another was adopted separately by voice vote. Of the 31 amendments that were adopted, 14 revised funding amounts with offsets, three added policy statements, and 14 made no substantive changes but were for the purposes of discussion. The $24.3 billion discretionary total in the House-passed FY2020 Agriculture appropriation would have been $1 billion more than (+4%) the comparable amount enacted for FY2019 that includes the CFTC ( Table 2 , Figure 3 ). Generally speaking, the House-passed bill did not include most of the reductions proposed by the Administration. <4.3.1. Comparison of Discretionary Authority: House-Passed Bill to FY2019> Table 3 provides details of the House-passed bill at the agency level. The primary changes from FY2019 that comprised the $1 billion increase, ranked by increases and decreases, include the following: Increase Rural Development accounts by $412 million (+14%), including a $144 million increase for the Rural Housing Service (+9%) and a $238 million increase for the Rural Utilities Service (+38%) to support rural water and waste disposal and rural broadband. In addition, the General Provisions title included a $393 million increase for the ReConnect Broadband Pilot Program (+314%). Increase foreign agricultural assistance by $377 million (+19%), including increasing Food for Peace humanitarian assistance by $350 million and McGovern-Dole Food for Education by $25 million. In FY2019, Food for Peace had received a temporary increase of $216 million in the General Provisions title. The larger FY2020 amount would have been to the program's base appropriation rather than the FY2019 approach that used the General Provisions. Increase related agencies appropriations by $232 million, including raising FDA appropriations by $185 million (+6%) and the CFTC by $47 million (+18%). Increase other agricultural program appropriations by $151 million, including the following: Increase departmental administration accounts by a net $205 million (+53%), including funding most of the Administration's request for a $271 million increase for construction to renovate USDA headquarters. Increase USDA regulatory programs by $56 million, including increasing the Animal and Plant Health Inspection Service by $23 million (+2%) and the Agricultural Marketing Service by $33 million (+20%). Decrease agricultural research by a net $134 million (-4%). Agricultural Research Service (ARS) construction would have been reduced by $331 million from FY2019 (-87%), while salaries and expenses would have increased for ARS (+$44 million, +3%) and the National Institute of Food and Agriculture (NIFA) (+$146 million, +10%). Some of these increases would have been offset by a net change of -$175 million in budget authority through the General Provisions title. This was mostly a combination of greater rescissions of carryover balances in WIC (-$300 million) and the absence of continuing the FY2019 appropriations in the General Provisions for Food for Peace (-$216 million, as mentioned above) and rural water and waste disposal (-$75 million). The General Provisions would have provided increases in funding for rural broadband (+$393 million, as mentioned above) and several appropriations for miscellaneous programs (+$33 million). <4.3.2. Comparison of Mandatory Spending: House-Passed Bill to FY2019> In addition to discretionary spending, the House-passed bill also carried mandatory spending that totaled $131 billion. This was about $2 billion more than in FY2019 generally because of automatic changes from economic conditions and expectations about enrollment in entitlement programs. Reimbursement for the CCC was projected to increase by $10 billion, mostly due to the cost of the first year of the Trump Administration's trade aid assistance package . Estimates for child nutrition programs would have increased by $0.9 billion. Crop insurance spending would have decreased by $6.4 billion, and SNAP spending decreased by about $2.4 billion. <4.4. Senate Action> The Senate Agriculture Appropriations Subcommittee marked up its FY2020 bill on September 17, 2019. On September 19, 2019, the full Appropriations Committee passed and reported an amended bill ( S. 2522 , S.Rept. 116-110 ) by a vote of 31-0. The committee adopted a manager's amendment with three additions to bill text and 19 additions to report language. On October 31, 2019, the Senate passed a four-bill minibus appropriation ( H.R. 3055 , after adopting S.Amdt. 948 , which was composed of four Senate-reported bills and amended by floor amendments). The Agriculture bill is Division B ( Table 1 , Figure 1 ). The Senate adopted 16 amendments to Division B, of which 14 were adopted en bloc by unanimous consent and two were adopted by recorded votes. Of these 16 amendments, eight revised funding amounts with offsets, three revised funding amounts within an existing appropriation, three changed the terms of an appropriation, and two required reports or studies. The $23.1 billion discretionary total in the Senate-passed FY2020 Agriculture appropriation would have been $57 million more than (+0.2%) the amount enacted for FY2019 ( Table 2 , Figure 3 ). The Senate bill was $894 million less than (-3.7%) the House-passed bill on a comparable basis without CFTC. Generally speaking, the Senate-passed bill did not include most of the reductions proposed by the Administration. Table 3 provides details of the Senate-passed bill at the agency level. <4.4.1. Comparison of Discretionary Authority: Senate-Passed to House-Passed Bill> Compared to the House-passed bill and ranked by increases and decreases, the primary changes in the Senate-passed bill that comprised the -$894 million difference from the House bill included the following: Agricultural research would have been $193 million greater in the Senate-passed bill than in the House-passed bill. ARS buildings and facilities would have been $255 million greater than in the House-passed bill, ARS salaries and expenses $77 million greater, and NIFA $132 million less. Departmental administration accounts would have been $97 million greater in the Senate bill than in the House bill, mostly by maintaining appropriations for the Chief Information Officer, General Counsel, and Departmental Administration that would have been reduced as offsets to pay for floor amendments that were adopted in the House bill. Rural Development would have been $407 million less in the Senate-passed bill than in the House-passed bill, mostly by a $300 million less for the Rural Utilities Service ($233 million less for rural water and waste disposal grants, $41 million less for distance learning and telemedicine, and $25 million less for existing non-pilot rural broadband programs), $70 million less for Rural Housing Service, and $22 million less for the Rural Business-Cooperative Service. In addition, for the separate ReConnect Broadband Pilot Program, the General Provisions title in the Senate-passed bill would not have provided for any of the $518 million that the House bill contained. Foreign agricultural assistance would have been $159 million less in the Senate bill than in the House bill, mostly by not increasing Food for Peace as much as in the House bill, and maintaining the McGovern-Dole program at a constant level. FDA appropriations would have been $105 million less in the Senate-passed bill than in the House-passed bill. <4.4.2. Comparison of Mandatory Spending: Senate-Passed to House-Passed Bill> In addition to discretionary spending, the Senate-passed bill also carried mandatory spending that totaled $129 billion. This was $153 million less than in FY2019 and $2.3 billion less than in the House-passed bill. Compared to the House-passed bill, amounts for CCC and crop insurance were the same. Mandatory amounts for the child nutrition programs were about $400 million less than the House bill, and the amount for SNAP was about $1.9 billion less than in the House bill. <4.5. Continuing Resolutions> In the absence of a final Agriculture appropriation at the beginning of FY2020 on October 1, 2019, Congress passed a CR to continue operations and prevent a government shutdown ( P.L. 116-59 , Division A). The first CR lasted nearly eight weeks until November 21, 2019. On November 21, a second CR ( P.L. 116-69 ) was enacted to last until December 20, 2019. On December 20, Congress passed and the President signed a full-year FY2020 appropriation. In general, a CR continues the funding rates and conditions that were in the previous year's appropriation. The Office of Management and Budget (OMB) may prorate funding to the agencies on an annualized basis for the duration of the CR through a process known as apportionment. For the first 52 days (about 14% of FY2020) through November 21, 2019, and the next 29 days (about 8% of FY2020) through December 20, 2019, the CRs continued the terms of the FY2019 Agriculture appropriations act ( 101) with a proviso for rural development in the anomalies below; and provided sufficient funding to maintain mandatory program levels, including for nutrition programs ( 111). This is similar to the approach taken in recent years. CRs may adjust prior-year amounts through anomalies or make specific administrative changes. Five anomalies applied specifically to the Agriculture appropriation during the first CR: Rural Water and Waste Disposal Program ( 101(1)) . Allowed the CR to cover the cost of direct loans in addition to loan guarantees and grants. In FY2019, direct loans did not require appropriation because they had a negative subsidy rate (i.e., fees and repayments more than covered the cost of loan making). In FY2020, OMB estimated a need for a positive subsidy rate. Disaster Assistance for Sugar Beet Processors ( 116) . Amended the list of eligible losses that may be covered under the Additional Supplemental Appropriations for Disaster Relief Act of FY2019 ( P.L. 116-20 , Title I) to include payments to cooperative processors for reduced sugar beet quantity and quality. The FY2019 supplemental provided $3 billion to cover agricultural production losses in 2018 and 2019 from natural disasters. Agricultural Research ( 117) . Allowed USDA to waive the nonfederal matching funds requirement for grants made under the Specialty Crop Research Initiative (7 U.S.C. 7632(g)(3)). The requirement was added in the 2018 farm bill. Summer Food for Children Demonstration Projects ( 118) . Allocated funding for the Food and Nutrition Service summer food for children demonstration projects at a rate so that projects could fully operate by May 2020 (prior to summer service, which typically starts in June). Similar provisions have been part of previous CRs. These projects, which include the Summer Electronic Benefit Transfer (EBT) demonstration, have operated in selected states since FY2010. C ommodity C redit C orporation ( 119 ) . Allowed CCC to receive its appropriation about a month earlier than usual so that it could reimburse the Treasury for a line of credit prior to a customary final report and audit. Many payments to farmers were due in October 2019, including USDA's plan to make supplemental payments under its trade assistance program. Without the anomaly, CCC might have exhausted its $30 billion line of credit in October or November 2019 before the audit was completed, which could have suspended payments. A similar provision was part of a CR in FY2019. In addition, the FY2020 CR required USDA to submit a report to Congress by October 31, 2019, with various disaggregated details about Market Facilitation Program payments, trade damages, and whether commodities were purchased from foreign-owned companies under the program. Hemp ( 120) . Provided $16.5 million on an annualized basis to the USDA Agricultural Marketing Service to implement the Hemp Production Program ( P.L. 115-334 , 10113), which was created in the 2018 farm bill. The second CR continued the terms of the first CR until December 20, 2019. It added one new anomaly for Agriculture appropriations: Commodity Assistance Program ( 146). Allowed funding for the Commodity Supplemental Food Program (CSFP) to be apportioned at a rate to maintain current program caseload. This meant that funding available under the second CR could exceed amounts that would otherwise would have been available. <4.6. FY2020 Further Consolidated Appropriations Act> On December 20, 2019, Congress passed and the President signed a full-year FY2020 appropriation the Further Consolidated Appropriations Act ( P.L. 116-94 , Committee Print 38-679 ) that included Agriculture appropriations in Division B. This was the second of two consolidated appropriations acts that were passed in tandem: P.L. 116-93 , which covered four appropriations subcommittee bills, and P.L. 116-94 , which covered eight appropriations subcommittee bills. The official discretionary total of the FY2020 Agriculture appropriation is $23.5 billion. This is $183 million more than (+0.8%) the comparable amount for FY2019 that includes CFTC. The appropriation also carries about $129 billion of mandatory spending that is largely determined in authorizing laws. Thus the overall total of the agriculture portion is $153 billion. In addition to these amounts, the appropriation includes budget authority that is designated as emergency spending and does not count against discretionary spending caps. These include $535 million to FDA for Ebola prevention and treatment, and $1.5 billion to USDA for the Wildfires and Hurricanes Indemnity Program (WHIP). The latter amount was offset by a $1.5 billion rescission of unobligated WHIP funding from a prior appropriation and emergency designation. <4.6.1. Comparison of Discretionary Authority> Table 3 provides details of the enacted FY2020 Agriculture appropriation at the agency level, and compared with the House- and Senate-passed bills, the Administration's request, and three prior years. The primary changes from FY2019 that comprised the overall $183 million increase, ranked by increases and decreases, include the following: Increase foreign agricultural assistance by $235 million (+12%), including increasing Food for Peace humanitarian assistance by $225 million and McGovern-Dole Food for Education by $10 million. In FY2017-FY2019, Food for Peace had received temporary increases in the General Provisions title, including $216 million in FY2019. The larger FY2020 amount replaces the temporary amount with an increase in the program's base appropriation. Increase Rural Development accounts by $229 million (+8%), including a $130 million increase for the Rural Utilities Service (+21%) to support rural water and waste disposal and telemedicine and an $81 million increase for the Rural Housing Service (+5%). In addition, the General Provisions title included a $175 million increase for a rural broadband pilot program (+140%). Increase related agencies appropriations by $138 million, including raising FDA appropriations by $91 million (+3%) and the CFTC by $47 million (+18%). Increase other agricultural program appropriations by $199 million, including the following: Increase departmental administration accounts by a net $82 million (+21%), including funding for construction to renovate USDA headquarters. Increase USDA regulatory programs by $59 million, including increasing the Animal and Plant Health Inspection Service by $32 million (+3%) and the Agricultural Marketing Service by $28 million (+17%). Decrease agricultural research by a net $18 million (-0.5%). Agricultural Research Service (ARS) construction is reduced by $189 million compared with FY2019 (-49%), while salaries and expenses are increased for ARS (+$111 million, +9%) and grants for the National Institute of Food and Agriculture (NIFA) (+$56 million, +4%). Increase Farm Service Agency salaries and expenses by $47 million (+3%). Increase Natural Resources Conservation Service appropriations by $35 million, including Watershed and Flood Prevention by $25 million (+17%), and Conservation Operations by $10 million (+1%). Decrease Food and Nutrition Service discretionary appropriations by $54 million, including decreasing WIC by $75 million (-1%) and increasing Commodity Assistance Programs by $22 million (+7%). Some of these increases are offset by a net change of -$570 million in budget authority through the General Provisions title. This was mostly a combination of greater rescissions of carryover balances in WIC (-$500 million) and the absence of continuing the FY2019 appropriations in the General Provisions for Food for Peace (-$216 million, as mentioned above) and rural water and waste disposal grants (-$75 million). The General Provisions provides increases in funding for rural broadband (+$175 million, as mentioned above) and several appropriations for miscellaneous programs (+$63 million over FY2019). Not included above is emergency funding that is not subject to discretionary budget caps. This includes funding for Ebola ($535 million) and the Wildfires and Hurricanes Indemnity Program (WHIP, $1.5 billion). The latter emergency authorization was offset by an identically sized rescission of prior-year emergency funding for WHIP. <4.6.2. Comparison of Mandatory Spending> In addition to discretionary spending, the House-passed bill also carried mandatory spending largely determined in separate authorizing laws that totals $129 billion. This is about $354 million more than (+0.3%) FY2019, generally due to automatic changes from economic conditions and expectations about enrollment in entitlement programs. Reimbursement to the Treasury for the CCC increased by $10.9 billion (+71%), mostly due to the cost of the Trump Administration's trade aid assistance that was announced in 2018. Child nutrition programs increase by $0.5 billion (+2%). Crop insurance spending decreases by $5.5 billion (-35%), and SNAP spending decreases by about $5.6 billion (-8%). <4.7. Policy-Related Provisions> Besides setting spending authority, appropriations acts are also a vehicle for policy-related provisions that direct executive branch actions. These provisions, limitations, or riders may have the force of law if they are included in the act's text, but their effect is generally limited to the current fiscal year unless they amend the U.S. Code , which is rare in appropriations acts. Table 4 compares some of the primary policy provisions that are included directly in the FY2020 Agriculture appropriations act, and its development in the House and Senate bills. Report language may also provide policy instructions. Although report language does not carry the force of text in an act, it often explains congressional intent, which the agencies may be expected to follow. Statements in the joint explanatory statement and the committee reports are not included in Table 4 . In the past, Congress has said that committee reports and the joint explanatory statement need to be read together to capture all of the congressional intent for a fiscal year. For example, the explanatory statement for the FY2020 Further Consolidated Appropriations act instructs that the House and Senate reports should be read together with the conference agreement: Congressional Directives. The statement is silent on provisions that were in both the House Report ( H.Rept. 116-107 ) and Senate Report ( S.Rept. 116-110 ) that remain unchanged by this agreement, except as noted in this statement. The House and Senate report language that is not changed by the statement is approved and indicates congressional intentions. The statement, while repeating some report language for emphasis, does not intend to negate the language referred to above unless expressly provided herein. Appendix A. Appropriations in Administrative Accounts Appendix B. Appropriations in General Provisions Appendix C. Budget Sequestration Sequestration is a process to reduce federal spending through automatic, largely across-the-board reductions that permanently cancel mandatory and/or discretionary budget authority. Sequestration is triggered as a budget enforcement mechanism when federal spending would exceed statutory budget goals. Sequestration is currently authorized by the BCA ( P.L. 112-25 ). A sequestration rate is the percentage reduction that is subtracted from an appropriated budget authority to achieve an intended budget goal. OMB computes these rates annually. Table C-1 shows the rates of sequestration that have been announced and the total amounts of budget authority that have been cancelled from accounts in Agriculture appropriations. Table C-2 provides additional detail at the program level for mandatory accounts. Discretionary Spending For discretionary spending, sequestration is authorized through FY2021 if discretionary defense and nondefense spending exceed caps that are specified in statute (2 U.S.C. 901(c)). In FY2013, the timing of the appropriations acts and the first year of sequestration resulted in triggering sequestration on discretionary spending. In FY2014-FY2019, BBAs in 2013, 2015, and 2018 ( P.L. 113-67 , P.L. 114-74 , and P.L. 115-123 , respectively) have avoided sequestration on discretionary spending. These BBAs raised the discretionary budget caps that were placed in statute by the BCA and allowed Congress to enact larger appropriations than would have been allowed. The enacted appropriations in FY2014-FY2019 met the spending limitations of the revised budget caps, and therefore no sequestration on discretionary accounts was necessary. For FY2020-FY2021, the BBA of 2019 ( P.L. 116-37 ) similarly provides a higher discretionary cap that may avoid sequestration (see " Discretionary Budget Caps and Subcommittee Allocations "). Mandatory Spending Sequestration Occurs and Continues For mandatory spending, sequestration is presently authorized and scheduled to continue through FY2029, having been amended and extended by budget acts that were subsequent to the BCA (2 U.S.C. 901a(6)). That is, sequestration of mandatory spending has not been avoided by the BBAs and continues to apply annually to certain accounts ( Table C-2 ). The original FY2021 sunset on the sequestration of mandatory accounts has been extended five times as an offset to pay for raising the caps on discretionary spending to avoid sequestration in the near term (or as a general budgetary offset for other authorization acts): 1. Congress extended the duration of mandatory sequestration by two years (until FY2023) as an offset in BBA 2013. 2. Congress extended it by another year (until FY2024) to maintain retirement benefits for certain military personnel ( P.L. 113-82 ). 3. Congress extended sequestration on nonexempt mandatory accounts another year (until FY2025) as an offset in BBA 2015. 4. Congress extended sequestration on nonexempt mandatory accounts for two years (until FY2027) as an offset in BBA 2018 ( P.L. 115-123 , 30101(c)). 5. Congress extended sequestration on nonexempt mandatory accounts by another two years (until FY2029) as an offset in BBA 2019 ( P.L. 116-37 , 402). Exemptions from Sequestration Some USDA mandatory programs are statutorily exempt from sequestration. Those expressly exempt by statute are the nutrition programs (SNAP, the child nutrition programs, and the Commodity Supplemental Food Program) and the Conservation Reserve Program. Some prior legal obligations in the Federal Crop Insurance Corporation and the farm commodity programs may be exempt as determined by OMB. Generally speaking, the experience since FY2013 is that OMB has ruled that most of crop insurance is exempt from sequestration, while the farm commodity programs, disaster assistance, and most conservation programs have been subject to it. Implementation of Sequestration Nonexempt mandatory spending in FY2020 is to be reduced by a 5.9% sequestration rate ( Table C-1 ) and thus would be paid at 94.1% of what would otherwise have been provided. This is projected to result in a reduction of about $1.4 billion from mandatory agriculture accounts in FY2020, including over $900 million from amounts paid by the CCC ( Table C-2 ). For example, for the farm commodity programs that support farm income such as the Agricultural Risk Coverage and Price Loss Coverage programs, payments to farmers are computed by a regular formula authorized in the farm bill, and the final actual payment to the farmer is reduced by the sequestration rate. For programs that operate on a fixed budget authority, such as the Environmental Quality Incentives Program and the Market Assistance Program, the sequestration rate is applied to the available budget authority for the fiscal year. Appendix D. Action on Agriculture Appropriations, FY1996-FY2020

The Agriculture appropriations bill funds the U.S. Department of Agriculture (USDA) except for the U.S. Forest Service. It also funds the Food and Drug Administration (FDA) and—in even-numbered fiscal years—the Commodity Futures Trading Commission (CFTC). Agriculture appropriations include both mandatory and discretionary spending. Discretionary amounts, though, are the primary focus during the bill's development. The largest discretionary spending items are the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); agricultural research; rural development; FDA; foreign food assistance and trade; farm assistance loans and salaries; food safety inspection; animal and plant health programs; and technical assistance for conservation programs. Congress passed and the President signed a full-year FY2020 appropriation on December 20, 2019—the Further Consolidated Appropriations Act ( P.L. 116-94 , Committee Print 38-679 )—that included Agriculture appropriations in Division B. The discretionary total of the FY2020 Agriculture appropriations act is $23.5 billion. This is $183 million more than the comparable amount for FY2019 (+0.8%) that includes the Commodity Futures Trading Commission (CFTC). The appropriation also carries about $129 billion of mandatory spending that is largely determined in authorizing laws. Thus, the overall total of the agriculture portion is $153 billion. In addition to these amounts, the FY2020 Further Consolidated Appropriations Act includes budget authority that is designated as emergency spending and does not count against discretionary spending caps. These include $535 million to FDA for Ebola prevention and treatment, and $1.5 billion to USDA for the Wildfires and Hurricanes Indemnity Program (WHIP). The latter amount was offset by a $1.5 billion rescission of unobligated WHIP funding from a prior appropriation and emergency designation. The primary components of the $183 million overall increase in the regular appropriation from FY2019 include increases to foreign agricultural assistance (+$235 million), rural development (+$229 million), rural broadband (+$175 million, separate from the rural development increase), agricultural research salaries and grants (+$167 million), FDA (+$91 million), departmental administration (+$82 million), Farm Service Agency (+$47 million), CFTC (+$47 million), the Natural Resources Conservation Service (+$35 million), Animal and Plant Health Inspection Service (+$32 million) and the Agricultural Marketing Service (+$28 million), and miscellaneous appropriations (+$63 million). Most of these increases are offset by decreases such as for construction for agricultural research facilities (-$189 million), Food and Nutrition Service discretionary appropriations (-$54 million), increasing a rescission of carryover balances in WIC (-$500 million), and not renewing temporary appropriations for Food for Peace and rural water and waste disposal grants (-$291 million). The Trump Administration had requested $19.2 billion for discretionary-funded accounts within the jurisdiction of Agriculture appropriations subcommittees. The request would have been a reduction of $4.1 billion from FY2019 (-18%). Policy provisions are also included that affect how the appropriation is delivered. This year, these provisions include issues such as the relocation of USDA agencies, disaster programs, rural definitions, livestock regulations, nutrition programs, and dietary guidelines. Budget sequestration continues to affect mandatory agricultural spending accounts. Sequestration refers to automatic across-the-board reductions in spending authority. In FY2020, sequestration on mandatory spending accounts is 5.9% and totals about $1.4 billion for agriculture accounts. Recent budget acts have extended sequestration through FY2029.

crs_RS20871

crs_RS20871_0

<1. Overview and Objectives> Sanctions have been a significant component of U.S. Iran policy since Iran's 1979 Islamic Revolution that toppled the Shah of Iran, a U.S. ally. In the 1980s and 1990s, U.S. sanctions were intended to try to compel Iran to cease supporting acts of terrorism and to limit Iran's strategic power in the Middle East more generally. After the mid-2000s, U.S. and international sanctions focused largely on ensuring that Iran's nuclear program is for purely civilian uses. During 2010-2015, the international community cooperated closely with a U.S.-led and U.N.-authorized sanctions regime in pursuit of the goal of persuading Iran to agree to limits to its nuclear program. Still, sanctions against Iran have multiple objectives and address multiple perceived threats from Iran simultaneously. This report analyzes U.S. and international sanctions against Iran. CRS has no way to independently corroborate whether any individual or other entity might be in violation of U.S. or international sanctions against Iran. The report tracks "implementation" of the various U.S. laws and executive orders as designations and imposition of sanctions. Some sanctions require the blocking of U.S.-based property of sanctioned entities. CRS has not obtained information from the executive branch indicating that such property has been blocked, and it is possible that sanctioned entities do not have any U.S. assets that could be blocked. The sections below are grouped by function, in the chronological order in which these themes have emerged. <2. Blocked Iranian Property and Assets> <2.1. Post-JCPOA Status: Iranian Assets Still Frozen, but Some Issues Resolved> U.S. sanctions on Iran were first imposed during the U.S.-Iran hostage crisis of 1979-1981, in the form of executive orders issued by President Jimmy Carter blocking nearly all Iranian assets held in the United States. These included E.O. 12170 of November 14, 1979, blocking all Iranian government property in the United States, and E.O 12205 (April 7, 1980) and E.O. 12211 (April 17, 1980) banning virtually all U.S. trade with Iran. The latter two Orders were issued just prior to the failed April 24-25, 1980, U.S. effort to rescue the U.S. Embassy hostages held by Iran. President Jimmy Carter also broke diplomatic relations with Iran on April 7, 1980. The trade-related Orders (12205 and 12211) were revoked by Executive Order 12282 of January 19, 1981, following the "Algiers Accords" that resolved the U.S.-Iran hostage crisis. Iranian assets still frozen are analyzed below. <2.2. U.S.-Iran Claims Tribunal> The Accords established a "U.S.-Iran Claims Tribunal" at the Hague that continues to arbitrate cases resulting from the 1980 break in relations and freezing of some of Iran's assets. All of the 4,700 private U.S. claims against Iran were resolved in the first 20 years of the Tribunal, resulting in $2.5 billion in awards to U.S. nationals and firms. The major government-to-government cases involved Iranian claims for compensation for hundreds of foreign military sales (FMS) cases that were halted in concert with the rift in U.S.-Iran relations when the Shah's government fell in 1979. In 1991, the George H. W. Bush Administration paid $278 million from the Treasury Department Judgment Fund to settle FMS cases involving weapons Iran had received but which were in the United States undergoing repair and impounded when the Shah fell. On January 17, 2016, (the day after the JCPOA took effect), the United States announced it had settled with Iran for FMS cases involving weaponry the Shah was paying for but that was not completed and delivered to Iran when the Shah fell. The Shah's government had deposited its payments into a DOD-managed "Iran FMS Trust Fund," and, after 1990, the Fund had a balance of about $400 million. In 1990, $200 million was paid from the Fund to Iran to settle some FMS cases. Under the 2016 settlement, the United States sent Iran the $400 million balance in the Fund, plus $1.3 billion in accrued interest, paid from the Department of the Treasury's "Judgment Fund." In order not to violate U.S. regulations barring direct U.S. dollar transfers to Iranian banks, the funds were remitted to Iran in late January and early February 2016 in foreign hard currency from the central banks of the Netherlands and of Switzerland. Some remaining claims involving the FMS program with Iran remain under arbitration at the Tribunal. <2.3. Other Iranian Assets Frozen> Iranian assets in the United States are blocked under several provisions, including Executive Order 13599 of February 2010. The United States did not unblock any of these assets as a consequence of the JCPOA. About $1.9 billion in blocked Iranian assets are bonds belonging to Iran's Central Bank, frozen in a Citibank account in New York belonging to Clearstream, a Luxembourg-based securities firm, in 2008. The funds were blocked on the grounds that Clearstream had improperly allowed those funds to access the U.S. financial system. Another $1.67 billion in principal and interest payments on that account were moved to Luxembourg and are not blocked. About $50 million of Iran's assets frozen in the United States consists of Iranian diplomatic property and accounts, including the former Iranian embassy in Washington, DC, and 10 other properties in several states, and related accounts. Among other frozen Iranian assets are real estate holdings of the Assa Company, a UK-chartered entity, which allegedly was maintaining the interests of Iran's Bank Melli in a 36-story office building in New York City and several other properties around the United States (in Texas, California, Virginia, Maryland, and other parts of New York City). An Iranian foundation, the Alavi Foundation, allegedly is an investor in the properties. The U.S. Attorney for the Southern District of New York blocked these properties in 2009. The Department of the Treasury report avoids valuing real estate holdings, but public sources assess these blocked real estate assets at nearly $1 billion. In June 2017, litigation won the U.S. government control over the New York City office building. <2.4. Use of Iranian Assets to Compensate U.S. Victims of Iranian Terrorism> There are a total of about $46 billion in court awards that have been made to victims of Iranian terrorism. These include the families of the 241 U.S. soldiers killed in the October 23, 1983, bombing of the U.S. Marine barracks in Beirut. U.S. funds equivalent to the $400 million balance in the DOD account (see above) have been used to pay a small portion of these judgments. The Algiers Accords apparently precluded compensation for the 52 U.S. diplomats held hostage by Iran from November 1979 until January 1981. The FY2016 Consolidated Appropriation (Section 404 of P.L. 114-113 ) set up a mechanism for paying damages to the U.S. embassy hostages and other victims of state-sponsored terrorism using settlement payments paid by various banks for concealing Iran-related transactions, and proceeds from other Iranian frozen assets. In April 2016, the U.S. Supreme Court determined the Central Bank assets, discussed above, could be used to pay the terrorism judgments, and the proceeds from the sale of the frozen real estate assets mentioned above will likely be distributed to victims of Iranian terrorism as well. On the other hand, in March 2018, the U.S. Supreme Court ruled that U.S. victims of an Iran-sponsored terrorist attack could not seize a collection of Persian antiquities on loan to a University of Chicago museum to satisfy a court judgment against Iran. Other past financial disputes include the mistaken U.S. shoot-down on July 3, 1988, of an Iranian Airbus passenger jet (Iran Air flight 655), for which the United States paid Iran $61.8 million in compensation ($300,000 per wage-earning victim, $150,000 per non-wage earner) for the 248 Iranians killed. The United States did not compensate Iran for the airplane itself, although officials involved in the negotiations told CRS in November 2012 that the United States later arranged to provide a substitute used aircraft to Iran. For more detail on how Iranian and other assets are used to compensate victims of Iranian terrorism, see CRS Report RL31258, Suits Against Terrorist States by Victims of Terrorism , by Jennifer K. Elsea and CRS Legal Sidebar LSB10104, It Belongs in a Museum: Sovereign Immunity Shields Iranian Antiquities Even When It Does Not Protect Iran , by Stephen P. Mulligan. <2.5. Executive Order 13599 Impounding Iran-Owned Assets> <2.5.1. Post-JCPOA Status: Still in Effect> Executive Order 13599, issued February 5, 2012, directs the blocking of U.S.-based assets of entities determined to be "owned or controlled by the Iranian government." The order was issued to implement Section 1245 of the FY2012 National Defense Authorization Act ( P.L. 112-81 ) that imposed secondary U.S. sanctions on Iran's Central Bank. The Order requires that any U.S.-based assets of the Central Bank of Iran, or of any Iranian government-controlled entity, be blocked by U.S. banks. The order goes beyond the regulations issued pursuant to the 1995 imposition of the U.S. trade ban with Iran, in which U.S. banks are required to refuse such transactions but to return funds to Iran. Even before the issuance of the Order, and in order to implement the ban on U.S. trade with Iran (see below) successive Administrations had designated many entities as "owned or controlled by the Government of Iran." Numerous designations have been made under Executive Order 13599, including the June 4, 2013, naming of 38 entities (mostly oil, petrochemical, and investment companies) that are components of an Iranian entity called the "Execution of Imam Khomeini's Order" (EIKO). EIKO was characterized by the Department of the Treasury as an Iranian leadership entity that controls "massive off-the-books investments." Implementation of the U.S. JCPOA Withdrawa l. To implement the JCPOA, many 13599-designated entities specified in the JCPOA (Attachment 3) were "delisted" from U.S. secondary sanctions (no longer considered "Specially Designated Nationals," SDNs), and referred to as "designees blocked solely pursuant to E.O 13599." That characterization permitted foreign entities to conduct transactions with the listed entities without U.S. sanctions penalty but continued to bar U.S. persons (or foreign entities owned or controlled by a U.S. person) from conducting transactions with these entities. Treasury Department announced on May 8, 2018, in concert with the U.S. withdrawal from the JCPOA, that almost all of the 13599-designated entities that were delisted as SDNs will be relisted as SDNs on November 5, 2018. That day, the Treasury Department updated the list of SDNs to reflect the redesignations. Civilian Nuclear Entity Exception . One notable exception to the relisting policy implemented in 2018 is the Atomic Energy Organization of Iran (AEOI). The entity, along with 23 of its subsidiaries, were redesignated under E.O. 13599 but not as entities subject to secondary sanctions under E.O. 13382. This U.S. listing decision was made in order to facilitate continued IAEA and EU and other country engagement with Iran's civilian nuclear program under the JCPOA. The May 2019 ending of some waivers for nuclear technical assistance to Iran modifies this stance somewhat (see subhead on waivers and exceptions under the JCPOA, below). <3. Sanctions for Iran's Support for Armed Factions and Terrorist Groups> Most of the hostage crisis-related sanctions were lifted upon resolution of the crisis in 1981. The United States began imposing sanctions against Iran again in the mid-1980s for its support for regional groups committing acts of terrorism. The Secretary of State designated Iran a "state sponsor of terrorism" on January 23, 1984, following the October 23, 1983, bombing of the U.S. Marine barracks in Lebanon by elements that established Lebanese Hezbollah. This designation triggers substantial sanctions on any nation so designated. None of the laws or Executive Orders in this section were waived or revoked to implement the JCPOA. No entities discussed in this section were "delisted" from sanctions under t he JCPOA. <3.1. Sanctions Triggered by Terrorism List Designation> The U.S. naming of Iran as a "state sponsor of terrorism" commonly referred to as Iran's inclusion on the U.S. "terrorism list" triggers several sanctions. The designation is made under the authority of Section 6(j) of the Export Administration Act of 1979 ( P.L. 96-72 , as amended), sanctioning countries determined to have provided repeated support for acts of international terrorism. The sanctions triggered by Iran's state sponsor of terrorism designation are as follows: Restrictions on sales of U.S. dual use items . The restriction a presumption of denial of any license applications to sell dual use items to Iran is required by the Export Administration Act, as continued by executive orders under the authority of the International Emergency Economic Powers Act, IEEPA. The restrictions are enforced through Export Administration Regulations (EARs) administered by the Bureau of Industry and Security (BIS) of the Commerce Department. Ban on direct U.S. financial assistance and arms sales to Iran . Section 620A of the Foreign Assistance Act, FAA (P.L. 87-95) and Section 40 of the Arms Export Control Act ( P.L. 95-92 , as amended), respectively, bar any U.S. foreign assistance to terrorism list countries. Included in the definition of foreign assistance are U.S. government loans, credits, credit insurance, and Ex-Im Bank loan guarantees. Successive foreign aid appropriations laws since the late 1980s have banned direct assistance to Iran, and with no waiver provisions. The FY2012 foreign operations appropriation (Section 7041(c)(2) of P.L. 112-74) banned the Ex-Im Bank from using funds appropriated in that Act to finance any entity sanctioned under the Iran Sanctions Act. The foreign aid provisions of the FY2019 Consolidated Appropriation (Section 7041) made that provision effective for FY2019. Requirement to oppose multilateral lending . U.S. officials are required to vote against multilateral lending to any terrorism list country by Section 1621 of the International Financial Institutions Act ( P.L. 95-118 , as amended [added by Section 327 of the Anti-Terrorism and Effective Death Penalty Act of 1996 ( P.L. 104-132 )]). Waiver authority is provided. Withholding of U.S. foreign assistance to countries that assist or sell arms to t errorism l ist c ountries . Under Sections 620G and 620H of the Foreign Assistance Act, as added by the Anti-Terrorism and Effective Death Penalty Act (Sections 325 and 326 of P.L. 104-132 ), the President is required to withhold foreign aid from any country that aids or sells arms to a terrorism list country. Waiver authority is provided. Section 321 of that act makes it a crime for a U.S. person to conduct financial transactions with terrorism list governments. Withholding of U.S. Aid to Organizations T hat Assist Iran . Section 307 of the FAA (added in 1985) names Iran as unable to benefit from U.S. contributions to international organizations, and require proportionate cuts if these institutions work in Iran. For example, if an international organization spends 3% of its budget for programs in Iran, then the United States is required to withhold 3% of its contribution to that international organization. No waiver is provided for. <3.1.1. Exception for U.S. Humanitarian Aid> The terrorism list designation, and other U.S. sanctions laws barring assistance to Iran, do not bar U.S. disaster aid. The United States donated $125,000, through relief agencies, to help victims of two earthquakes in Iran (February and May 1997); $350,000 worth of aid to the victims of a June 22, 2002, earthquake; and $5.7 million in assistance for victims of the December 2003 earthquake in Bam, Iran, which killed 40,000. The U.S. military flew 68,000 kilograms of supplies to Bam. <3.2. Sanctions on States "Not Cooperating" Against Terrorism> Section 330 of the Anti-Terrorism and Effective Death Penalty Act ( P.L. 104-132 ) added a Section 40A to the Arms Export Control Act that prohibits the sale or licensing of U.S. defense articles and services to any country designated (by each May 15) as "not cooperating fully with U.S. anti-terrorism efforts." The President can waive the provision upon determination that a defense sale to a designated country is "important to the national interests" of the United States. Every May since the enactment of this law, Iran has been designated as a country that is "not fully cooperating" with U.S. antiterrorism efforts. However, the effect of the designation is largely mooted by the many other authorities that prohibit U.S. defense sales to Iran. <3.3. Executive Order 13224 Sanctioning Terrorism-Supporting Entities> Executive Order 13324 (September 23, 2001) mandates the freezing of the U.S.-based assets of and a ban on U.S. transactions with entities determined by the Administration to be supporting international terrorism. This order was issued two weeks after the September 11, 2001, attacks on the United States, under the authority of the IEEPA, the National Emergencies Act, the U.N. Participation Act of 1945, and Section 301 of the U.S. Code, initially targeting Al Qaeda. <3.3.1. Use of the Order to Target Iranian Arms Exports> E.O. 13224 is not specific to Iran and does not explicitly target Iranian arms exports to movements, governments, or groups in the Middle East region. However, successive Administrations have used the Order and the orders discussed immediately below to sanction such Iranian activity by designating persons or entities that are involved in the delivery or receipt of such weapons shipments. Some persons and entities that have been sanctioned for such activity have been cited for supporting groups such as the Afghan Taliban organization and the Houthi rebels in Yemen, which are not named as terrorist groups by the United States. <3.3.2. Application of CAATSA to the Revolutionary Guard> Section 105 of the Countering America's Adversaries through Sanctions Act (CAATSA, P.L. 115-44 , signed on August 2, 2017), mandates the imposition of E.O. 13324 penalties on the Islamic Revolutionary Guard Corps (IRGC) and its officials, agents, and affiliates by October 30, 2017 (90 days after enactment). The IRGC was named as a terrorism-supporting entity under E.O 13224 within that deadline. The Treasury Department made the designation of the IRGC as a terrorism-supporting entity under that E.O. on October 13, 2017. <3.3.3. Implementation> No entities designated under E.O. 13224 were delisted to implement the JCPOA. Additional Iran-related entities have been designated under the Order since JCPOA implementation, as shown in the tables at the end of this report. <3.4. Foreign Terrorist Organization Designations> Sanctions similar to those of E.O. 13224 are imposed on Iranian and Iran-linked entities through the State Department authority under Section 219 of the Immigration and Nationality Act (8.U.S.C. 1189) to designate an entity as a Foreign Terrorist Organization (FTO). In addition to the sanctions of E.O. 13224, any U.S. person (or person under U.S. jurisdiction) who "knowingly provides material support or resources to an FTO, or attempts or conspires to do so" is subject to fine or up to 20 years in prison. A bank that commits such a violation is subject to fines. Implementation: The following organizations have been designated as FTOs for acts of terrorism on behalf of Iran or are organizations assessed as funded and supported by Iran: Islamic Revolutionary Guard Corps (IRGC). Designated April 8, 2019. See CRS Insight IN11093, Iran's Revolutionary Guard Named a Terrorist Organization , by Kenneth Katzman. On April 22, 2019, the State Department issued guidelines for implementing the IRGC FTO designation, indicating that it would not penalize routine diplomatic or humanitarian-related dealings with the IRGC by U.S. partner countries or nongovernmental entities. Lebanese HezbollahKata'ib Hezbollah . Iran-backed Iraqi Shi'a militia. Hamas . Sunni, Islamist Palestinian organization that essentially controls the Gaza Strip. Palestine Islamic Jihad . Small Sunni Islamist Palestinian militant group Al Aqsa Martyr's Brigade . Secular Palestinian militant group. Popular Front for the Liberation of Palestine-General Command (PFLP-GC). Leftwing secular Palestinian group based mainly in Syria. Al Ashtar Brigades . Bahrain militant opposition group <3.5. Other Sanctions on Iran's "Malign" Regional Activities> Some sanctions have been imposed to try to curtail Iran's destabilizing influence in the region. <3.5.1. Executive Order 13438 on Threats to Iraq's Stability> Issued on July 7, 2007, the order blocks U.S.-based property of persons who are determined by the Administration to "have committed, or pose a significant risk of committing" acts of violence that threaten the peace and stability of Iraq, or undermine efforts to promote economic reconstruction or political reform in Iraq. The Order extends to persons designated as materially assisting such designees. The Order was clearly directed at Iran for its provision of arms or funds to Shiite militias there. Persons sanctioned under the Order include IRGC-Qods Force officers, Iraqi Shiite militia-linked figures, and other entities. Some of these sanctioned entities worked to defeat the Islamic State in Iraq and are in prominent roles in Iraq's parliament and political structure. <3.5.2. Executive Order 13572 on Repression of the Syrian People.> Issued on April 29, 2011, the order blocks the U.S.-based property of persons determined to be responsible for human rights abuses and repression of the Syrian people. The IRGC-Qods Force (IRGC-QF), IRGC-QF commanders, and others are sanctioned under this order. <3.5.3. The Hizballah International Financing Prevention Act (P.L. 114-102) and Hizballah International Financing Prevention Amendments Act of 2018 (S. 1595, P.L. 115-272).> The latter Act was signed by President Trump on October 23, 2018the 25 th anniversary of the Marine barracks bombing in Beirut. The original law, modeled on the 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act ("CISADA," see below), excludes from the U.S. financial system any bank that conducts transactions with Hezbollah or its affiliates or partners. The more recent law expands the authority of the original law by authorizing the blocking of U.S.-based property of and U.S. transactions with any "agency or instrumentality of a foreign state" that conducts joint operations with or provides financing or arms to Lebanese Hezbollah. These latter provisions clearly refer to Iran, but are largely redundant with other sanctions on Iran. <4. Ban on U.S. Trade and Investment with Iran> <4.1. Status: Trade ban eased for JCPOA, but back in full effect on August 6, 2018> In 1995, the Clinton Administration expanded U.S. sanctions against Iran by issuing Executive Order 12959 (May 6, 1995) banning U.S. trade with and investment in Iran. The order was issued under the authority primarily of the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701 et seq.), which gives the President wide powers to regulate commerce with a foreign country when a "state of emergency" is declared in relations with that country. E.O. 12959 superseded Executive Order 12957 (March 15, 1995) barring U.S. investment in Iran's energy sector, which accompanied President Clinton's declaration of a "state of emergency" with respect to Iran. Subsequently, E.O 13059 (August 19, 1997) added a prohibition on U.S. companies' knowingly exporting goods to a third country for incorporation into products destined for Iran. Each March since 1995, the U.S. Administration has renewed the "state of emergency" with respect to Iran. IEEPA gives the President the authority to alter regulations to license transactions with Iran regulations enumerated in Section 560 of the Code of Federal Regulations (Iranian Transactions Regulations, ITRs). Section 103 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA, P.L. 111-195 ) codified the trade ban and reinstated the full ban on imports that had earlier been relaxed by April 2000 regulations. That relaxation allowed importation into the United States of Iranian nuts, fruit products (such as pomegranate juice), carpets, and caviar. U.S. imports from Iran after that time were negligible. Section 101 of the Iran Freedom Support Act ( P.L. 109-293 ) separately codified the ban on U.S. investment in Iran, but gives the President the authority to terminate this sanction with presidential notification to Congress of such decision 15 days in advance (or 3 days in advance if there are "exigent circumstances"). <4.2. JCPOA-Related Easing and Reversal> In accordance with the JCPOA, the ITRs were relaxed to allow U.S. importation of the Iranian luxury goods discussed above (carpets, caviar, nuts, etc.), but not to permit general U.S.-Iran trade. U.S. regulations were also altered to permit the sale of commercial aircraft to Iranian airlines that are not designated for sanctions. The modifications were made in the Departments of State and of the Treasury guidance issued on Implementation Day and since. In concert with the May 8, 2018, U.S. withdrawal from the JCPOA, the easing of the regulations to allow for importation of Iranian carpets and other luxury goods was reversed on August 6, 2018. <4.3. What U.S.-Iran Trade Is Allowed or Prohibited?> The following provisions apply to the U.S. trade ban on Iran as specified in regulations (Iran Transaction Regulations, ITRs) written pursuant to the executive orders and laws discussed above and enumerated in regulations administered by the Office of Foreign Assets Control (OFAC) of the Department of the Treasury. Oil Transactions . All U.S. transactions with Iran in energy products are banned. The 1995 trade ban (E.O. 12959) expanded a 1987 ban on imports from Iran that was imposed by Executive Order 12613 of October 29, 1987. The earlier import ban, authorized by Section 505 of the International Security and Development Cooperation Act of 1985 (22 U.S.C. 2349aa-9), barred the importation of Iranian oil into the United States but did not ban the trading of Iranian oil overseas. The 1995 ban prohibits that activity explicitly, but provides for U.S. companies to apply for licenses to conduct "swaps" of Caspian Sea oil with Iran. These swaps have been prohibited in practice; a Mobil Corporation application to do so was denied in April 1999, and no applications have been submitted since. The ITRs do not ban the importation, from foreign refiners, of gasoline or other energy products in which Iranian oil is mixed with oil from other producers . The product of a refinery in any country is considered to be a product of the country where that refinery is located, even if some Iran-origin crude oil is present. Transshipment and Brokering . The ITRs prohibit U.S. transshipment of prohibited goods across Iran, and ban any activities by U.S. persons to broker commercial transactions involving Iran. Iranian Luxury Goods . Pursuant to the JCPOA, Iranian luxury goods, such as carpets and caviar, could be imported into the United States after January 2016. This prohibition went back into effect on August 6, 2018 (90-day wind-down). Shipping Insurance . Obtaining shipping insurance is crucial to Iran's expansion of its oil and other exports. A pool of 13 major insurance organizations, called the International Group of P & I Clubs, dominates the shipping insurance industry and is based in New York. The U.S. presence of this pool renders it subject to the U.S. trade ban, which complicated Iran's ability to obtain reinsurance for Iran's shipping after Implementation Day. On January 16, 2017, the Obama Administration issued waivers of Sections 212 and 213 of the ITRSHRA to allow numerous such insurers to give Iranian ships insurance. However, this waiver ended on August 6, 2018 (90-day wind-down). Civilian Airline Sales . The ITRs have always permitted the licensing of goods related to the safe operation of civilian aircraft for sale to Iran ( 560.528 of Title 31, C.F.R.), and spare parts sales have been licensed periodically. However, from June 2011 until Implementation Day, Iran's largest state-owned airline, Iran Air, was sanctioned under Executive Order 13382 (see below), rendering licensing of parts or repairs for that airline impermissible. Several other Iranian airlines were sanctioned under that Order and Executive Order 13224. In accordance with the JCPOA, the United States relaxed restrictions on to allow for the sale to Iran of finished commercial aircraft, including to Iran Air, which was "delisted" from sanctions. A March 2016 general license allowed for U.S. aircraft and parts suppliers to negotiate sales with Iranian airlines that are not sanctioned, and Boeing and Airbus subsequently concluded major sales to Iran Air. In keeping with the May 8, 2018, U.S. withdrawal from the JCPOA, preexisting licensing restrictions went back into effect on August 6, 2018, and the Boeing and Airbus licenses to sell aircraft to Iran were revoked. Sales of some aircraft spare parts ("dual use items") to Iran also require a waiver of the relevant provision of the Iran-Iraq Arms Non-Proliferation Act, discussed below. Personal Communications , Remittances , and Publishing . The ITRs permit personal communications (phone calls, emails) between the United States and Iran, personal remittances to Iran, and Americans to engage in publishing activities with entities in Iran (and Cuba and Sudan). Information Technology Equipment. CISADA exempts from the U.S. ban on exports to Iran information technology to support personal communications among the Iranian people and goods for supporting democracy in Iran. In May 2013, OFAC issued a general license for the exportation to Iran of goods (such as cell phones) and services, on a fee basis, that enhance the ability of the Iranian people to access communication technology. Food and Medical Exports. Since April 1999, sales to Iran by U.S. firms of food and medical products have been permitted, subject to OFAC stipulations. In October 2012, OFAC permitted the sale to Iran of specified medical products, such as scalpels, prosthetics, canes, burn dressings, and other products, that could be sold to Iran under "general license" (no specific license application required). This list of general license items list was expanded in 2013 and 2016 to include more sophisticated medical diagnostic machines and other medical equipment. Licenses for exports of medical products not on the general license list are routinely expedited for sale to Iran, according to OFAC. The regulations have a specific definition of "food" that can be licensed for sale to Iran, and that definition excludes alcohol, cigarettes, gum, or fertilizer. The definition addresses information in a 2010 article that OFAC had approved exports to Iran of condiments such as food additives and body-building supplements that have uses other than purely nutritive. Humanitarian and Related Services . Donations by U.S. residents directly to Iranians (such as packages of food, toys, clothes, etc.) are not prohibited, but donations through relief organizations broadly require those organizations' obtaining a specific OFAC license. On September 10, 2013, the Department of the Treasury eliminated licensing requirements for relief organizations to (1) provide to Iran services for health projects, disaster relief, wildlife conservation; (2) to conduct human rights projects there; or (3) undertake activities related to sports matches and events. The amendment also allowed importation from Iran of services related to sporting activities, including sponsorship of players, coaching, referees, and training. In some cases, such as the earthquake in Bam in 2003 and the earthquake in northwestern Iran in August 2012, OFAC has issued blanket temporary general licensing for relief organizations to work in Iran. Payment Methods, Trade Financing , and Financing Guarantees . U.S. importers are allowed to pay Iranian exporters, including with U.S. dollars. However, U.S. funds cannot go directly to Iranian banks, but must instead pass through third-country banks. In accordance with the ITRs' provisions that transactions that are incidental to an approved transaction are allowed, financing for approved transactions are normally approved, presumably in the form of a letter of credit from a non-Iranian bank. Title IX of the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106-387 ) bans the use of official credit guarantees (such as the Ex-Im Bank) for food and medical sales to Iran and other countries on the U.S. terrorism list, except Cuba, although allowing for a presidential waiver to permit such credit guarantees. The Ex-Im Bank is prohibited from guaranteeing any loans to Iran because of Iran's continued inclusion on the terrorism list, and the JCPOA did not commit the United States to provide credit guarantees for Iran. <4.4. Application to Foreign Subsidiaries of U.S. Firms> The ITRs do not ban subsidiaries of U.S. firms from dealing with Iran, as long as the subsidiary is not "controlled" by the parent company. Most foreign subsidiaries are legally considered foreign persons subject to the laws of the country in which the subsidiaries are incorporated. Section 218 of the Iran Threat Reduction and Syrian Human Rights Act (ITRSHRA, P.L. 112-158 ) holds "controlled" foreign subsidiaries of U.S. companies to the same standards as U.S. parent firms, defining a controlled subsidiary as (1) one that is more than 50% owned by the U.S. parent; (2) one in which the parent firm holds a majority on the Board of Directors of the subsidiary; or (3) one in which the parent firm directs the operations of the subsidiary. There is no waiver provision. JCPOA Regulations and Reversal. To implement the JCPOA, the United States licensed "controlled" foreign subsidiaries to conduct transactions with Iran that are permissible under JCPOA (almost all forms of civilian trade). The Obama Administration asserted that the President has authority under IEEPA to license transactions with Iran, the ITRSHRA notwithstanding. This was implemented with the Treasury Department's issuance of "General License H: Authorizing Certain Transactions Relating to Foreign Entities Owned or Controlled by a United States Person." With the Trump Administration reimposition of sanctions, the licensing policy ("Statement of Licensing Policy," SLP) returned to pre-JCPOA status on November 5, 2018. <5. Sanctions on Iran's Energy Sector> <5.1. Status: Energy sanctions waived for JCPOA, back in effect November 5, 2018> In 1996, Congress and the executive branch began a long process of pressuring Iran's vital energy sector in order to deny Iran the financial resources to support terrorist organizations and other armed factions or to further its nuclear and WMD programs. Iran's oil sector is as old as the petroleum industry itself (early 20 th century), and Iran's onshore oil fields are in need of substantial investment. Iran has 136.3 billion barrels of proven oil reserves, the third largest after Saudi Arabia and Canada. Iran has large natural gas resources (940 trillion cubic feet), exceeded only by Russia. However, Iran's gas export sector is still emerging most of Iran's gas is injected into its oil fields to boost their production. The energy sector still generates about 20% of Iran's GDP and as much as 30% of government revenue. <5.2. The Iran Sanctions Act (and Triggers added by other Laws)> The Iran Sanctions Act (ISA) has been a pivotal component of U.S. sanctions against Iran's energy sector. Since its enactment in 1996, ISA's provisions have been expanded and extended to other Iranian industries. ISA sought to thwart Iran's 1995 opening of the sector to foreign investment in late 1995 through a "buy-back" program in which foreign firms gradually recoup their investments as oil and gas is produced. It was first enacted as the Iran and Libya Sanctions Act (ILSA, P.L. 104-172 , signed on August 5, 1996) but was later retitled the Iran Sanctions Act after it terminated with respect to Libya in 2006. ISA was the first major "extra-territorial sanction" on Iran a sanction that authorizes U.S. penalties against third country firms. <5.2.1. Key Sanctions "Triggers" Under ISA> ISA consists of a number of "triggers" transactions with Iran that would be considered violations of ISA and could cause a firm or entity to be sanctioned under ISA's provisions. The triggers, as added by amendments over time, are detailed below: <5.2.1.1. Trigger 1 (Original Trigger): "Investment" To Develop Iran's Oil and Gas Fields> The core trigger of ISA when first enacted was a requirement that the President sanction companies (entities, persons) that make an "investment" of more than $20 million in one year in Iran's energy sector. The definition of "investment" in ISA ( 14 [9]) includes not only equity and royalty arrangements but any contract that includes "responsibility for the development of petroleum resources" of Iran. The definition includes additions to existing investment (added by P.L. 107-24 ) and pipelines to or through Iran and contracts to lead the construction, upgrading, or expansions of energy projects (added by CISADA). <5.2.1.2. Trigger 2: Sales of WMD and Related Technologies, Advanced Conventional Weaponry, and Participation in Uranium Mining Ventures> This provision of ISA was not waived under the JCPOA. The Iran Freedom Support Act ( P.L. 109-293 , signed September 30, 2006) added Section 5(b)(1) of ISA, subjecting to ISA sanctions firms or persons determined to have sold to Iran (1) "chemical, biological, or nuclear weapons or related technologies" or (2) "destabilizing numbers and types" of advanced conventional weapons. Sanctions can be applied if the exporter knew (or had cause to know) that the end-user of the item was Iran. The definitions do not specifically include ballistic or cruise missiles, but those weapons could be considered "related technologies" or, potentially, a "destabilizing number and type" of advanced conventional weapon. The Iran Threat Reduction and Syria Human Rights Act (ITRSHRA, P.L. 112-158 , signed August 10, 2012) created Section 5(b)(2) of ISA subjecting to sanctions entities determined by the Administration to participate in a joint venture with Iran relating to the mining, production, or transportation of uranium. Implementation: No ISA sanctions have been imposed on any entities under these provisions. <5.2.1.3. Trigger 3: Sales of Gasoline to Iran> Section 102(a) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA, P.L. 111-195 , signed July 1, 2010) amended Section 5 of ISA to exploit Iran's dependency on imported gasoline (40% dependency at that time). It followed legislation such as P.L. 111-85 that prohibited the use of U.S. funds to fill the Strategic Petroleum Reserve with products from firms that sell gasoline to Iran; and P.L. 111-117 that denied Ex-Im Bank credits to any firm that sold gasoline or related equipment to Iran. The section subjects the following to sanctions: Sales to Iran of over $1 million worth (or $5 million in a one year period) of gasoline and related aviation and other fuels. (Fuel oil, a petroleum by-product, is not included in the definition of refined petroleum.) Sales to Iran of equipment or services (same dollar threshold as above) which would help Iran make or import gasoline. Examples include equipment and services for Iran's oil refineries or port operations. <5.2.1.4. Trigger 4: Provision of Equipment or Services for Oil, Gas, and Petrochemicals Production> Section 201 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHA, P.L. 112-158 , signed August 10, 2012) codified an Executive Order, 13590 (November 21, 2011), by adding Section 5(a)(5 and 6) to ISA sanctioning firms that provide to Iran $1 million or more (or $5 million in a one-year period) worth of goods or services that Iran could use to maintain or enhance its oil and gas sector. This subjects to sanctions, for example, transactions with Iran by global oil services firms and the sale to Iran of energy industry equipment such as drills, pumps, vacuums, oil rigs, and like equipment. provide to Iran $250,000 (or $1 million in a one year period) worth of goods or services that Iran could use to maintain or expand its production of petrochemical products. This provision was not altered by the JPA. <5.2.1.5. Trigger 5: Transporting Iranian Crude Oil> Section 201 of the ITRSHRA amends ISA by sanctioning entities the Administration determines owned a vessel that was used to transport Iranian crude oil. The section also authorizes but does not require the President, subject to regulations, to prohibit a ship from putting to port in the United States for two years, if it is owned by a person sanctioned under this provision (adds Section 5[ a ][ 7 ] to ISA) . This sanction does not apply in cases of transporting oil to countries that have received exemptions under P.L. 112-81 (discussed below). participated in a joint oil and gas development venture with Iran, outside Iran, if that venture was established after January 1, 2002. The effective date exempts energy ventures in the Caspian Sea, such as the Shah Deniz oil field there (adds Section 5[ a ][ 4 ] to ISA ) . <5.2.1.6. Iran Threat Reduction and Syria Human Rights Act (ITRSHRA): ISA Sanctions for insuring Iranian oil entities, purchasing Iranian bonds, or engaging in transactions with the IRGC> Separate provisions of the ITRSHR Act which do not amend ISA require the application of ISA sanctions (the same 5 out of 12 sanctions as required in ISA itself) on any entity that provides insurance or reinsurance for the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC) (Section 212). purchases or facilitates the issuance of sovereign debt of the government of Iran, including Iranian government bonds (Section 213). This sanction went back into effect on August 6, 2018 (90-day wind-down period). assists or engages in a significant transaction with the IRGC or any of its sanctioned entities or affiliates. (Section 302). This section of ITRSHRA was not waived to implement the JCPOA. Implementation . Section 312 of ITRSHRA required an Administration determination, within 45 days of enactment (by September 24, 2012) whether NIOC and NITC are IRGC agents or affiliates. Such a determination would subject financial transactions with NIOC and NITC to sanctions under CISADA (prohibition on opening U.S.-based accounts). On September 24, 2012, the Department of the Treasury determined that NIOC and NITC are affiliates of the IRGC. On November 8, 2012, the Department of the Treasury named NIOC as a proliferation entity under Executive Order 13382 a designation that, in accordance with Section 104 of CISADA, bars any foreign bank determined to have dealt directly with NIOC (including with a NIOC bank account in a foreign country) from opening or maintaining a U.S.-based account. Sanctions on dealings with NIOC and NITC were waived in accordance with the interim nuclear deal and the JCPOA, and designations of these entities under Executive Order 13382 were rescinded in accordance with the JCPOA. These entities were "relisted" again on November 5, 2018. Some NIOC have partners and independent Iranian energy firms have not been designated, including: Iranian Offshore Oil Company; National Iranian Gas Export Co.; Petroleum Engineering and Development Co.; Pasargad Oil Co., Zagros Petrochem Co.; Sazeh Consultants; Qeshm Energy; and Sadid Industrial Group. <5.2.1.7. Executive Order 13622: Sanctions on the Purchase of Iranian Crude Oil and Petrochemical Products, and Dealings in Iranian Bank Notes> Status: Revoked (by E.O. 13716) but will back into effect as stipulated below Executive Order 13622 (July 30, 2012) imposes specified sanctions on the ISA sanctions menu, and bars banks from the U.S. financial system, for the following activities ( E .O. 13622 d id not amend ISA itself ): the purchase of oil, other petroleum, or petrochemical products from Iran. Th e part of th is order pertaining to petrochemical purchases was suspended under the JPA. The wind-down period was 180 days (ending November 4, 2018). transactions with the National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO) (180-day wind-down period). E.O. 13622 also blocks U.S.-based property of entities determined to have assisted or provided goods or services to NIOC, NICO, the Central Bank of Iran (180-day wind-down period). assisted the government of Iran in the purchase of U.S. bank notes or precious metals, precious stones, or jewels. (The provision for precious stones or jewels was added to this Order by E.O. 16345 below.) (90-day wind-down period.) E.O. 13622 sanctions do not apply if the parent country of the entity has received an oil importation exception under Section 1245 of P.L. 112-81 , discussed below. An exception also is provided for projects that bring gas from Azerbaijan to Europe and Turkey, if such project was initiated prior to the issuance of the Order. <5.2.2. Mandate and Time Frame to Investigate ISA Violations> In the original version of ISA, there was no firm requirement, and no time limit, for the Administration to investigate potential violations and determine that a firm has violated ISA's provisions. The Iran Freedom Support Act ( P.L. 109-293 , signed September 30, 2006) added a provision calling for, but not requiring , a 180-day time limit for a violation determination. CISADA (Section 102[g][5]) mandated that the Administration begin an investigation of potential ISA violations when there is "credible information" about a potential violation, and made mandatory the 180-day time limit for a determination of violation. The Iran Threat Reduction and Syria Human Rights Act ( P.L. 112-158 ) defines the "credible information" needed to begin an investigation of a violation to include a corporate announcement or corporate filing to its shareholders that it has undertaken transactions with Iran that are potentially sanctionable under ISA. It also says the President may (not mandatory) use as credible information reports from the Government Accountability Office and the Congressional Research Service. In addition, Section 219 of ITRSHRA requires that an investigation of an ISA violation begin if a company reports in its filings to the Securities and Exchange Commission (SEC) that it has knowingly engaged in activities that would violate ISA (or Section 104 of CISADA or transactions with entities designated under E.O 13224 or 13382, see below). <5.2.2.1. Oversight> Several mechanisms for Congress to oversee whether the Administration is investigating ISA violations were added by ITRSHRA. Section 223 of that law required a Government Accountability Office report, within 120 days of enactment, and another such report a year later, on companies that have undertaken specified activities with Iran that might constitute violations of ISA. Section 224 amended a reporting requirement in Section 110(b) of CISADA by requiring an Administration report to Congress every 180 days on investment in Iran's energy sector, joint ventures with Iran, and estimates of Iran's imports and exports of petroleum products. The GAO reports have been issued; there is no information available on whether the required Administration reports have been issued as well. <5.2.3. Interpretations of ISA and Related Laws> The sections below provide information on how some key ISA provisions have been interpreted and implemented. <5.2.3.1. Application to Energy Pipelines> ISA's definition of "investment" that is subject to sanctions has been consistently interpreted by successive Administrations to include construction of energy pipelines to or through Iran. Such pipelines are deemed to help Iran develop its petroleum (oil and natural gas) sector. This interpretation was reinforced by amendments to ISA in CISADA, which specifically included in the definition of petroleum resources "products used to construct or maintain pipelines used to transport oil or liquefied natural gas." In March 2012, then-Secretary of State Clinton made clear that the Obama Administration interprets the provision to be applicable from the beginning of pipeline construction. <5.2.3.2. Application to Crude Oil Purchases> The original version of ISA did not provide for sanctioning purchases of crude oil from Iran. However, subsequent laws and executive orders took that step. <5.2.3.3. Application to Purchases from Iran of Natural Gas> The Iran Freedom and Counterproliferation Act (IFCA, discussed below) authorized sanctions on transactions with Iran's energy sector, but s pecifically exclude d from sanctions purchases of natural gas from Iran . But construction of gas pipelines involving Iran is subject to sanctions. <5.2.3.4. Exception for Shah Deniz and other Gas Export Projects> The effective dates of U.S. sanctions laws and Orders exclude long-standing joint natural gas projects that involve some Iranian firms particularly the Shah Deniz natural gas field and related pipelines in the Caspian Sea. These projects involve a consortium in which Iran's Naftiran Intertrade Company (NICO) holds a passive 10% share, and includes BP, Azerbaijan's natural gas firm SOCAR, Russia's Lukoil, and other firms. NICO was sanctioned under ISA and other provisions (until JCPOA Implementation Day), but an OFAC factsheet of November 28, 2012, stated that the Shah Deniz consortium, as a whole, is not determined to be "a person owned or controlled by" the government of Iran and transactions with the consortium are permissible. <5.2.3.5. Application to Iranian Liquefied Natural Gas Development> The original version of ISA did not apply to the development by Iran of a liquefied natural gas (LNG) export capability. Iran has no LNG export terminals, in part because the technology for such terminals is patented by U.S. firms and unavailable for sale to Iran. CISADA specifically included LNG in the ISA definition of petroleum resources and therefore made subject to sanctions LNG investment in Iran or supply of LNG tankers or pipelines to Iran. <5.2.3.6. Application to Private Financing but Not Official Credit Guarantee Agencies> The definitions of investment and other activity that can be sanctioned under ISA include financing for investment in Iran's energy sector, or for sales of gasoline and refinery-related equipment and services. Therefore, banks and other financial institutions that assist energy investment and refining and gasoline procurement activities could be sanctioned under ISA. However, the definitions of financial institutions are interpreted not to apply to official credit guarantee agencies such as France's COFACE and Germany's Hermes. These credit guarantee agencies are arms of their parent governments, and ISA does not provide for sanctioning governments or their agencies. <5.2.4. Implementation of Energy-Related Iran Sanctions> Entities sanctioned under the executive orders or laws cited in this section are listed in the tables at the end of this report. As noted, some of the Orders cited provide for blocking U.S.-based assets of the entities designated for sanctions. OFAC has not announced the blocking of any U.S.-based property of the sanctioned entities, likely indicating that those entities sanctioned do not have a presence in the United States. <5.3. Iran Oil Export Reduction Sanctions: Section 1245 of the FY2012 NDAA Sanctioning Transactions with Iran's Central Bank> <5.3.1. Status: Back into effect November 5, 2018, and exceptions ended> In 2011, Congress sought to reduce Iran's exportation of oil by imposing sanctions on the mechanisms that importers use to pay Iran for oil. The Obama Administration asserted that such legislation could lead to a rise in oil prices and harm U.S. relations with Iran's oil customers, and President Obama, in his signing statement on the bill, indicated he would implement the provision so as not to damage U.S. relations with partner countries. The law imposed penalties on transactions with Iran's Central Bank. Section 1245 of the FY2012 National Defense Authorization Act (NDAA, P.L. 112-81 , signed on December 31, 2011): Requires the President to prevent a foreign bank from opening an account in the United States or impose strict limitations on existing U.S. accounts if that bank is determined to have conducted a "significant financial transaction" with Iran's Central Bank or with any sanctioned Iranian bank . The provision applies to a foreign central bank only if the transaction with Iran's Central Bank is for oil purchases. The provision went into effect after 180 days (June 28, 2012). Significant Reduction Ex c eption (SRE): The law provides incentive for Iran's oil buyers to cut purchases of Iranian oil by providing for an exception (exemption) for the banks of any country determined to have " significantly reduced " its purchases of oil from Iran. The banks of countries granted the SRE may continue to conduct all transactions with the Central Bank (not just for oil) or with any sanctioned Iranian bank. The SRE exception is reviewed every 180 days and, to maintain the exception, countries are required to reduce their oil buys from Iran, relative to the previous 180-day period. ITRSHRA amended Section 1245 such that any country that completely ceased purchasing oil from Iran entirely would retain an exception. The law lacks a precise definition of "significant reduction" of oil purchases, but the Obama Administration adopted a standard set in a January 2012 letter by several Senators to then-Treasury Secretary Geithner setting that definition at an 18% purchase reduction based on total paid for the Iranian oil (not just volume reduction). Sanctions on transactions for oil apply only if the President certifies to Congress every 90 days, based on a report by the Energy Information Administration, that the oil market is adequately supplied, and, an Administration determination every 180 days that there is a sufficient supply of oil worldwide to permit countries to reduce purchases from Iran. The required EIA reports and Administration determinations have been issued at the prescribed intervals, even during the period when the law was in a state of waiver. Hum anitarian Exception . Paragraph (2) of Section 1245 exempts transactions with Iran's Central Bank that are for "the sale of agricultural commodities, food, medicine, or medical devices to Iran" from sanctions. <5.3.2. Implementation/SREs Issued and Ended> The Obama and Trump Administration have implemented the FY2012 NDAA with an eye toward balancing the global oil market with the intended effects on Iran's economy and behavior. The table below on major Iranian oil customers indicates cuts made by major customers compared to 2011. In March 20, 2012, Japan received an SRE. In September 2012, following a July 2012 EU Iran oil embargo, 10 EU countries (Belgium, Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland, Spain, and Britain) received the SRE because they ended purchases pursuant to the EU Iran oil purchase embargo of July 1, 2012. Seventeen EU countries were not granted the SRE because they were not buying Iran's oil and could not "significantly reduce" buys from Iran. In December 2012, the following countries/jurisdictions received the SRE: China, India, Malaysia, South Africa, South Korea, Singapore, Sri Lanka, Turkey, and Taiwan. <5.3.2.1. Reactivation on November 5, 2018, and Exceptions Granted then Ended> The January 2016 waivers issued to implement the JCPOA suspended the requirement for a country to cut oil purchases from Iran in order to maintain their exceptions, and Iran's historic oil customers quickly resumed buying Iranian oil. The provision went back into effect on November 5, 2018. On June 26, 2018, a senior State Department official, in a background briefing, stated that department officials, in meetings with officials of countries that import Iranian oil, were urging these countries to cease buying Iranian oil entirely, but Administration officials later indicated that requests for exceptions would be evaluated based on the ease of substituting for Iranian oil, country-specific needs, and the need for global oil market stability. On November 5, 2018, in the first SRE grants available under reimposed U.S. sanctions, the following eight countries received the SRE: China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey. The SREs expired on May 2, 2019. On April 22, 2019, the State Department announced that no more SREs would be granted after their expiration at 12:00 AM on May 2, 2019. The Administration indicated that the global oil market is well supplied enough to permit the decision, which is intended to "apply maximum pressure on the Iranian regime until its leaders change their destructive behavior, respect the rights of the Iranian people, and return to the negotiating table." The announcement indicated that U.S. officials have had discussions with Saudi Arabia and the UAE to ensure that the global oil market remains well supplied. Left unclear is the extent to which, if at all, Iran's oil customers seek to continue importing Iranian oil and whether the Administration will penalize foreign banks for continuing transactions with Iran's Central Bank. <5.3.3. Iran Foreign Bank Account "Restriction" Provision> <5.3.3.1. Status: Back in Effect on November 5, 2018> The ability of Iran to repatriate hard currency U.S. dollars are the primary form of payment for oil to its Central Bank was impeded by a provision of the ITRSHRA which went into effect on February 6, 2013 (180 days after enactment). Section 504 of the ITRSHRA amended Section 1245 of the FY2012 NDAA (adding "clause ii" to Paragraph D[1]) by requiring that any funds paid to Iran as a result of exempted transactions (oil purchases, for example) be credited to an account located in the country with primary jurisdiction over the foreign bank making the transaction. This provision essentially prevents Iran from repatriating to its Central Bank any hard currency Iran held in foreign banks around the world. Most of Iran's funds held abroad are in banks located in Iran's main oil customers. The provision largely compels Iran to buy the products of the oil customer countries. Some press reports refer to this arrangement as an "escrow account," but State Department officials describe the arrangement as "restricted" accounts. <6. Sanctions on Auto Production and Minerals Sectors> Successive Administrations have expanded sanctions, primarily by executive order, on several significant nonoil industries and sectors of Iran's economy. The targeted sectors include Iran's automotive production sector, which is Iran's second-largest industry (after energy), and its mineral exports, which account for about 10% of Iran's export earnings. <6.1. Executive Order 13645: Application of ISA and Other Sanctions to Iran's Automotive Sector, Rial Trading, and Precious Stones> JCPOA Status: Revoked (by E.O 13716) but most provisions below went back into effect as of August 6, 2018 (90-day wind-down period). Executive Order 13645 of June 3, 2013 (effective July 1, 2013), contains the provisions below. (E.O. 13645 did not amend ISA itself.) Imposes specified ISA-related sanctions on firms that supply goods or services to Iran's automotive (cars, trucks, buses, motorcycles, and related parts) sector, and blocks foreign banks from the U.S. market if they finance transactions with Iran's automotive sector. (An executive order cannot amend a law, so the order does not amend ISA.) Blocks U.S.-based property and prohibits U.S. bank accounts for foreign banks that conduct transactions in Iran's currency, the rial , or hold rial accounts. This provision mostly affected banks in countries bordering or near Iran. The order applies also to "a derivative, swap, future, forward, or other similar contract whose value is based on the exchange rate of the Iranian rial ." If Iran implements plans to develop a digital currency, or cryptocurrency, backed by or tied to rials, it would appear that the Order also applies to that digital currency. Expands the application of Executive Order 13622 (above) to helping Iran acquire precious stones or jewels (see above). Blocks U.S.-based property of a person that conducts transactions with an Iranian entity listed as a Specially Designated National (SDN) or Blocked Person. SDNs to be "relisted" on November 5, 2018. <6.2. Executive Order 13871 on Iran's Minerals and Metals Sectors> On May 8, 2019, President Trump issued Executive Order 13871 sanctioning transactions with Iran's key minerals and industrial commodities. The White House announcement stated that Iran earns 10% of its total export revenues from sales of the minerals and metals sanctioned under the order. The order does the following: blocks U.S.-based property of any entity that conducts a significant transaction for the "sale, supply, or transfer to Iran" of goods or services, or the transport or marketing, of the iron, steel, aluminum, and copper sectors of Iran; authorizes the Secretary of the Treasury to bar from the U.S. financial system any foreign bank that conducts or facilitates a financial transaction for steel, steel products, copper, or copper products from Iran; bars the entry into the United States of any person sanctioned under the order. <7. Sanctions on Weapons of Mass Destruction, Missiles, and Conventional Arms Transfers> <7.1. Status: No sanctions in this section eased to implement JCPOA> Several laws and executive orders seek to bar Iran from obtaining U.S. or other technology that can be used for weapons of mass destruction (WMD) programs. Sanctions on Iran's exportation of arms are discussed in the sections above on sanctions for Iran's support for terrorist groups. <7.2. Iran-Iraq Arms Nonproliferation Act and Iraq Sanctions Act> The Iran-Iraq Arms Nonproliferation Act (Title XIV of the FY1993 National Defense Authorization Act, P.L. 102-484 , signed in October 1992) imposes a number of sanctions on foreign entities that supply Iran with WMD technology or "destabilizing numbers and types of advanced conventional weapons." Advanced conventional weapons are defined as follows: (1) such long-range precision-guided munitions, fuel air explosives, cruise missiles, low observability aircraft, other radar evading aircraft, advanced military aircraft, military satellites, electromagnetic weapons, and laser weapons as the President determines destabilize the military balance or enhance the offensive capabilities in destabilizing ways; (2) such advanced command, control, and communications systems, electronic warfare systems, or intelligence collections systems as the President determines destabilize the military balance or enhance offensive capabilities in destabilizing ways; and (3) such other items or systems as the President may, by regulation, determine necessary for the purposes of this title. The definition is generally understood to include technology used to develop ballistic missiles. Sanctions to be i mposed : Sanctions imposed on violating entities include a ban, for two years, on U.S. government procurement from the entity; a ban, for two years, on licensing U.S. exports to that entity; authority (but not a requirement) to ban U.S. imports from the entity. If the violator is determined to be a foreign country, sanctions to be imposed are a one-year ban on U.S. assistance to that country; a one-year requirement that the United States vote against international lending to it; a one-year suspension of U.S. coproduction agreements with the country; a one-year suspension of technical exchanges with the country in military or dual use technology; a one-year ban on sales of U.S. arms to the country; an authorization to deny the country most-favored-nation trade status; and to ban U.S. trade with the country. Section 1603 of the act amended an earlier law, the Iraq Sanctions Act of 1990 (Section 586G(a) of P.L. 101-513 ), to provide for a "presumption of denial" for all dual use exports to Iran (including computer software). <7.2.1. Implementation> A number of entities were sanctioned under the act in the 1990s, as shown in the tables at the end of this paper. None of the designations remain active, because the sanctions have limited duration. <7.3. Banning Aid to Countries that Aid or Arm Terrorism List States: Anti-Terrorism and Effective Death Penalty Act of 1996> Another law reinforces the authority of the President to sanction governments that provide aid or sell arms to Iran (and other terrorism list countries). Under Sections 620G and 620H of the Foreign Assistance Act, as added by the Anti-Terrorism and Effective Death Penalty Act of 1996 (Sections 325 and 326 of P.L. 104-132 ), the President is required to withhold foreign aid from any country that provides to a terrorism list country financial assistance or arms. Waiver authority is provided. Section 321 of that act also makes it a criminal offense for U.S. persons to conduct financial transactions with terrorism list governments. No foreign assistance cuts or other penalties under this law have been announced. <7.4. Proliferation-Related Provision of the Iran Sanctions Act> As noted above, Section 5(b)(1) of ISA subjects to ISA sanctions firms or persons determined to have sold to Iran (1) technology useful for weapons of mass destruction (WMD) or (2) "destabilizing numbers and types" of advanced conventional weapons. This, and Section 5(b)(2) pertaining to joint ventures to mine uranium, are the only provisions of ISA that were not waived to implement the JCPOA. As noted, no sanctions under this section have been imposed. <7.5. Iran-North Korea-Syria Nonproliferation Act> The Iran Nonproliferation Act ( P.L. 106-178 , signed in March 2000) is now called the Iran-North Korea-Syria Nonproliferation Act (INKSNA) after amendments applying its provisions to North Korea and to Syria. It authorizes sanctions for two years unless renewed on foreign persons (individuals or corporations, not governments) that are determined in a report by the Administration to have assisted Iran's WMD programs. Sanctions imposed include (1) a prohibition on U.S. exportation of arms and dual use items to the sanctioned entity; and (2) a ban on U.S. government procurement and of imports to the United States from the sanctioned entity under Executive Order 12938 (of November 14, 1994). INKSNA also banned U.S. extraordinary payments to the Russian Aviation and Space Agency in connection with the international space station unless the President certified that the agency had not transferred any WMD or missile technology to Iran within the year prior. <7.5.1. Implementation> Entities that have been sanctioned under this law are listed in the tables at the end of the report. Designations more than two years old are no longer active. The JCPOA required the United States to suspend INKSNA sanctions against "the acquisition of nuclear-related commodities and services for nuclear activities contemplated in the JCPOA," but no entities were "delisted" to implement the JCPOA. <7.6. Executive Order 13382 on Proliferation-Supporting Entities> <7.6.1. Status: Order Remained in Force, but Numerous Entities "Delisted"> Executive Order 13382 (June 28, 2005) allows the President to block the assets of proliferators of weapons of mass destruction (WMD) and their supporters under the authority granted by the International Emergency Economic Powers Act (IEEPA; 50 U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 1601 et seq.), and Section 301 of Title 3, United States Code . Implementation. The numerous entities sanctioned under the order for dealings with Iran are listed in the tables at the end of this report. Entities delisted and which were to be delisted in accordance with the JCPOA (in October 2023) are in italics and boldface type, respectively. All entities delisted to implement the JCPOA are to be relisted on November 5, 2018, according to the Treasury Department. <7.7. Arms Transfer and Missile Sanctions: The Countering America's Adversaries through Sanctions Act (CAATSA, P.L. 115-44)> The CAATSA law, signed on August 2, 2017, mandates sanctions on arms sales to Iran and on entities that "materially contribute" to Iran's ballistic missile program. Section 104 references implementation of E.O. 13382, which sanctions entities determined by the Administration to be assisting Iran's ballistic missile program. The section mandates that the Administration impose the same sanctions as in E.O. 13382 on any activity that materially contributes to Iran's ballistic missile program or any system capable of delivering WMD. The section also requires an Administration report every 180 days on persons (beginning on January 29, 2018) contributing to Iran's ballistic missile program in the preceding 180 days. Section 107 mandates imposition of sanctions (the same sanctions as those contained in E.O. 13382) on any person that the President determines has sold or transferred to or from Iran, or for the use in or benefit of Iran: the weapons systems specified as banned for transfer to or from Iran in U.N. Security Council Resolution 2231. These include most major combat systems such as tanks, armored vehicles, warships, missiles, combat aircraft, and attack helicopters. The provision goes somewhat beyond prior law that mandates sanctions mainly on sales to Iran of "destabilizing numbers and types of advanced conventional weapons." The imposition of sanctions is not required if the President certifies that a weapons transfer is in the national security of the United States; that Iran no longer poses a significant threat to the United States or U.S. allies; and that the Iranian government no longer satisfies the requirements for designation as a state sponsor of terrorism. <7.8. Foreign Aid Restrictions for Named Suppliers of Iran> Some past foreign aid appropriations have withheld U.S. assistance to the Russian Federation unless it terminates technical assistance to Iran's nuclear and ballistic missiles programs. The provision applied to the fiscal year for which foreign aid is appropriated. Because U.S. aid to Russia generally has not gone to the Russian government, little or no funding was withheld as a result of the provision. The JCPOA makes no reference to any U.S. commitments to waive this sanction or to request that Congress not enact such a provision. <7.9. Sanctions on "Countries of Diversion Concern"> Title III of CISADA established authorities to sanction countries that allow U.S. technology that Iran could use in its nuclear and WMD programs to be re-exported or diverted to Iran. Section 303 of CISADA authorizes the President to designate a country as a "Destination of Diversion Concern" if that country allows substantial diversion of goods, services, or technologies characterized in Section 302 of that law to Iranian end-users or Iranian intermediaries. The technologies specified include any goods that could contribute to Iran's nuclear or WMD programs, as well as goods listed on various U.S. controlled-technology lists such as the Commerce Control List or Munitions List. For any country designated as a country of diversion concern, there would be prohibition of denial for licenses of U.S. exports to that country of the goods that were being re-exported or diverted to Iran. Implementation : To date, no country has been designated a "Country of Diversion Concern." Some countries adopted or enforced anti-proliferation laws apparently to avoid designation. <8. Financial/Banking Sanctions> U.S. efforts to shut Iran out of the international banking system were a key component of the 2010-2016 international sanctions regime. <8.1. Targeted Financial Measures> <8.1.1. Status: Initiative Suspended during JCPOA Implementation> During 2006-2016, the Department of the Treasury used long-standing authorities to persuade foreign banks to cease dealing with Iran, in part by briefing them on Iran's use of the international financial system to fund terrorist groups and acquire weapons-related technology. According to a GAO report of February 2013, the Department of the Treasury made overtures to 145 banks in 60 countries, including several visits to banks and officials in the UAE, and convinced at least 80 foreign banks to cease handling financial transactions with Iranian banks. Upon implementation of the JCPOA, the Treasury Department largely dropped this initiative, and instead largely sought to encourage foreign banks to conduct normal transactions with Iran. <8.2. Ban on Iranian Access to the U.S. Financial System/Use of Dollars> <8.2.1. Status: Remains in Force> There is no blanket ban on foreign banks or persons paying Iran for goods using U.S. dollars. But, U.S. regulations (ITRs, C.F.R. Section 560.516) ban Iran from direct access to the U.S. financial system. The regulations allow U.S. banks to send funds (including U.S. dollars) to Iran for allowed (licensed) transactions. However, the U.S. dollars cannot be directly transferred to an Iranian bank, but must instead be channeled through an intermediary financial institution, such as a European bank. Section 560.510 specifically allows for U.S. payments to Iran to settle or pay judgments to Iran, such as those reached in connection with the U.S.-Iran Claims Tribunal, discussed above. However, the prohibition on dealing directly with Iranian banks still applies. On November 6, 2008, the Department of the Treasury broadened restrictions on Iran's access to the U.S. financial system by barring U.S. banks from handling any transactions with foreign banks that are handling transactions on behalf of an Iranian bank ("U-turn transactions"). This means a foreign bank or person that pays Iran for goods in U.S. dollars cannot access the U.S. financial system (through a U.S. correspondent account, which most foreign banks have) to acquire dollars for any transaction involving Iran. This ban remained in effect under the JCPOA implementation, and Iran argued that these U.S. restrictions deter European and other banks from reentering the Iran market, as discussed later in this report. <8.2.2. Recent Developments> Then-Treasury Secretary Lew in March and April 2016 suggested the Obama Administration was considering licensing transactions by foreign (non-Iranian) clearinghouses to acquire dollars that might facilitate transactions with Iran, without providing Iran with dollars directly. However, doing so was not required by the JCPOA and the Administration declined to take that step. Instead, the Obama Administration encouraged bankers to reenter the Iran market without fear of being sanctioned. The Trump Administration has not, at any time, expressed support for allowing Iran greater access to dollars. The reimposition of U.S. sanctions has further reduced the willingness and ability of foreign firms to use dollars in transactions with Iran. <8.2.3. Punishments/Fines Implemented against Some Banks.> The Department of the Treasury and other U.S. authorities has announced financial settlements (forfeiture of assets and imposition of fines) with various banks that have helped Iran (and other countries such as Sudan, Syria, and Cuba) access the U.S. financial system. The amounts were reportedly determined, at least in part, by the value, number, and duration of illicit transactions conducted, and the strength of the evidence collected by U.S. regulators. (As noted above, the FY2016 Consolidated Appropriation, P.L. 114-113 , provides for use of the proceeds of the settlements above to pay compensation to victims of Iranian terrorism.) <8.3. CISADA: Sanctioning Foreign Banks That Conduct Transactions with Sanctioned Iranian Entities> <8.3.1. Status: Remained in force after JCPOA, but Iranian banks "delisted." Delisted banks will be "relisted" as of November 5, 2018.> Section 104 of CISADA requires the Secretary of the Treasury to forbid U.S. banks from opening new "correspondent accounts" or "payable-through accounts" (or force the cancellation of existing such accounts) for any foreign bank that transactions business with an entity that is sanctioned by Executive Order 13224 or 13382 (terrorism and proliferation activities, respectively). These orders are discussed above. A full list of such entities is at the end of this report, and entities "delisted" are in italics. any foreign bank determined to have facilitated Iran's efforts to acquire WMD or delivery systems or provide support to groups named as Foreign Terrorist Organizations (FTOs) by the United States. any foreign bank that facilitates "the activities of" an entity designated under by U.N. Security Council resolutions that sanction Iran. any foreign bank that transacts business with the IRGC or any of its affiliates designated under any U.S. Iran-related executive order. any foreign bank that does business with Iran's energy, shipping, and shipbuilding sectors, including with NIOC, NITC, and IRISL. (This provision was contained in Section 1244(d) of the Iran Freedom and Counterproliferation Act, IFCA, discussed below, but d id not specifically amend CISADA . The provision was waived to implement the JCPOA. One additional intent of the provision was to reduce the ability of Iran's pivotal import-export community (referred to in Iran as the "bazaar merchants" or " bazaaris ") from obtaining "letters of credit" (trade financing) to buy or sell goods. The Department of the Treasury has authority to determine what constitutes a "significant" financial transaction. <8.3.2. Implementation of Section 104: Sanctions Imposed> On July 31, 2012, the United States sanctioned the Bank of Kunlun in China and the Elaf Islamic Bank in Iraq under Section 104 of CISADA. On May 17, 2013, the Department of the Treasury lifted sanctions on Elaf Islamic Bank in Iraq, asserting that the bank had reduced its exposure to the Iranian financial sector and stopped providing services to the Export Development Bank of Iran. <8.4. Iran Designated a Money-Laundering Jurisdiction/FATF> <8.4.1. Status: Central Bank Remained Designated Under this Section during JCPOA> On November 21, 2011, the Obama Administration identified Iran as a "jurisdiction of primary money laundering concern" under Section 311 of the USA Patriot Act (31 U.S.C. 5318A), based on a determination that Iran's financial system, including the Central Bank, constitutes a threat to governments or financial institutions that do business with Iran's banks. The designation imposed additional requirements on U.S. banks to ensure against improper Iranian access to the U.S. financial system. The Administration justified the designation as implementation of recommendations of the Financial Action Task Force (FATF) a multilateral standard-setting body for anti-money laundering and combating the financing of terrorism (AML/CFT). In 2016, the FATF characterized Iran as a "high-risk and non-cooperative jurisdiction" with respect to AMF/CFT issues. On June 24, 2016, the FATF welcomed an "Action Plan" filed by Iran to address its strategic AML/CFT deficiencies and decided to suspend, for one year, "countermeasures" mostly voluntary recommendations of increased due diligence with respect to Iran transactions pending an assessment of Iran's implementation of its Action Plan. The FATF continued the suspension of countermeasures in June and November 2017, and February 2018. On October 19, 2018, the FATF stated that Iran had only acted on 9 out of 10 of its guidelines, and that Iran's Majles had not completed legislation to adopt international standards. The FATF continued to suspend countermeasures and gave Iran until February 2019 to fully accede to all FATF guidelines. On February 22, 2019, the FATF stated that countermeasures remained suspended but that "If by June 2019, Iran does not enact the remaining legislation in line with FATF Standards, then the FATF will require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran. The FATF also expects Iran to continue to progress with enabling regulations and other amendments." On October 12, 2018, the Treasury Department Financial Crimes Enforcement Network (FINCEN) issued a warning to U.S. banks to guard against likely Iranian efforts to evade U.S. financial sanctions. Earlier, in January 1, 2013, OFAC issued an Advisory to highlight Iran's use of hawalas (traditional informal banking and money exchanges) in the Middle East and South Asia region to circumvent U.S. financial sanctions. Because the involvement of an Iranian client is often opaque, banks have sometimes inadvertently processed hawala transactions involving Iranians. <8.5. Use of the SWIFT System> Section 220 of the ITRSHRA required reports on electronic payments systems, such as the Brussels-based SWIFT (Society of Worldwide Interbank Financial Telecommunications), that do business with Iran. That law also authorizes but neither it nor any other U.S. law or executive order mandates sanctions against SWIFT or against electronic payments systems. Still, many transactions with Iran are subject to U.S. sanctions, no matter the payment mechanism. <9. Cross-Cutting Secondary Sanctions: The Iran Freedom and Counter-Proliferation Act (IFCA)> <9.1. Status: Waived to implement JCPOA; will go back into effect as specified.> The National Defense Authorization Act for FY2013 ( H.R. 4310 , P.L. 112-239 , signed January 2, 2013) Subtitle D, The Iran Freedom and Counter-Proliferation Act (IFCA), sanctions a wide swath of Iran's economy, touching several sectors. Its provisions on Iran's human rights record are discussed in the section on " Measures to Sanction Human Rights Abuses and Promote the Opposition ." Section 1244 of IFCA mandates the blocking of U.S.-based property of any entity (Iranian or non-Iranian) that provides goods, services, or other support to any Iranian entity designated by the Treasury Department as a "specially designated national" (SDN). The tables at the end of this report show that hundreds of Iranian entities are designated as SDNs under various executive orders. The Iranian entities designated for civilian economic activity were "delisted" to implement the JCPOA, but will be relisted on November 5, 2018. Section 1247 of IFCA prohibits from operating in the United States any bank that knowingly facilitates a financial transaction on behalf of an Iranian SDN. The section also specifically sanctions foreign banks that facilitate payment to Iran for natural gas unless the funds owed to Iran for the gas are placed in a local account. The section provides for a waiver for a period of 180 days. Several sections of IFCA impose ISA sanctions on entities determined to have engaged in specified transactions below. ( The provision s apply ISA sanctions but do not amend ISA .) Energy, Shipbuilding, and Shipping Sector . Section 1244 mandates 5 out of 12 ISA sanctions on entities that provide goods or services to Iran's energy, shipbuilding, and shipping sectors, or to port operations there or which provide insurance for such transactions. The sanctions d o not apply when such transactions involve d purchases of Iranian oil by countries that have exemptions under P.L. 112-81 , or to the purchase of natural gas from Iran . This section goes back into effect after a 180-day wind-down period (by November 4, 2018). Dealings in Precious Metals . Section 1245 imposes 5 out of 12 ISA sanctions on entities that provide precious metals to Iran (including gold) or semifinished metals or software for integrating industrial processes. The section affected foreign firms that transferred these items or other precious metals to Iran in exchange for oil or any other product. There is no exception to this sanction for countries exempted under P.L. 112-81 . This section went back into effect after a 90-day wind-down period (August 6, 2018). Insurance for Related Activities . Section 1246 imposes 5 out of 12 ISA sanctions on entities that provide underwriting services, insurance, or reinsurance for any transactions sanctioned under any executive order on Iran, ISA, CISADA, the Iran Threat Reduction Act, INKSNA, other IFCA provisions, or any other Iran sanction, as well as to any Iranian SDN. ( There is no exception for countries exempted under P.L. 112-81 .) This provision goes back into effect after a 180-day wind-down period (by November 4, 2018). Exception for Afghanistan Reconstruction . Section 1244(f) of IFCA provides a sanctions exemption for transactions that provide reconstruction assistance for or further the economic development of Afghanistan. See JCPOA waivers below. <9.2. Implementation> On August 29, 2014, the State Department sanctioned UAE-based Goldentex FZE in accordance with IFCA for providing support to Iran's shipping sector. It was "delisted" from sanctions on Implementation Day of the JCPOA. On October 16, 2018, OFAC designated as terrorism-related entities several Iranian industrial companies on the grounds that they provide the Basij s ecurity force with revenue to support its operations in the Middle East. The designations, pursuant to E.O. 13224, mean that foreign firms that transact business with these Iranian industrial firms could be subject to U.S. sanctions under IFCA. The industrial firms which were not previously designated and were therefore not "relisted" as SDNs on November 5, 2018, were Technotar Engineering Company; Iran Tractor Manufacturing Company; Iran's Zinc Mines Development Company and several related zinc producers; and Esfahan Mobarakeh Steel Company, the largest steel producer in the Middle East. <9.3. Executive Order 13608 on Sanctions Evasion> Executive Order 13608 of May 1, 2012, gives the Department of the Treasury the ability to identify and sanction (cutting them off from the U.S. market) foreign persons who help Iran (or Syria) evade U.S. and multilateral sanctions. Several persons and entities have been designated for sanctions, as shown in the tables at the end of the report. <10. Sanctions on Iran's Cyber and Transnational Criminal Activities> <10.1. Status: All in Force during JCPOA Period> The Trump Administration appears to be making increasing use of executive orders issued during the Obama Administration to sanction Iranian entities determined to be engaged in malicious cyberactivities or in transnational crime. Iranian entities have attacked, or attempted to attack, using cyberactivity, infrastructure in the United States, Saudi Arabia, and elsewhere. Iran's ability to conduct cyberattacks appears to be growing. Separately, the Justice Department has prosecuted Iranian entities for such activity. The section below discusses Executive Order 13694 on malicious cyberactivities and Executive Order 13581 on transnational crime. <10.2. Executive Order 13694 (April 1, 2015)> Executive Order 13694 blocks U.S.-based property of foreign entities determined to have engaged in cyber-enabled activities that (1) harm or compromise the provision of services by computers or computer networks supporting in the critical infrastructure sector; (2) compromise critical infrastructure; (3) disrupt computers or computer networks; or (4) cause misappropriation of funds, trade secrets, personal identifiers, or financial information for financial advantage or gain. <10.3. Executive Order 13581 (July 25, 2011)> Executive Order 13581 blocks the U.S.-based property of entities determined (1) to be a foreign person that constitutes a significant transnational criminal organization; (2) to have materially assisted any person sanctioned under this order; or (3) to be owned or controlled by or to have acted on behalf of a person sanctioned under the order. <10.3.1. Implementation> Iran-related entities sanctioned under the Orders are listed in the tables at the end of this report. <11. Divestment/State-Level Sanctions> Some U.S. laws require or call for divestment of shares of firms that conduct certain transactions with Iran. A divestment-promotion provision was contained in CISADA, providing a "safe harbor" for investment managers who sell shares of firms that invest in Iran's energy sector at levels that would trigger U.S. sanctions under the Iran Sanctions Act. As noted above, Section 219 of the ITRSHRA of 2012 requires companies to reports to the Securities and Exchange Commission whether they or any corporate affiliate has engaged in any transactions with Iran that could trigger sanctions under ISA, CISADA, and E.O 13382 and 13224. Implementation : Numerous states have adopted laws, regulations, and policies to divest from or avoid state government business with foreign companies that conduct certain transactions with Iran. The JCPOA requires the United States to work with state and local governments to ensure that state-level sanctions do not conflict with the sanctions relief provided by the federal government under the JCPOA. Most states that have adopted Iran sanctions continue to enforce those measures. <12. Sanctions and Sanctions Exemptions to Support Democratic Change/Civil Society in Iran> <12.1. Post-JCPOA Status: Virtually All Sanctions in This Section Remain in Effect. No Entities "Delisted."39> A trend in U.S. policy and legislation since the June 12, 2009, election-related uprising in Iran has been to support the ability of the domestic opposition in Iran to communicate and to sanction Iranian officials that commit human rights abuses. Sanctions on the IRGC represent one facet of that trend because the IRGC is a key suppressive instrument. Individuals and entities designated under the executive orders and provisions discussed below are listed in the tables at the end of this report. For those provisions that ban visas to enter the United States, the State Department interprets the provisions to apply to all members of the designated entity. <12.2. Expanding Internet and Communications Freedoms> Some laws and Administration action focus on expanding internet freedom in Iran or preventing the Iranian government from using the internet to identify opponents. Subtitle D of the FY2010 Defense Authorization Act ( P.L. 111-84 ), called the "VOICE" (Victims of Iranian Censorship) Act, contained several provisions to increase U.S. broadcasting to Iran and to identify (in a report to be submitted 180 days after enactment) companies that are selling Iran technology equipment that it can use to suppress or monitor the internet usage of Iranians. The act authorized funds to document Iranian human rights abuses since the June 2009 Iranian presidential election. Section 1241 required an Administration report by January 31, 2010, on U.S. enforcement of sanctions against Iran and the effect of those sanctions on Iran. <12.2.1. Countering Censorship of the Internet: CISADA, E.O. 13606, and E.O. 13628> Section 106 of CISADA prohibits U.S. government contracts with foreign companies that sell technology that Iran could use to monitor or control Iranian usage of the internet. The provisions were directed, in part, against Nokia (Finland) and Siemens (Germany) for reportedly selling internet monitoring and censorship technology to Iran in 2008. The provision was derived from the Reduce Iranian Cyber-Suppression Act (111 th Congress, S. 1475 and H.R. 3284 ). On April 23, 2012, President Obama issued an executive order (13606) sanctioning persons who commit "Grave Human Rights Abuses by the Governments of Iran and Syria via Information Technology (GHRAVITY)." The order blocks the U.S.-based property and essentially bars U.S. entry and bans any U.S. trade with persons and entities listed in an Annex and persons or entities subsequently determined to be (1) operating any technology that allows the Iranian (or Syrian) government to disrupt, monitor, or track computer usage by citizens of those countries or assisting the two governments in such disruptions or monitoring; or (2) selling to Iran (or Syria) any technology that enables those governments to carry out such actions. Section 403 of the ITRSHRA sanctions (visa ban, U.S.-based property blocked) persons/firms determined to have engaged in censorship in Iran, limited access to media, or for example, a foreign satellite service provider supported Iranian government jamming or frequency manipulation. On October 9, 2012, the President issued Executive Order 13628 implementing Section 403 by blocking the property of persons/firms determined to have committed the censorship, limited free expression, or assisted in jamming communications. The order also specifies the sanctions authorities of the Department of State and of the Treasury. <12.2.2. Laws and Actions to Promote Internet Communications by Iranians> On March 8, 2010, OFAC amended the Iran Transactions Regulations to allow for a general license for providing free mass market software to Iranians. The ruling incorporated major features of the Iran Digital Empowerment Act ( H.R. 4301 in the 111 th Congress). The OFAC determination required a waiver of the provision of the Iran-Iraq Arms Nonproliferation Act (Section 1606 waiver provision) discussed above. Section 103(b)(2) of CISADA exempts from the U.S. export ban on Iran equipment to help Iranians communicate and use the internet. On March 20, 2012, the Department of the Treasury amended U.S.-Iran trade regulations to permit several additional types of software and information technology products to be exported to Iran under general license, provided the products were available at no cost to the user . The items included personal communications, personal data storage, browsers, plug-ins, document readers, and free mobile applications related to personal communications. On May 30, 2013, the Department of the Treasury amended the trade regulations further to allow for the sale, on a cash basis (no financing), to Iran of equipment that Iranians can use to communicate (e.g., cellphones, laptops, satellite internet, website hosting, and related products and services). <12.3. Measures to Sanction Human Rights Abuses and Promote the Opposition> Some legislation has sought to sanction regime officials involved in suppressing the domestic opposition in Iran or in human rights abuses more generally. Much of this legislation centers on amendments to Section 105 of CISADA. Sanctions against Iranian Human Rights Abusers. Section 105 of CISADA bans travel and freezes the U.S.-based assets of those Iranians determined to be human rights abusers. On September 29, 2010, pursuant to Section 105, President Obama issued Executive Order 13553 providing for CISADA sanctions against Iranians determined to be responsible for or complicit in post-2009 Iran election human rights abuses. Those sanctioned under the provisions are listed in the tables at the end of this report. Section 105 terminates if the President certifies to Congress that Iran has (1) unconditionally released all political prisoners detained in the aftermath of the June 2009 uprising; (2) ceased its practices of violence, unlawful detention, torture, and abuse of citizens who were engaged in peaceful protest; (3) fully investigated abuses of political activists that occurred after the uprising; and (4) committed to and is making progress toward establishing an independent judiciary and respecting human rights. Sanctions on Sales of Anti-Riot Equipment. Section 402 of the ITRSHRA amended Section 105 by adding provisions that sanction (visa ban, U.S. property blocked) any person or company that sells the Iranian government goods or technologies that it can use to commit human rights abuses against its people. Such goods include firearms, rubber bullets, police batons, chemical or pepper sprays, stun grenades, tear gas, water cannons, and like goods. In addition, ISA sanctions are to be imposed on any person determined to be selling such equipment to the IRGC. Sanctions a gainst Iranian Government Broadcasters /IRIB . Section 1248 of IFCA (Subtitle D of P.L. 112-239 ) mandates inclusion of the Islamic Republic of Iran Broadcasting (IRIB), the state broadcasting umbrella group, as a human rights abuser. IRIB was designated as an SDN on February 6, 2013, under E.O. 13628 for limiting free expression in Iran. On February 14, 2014, the State Department waived IFCA sanctions under Sections 1244, 1246, or 1247, on any entity that provides satellite connectivity services to IRIB. The waiver has been renewed each year since. Sanctions a gainst Iranian Profiteers . Section 1249 of IFCA amends Section 105 by imposing sanctions on any person determined to have engaged in corruption or to have diverted or misappropriated humanitarian goods or funds for such goods for the Iranian people. The measure is intended to sanction Iranian profiteers who are, for example, using official connections to corner the market for vital medicines. This provision, which remains in forces, essentially codifies a similar provision of Executive Order 13645. The Countering America's Adversaries through Sanctions Act (CAATSA, P.L. 115-44 ). Section 106 authorizes, but does not require, the imposition of the same sanctions as those prescribed in E.O. 13553 on persons responsible for extrajudicial killings, torture, or other gross violations of internationally recognized human rights against Iranians who seek to expose illegal activity by officials or to defend or promote human rights and freedoms in Iran. The persons to be sanctioned are those named in a report provided 90 days after CAATSA enactment (by October 31, 2017) and annually thereafter. The provision is similar to E.O. 13553 but, in contrast, applies broadly to Iranian human rights abuses and is not limited to abuses connected to suppressing the June 2009 uprising in Iran. Additional designations of Iranian human rights abusers under E.O. 13533 were made subsequent to the enactment of CAATSA and the October 31, 2017, CAATSA report deadline. Separate Visa Bans. On July 8, 2011, the State Department imposed visa restrictions on 50 Iranian officials for participating in political repression in Iran, but it did not name those banned on the grounds that visa records are confidential. The action was taken under the authorities of Section 212(a)(3)(C) of the Immigration and Nationality Act, which renders inadmissible to the United States a foreign person whose activities could have serious consequences for the United States. On May 30, 2013, the State Department announced it had imposed visa restrictions on an additional 60 Iranian officials on similar grounds. High Level Iranian Visits . There are certain exemptions in the case of high level Iranian visits to attend U.N. meetings in New York. The U.N. Participation Act (P.L. 79-264) provides for U.S. participation in the United Nations and as host nation of U.N. headquarters in New York, and visas are routinely issued to heads of state and their aides attending these meetings. In September 2012, the State Department refused visas for 20 members of Iranian President Ahmadinejad's traveling party on the grounds of past involvement in terrorism or human rights abuses. Still, in line with U.S. obligations under the act, then-President Ahmadinejad was allowed to fly to the United States on Iran Air, even though Iran Air was at the time a U.S.-sanctioned entity, and his plane reportedly was allowed to park at Andrews Air Force base. <13. U.N. Sanctions> U.N. sanctions on Iran, enacted by the Security Council under Article 41 of Chapter VII of the U.N. Charter, applied to all U.N. member states. During 2006-2008, three U.N. Security Council resolutions 1737, 1747, and 1803 imposed sanctions on Iran's nuclear program and weapons of mass destruction (WMD) infrastructure. Resolution 1929, adopted on June 9, 2010, was key for its assertion that major sectors of the Iranian economy support Iran's nuclear program giving U.N. member states authorization to sanction civilian sectors of Iran's economy. It also imposed strict limitations on Iran's development of ballistic missiles and imports and exports of arms. <13.1. Resolution 2231 and U.N. Sanctions Eased> U.N. Security Council Resolution 2231 of July 20, 2015 endorsed the JCPOA and superseded all prior Iran-related resolutions as of Implementation Day (January 16, 2016). lifted all U.N. sanctions discussed above. The Resolution did not continue the mandate of the "the panel of experts" and the panel ended its operations. "calls on" Iran not to develop ballistic missiles "designed to be capable" of delivering a nuclear weapon for a maximum of eight years from Adoption Day (October 18, 2015). The restriction expires on October 18, 2023. And, 2231 is far less restrictive on Iran's missile program than is Resolution 1929. No specific sanctions are mandated in the Resolution if Iran conducted missile tests inconsistent with the Resolution. The JCPOA did not impose any specific missile-related requirements. requires Security Council approval for Iran to export arms or to purchase any arms (major combat systems named in the Resolution) for a maximum of five years from Adoption Day (until October 18, 2020). The JCPOA does not impose arms requirements. The U.S. withdrawal from the JCPOA did not change the status of Resolution 2231. <13.1.1. Iran Compliance Status> U.N. and International Atomic Energy Agency reports since the JCPOA began implementation have stated that Iran is complying with its nuclear obligations under the JCPOA. That assessment was corroborated by U.S. intelligence leaders in January 29, 2019, testimony before the Senate Select Committee on Intelligence. U.N. reports on Iranian compliance with Resolution 2231 have noted assertions by several U.N. Security Council members, including the United States, that Iranian missile tests have been inconsistent with the Resolution. U.S. officials have called some of Iran's launches of its Khorramshahr missile as violations of the Resolution. The reports required by Resolution 2231, as well as those required by other Resolutions pertaining to various regional crises, such as that in Yemen, also note apparent violations of the Resolution 2231 restrictions on Iran's exportation of arms. The Security Council is responsible for prescribing penalties on Iran for violations, and no U.N. Security Council actions have been taken against Iran for these violations to date. <13.1.2. U.N. List of Sanctioned Entities> Under Paragraph 6(c) of Annex B of Resolution 2231, entities sanctioned by the previous Iran-related Resolutions would continue to be sanctioned for up to eight years from Adoption Day (until October 2023). An attachment to the Annex listed 36 entities for which this restriction would no longer apply (entities "delisted") as of Implementation Day. Most of the entities immediately delisted were persons and entities connected to permitted aspects of Iran's nuclear program and its civilian economy. According to press reports, two entities not on the attachment list, Bank Sepah and Bank Sepah International PLC, also were delisted on Implementation Day by separate Security Council action. Paragraph 6(c) provides for the Security Council to be able to delist a listed entity at any time, as well as to add new entities to the sanctions list. Delisted entities are in italics in the table of U.N.-listed sanctioned entities at the end of the report. <14. Sanctions Application under Nuclear Agreements> The following sections discuss sanctions relief provided under the November 2013 interim nuclear agreement (JPA) and, particularly, the JCPOA. Later sections discuss the degree to which Iran is receiving the expected benefits of sanctions relief. <14.1. Sanctions Eased by the JPA> U.S. officials said that the JPA provided "limited, temporary, targeted, and reversible" easing of international sanctions. Under the JPA (in effect January 20, 2014-January 16, 2016) Iran's oil customers were not required reduce their oil purchases from Iran because waivers were issued for Section 1245(d)(1) of the National Defense Authorization Act for FY2012 ( P.L. 112-81 ) and Section 1244c(1) of IFCA. The Waivers of ITRSHRA and ISA provisions were issued to permit transactions with NIOC. The European Union amended its regulations to allow shipping insurers to provide insurance for ships carrying oil from Iran. A waiver of Section 1245(d)(1) of IFCA allowed Iran to receive directly $700 million per month in hard currency from oil sales and $65 million per month to make tuition payments for Iranian students abroad (paid directly to the schools). Executive Orders 13622 and 13645 and several provisions of U.S.-Iran trade regulations were suspended. Several sections of IFCA were waived to enable Iran to sell petrochemicals and trade in gold and other precious metals, and to conduct transactions with foreign firms involved in Iran's automotive manufacturing. Executive Order 13382 provisions and certain provisions of U.S.-Iran trade regulations were suspended for equipment sales to Iran Air. The United States licensed some safety-related repairs and inspections for certain Iranian airlines and issued a new "Statement of Licensing Policy" to enable U.S. aircraft manufacturers to sell equipment to Iranian airlines. The JPA required that the P5+1 "not impose new nuclear-related sanctions ... to the extent permissible within their political systems." <14.2. Sanctions Easing under the JCPOA and U.S. Reimposition> Under the JCPOA, sanctions relief occurred at Implementation Day (January 16, 2016), following IAEA certification that Iran had completed stipulated core nuclear tasks. U.S. secondary sanctions were waived or terminated, but most sanctions on direct U.S.-Iran trade. The secondary sanctions eased included (1) sanctions that limited Iran's exportation of oil and sanction foreign sales to Iran of gasoline and energy sector equipment, and which limit foreign investment in Iran's energy sector; (2) financial sector sanctions; and (3) sanctions on Iran's auto sector and trading in the rial . The EU lifted its ban on purchases of oil and gas from Iran; and Iranian banks were readmitted to the SWIFT electronic payments system. All U.N. sanctions were lifted. All of the U.S. sanctions that were eased will go back into effect on November 4, 2018, in accordance with the May 8, 2018, announcement that the United States will cease participating in the JCPOA. The Administration has stated that the purpose of reimposing the sanctions is to deny Iran the revenue with which to conduct regional malign activities and advance its missile, nuclear, and conventional weapons programs. The sanctions that went back into effect on August 7, 2018 (90-day wind-down period), are on the purchase or acquisition of U.S. bank notes by Iran; Iran's trade in gold and other precious metals; transactions in the Iranian rial ; activities relating to Iran's issuing of sovereign debt; transactions with Iran in graphite, aluminum, steel, coal, and industrial software; importation of Iranian luxury goods to the United States; and the sale to Iran of passenger aircraft (and aircraft with substantial U.S. content). The sanctions that went back into effect on November 5, 2018, are on petroleum-related transactions with Iran. port operators and energy, shipping, and shipbuilding sectors; and transactions by foreign banks with Iran's Central Banks (including the provision that restricts Iran's access to hard currency held in banks abroad). <14.2.1. U.S. Laws Waived and Executive Orders Terminated, and Reimposition52> The laws below required waivers to implement U.S. commitments under the JCPOA, and all waivers were revoked in concert with the Trump Administration exit from the accord. All the provisions discussed below went back into effect on November 5, 2018. Iran Sanctions Act . The blanket energy/economic-related provisions of the ISA of P.L. 104-172 , as amended. (Section 4(c)(1)(A) waiver provision.) The WMD-related provision of ISA was not waived. FY2012 NDAA . Section 1245(d) of the National Defense Authorization Act for FY2012 ( P.L. 112-81 ) imposes sanctions on foreign banks of countries that do not reduce Iran oil imports. Iran Threat Reduction and Syria Human Rights Act ( P.L. 112-158 ) . Sections 212 and 213 the economy-related provisions of the act were waived. The human rights-related provisions of the law were not waived. Iran Freedom and Counter-proliferation Act . Sections 1244, 1245, 1246, and 1247 of the Iran Freedom and Counter-Proliferation Act (Subtitle D of P.L. 112-239 ). The core provision of CISADA ( P.L. 111-195 ) that sanctions foreign banks was not waived, but most listed Iranian banks were "delisted" to implement the JCPOA, thereby making this CISADA provision largely moot. The Administration relisted all delisted Iranian banks on November 5, 2018. Executive Orders: 13574, 13590, 13622, 13645, and Sections 5-7 and 15 of Executive Order 13628 were revoked outright by Executive Order 13716. The orders were reinstated on August 6, 2018, by Executive Order 13846. The United States "delisted" for sanctions the specified Iranian economic entities and personalities listed in Attachment III of the JCPOA, including the National Iranian Oil Company (NIOC), various Iranian banks, and many energy and shipping-related institutions. That step enabled foreign companies/banks to resume transactions with those entities without risking being penalized by the United States. The tables at the end of the report depict in italics those entities delisted. Entities that were to be delisted on "Transition Day" (October 2023) are in bold type. The Administration relisted these entities for secondary sanctions, with selected exceptions (such as the AEOI and 23 subsidiaries), on November 5, 2018. The continued de-listing of the nuclear entities was in order to allow European and other U.S. partners to continue providing civilian nuclear assistance to Iran as permitted under the JCPOA. The JCPOA required the U.S. Administration, by "Transition Day," to request that Congress lift virtually all of the sanctions that were suspended under the JCPOA. No outcome of such a request is mandated. The JCPOA requires all U.N. sanctions to terminate after 10 years of adoption ("Termination Day"). The U.S.-related provisions are rendered moot by the U.S. exit from the JCPOA. <14.2.1.1. Exceptions and Waivers Provided by the Trump Administration> Even though it has reimposed all U.S. sanctions on Iran, the Trump Administration has issued some exceptions that are provided for under the various U.S. sanctions laws, including the following: As noted above, on November 5, 2018, eight countries were given the SRE to enable them to continue transactions with Iran's Central Bank and to purchase Iranian oil. At an April 10 hearing of the Senate Foreign Relations Committee, Secretary Pompeo appeared to indicate that the SREs would be renewed. However, on April 22 the Administration announced termination of the SREs as of their expiration on May 2, 2019. On May 3, the Administration ended some waivers under IFCA and various antiproliferation laws (discussed above) that allow international technical assistance to Iran's three nuclear sites permitted to operate under the JCPOA the Fordow facility, the Bushehr nuclear power reactor, and the Arak heavy water plant. The Administration ended the waiver that enabled Rosatom (Russia) to remove Iran's LEU that exceeds the 300kg allowed stockpile, and that allowed Iran to export heavy water that exceeded the limits on that product to Oman. The waiver limitations also will prohibit the expansion of the Bushehr reactor by any supplier. In response, President Rouhani announced that Iran would no longer abide by the JCPOA stockpile limits. The Administration waived Section 1247(e) of IFCA to enable Iraq to continue paying for purchases of natural gas from Iran. The waiver term for that section is up to 180 days, but the Administration has been providing the waiver for 90-day increments. The Administration has issued the permitted IFCA exception for Afghan reconstruction to enable India to continue work at Iran's Chahbahar Port. A U.S. State Department official told Afghan leaders in mid-May 2019 that the exception would continue. The Administration has renewed the licenses of certain firms to enable them to continue developing the Rhum gas field in the North Sea that Iran partly owns. <14.2.2. U.S. Sanctions that Remained in Place during JCPOA and Since> The JCPOA did not commit the United States to suspend U.S. sanctions on Iran for terrorism or human rights abuses, on foreign arms sales to Iran or sales of proliferation-sensitive technology such as ballistic missile technology, or on U.S.-Iran direct trade (with the selected exceptions of the latter discussed above). The sanctions below remained in place during JCPOA implementation and remain in effect now: E.O. 12959, the ban on U.S. trade with and investment in Iran; E.O. 13224 sanctioning terrorism entities, any sanctions related to Iran's designation as a state sponsor or terrorism, and any other terrorism-related sanctions. The JCPOA does not commit the United States to revoke Iran's placement on the terrorism list; E.O. 13382 sanctioning entities for proliferation; the Iran-Iraq Arms Non-Proliferation Act; the Iran-North Korea-Syria Non-Proliferation Act (INKSNA); the section of ISA that sanctions WMD- and arms-related transactions with Iran; E.O. 13438 on Iran's interference in Iraq and E.O. 13572 on repression in Syria; Executive Orders (E.O. 13606 and E.O. 13628) and the provisions of CISADA, ITRSHRA, and IFCA that pertain to human rights or democratic change in Iran; all sanctions on the IRGC, military, proliferation-related, and human rights- and terrorism-related entities, which were not "delisted" from sanctions; Treasury Department regulations barring Iran from access to the U.S. financial system. Foreign banks can pay Iran in dollars out of their existing dollar supply, and the Treasury Department revised its guidance in October 2016 to stress that such transactions are permitted. <14.2.2.1. Other Mechanisms to "Snap-Back" Sanctions on Iran> Sanctions might have been reimposed by congressional action in accordance with President Trump's withholding of certification of Iranian compliance with the JCPOA. Such certification under the Iran Nuclear Agreement Review Act (INARA, P.L. 114-17 ), was withheld in October 2017 and January and April of 2018. Congress had the opportunity to act on legislation, under expedited procedures, to reimpose sanctions that were suspended. Congress did not take such action. Additionally, the JCPOA (paragraph 36 and 37) contains a mechanism for the "snap back" of U.N. sanctions if Iran does not satisfactorily resolve a compliance dispute. According to the JCPOA (and Resolution 2231), the United States (or any veto-wielding member of the U.N. Security Council) would be able to block a U.N. Security Council resolution that would continue the lifting of U.N. sanctions despite Iran's refusal to resolve the dispute. In that case "... the provisions of the old U.N. Security Council resolutions would be reimposed, unless the U.N. Security Council decides otherwise." There are no indications that the Administration plans to try to snap back U.N. sanctions under this process. However, some observers maintain that the Administration assertions in 2019 that Iran was not forthcoming with the IAEA about its past nuclear weapons research could potentially indicate that the Administration will trigger the snap-back mechanism. <15. International Implementation and Compliance59> During 2010-2016, converging international views on Iran produced global consensus to pressure Iran through sanctions. In addition to asserting that the international community needed to ensure that Iran did not develop a nuclear weapon, some countries joined the sanctions regime to head off unwanted U.S. or other military action against Iran. Some countries cooperated in order to preserve their close relationships with the United States. This section assesses international cooperation and compliance with U.S. sanctions, and cooperation with U.S. sanctions reimposed as a consequence of the May 8, 2018, U.S. exit from the JCPOA. All the JCPOA parties publicly opposed the U.S. decision to exit the JCPOA and have sought to stay engaged in the Iran market in order to continue to provide the JCPOA's economic benefits to Iran. A comparison between U.S., U.N., and EU sanctions against Iran is contained in Table A-1 below. Broader issues of Iran's relations with the countries discussed in this section can be found in CRS Report R44017, Iran's Foreign and Defense Policies , by Kenneth Katzman. <15.1. European Union (EU)> After the passage of Resolution 1929 in June 2010, European Union (EU) sanctions on Iran became nearly as extensive as those of the United States a contrast from most of the 1990s, when the EU countries refused to join the 1995 U.S. trade and investment ban on Iran and (along with Japanese creditors) rescheduled $16 billion in Iranian debt bilaterally. In July 2002, Iran tapped international capital markets for the first time since the Islamic revolution, selling $500 million in bonds to European banks and, during 2002-2005, there were negotiations between the EU and Iran on a "Trade and Cooperation Agreement" (TCA) that would have lowered the tariffs or increased quotas for Iranian exports to the EU countries. Under the JCPOA, EU sanctions, most of which were imposed in 2012, were lifted, including the following: the ban on oil and gas imports from Iran. a ban on insurance for shipping oil or petrochemicals from Iran and a freeze on the assets of several Iranian firms involved in shipping. a ban on trade with Iran in gold, precious metals, diamonds, and petrochemicals. a freeze of the assets of Iran's Central Bank (except for approved civilian trade). a ban on transactions between European and all Iranian banks and on short-term export credits, guarantees, and insurance. a ban on exports to Iran of graphite, semi-finished metals such as aluminum and steel, industrial software, shipbuilding technology, oil storage capabilities, and flagging or classification services for Iranian tankers and cargo vessels. The cutoff of 14 EU-sanctioned Iranian banks from the Brussels-based SWIFT electronic payments system was lifted, and the Iranian banks resumed accessing the system in February 2016. A large number of entities that had been sanctioned by EU Council decisions and regulations over the years were "delisted" by the EU on Implementation Day. The following EU sanctions have remained in place: an embargo on sales to Iran of arms, missile technology, other proliferation-sensitive items, and gear for internal repression. a ban on 84 Iranian persons and one entity all designated for human rights abuses or supporting terrorism from visiting EU countries, and a freeze on their EU-based assets (see Table C-1 below). <15.1.1. U.S. JCPOA Exit-Driven Divestment> The EU countries have not reimposed sanctions on Iran and instead have sought to preserve the JCPOA by maintaining economic relations with Iran. However, to avoid risk to their positions in the large U.S. market, more than 100 companies mostly in Europe have left Iran since May 2018. In some cases, European companies have stopped doing business with Iran after being threatened with U.S. sanctions by U.S. diplomats. Some of the 100+ European companies that have ended investments in or transactions with Iran to avoid reimposed U.S. sanctions include the following: Oil Importation. No EU state has bought Iranian oil since U.S. energy sanctions went back into effect in November 2018, even though Italy and Greece were given SRE sanctions exemptions from November 5, 2018, until May 2, 2019. Cars. Renault and Citroen of France suspended their post-JCPOA $1 billion investments in a joint venture with two Iranian firms to boost Renault's car production capacity in Iran to 350,000 cars per year. On August 6, 2018, Daimler (manufacturer of Mercedes Benz autos) announced it was suspending its activities in Iran. Volkswagen followed suit one month later. Buses. Scania of Sweden established a factory in Iran to supply the country with 1,350 buses, but it is not clear whether this venture is still operating. Other Industry . German industrial giant Siemens signed an agreement in March 2016 with Iranian firm Mapna to transfer technology to produce gas turbines in Iran, and other contracts to upgrade Iran's railways. Siemens said in late 2018 that it would pursue no new Iranian business. Italy's Danieli industrial conglomerates and Gruppo Ventura have exited the Iranian market. Banking . Several banks have announced since the U.S. JCPOA exit a cessation of transactions with Iran: DZ Bank and Allianz of Germany; Oberbank of Austria; and Banque Wormser Freres of France. In July 2018, at U.S. request, Germany's central bank (Deutsche Bundesbank) introduced a rule change that blocked Iran's withdrawal of $400 million in cash from the Europaische-Iranische Handlesbank (EIH). EIH is reportedly at least partly owned by Iran and has often partnered on transactions with the Bundesbank. (EIH was "de-listed" from sanctions by the United States to implement the JCPOA, but was relisted on November 5, 2018.) Energy. On energy issues: Total SA has exited a nearly $5 billion energy investment in South Pars gas field, and it is transferring its stake to its joint venture partner, China National Petroleum Corporation. As noted above, European countries have reduced their purchases of Iranian oil. OMV of Austria has announced it would halt energy development work. Norway's Saga Energy (Norway is not in the EU) signed a $3 billion deal to build solar power plants in Iran, and Italy's FS signed a $1.4 billion agreement to build a high speed railway between Qom and Arak. These deals are still active. Shipping. Hapag-Lloyd of Germany and Denmark's AP Moller-Maersk have ceased shipping services to Iran. Telecommunications. Germany telecommunications firm Deutsche Telekom announced in September 2018 that it would end its business in Iran. Flights. Although air service is not subject to U.S. sanctions per se, Air France and British Air announced in September 2018 that they would cease service to Iran due to lack of demand. Rhum Gas Field . One project, the Rhum gas field in the North Sea that is partly owned by Iranian Oil Company (a subsidiary of NIOC), has been able to continue operating. In part because the field supplies about 5% of Britain's demand for natural gas, in October 2018, the Trump Administration renewed the license of BP and Serica Energy to continue providing goods and services to the field, despite the Iranian involvement in the project. <15.1.2. European Counterefforts/Special Purpose Vehicle/INSTEX> The EU countries, in an attempt to persuade Iran to continue to adhere to the JCPOA, have undertaken several steps that run counter to Trump Administration policy. On August 6, 2018, a 1996 EU "blocking statute" that seeks to protect EU firms from reimposed U.S. sanctions took effect. In September 2018, EU countries announced small amounts of development assistance to Iran, apparently in order to demonstrate that the EU is making good faith efforts to provide Iran the economic benefits of the JCPOA. The EU subsequently designed a mechanism under which EU countries could continue to trade with Iran with relative immunity from U.S. sanctions. On September 25, 2018, Germany, France, and Britain, joined by Russia and China, as well as Iran, endorsed the creation of a "special purpose vehicle" (SPV) an entity that would facilitate trade without utilizing dollar-denominated transactions with Iran, and without exposure to the U.S. market. In a January 31, 2019, joint statement, France, Britain, and Germany announced the formal registration of the SPV, formally termed the Instrument for Supporting Trade Exchanges (INSTEX). It is based in France, with German governance, and financial support from the three governments. It will initially focus on the sectors most essential to Iran, including medicines, medical devices, and food, and perhaps eventually provide a platform for non-European countries to trade with Iran in oil and other products. The operation of INSTEX depended on Iran setting up a counterparty vehicle in Europe and, in April 2019, Iran set up that counterparty as the "Special Trade and Finance Instrument" (STFI). Secretary of State Michael Pompeo denounced the plan as counterproductive, and Vice President Mike Pence, in mid-February 2019, criticized INSTEX as an outright attempt to undermine U.S. sanctions against Iran. Amid reported agitation among Iranian regime hardliners to exit the JCPOA because of the EU's failure to prevent harm to the Iranian economy, Iranian officials indicated the announcement represented a positive first step. Indicative of U.S. pressure on the EU not to begin INSTEX operations, on May 7, 2019, Treasury Department Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said that INSTEX is unlikely to fulfill EU pledges to prevent INSTEX from being used by Iran to launder money or fund terrorism. Mandelker's statement included an implicit threat to potentially sanction INSTEX or its counterparties. The U.S. concerns about INSTEX might be a product, at least in part, of the alleged involvement of sanctioned Iranian banks in Iran's STFI counterparty. <15.1.3. EU Antiterrorism and Anti-proliferation Actions> While attempting to preserve civilian economic engagement with Iran, the European countries have sought to support U.S. efforts to counter Iran's terrorism and proliferation activities. In December 2018, Albania expelled Iran's ambassador and one other Iranian diplomat for involvement in a terrorism plot that was thwarted. In January 2019, the EU added Iran's intelligence service (MOIS) and two intelligence operatives to its terrorism-related sanctions list in response to allegations of Iranian terrorism plotting in Europe. Germany followed that move by denying landing rights to Iran's Mahan Air, which the United States has designated as a terrorism supporting entity. <15.1.4. SWIFT Electronic Payments System> The management of the Brussels-based Swift electronic payments system has sought to balance financial risks with the policies of the EU governments. In March 2012, SWIFT acceded to an EU request to expel sanctioned Iranian banks. Some Iranian banks were still able to conduct electronic transactions with the European Central Bank via the "Target II" system. EU diplomats indicated they would not comply with U.S. requests to ask SWIFT to expel Iranian banks again, and no EU request to SWIFT to again expel sanctioned Iranian banks was made. However, SWIFT is run by an independent board and seeks to avoid risk of U.S. penalties. In late 2018, the system again disconnected the Iranian banks that were "relisted" for U.S. sanctions as of November 5, 2018. <15.2. China and Russia> Russia and China, two permanent members of the U.N. Security Council and parties to the JCPOA, historically have imposed only those sanctions required by Security Council resolutions. Both governments opposed the U.S. withdrawal from the JCPOA. Many observers expect that, because companies in both countries have limited U.S. exposure and are strongly influenced by their governments, much of Iran's trade and economic engagement will shift to China and Russia from EU countries, Japan, and South Korea. <15.2.1. Russia> Increasingly close politically primarily on the issue of the conflict in Syria, Iran and Russia have discussed expanding energy and trade cooperation. The two countries reportedly agreed on broad energy development deals during President Putin's visit to Tehran in late October 2017, with an estimated investment value of up to $30 billion, although implementation remains uncertain. In December 2018, Iran signed a free trade deal with the Russia-led "Eurasian Economic Union," suggesting Russian intent not to abide by reimposed U.S. sanctions on Iran. The revenues of Russia's Rosatam conglomerate are likely to be reduced as a consequence of the Trump Administration's May 2019 ending of waivers for some assistance to Iran's nuclear program. In April 2015, Russia lifted its own restriction on delivering the S-300 air defense system that it sold Iran in 2007 but refused to deliver after Resolution 1929 was adopted even though that Resolution technically did not bar supply of that defensive system. In April 2016, Russia began delivering the five S-300 batteries. Iran's Defense Minister visited Russia in February 2016 to discuss possible future purchases of major combat systems. No sales have been announced. <15.2.2. China> China is a major factor in the effectiveness of any sanctions regime on Iran because China is Iran's largest oil customer. During 2012-2016, China was instrumental in reducing Iran's total oil exports because it cut its buys from Iran to about 435,000 barrels per day from its 2011 average of 600,000 barrels per day. The State Department asserted that, because China was the largest buyer of Iranian oil, percentage cuts by China had a large impact in reducing Iran's oil sales by volume and China merited an SRE. After sanctions were lifted in early 2016, China increased its purchases of Iranian oil to levels that sometimes exceeded those of 2011. Several Chinese energy firms that invested in Iran's energy sector put those projects on hold in 2012, but resumed or considered resuming work after sanctions were eased in 2016. Chinese firms also took over some EU country energy investments that have been divested after the reimposition of U.S. sanctions. Since the reimposition of U.S. sanctions, China appears to have reduced its oil imports from Iran somewhat (see Table 1 . The Administration gave China a SRE sanctions exception on November 5, 2018, in part to recognize import reductions but also possibly to avoid further complicating U.S. relations with China. However, China reportedly is continuing to import at least some Iranian oil despite the ending of the SRE as of May 2, 2019, in large part on the expectation that the Trump Administration will be hesitant to impose actual sanctions on Chinese banks for continuing to engage with Iran on oil payments. Prior to the expiration of the SREs, China had stockpiled 20 million barrels of Iranian oil at its Dalian port. Sanctions have complicated Iran-China banking and trade relations. During 2012-2016, China settled much of its trade balance with Iran with goods rather than hard currency, which was highly favorable to China financially. Iran's automotive sector obtains a significant proportion of its parts from China, including from China-based Geelran and Chery companies, and Iran's auto parts imports from China often fluctuate depending on the availability of trade financing. Iran and China also have a separate escrow account to pay for China's infrastructure projects in Iran, such as the long Niayesh Tunnel, funded by about $20 billion of Iran's hard currency reserves. However, suggesting that reimposed U.S. sanctions have again complicated Iran-China banking relations, China's Kunlun Bank an affiliate of China's energy company CNPC and which was sanctioned under CISADA in 2012 as the main channel for money flows between the two countries reportedly stopped accepting Euro and then China currency-denominated payments from Iran in November 2018. Existing Iranian accounts at the bank presumably can still be used to pay for Iranian imports from China. China's President Xi Jinping visited Iran and other Middle East countries in the immediate aftermath of the JCPOA, and he has stated that Iran is a vital link in an effort to extend its economic influence westward through its "One Belt, One Road" initiative. Chinese firms and entrepreneurs are integrating Iran into this vision by modernizing Iran's rail and other infrastructure, particularly where that infrastructure links to that of neighboring countries, including the Sultanate of Oman, funded by loans from China. Iran's place in this initiative offers China's government and firms incentive to avoid cooperating with U.S. sanctions. In April 2018, the Commerce Department (Bureau of Industry and Security, BIS, which administers Export Administration Regulations) issued a denial of export privileges action against China-based ZTE Corporation and its affiliates. The action was taken on the grounds that ZTE did not uphold the terms of March 2017 settlement agreement with BIS over ZTE's shipment of prohibited U.S. telecommunications technology to Iran (and North Korea). On March 27, 2019, OFAC announced a $1.9 million settlement with a Chinese subsidiary of the U.S. Black and Decker tool company for unauthorized exports of tools and parts to Iran. <15.3. Japan/Korean Peninsula/Other East Asia> During 2010-2016, Japan and South Korea enforced sanctions on Iran similar to those imposed by the United States and the EU. Both countries cut imports of Iranian oil sharply after 2011, and banks in the two countries restricted Iran's access to the foreign exchange assets Iran held in their banks. From 2016-2018, both countries increased importation of Iranian oil, and Iran has been able to access funds in banks in both countries. Japan exports to Iran significant amounts of chemical and rubber products, as well as consumer electronics. South Korean firms have been active in energy infrastructure construction in Iran, and its exports to Iran are mainly iron, steel, consumer electronics, and appliances meaning that South Korea could be affected significantly by the May 2019 executive order sanctioning transactions with Iran's minerals and metals sector. Both countries and their companies have historically been unwilling to undertake transactions with Iran that could violate U.S. sanctions, and firms in both countries have said they will comply with reimposed U.S. sanctions. South Korea, in particular, sought Administration concurrence to continue to import Iranian condensates (a petroleum product sometimes considered as crude oil), on which South Korea depends. Both countries reduced their Iranian oil purchases to zero in October 2018 and both countries received SRE sanctions exceptions on November 5. Japan resumed some Iranian oil importation in early 2019, and South Korea has been purchasing about 200,000 barrels per day of Iranian condensates. Both countries are widely assessed as likely to cease energy transactions with Iran entirely as a result of the Administration's decision to end SREs as of May 2, 2019, and South Korea reportedly is seeking to replace Iranian condensates supplies with those of Qatar and Australia. The following firms have announced their postures following the U.S. exit from the JCPOA: Daelim of South Korea terminated a $2 billion contract to expand an Iranian oil refinery. In late October, Hyundai cancelled a $500 million contract to build a petrochemical plant in Iran, citing "financing difficulties." Car companies Mazda and Toyota of Japan and Hyundai of South Korea have suspended joint ventures to produce cars in Iran. Among banks, South Korea's Woori Bank and Industrial Bank of Korea have partly suspended transactions with Iran. Woori Bank reportedly is only using an Iran Central Bank account held there to process payments for South Korean humanitarian goods sold to Iran. Nomura Holdings of Japan has taken a similar position. The South Korean conglomerate POSCO withdrew from a 2016 deal to build a steel plant in Iran's free trade zone at the port of Chahbahar. <15.3.1. North Korea> North Korea, like Iran, has been subject to significant international sanctions. North Korea has never pledged to abide by international sanctions against Iran, and it reportedly cooperates with Iran on a wide range of WMD-related ventures, particularly the development of ballistic missiles. A portion of the oil that China buys from Iran (and from other suppliers) is reportedly sent to North Korea, but it is not known if North Korea buys any Iranian oil directly. The potential for North Korea to try to buy Iranian oil illicitly increased in the wake of the adoption in September 2017 of U.N. Security Council sanctions that limit North Korea's importation of oil, but there are no publicly known indications that it is doing so. While serving as Iran's president in 1989, the current Supreme Leader, Ayatollah Ali Khamene'i, visited North Korea. North Korea's titular head of state Kim Yong Nam attended President Rouhani's second inauguration in August 2017, and during his visit signed various technical cooperation agreements of unspecified scope. <15.3.2. Taiwan> Taiwan has generally been a small buyer of Iranian oil. It resumed imports of Iranian oil after sanctions were eased in 2016. Taiwan received an SRE as of November 5, 2018, but has bought no Iranian oil since late 2018. It is unlikely to resume any Iranian oil imports now that the SREs have ended as of May 2, 2019. <15.4. South Asia> <15.4.1. India> India cites U.N. Security Council resolutions on Iran as justification for its stances on trade with Iran. During 2011-2016, with U.N. sanctions in force, India's private sector assessed Iran as a "controversial market" a term describing markets that entail reputational and financial risks. India's central bank ceased using a Tehran-based regional body, the Asian Clearing Union, to handle transactions with Iran, and the two countries agreed to settle half of India's oil buys from Iran in India's currency, the rupee. Iran used the rupee accounts to buy India's wheat, pharmaceuticals, rice, sugar, soybeans, auto parts, and other products. India reduced its imports of Iranian oil substantially after 2011, in the process incurring significant costs to retrofit refineries that were handling Iranian crude. However, after sanctions were eased in 2016, India's oil imports from Iran increased to as much as 800,000 bpd in July 2018 well above 2011 levels. Indian firms resumed work that had been ended or slowed during 2012-2016. India also paid Iran the $6.5 billion it owed for oil purchased during 2012-2016. India's cooperation with reimposed U.S. sanctions is mixed because no U.N. sanctions have been reimposed. In June 2018, the two countries again agreed to use rupee accounts for their bilateral trade. Nonetheless, India's purchases of Iranian oil appear to have fallen from levels of most of 2018, but volumes remain substantial. India received the SRE exception on November 5, 2018. Because some Indian banks do not have or seek a presence in the United States, it was widely expected that India and Iran will work out alternative payment arrangements under which India will continue importing at least some Iranian oil despite the end of the SRE as of May 2, 2019. However, Indian officials said in early May 2019 that India would comply with U.S. sanctions and find alternative suppliers, although some industry sources indicate that Indian refiners might still be buying some Iranian oil as of mid-May 2019. In 2015, India and Iran agreed that India would help develop Iran's Chahbahar port that would enable India to trade with Afghanistan unimpeded by Pakistan. With sanctions lifted, the project no longer entails risk to Indian firms involved. In May 2016, Indian Prime Minister Narendra Modi visited Iran and signed an agreement to invest $500 million to develop the port and related infrastructure. Construction at the port is proceeding. As noted above, the Administration has utilized the "Afghanistan reconstruction" exception under Section 1244(f) of IFCA to allow for firms to continue developing it. <15.4.2. Pakistan> One test of Pakistan's compliance with sanctions was a pipeline project that would carry Iranian gas to Pakistan a project that U.S. officials on several occasions stated would be subject to ISA sanctions. Despite that threat, agreement on the $7 billion project was finalized on June 12, 2010, and construction was formally inaugurated in a ceremony attended by the Presidents of both countries on March 11, 2013. In line with an agreed completion date of mid-2014, Iran reportedly completed the pipeline on its side of the border. China's announcement in April 2015 of a $3 billion investment in the project seemed to remove financial hurdles to the line's completion, and the JCPOA removed sanctions impediments to the project. However, during President Hassan Rouhani's visit to Pakistan in March 2016, Pakistan still did not commit to complete the line, and observers note that there are few indications of progress on the project. In 2009, India dissociated itself from the project over concerns about the security of the pipeline, the location at which the gas would be transferred to India, pricing of the gas, and tariffs. <15.5. Turkey/South Caucasus> Iran has substantial economic relations with Turkey and the countries of the South Caucasus. <15.5.1. Turkey> Turkey buys about 40% of its oil from Iran, and bought about 6% of its total gas imports from Iran in 2017. Turkey reduced purchases of Iranian oil during 2012-2016, but its buys returned to 2011 levels after sanctions on Iran were eased in 2016. Turkey's leaders have said that the country will not cooperate with reimposed U.S. sanctions, but its oil import volumes from Iran have fallen since late 2018. Turkey received an SRE sanctions exemption on November 5, 2018, and its officials strongly indicated in late April 2019 that Turkey expected to receive another SRE as of the May 2, 2019, expiration. Turkey's insistence on being allowed to buy Iranian oil without fear of U.S. penalty as well as its overall dependence on Iranian oil might underpin a reported decision by Turkey to continue buying at least some Iranian oil despite the expiration of the SRE exception. Turkey also is Iran's main gas customer via a pipeline built in 1997, which at first was used for a swap arrangement under which gas from Turkmenistan was exported to Turkey. Direct Iranian gas exports to Turkey through the line began in 2001 (with additional such exports through a second pipeline built in 2013), but no ISA sanctions were imposed on the grounds that the gas supplies were crucial to Turkey's energy security. Prior to the October 2012 EU ban on gas purchases from Iran, this pipeline was a conduit for Iranian gas exports to Europe (primarily Bulgaria and Greece). Pre-JCPOA, in response to press reports that Turkey's Halkbank was settling Turkey's payments to Iran for energy with gold, U.S. officials testified on May 15, 2013, that the gold going from Turkey to Iran consists mainly of Iranian private citizens' purchases of Turkish gold to hedge against the value of the rial . A U.S. criminal case involved a dual Turkish-Iranian gold dealer, Reza Zarrab, arrested in the United States in 2016 for allegedly violating U.S. sanctions prohibiting helping Iran deal in precious metals. Among past cases of possible Turkish violations of Iran sanctions, on November 7, 2016, the U.S. Attorney for New York's Southern District indicted several individuals for using money services businesses in Turkey and in the UAE for conspiring to conceal from U.S. banks transactions on behalf of and for the benefit of sanctioned Iranian entities, including Mahan Air. On January 6, 2014, the Commerce Department blocked a Turkey-based firm (3K Aviation Consulting and Logistics) from re-exporting two U.S.-made jet engines to Iran's Pouya Airline. <15.5.2. Caucasus and Caspian Sea> The rich energy reserves of the Caspian Sea create challenges for U.S. efforts to deny Iran financial resources. The Clinton and George W. Bush Administrations cited potential ISA sanctions to deter oil pipeline routes involving Iran thereby successfully promoting an the alternate route from Azerbaijan (Baku) to Turkey (Ceyhan), which became operational in 2005. Section 6 of Executive Order 13622 exempts from sanctions any pipelines that bring gas from Azerbaijan to Europe and Turkey. Agreements reached in 2018 between Russia and the Caspian Sea states on the legal division of the sea could spawn new energy development in the Caspian. Iran's energy firms will undoubtedly become partners in joint ventures to develop the Caspian's resources, and Iran's involvement in such projects will require the Administration to determine whether to impose sanctions. Iran's relations with Azerbaijan even though that country is inhabited mostly by Shiite Muslims are hindered by substantial political and ideological differences. Iran and Azerbaijan have in recent years tried to downplay these differences for joint economic benefit, and they have been discussing joint energy and infrastructure projects among themselves and with other powers, including Russia. Iran and Armenia Azerbaijan's adversary have long enjoyed extensive economic relations: Armenia is Iran's largest direct gas customer, after Turkey. In May 2009, Iran and Armenia inaugurated a natural gas pipeline between the two, built by Gazprom of Russia. No determination of ISA sanctions was issued. Armenia has said its banking controls are strong and that Iran is unable to process transactions illicitly through Armenia's banks. However, observers in the South Caucasus assert that Iran is using Armenian banks operating in the Armenia-occupied Nagorno-Karabakh territory to circumvent international financial sanctions. <15.6. Persian Gulf States and Iraq82> The Gulf Cooperation Council states (GCC: Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, and Oman) are oil exporters and close allies of the United States. As Iranian oil exports decreased after 2012, the Gulf states supplied the global oil market with additional oil. Since the U.S. exit from the JCPOA, U.S. officials have worked with Gulf oil exporters to ensure that the global oil market is well supplied even as Iranian oil exports fall. And the State Department's SRE announcement on April 22, 2019, indicated that the Administration is looking to Saudi Arabia and the UAE, in particular, to keep the global oil market well supplied after SREs end on May 2, 2019. Still, in order not to antagonize Iran, the Gulf countries maintain relatively normal trade with Iran. Some Gulf-based shipping companies, such as United Arab Shipping Company reportedly continued to pay port loading fees to such sanctioned IRGC-controlled port operators as Tidewater. The UAE has attracted U.S. scrutiny because of the large presence of Iranian firms there, and several UAE-based firms have been sanctioned, as noted in the tables at the end of the report. U.S. officials praised the UAE's March 1, 2012, ban on transactions with Iran by Dubai-based Noor Islamic Bank, which Iran reportedly used to process oil payments. Some Iranian gas condensates (120,000 barrels per day) were imported by Emirates National Oil Company (ENOC) and refined mostly into jet fuel. Subsequent to the May 8, 2018, U.S. exit from the JCPOA, ENOC officials said they were trying to find alternative supplies of the hydrocarbon products it buys from Iran. Iran and several of the Gulf states have had discussions on various energy and related projects, but few have materialized because of broad regional disputes between Iran and the Gulf states. Kuwait and Iran have held talks on the construction of a 350-mile pipeline that would bring Iranian gas to Kuwait, but the project does not appear to be materializing. Bahrain's discussions of purchasing Iranian gas have floundered over sharp political differences. Qatar and Iran share the large gas field in the Gulf waters between them, and their economic relations have become closer in light of the isolation of Qatar by three of its GCC neighbors, Saudi Arabia, UAE, and Bahrain. The only GCC state that has moved forward with economic joint ventures with Iran is Oman, particularly in the development of Oman's priority project to expand its port at Al Duqm port, which Oman and Iran envision as a major hub for regional trade. In September 2015, the two countries also recommitted to a gas pipeline joint venture. Omani banks, some of which operate in Iran, were used to implement some of the financial arrangements of the JPA and JCPOA. As a consequence, a total of $5.7 billion in Iranian funds had built up in Oman's Bank Muscat by the time of implementation of the JCPOA in January 2016. In its efforts to easily access these funds, Iran obtained from the Office of Foreign Assets Control (OFAC) of the Treasury Department a February 2016 special license to convert the funds (held as Omani rials) to dollars as a means of easily converting the funds into Euros. Iran ultimately used a different mechanism to access the funds as hard currency, but the special license issuance resulted in a May 2018 review by the majority of the Senate Permanent Subcommittee on Investigation to assess whether that license was consistent with U.S. regulations barring Iran access to the U.S. financial system. <15.6.1. Iraq> Iraq's attempts to remain close to its influential neighbor, Iran, have complicated Iraq's efforts to rebuild its economy yet avoid running afoul of the United States and U.S. sanctions on Iran. As noted above, in 2012, the United States sanctioned an Iraqi bank that was a key channel for Iraqi payments to Iran, but lifted those sanctions when the bank reduced that business. Iraq presented the United States with a sanctions-related dilemma in July 2013, when it signed an agreement with Iran to buy 850 million cubic feet per day of natural gas through a joint pipeline that enters Iraq at Diyala province and would supply several power plants. No sanctions were imposed on the arrangement, which was agreed while applicable sanctions were in effect. In May 2015, the Treasury Department sanctioned Iraq's Al Naser Airlines for helping Mahan Air (sanctioned entity) acquire nine aircraft. The Trump Administration reportedly is seeking to accommodate Iraq's need for Iranian electricity supplies and other economic interactions. As of October 2018, Iraq reportedly has discontinued crude oil swaps with Iran about 50,000 barrels per day in which Iranian oil flowed to the Kirkuk refinery and Iran supplied oil to Iraq's terminals in the Persian Gulf. The Administration reportedly has given Iraq waiver permission apparently under Section 1247 of IFCA to buy the Iranian natural gas that runs Iraq's power plants. That section provides for waivers of up to 180 days, but press reports indicate that the Administration has limited the waiver period to 90-day increments to give Iraq time to line up alternative supplies and equipment to generate electricity. The latest waiver rollover was in March 2019 and extends until June 2019. Iranian arms exports to Shia militias in Iraq remain prohibited by Resolution 2231, but no U.N. sanctions on that activity have been imposed to date. <15.7. Syria and Lebanon> Iran has extensive economic relations with both Syria and Lebanon, countries where Iran asserts that core interests are at stake. The compliance of Syrian or Lebanese banks and other institutions with international sanctions against Iran was limited even during 2012-2015. Iran reportedly uses banks in Lebanon to skirt financial sanctions, according to a wide range of observers, and these banks are among the conduits for Iran to provide financial assistance to Hezbollah as well as to the regime of Syrian President Bashar Al Assad. However, some reports indicate that sanctions on Iran are adversely affecting Hezbollah's finances to the point where the party has had to cut expenses, request donations, and delay or reduce payments to its fighters. In January 2017, Iran and Syria signed a series of economic agreements giving Iranian firms increased access to Syria's mining, agriculture, and telecommunications sectors, as well as management of a Syrian port. <15.8. Africa and Latin America> During the presidency of Ahmadinejad, Iran looked to several Latin American and African countries to try to circumvent international sanctions. For the most part, however, Iran's trade and other business dealings with these regions are apparently too modest to weaken the effect of international sanctions significantly. <15.9. World Bank and WTO> The united approach to sanctions on Iran during 2010-2016 carried over to international lending to Iran. The United States representative to international financial institutions is required to vote against international lending, but that vote, although weighted, is not sufficient to block international lending. No new loans have been approved to Iran since 2005, including several environmental projects under the Bank's "Global Environmental Facility" (GEF). The initiative slated more than $7.5 million in loans for Iran to dispose of harmful chemicals. The 2016 lifting of sanctions increased international support for new international lending to Iran, but the U.S. exit from the JCPOA will likely lead to differences between the United States and other lenders over extending any new loans to Iran. Earlier, in 1993, the United States voted its 16.5% share of the World Bank against loans to Iran of $460 million for electricity, health, and irrigation projects, but the loans were approved. To block that lending, the FY1994-FY1996 foreign aid appropriations ( P.L. 103-87 , P.L. 103-306 , and P.L. 104-107 ) cut the amount appropriated for the U.S. contribution to the bank by the amount of those loans, contributing to a temporary halt in new bank lending to Iran. But, in May 2000, the United States' allies outvoted the United States to approve $232 million in loans for health and sewage projects. During April 2003-May 2005, a total of $725 million in loans were approved for environmental management, housing reform, water and sanitation projects, and land management projects, in addition to $400 million in loans for earthquake relief. <15.9.1. WTO Accession> An issue related to sanctions is Iran's request to join the World Trade Organization (WTO). Iran began accession talks in 2006 after the George W. Bush Administration dropped its objection to Iran's application as part of an effort to incentivize Iran to reach an interim nuclear agreement. The lifting of sanctions presumably paves the way for talks to accelerate, but the accession process generally takes many years. Accession generally takes place by consensus of existing WTO members. Iran's accession might be complicated by the requirement that existing members trade with other members; as noted above, the U.S. ban on trade with Iran remains in force. The Trump Administration does not advocate Iran's admission to that convention. <16. Effectiveness of Sanctions on Iranian Behavior> It can be argued that the question "are sanctions on Iran 'working'?" should be assessed based on an analysis of the goals of the sanctions. The following sections try to assess the effectiveness of Iran sanctions according to a number of criteria. <16.1. Effect on Iran's Nuclear Program and Strategic Capabilities> The international sanctions regime of 2011-2016 is widely credited with increasing Iran's willingness to accept restraints on its nuclear program, as stipulated in the JCPOA. Hassan Rouhani was elected president of Iran in June 2013 in part because of his stated commitment to achieving an easing of sanctions and ending Iran's international isolation. Still, as to the long-term effects of sanctions, the intelligence community assesses that it "does not know" whether Iran plans to eventually develop a nuclear weapon, and the JCPOA restrictions begin to expire in 2025. Iran remained in the JCPOA despite the U.S. exit from it, but Rouhani has announced that, in response to the ending of U.S. nuclear waivers and other steps such as the FTO designation of the IRGC, Iran will cease abiding by JCPOA restrictions on stockpiles of low-enriched uranium and heavy water. Still, Iran has not withdrawn from the JCPOA outright. Yet, Iranian leaders have not, to date, taken up the Trump Administration's stated offer for negotiations on a new agreement that would cover not only Iran's nuclear program but also its missile program and its regional malign activities. Both President Trump and President Rouhani have publicly said they would accept bilateral talks without conditions, but both leaders generally indicate that the other's demands are too extensive to make such a meeting productive. There is little evidence that even the strict sanctions of 2011-2016 slowed Iran's nuclear program or its missile program. And, even though U.S. and EU sanctions remain on Iran's missile programs, U.S. intelligence officials have testified that Iran continues to expand the scale, reach, and sophistication of its ballistic missile arsenal. Still, some U.S. officials have asserted that Iran's nuclear and missile programs might have advanced faster were sanctions not imposed. Sanctions have apparently prevented Iran from buying significant amounts of major combat systems since the early 1990s. Iran's indigenous arms industry has grown over the past two decades. U.S. intelligence directors testified in January 2019 that Iran continues to field increasingly lethal weapons systems, including more advanced naval mines and ballistic missiles, small submarines, armed UAVs (unmanned aerial vehicles), coastal defense cruise missile batteries, attack craft, and anti-ship ballistic missiles. Iran has been able to acquire some defensive systems that were not specifically banned by Resolution 2231; Russia delivered the S-300 air defense system in April 2016. <16.2. Effects on Iran's Regional Influence> Neither the imposition, lifting, nor reimposition of strict sanctions has appeared to affect Iran's regional behavior. Iran intervened extensively in Syria, Iraq, and Yemen during the 2012-2016 period when sanctions had a significant adverse effect on Iran's economy. Iran apparently is able to manufacture domestically much of the weaponry it supplies to its regional allies. Iran has remained engaged in these regional conflicts since sanctions were eased in early 2016. On the other hand, press reports since March 2019 note that Iran has scaled back payments to Hezbollah and to various pro-Iranian fighters in Syria, perhaps as a reflection of Iranian financial difficulties. An alternate explanation is that Iran is adjusting its expenditures in the Syria conflict to the reduced activity on the battlefield there. The Administration points to reports of the reduced payments as evidence that its "maximum pressure" campaign on Iran is working. The Administration has asserted that the easing of sanctions during the period of U.S. implementation of the JCPOA (2016-2018) caused Iran to expand its regional activities. President Trump stated that Iran's defense budget had increased 40% during that time. He stated on August 6, 2018, that "Since the deal [JCPOA] was reached, Iran's aggression has only increased. The regime has used the windfall of newly accessible funds it received under the JCPOA to build nuclear-capable missiles, fund terrorism, and fuel conflict across the Middle East and beyond.... The reimposition of nuclear-related sanctions through today's actions further intensifies pressure on Tehran to change its conduct." However, most outside Iran experts who assess Iran's regional activities asserted that Iran's regional activities were not facilitated by the easing of sanctions during that period, but instead increased because of the opportunities to expand its influence that were provided by Iran by the region's several conflicts. In terms of congressional oversight, a provision of the FY2016 Consolidated Appropriation ( P.L. 114-113 ) required an Administration report to Congress on how Iran has used the financial benefits of sanctions relief. And, a provision of the Iran Nuclear Agreement Review Act ( P.L. 114-17 ) requires that a semiannual report on Iran's compliance with the JCPOA include information on any Iranian use of funds to support acts of terrorism. <16.3. Political Effects> No U.S. Administration, including the Trump Administration, has asserted that sanctions on Iran are intended to bring about the change of Iran's regime, although some experts assert that this might be a desired Trump Administration goal. Iranians seeking reintegration with the international community and sanctions relief helped propel the relatively moderate Rouhani to election victories in both 2013 and 2017. Many Iranians cheered the finalization of the JCPOA on July 15, 2015, undoubtedly contributing to Supreme Leader Khamene'i's acceptance of the deal. Despite the Trump Administration's withdrawal from the JCPOA and its additional steps to pressure Iran in 2019, there does not appear to be an imminent political threat to Rouhani's grip on his office. Still, the IRGC and other hardliners control domestic security and the judiciary, and these factions have criticized Rouhani for remaining in the JCPOA despite the U.S. exit. In July 2018, the IRGC and Iran's parliament ( Majles ) called for cabinet changes to address economic mismanagement and, in September 2018, the Majles compelled Rouhani to be questioned about the economic situation. In July 2018, Rouhani replaced Iran's Central Bank governor as an apparent gesture to indicate responsiveness to economic concerns. In February 2019, apparently under pressure from hardliners, Foreign Minister Mohammad Javad Zarif announced his resignation, but Rouhani apparently as a challenge to the hardliners did not accept the resignation and reinstated him. Some assert that the sanctions are sustaining the periodic unrest that has erupted in Iran since late 2017. In 2018 and thus far in 2019, labor strikes and unrest among women protesting the strict public dress code have continued, although not at a level that appears to threaten the regime. Other protests occurred over flooding in the southwest in March-April 2019, but again not to the level where the regime was threatened. Still, some protesters complain that the country's money is being spent on regional interventions rather than on the domestic economy. <16.4. Economic Effects> The U.S. sanctions enacted since 2011, when fully implemented, take a substantial toll on Iran's economy. GDP and Employment Trends . At the height of the sanctions regime in April 2015, then-Treasury Secretary Jacob Lew said that Iran's gross domestic product (GDP) was 15%-20% smaller than it would have been had global sanctions not been imposed in 2011. The unemployment rate rose to about 20% by 2014, and many Iranians worked unpaid or partially paid. In 2015, Iran's GDP was about $400 billion at the official exchange rate ($1.4 trillion if assessed on a purchasing power parity [PPP] basis). The 2016 lifting of sanctions enabled Iran to achieve 7% annual growth during 2016-2018. The reimposition of U.S. sanctions in mid-2018 caused Iran's GDP to decline 2% from March 2018 to March 2019, and it is projected to decline by more than 5% during March 2019-March 2020. Oil Exports . Global Iran sanctions (2011-2016) reduced Iran's crude oil sales about 60% from the 2.5 mbd level of 2011, causing Iran to lose over $160 billion in oil revenues during that time. The JCPOA sanctions relief enabled Iran to increase its oil exports to 2011 levels, but the reimposition of U.S. sanctions has driven Iran's oil exports to under 1 mbd as of the end of April 2019. The Trump Administration said in an April 2019 factsheet that the reimposition of sanctions since May 2018 has cost Iran $10 billion in lost oil revenues. The May 2019 end to SREs was an effort to cause Iran's oil exports to fall to zero, although results will depend on whether China, India, and Turkey continue buying Iran oil. Bankin g. Global banks mostly left the Iranian market after 2011 because of the international sanctions in force. Banks were hesitant to reenter the Iran market after the 2016 easing of sanctions because of (1) reported concerns that the United States might still sanction their transactions with Iran; (2) a lack of transparency in Iran's financial sector; (3) lingering concerns over past financial penalties for processing Iran-related transactions in the U.S. financial system; and (4) extra costs and procedures caused by the inability to process Iran-related transactions through the U.S. financial system and/or easily use dollars in Iran-related transactions. Those banks that did reenter the Iran market have, as a consequence of the U.S. exit from the JCPOA, stopped or limited their transactions with Iran. Shipping Insurance . Iran was able after 2016 to obtain shipping insurance as a result of U.S. waivers given to numerous insurers, as discussed above. However, as of August 7, 2018, U.S.-based shipping reinsurers no longer have active U.S. waivers, and Iran has been compelled to self-insure most of its shipments. Hard Currency A ccessib ility . The 2011-2016 sanctions regime prevented Iran from accessing the hard currency it was being paid for its oil. By January 2016, Iran's hard currency reserves held in foreign banks stood at about $115 billion. Iranian officials stated in February 2016 that sanctions relief had allowed them to access the funds, and it could move the funds via renewed access to the SWIFT electronic payments system. Of this amount, about $60 billion was due to creditors such as China ($20 billion) or to repay nonperforming loans extended to Iranian energy companies working in the Caspian and other areas in Iran's immediate neighborhood. After 2016, Iran kept most of its reserves abroad for cash management and to pay for imports, but Iran's foreign reserves are again restricted by reimposed U.S. sanctions. Currency Decline . Sanctions caused the value of the rial on unofficial markets to decline about 60% from January 2012 until the 2013, when the election of Rouhani stabilized the rial at about 35,000 to the dollar. The reimposition of U.S. sanctions in 2018 caused the rial 's value to plummet to 150,000 to the dollar by the November 5, 2018. The value later recovered somewhat to about 100,000 to one at the beginning of 2019. The downturn has made it difficult for Iranian merchants to import goods or properly price merchandise, and the government has banned the importation of 1,400 goods to preserve hard currency. Inflation . The drop in value of the currency caused inflation to accelerate during 2011-2013 to a rate of about 60% a higher figure than that acknowledged by Iran's Central Bank. As sanctions were eased, inflation slowed to the single digits by June 2016, meeting the Central Bank's stated goal. However, in 2017, the inflation rate reportedly increased back to double digits, and turmoil surrounding the possible U.S. exit from the JCPOA caused inflation to increase to about 15% by late June 2018. It increased significantly, to nearly 40%, by the end of 2018. Industrial/Auto Production and Sales . Iran's light-medium manufacturing sector was expanding prior to 2011, but its dependence on imported parts left the sector vulnerable to sanctions that reduced the availability of import financing. Iran's vehicle production fell by about 60% from 2011 to 2013. Press reports say that the auto sector, and manufacturing overall, rebounded since sanctions were lifted, but is declining again in light of the announced divestments by auto makers following the U.S. exit from the JCPOA. Researchers at Iran's parliament estimated in September 2018 that auto production would decline 45% by March 2019, and other industrial production would drop by 5%. U.S.-Iran Trade. U.S.-Iran trade remains negligible. In 2015, the last full year before JCPOA implementation, the United States sold $281 million in goods to Iran and imported $10 million worth of Iranian products. The slight relaxation of the U.S. import ban stemming from the JCPOA likely accounts for the significant increase in imports from Iran in 2016 to $86 million. U.S. imports from Iran were about $63 million in 2017 and about that same amount in 2018. U.S. exports to Iran remained low for all of 2016 and 2017 ($172 million and $137 million, respectively) but spiked to $440 million for 2018. <16.4.1. Iran's Economic Coping Strategies> Iran had some success mitigating the economic effect of sanctions. These strategies will likely be used to try to cope with reimposed U.S. sanctions. Export Diversification . Over the past 10 years, Iran has promoted sales of nonoil products such as minerals, cement, urea fertilizer, and other agricultural and basic industrial goods. Such "nonoil" exports now generate much of the revenue that funds Iran's imports. This diversification might have been a factor in the Trump Administration decision in May 2019 to sanction Iran's mineral and metals sector (see above). Even in the energy sector, Iran has promoted the sale of oil products such as petrochemicals and condensates, earning about $4.7 billion in revenue from that source by 2016. Reallocation of Investment Funds and Import Substitution . Sanctions compelled some Iranian manufacturers to increase domestic production of some goods as substitutes for imports. This trend has been hailed by Iranian economists and Supreme Leader Khamene'i, who supports building a "resistance economy" that is less dependent on imports and foreign investment. Partial Privatization/IRGC in the Economy . Over the past few years, portions of Iran's state-owned enterprises have been transferred to the control of quasi-governmental or partially private entities. Some of them are incorporated as holding companies, foundations, or investment groups. Based on data from the Iranian Privatization Organization, there are about 120 such entities that account for a significant proportion of Iran's GDP. Rouhani has sought to push the IRGC out of Iran's economy through divestment, to the extent possible. However, a substantial part of the economy remains controlled by government-linked conglomerates, including the IRGC. Although estimates vary widely, the IRGC's corporate affiliates are commonly assessed as controlling at least 20% of Iran's economy, although there is little available information on the degree of IRGC-affiliated ownership stakes. Subsidy Reductions . In 2007, the Ahmadinejad government began trying to wean the population off of generous subsidies by compensating families with cash payments of about $40 per month. Gasoline prices were raised to levels similar to those in other regional countries, and far above the subsidized price of 40 cents per gallon. Rouhani has continued to reduce subsidies, including by raising gasoline and staple food prices further and limiting the cash payments to only those families who could claim financial hardship. Rouhani also has improved collections of taxes and of price increases for electricity and natural gas utilities. Import Restrictions /Currency Controls . To conserve hard currency, Iran has at times reduced the supply of hard currency to importers of luxury goods, such as cars or cellphones, in order to maintain hard currency supplies to importers of essential goods. These restrictions eased after sanctions were lifted in 2016 but were reimposed in 2018 to deal with economic unrest and the falling value of the rial . <16.5. Effect on Energy Sector Development> The Iran Sanctions Act (ISA) was enacted in large part to reduce Iran's oil and gas production capacity over the longer term by denying Iran the outside technology and investment to maintain or increase production. U.S. officials estimated in 2011 that Iran had lost $60 billion in investment in the sector as numerous major firms pulled out of Iran. Iran says it needs $130 billion-$145 billion in new investment by 2020 to keep oil production capacity from falling. Further development of the large South Pars gas field alone requires $100 billion. Table B-1 at the end of this report discusses various Iranian oil and gas fields and the fate of post-1999 investments in them. During 2012-2016, there was little development activity at Iran's various oil and gas development sites, as energy firms sought to avoid sanctions. Some foreign investors resold their equity stakes to Iranian companies. However, the Iranian firms are not as technically capable as the international firms that have withdrawn. The lifting of sanctions in 2016 lured at least some foreign investors back into the sector, encouraged by Iran's more generous investment terms under a concept called the "Iran Petroleum Contract." That contract gives investing companies the rights to a set percentage of Iran's oil reserves for 20-25 years. Iran signed a number of new agreements with international energy firms since mid-2016 but, as noted in the tables and other information above, major energy firms have begun to divest in response to the U.S. exit from the JCPOA. Sanctions relief also opened opportunities for Iran to resume developing its gas sector. Iran has used its gas development primarily to reinject into its oil fields rather than to export. Iran exports about 3.6 trillion cubic feet of gas, primarily to Turkey and Armenia. Sanctions have rendered Iran unable to develop a liquefied natural gas (LNG) export business. However, it was reported in March 2017 that the Philippine National Oil Company is seeking to build a 2-million-ton LNG plant in Iran, suggesting that patent issues do not necessarily preclude Iran from pursuing LNG. With respect to gasoline, the enactment of the CISADA law targeting sales of gasoline to Iran had a measurable effect. Several suppliers stopped selling gasoline to Iran once enactment appeared likely, and others ceased supplying Iran after enactment. Gasoline deliveries to Iran fell from about 120,000 barrels per day before CISADA to about 30,000 barrels per day immediately thereafter, although importation later increased to about 50,000 barrels per day. As a result, Iran expanded several of its refineries and, in 2017, Iranian officials said Iran had become largely self-sufficient in gasoline production. <16.6. Human Rights-Related Effects> It is difficult to draw any direct relationship between sanctions and Iran's human rights practices. Recent human rights reports by the State Department and the U.N. Special Rapporteur on Iran's human rights practices assess that there was only modest improvement in some of Iran's practices in recent years, particularly relaxation of enforcement of the public dress code for women. The altered policies cannot necessarily be attributed to sanctions pressure or sanctions relief, although some might argue that sanctions-induced economic dissatisfaction emboldened Iranians to protest and to compel the government to relax some restrictions. Since at least 2012, foreign firms have generally refrained from selling the Iranian government equipment to monitor or censor social media use. Such firms include German telecommunications firm Siemens, Chinese internet infrastructure firm Huawei, and South African firm MTN Group. In October 2012, Eutelsat, a significant provider of satellite service to Iran's state broadcasting establishment, ended that relationship after the EU sanctioned the then head of the Islamic Republic of Iran Broadcasting (IRIB), Ezzatollah Zarghami. However, the regime retains the ability to monitor and censor social media use. <16.7. Humanitarian Effects> During 2012-2016, sanctions produced significant humanitarian-related effects, particularly in limiting the population's ability to obtain expensive Western-made medicines, such as chemotherapy drugs. Some of the scarcity was caused by banks' refusal to finance such sales, even though doing so was not subject to any sanctions. Some observers say the Iranian government exaggerated reports of medicine shortages to generate opposition to the sanctions. Other accounts say that Iranians, particularly those with connections to the government, took advantage of medicine shortages by cornering the import market for key medicines. These shortages resurfaced in 2018 following the reimposition of sanctions by the Trump Administration. For example, reports indicate that the reimposition of U.S. sanctions may be inhibiting the flow of humanitarian goods to the Iranian people and reportedly contributing to shortages in medicine to treat ailments such as multiple sclerosis and cancer. Other reports indicate that Cargill, Bunge, and other global food traders have halted supplying Iran because of the absence of trade financing. And, Iranian officials and some international relief groups have complained that U.S. sanctions inhibited the ability to provide relief to flooding victims in southwestern Iran in March-April 2019. EU officials have called on the United States to produce a "white list" that would "give clear guidelines about what channels European banks and companies should follow to conduct legitimate [humanitarian] transactions with Iran without fear of future penalties." Iranian officials have also accused U.S. sanctions of hampering international relief efforts for victims of vast areas of flooding in southwestern Iran in the spring of 2019. Other reports say that pollution in Tehran and other big cities is made worse by sanctions because Iran produces gasoline itself with methods that cause more impurities than imported gasoline. As noted above, Iran's efforts to deal with environmental hazards and problems might be hindered by denial of World Bank lending for that purpose. In the aviation sector, some Iranian pilots complained publicly that U.S. sanctions caused Iran's passenger airline fleet to deteriorate to the point of jeopardizing safety. Since the U.S. trade ban was imposed in 1995, 1,700 passengers and crew of Iranian aircraft have been killed in air accidents, although it is not clear how many of the crashes, if any, were due to difficultly in acquiring U.S. spare parts. <16.7.1. Air Safety> Sanctions relief ameliorated at least some of the humanitarian difficulties discussed above. In the aviation sector, several sales of passenger aircraft have been announced, and licensed by the Department of the Treasury, since Implementation Day. However, as noted, the licenses are being revoked and deliveries will not proceed beyond November 2018. In February 2016, Iran Air which was delisted from U.S. sanctions as of Implementation Day announced it would purchase 118 Airbus commercial aircraft at an estimated value of $27 billion. Airbus received an OFAC license and three of the aircraft have been delivered. Airbus has said it will not deliver any more aircraft to Iran because its U.S. Treasury Department license is revoked. In December 2016, Boeing and Iran Air finalized an agreement for Boeing to sell the airline 80 passenger aircraft and lease 29 others. Boeing received a specific license for the transaction. The deal has a total estimated value of about $17 billion, with deliveries scheduled to start later in 2018. The Boeing sale is to include 30 of the 777 model. None were delivered, and Boeing cancelled planned deliveries to Iran after its export licenses were revoked. In April 2017, Iran's Aseman Airlines signed a tentative agreement to buy at least 30 Boeing MAX passenger aircraft. No U.S. license for this sale was announced prior to the U.S. exit from the JCPOA. The airline is owned by Iran's civil service pension fund but managed as a private company. In June 2017, Airbus agreed to tentative sales of 45 A320 aircraft to Iran's Airtour Airline, and of 28 A320 and A330 aircraft to Iran's Zagros Airlines. No U.S. license for the sale was announced prior to the U.S. exit from the JCPOA. ATR, owned by Airbus and Italy's Leonardo, sold 20 aircraft to Iran Air. It delivered eight aircraft by the time of the U.S. JCPOA exit. It reportedly has been given temporary U.S. Treasury Department licenses to deliver another five after the August 6, 2018, initial sanctions reimposition in which its U.S. export licenses were to be revoked. <17. Post-JCPOA Sanctions Legislation> JCPOA oversight and implications, and broader issues of Iran's behavior have been the subject of legislation. <17.1. Key Legislation in the 114th Congress> The JCPOA states that as long as Iran fully complies with the JCPOA, the sanctions that were suspended or lifted shall not be reimposed on other bases (such as terrorism or human rights). The Obama Administration stated that it would adhere to that provision but that some new sanctions that seek to limit Iran's military power, its human rights abuses, or its support for militant groups might not necessarily violate the JCPOA. <17.1.1. Iran Nuclear Agreement Review Act (P.L. 114-17)> The Iran Nuclear Agreement Review Act of 2015 (INARA, P.L. 114-17 ) provided for a 30- or 60-day congressional review period after which Congress could pass legislation to approve or to disapprove of the JCPOA, or do nothing. No such legislation of disapproval was enacted. There are several certification and reporting requirements under INARA, although most of them clearly no longer apply as a result of the Trump Administration withdrawal: Material Breach Report . The President must report a potentially significant Iranian breach of the agreement within 10 days of acquiring credible information of such. Within another 30 days, the President must determine whether this is a material breach and whether Iran has cured the breach. Certification Report . The President is required to certify, every 90 days, that Iran is "transparently, verifiably, and fully implementing" the agreement, and that Iran has not taken any action to advance a nuclear weapons program. The latest certification was submitted on July 17, 2017, and another one was due on October 15, 2017. On October 13, 2017, the Administration declined to make that certification, on the grounds that continued sanctions relief is not appropriate and proportionate to Iran's measures to terminate its illicit nuclear program (Section (d)(6)(iv)(I) of INARA). If a breach is reported, or if the President does not certify compliance, Congress may initiate within 60 days "expedited consideration" of legislation that would reimpose any Iran sanctions that the President had suspended through use of waiver or other authority. That 60-day period is to expire on December 12, 2017. Semiannual Report. INARA also requires an Administration report every 180 days on Iran's nuclear program, including not only Iran's compliance with its nuclear commitments but also whether Iranian banks are involved in terrorism financing; Iran's ballistic missile advances; and whether Iran continues to support terrorism. <17.1.2. Visa Restriction> The FY2016 Consolidated Appropriation ( P.L. 114-113 ) contained a provision amending the Visa Waiver Program to require a visa to visit the United States for any person who has visited Iraq, Syria, or any terrorism list country (Iran and Sudan are the two aside from Syria still listed) in the previous five years. Iran argued that the provision represented a violation of at least the spirit of the JCPOA by potentially deterring European businessmen from visiting Iran. The Obama Administration issued a letter to Iran stating it would implement the provision in such a way as not to not impinge on sanctions relief, and allowances for Iranian students studying in the United States were made in the implementing regulations. Another provision of that law requires an Administration report to Congress on how Iran has used the benefits of sanctions relief. President Trump has issued and amended executive orders that, in general, prohibit Iranian citizens (as well as citizens from several other countries) from entering the United States. This marked a significant additional restriction beyond the FY2016 Consolidated Appropriation. <17.1.3. Iran Sanctions Act Extension> The 114 th Congress acted to prevent ISA from expiring in its entirety on December 31, 2016. The Iran Sanctions Extension Act ( H.R. 6297 ), which extended ISA until December 31, 2026, without any other changes, passed the House on November 15 by a vote of 419-1 and then passed the Senate by 99-0. President Obama allowed the bill to become law without signing it ( P.L. 114-277 ), even though the Administration considered it unnecessary because the President retains ample authority to reimpose sanctions on Iran. Iranian leaders called the extension a breach of the JCPOA, but the JCPOA's "Joint Commission" did not determine it breached the JCPOA. <17.1.4. Reporting Requirement on Iran Missile Launches> The conference report on the FY2017 National Defense Authorization Act ( P.L. 114-328 ) contained a provision (Section 1226) requiring a quarterly report to Congress on Iran's missile launches the imposition of U.S. sanctions with respect to Iran's ballistic missile launches until December 31, 2019. The conference report on the FY2018 NDAA ( P.L. 115-91 ) extended that reporting requirement until December 31, 2022. The report is to include efforts to sanction entities or individuals that assist those missile launches. <17.1.5. 114th Congress Legislation Not Enacted> The Iran Policy Oversight Act ( S. 2119 ) and the Iran Terror Finance Transparency Act ( H.R. 3662 ) contained a provision that would have added certification requirements for the Administration to remove designations of Iranian entities sanctioned. The House passed the latter bill but then vacated its vote. The IRGC Terrorist Designation Act ( H.R. 3646 / S. 2094 ) would have required a report on whether the IRGC meets the criteria for designation as a Foreign Terrorist Organization (FTO). The Obama Administration argued that the law that set up the FTO designations (Section 219 of the Immigration and Nationality Act [8 U.S.C. 1189]) applies such designations only to groups, rather than armed forces of a nation-state (which the IRGC is). The Prohibiting Assistance to Nuclear Iran Act ( H.R. 3273 ) would have prohibited the use of U.S. funds to provide technical assistance to Iran's nuclear program. The provision appeared to conflict with the provision of the JCPOA that calls on the P5+1 to engage in peaceful nuclear cooperation with Iran (Paragraph 32). The Justice for Victims of Iranian Terrorism Act ( H.R. 3457 / S. 2086 ) would have prohibited the President from waiving U.S. sanctions until Iran completed paying judgments issued for victims of Iranian or Iran-backed acts of terrorism. The House passed it on October 1, 2015, by a vote of 251-173, despite Obama Administration assertions that the bill would contradict the JCPOA. H.R. 3728 would have amended ITRSHRA to make mandatory (rather than voluntary) sanctions against electronic payments systems such as SWIFT if they were allowed to be used by Iran. The IRGC Sanctions Act ( H.R. 4257 ) would have required congressional action to approve an Administration request to remove a country from the terrorism list and would have required certification that any entity to be "delisted" from sanctions is not a member, agent, affiliate, or owned by the IRGC. The Iran Ballistic Missile Sanctions Act of 2016 ( S. 2725 ) would have required that specified sectors of Iran's economy (automotive, chemical, computer science, construction, electronic, energy metallurgy, mining, petrochemical, research, and telecommunications) be subject to U.S. sanctions, if those sectors were determined to provide support for Iran's ballistic missile program. A similar bill, H.R. 5631 , the Iran Accountability Act, which passed the House on July 14, 2016, by a vote of 246-179, would have removed some waiver authority for certain provisions of several Iran sanctions laws and required sanctions on sectors of Iran's civilian economy determined to have supported Iran's ballistic missile program. The latter provision, as did S.2725, appeared to contradict the JCPOA. In the 115 th Congress, S. 15 and key sections of S. 227 and H.R. 808 (Iran Nonnuclear Sanctions Act of 2017) mirror S. 2725 . H.R. 4992 , which passed the House on July 14, 2016, by a vote of 246-181, and the related Countering Iranian Threats Act of 2016 ( S. 3267 ), would have, among their central provisions, required foreign banks and dollar clearinghouses to receive a U.S. license for any dollar transactions involving Iran. The Obama Administration opposed the bill as a violation of the JCPOA. H.R. 5119 , which passed the House by a vote of 249-176, would have prohibited the U.S. government from buying additional heavy water from Iran and appeared intended to block additional U.S. purchases similar to one in April 2016 in which the United States bought 32 metric tons from Iran at a cost of about $8.6 million. Several bills and amendments in the 114 th Congress sought to block or impede the sale of the Boeing aircraft to Iran by preventing the licensing, financing, or Ex-Im Bank loan guarantees for the sale. These included H.R. 5715 , H.R. 5711 , and several amendments to the House version of the FY2017 Financial Services and General Government Appropriations Act ( H.R. 5485 ). That act passed the House on July 7, 2016, by a vote of 239-185, and H.R. 5711 passed by the House on November 17, 2016, by a vote of 243-174. The Obama Administration opposed the measures as JCPOA violations. <17.2. The Trump Administration and Major Iran Sanctions Legislation> Even before the Trump Administration pulled the United States out of the JCPOA, Congress acted on or considered additional Iran sanctions legislation. The following Iran sanctions legislation was enacted or considered in the 115 th Congress. <17.2.1. The Countering America's Adversaries through Sanctions Act of 2017 (CAATSA, P.L. 115-44)> A bill, S. 722 , which initially contained only Iran-related sanctions, was reported out by the Senate Foreign Relations Committee on May 25, 2017. After incorporating an amendment adding sanctions on Russia, the bill was passed by the Senate on June 15, 2017, by a vote of 98-2. A companion measure, H.R. 3203 , was introduced in the House subsequent to the Senate passage of S. 722 , and contained Iran-related provisions virtually identical to the engrossed Senate version of S. 722 . Following a reported agreement among House and Senate leaders, H.R. 3364 , with additional sanctions provisions related to North Korea (and provisions on Iran remaining virtually unchanged from those of the engrossed S. 722 ), was introduced and passed both chambers by overwhelming margins. President Trump signed it into law on August 2, 2017 ( P.L. 115-44 ), accompanied by a signing statement expressing reservations about the degree to which provisions pertaining to Russia might conflict with the President's constitutional authority. CAATSA's Iran-related provisions are analyzed above. Overall, CAATSA does not appear to conflict with the JCPOA insofar as it does not reimpose U.S. secondary sanctions on Iran's civilian economic sectors. The JCPOA did not require the United States to refrain from imposing additional sanctions as CAATSA does on Iranian proliferation, human rights abuses, terrorism, or the IRGC. Section 108 of CAATSA requires an Administration review of all designated entities to assess whether such entities are contributing to Iran's ballistic missile program or contributing to Iranian support for international terrorism. <17.2.2. Legislation in the 115th Congress Not Enacted> H.R. 1698 . The Iran Ballistic Missiles and International Sanctions Enforcement Act, passed the House on October 26, 2017, by a vote of 423-2. It would have amended the remaining active (not waived) section of ISA (Section 5b) to clarify that assistance to Iran's ballistic missile program is included as subject to sanctions. The provision would have applied the sanctions to foreign governments determined to be assisting Iran's missile programs, and would have applied several ISA sanctions to foreign entities, including foreign governments, that sell to or import from Iran the major combat systems banned for sale to Iran in Security Council Resolution 2231. This represents a more specific list of banned items than the "destabilizing numbers and types" of weaponry the sale to Iran of which can be sanctioned under ISA and several other U.S. laws discussed above. H.R. 1638 . On November 14, 2017, the House Financial Services Committee ordered reported H.R. 1638 , the Iranian Leadership Asset Transparency Act, which would have required the Treasury Secretary to report to Congress on the assets and equity interests held by named Iranian persons, including the Supreme Leader, the President, various IRGC and other security commanders, and members of various leadership bodies. H.R. 4324 . The House Financial Services Committee also ordered reported on November 14, 2017, the Strengthening Oversight of Iran's Access to Finance Act. The bill would have required Administration reports on whether financing of Iranian commercial passenger aircraft purchases posed money-laundering or terrorism risks or benefited Iranian persons involved in Iranian proliferation or terrorism. Some argued that the bill might affect the willingness of the Treasury Department to license aircraft sales to Iran, and in so doing potentially breach the U.S. JCPOA commitment to sell such aircraft to Iran. Following President Trump's October 13, 2017, statement on Iran, then-Senate Foreign Relations Committee Chairman Bob Corker and Senator Tom Cotton released an outline of legislation that would reimpose waived U.S. sanctions if, at any time including after JCPOA restrictions expire Iran breaches JCPOA-stipulated restrictions. The bill draft, which was not introduced, included sanctions triggers based on Iranian missile developments. H.R. 5132 . The Iranian Revolutionary Guard Corps Economic Exclusion Act. This bill mandated Administration reports on whether specified categories of entities are owned or controlled by the IRGC, or conduct significant transactions with the IRGC. The bill defined an entity as owned or controlled by the IRGC even if the IRGC's ownership interest is less than 50% a lower standard than the usual practice in which ownership is defined as at least 50%. The bill would have required Administration investigation of several specified entities as potentially owned or controlled by the IRGC, including several telecommunications, mining, and machinery companies, and required a report on whether the Iran Airports Company violates E.O. 13224 by facilitating flight operations by Mahan Air, which is a designated SDN under E.O. 13224. Whereas the bill's provisions did not mandate any sanctions on entities characterized within, the bill appeared to establish a process under which the Administration could name as SDNs entities in Iran's civilian economic sectors, including civil aviation. H.R. 6751 . The Banking Transparency for Sanctioned Persons Act of 2018, would have required reporting to Congress on any license given to a bank to provide financial services to a state sponsor of terrorism. H.R. 4591 , S. 3431 , and H.R. 4238 . Several bills would have essentially codified Executive Order 13438 by requiring the blocking of U.S.-based property and preventing U.S. visas for persons determined to be threatening the stability of Iraq legislation apparently directed at Iran's Shiite militia allies in Iraq. The latter two bills specifically mentioned the Iraqi groups As'aib Ahl Al Haq and Harakat Hizballah Al Nujabi as entities that the Administration should so sanction. H.R. 4591 passed the House on November 27, 2018. <17.2.3. 116th Congress> Because the Trump Administration has exited the JCPOA, there is increased potential for the 116 th Congress to consider legislation that sanctions those Iranian economic sectors that could not be sanctioned under the JCPOA. As the 116 th Congress began work in 2019, press reports indicated that several Senators and at least one House Member planned to introduce legislation to greatly expand U.S. secondary sanctions on Iran's financial sector. Among the reported provisions were (1) mandatory imposition of sanctions on the SWIFT electronic payments system if it does not expel sanctioned Iranian banks from its network; (2) amending IFCA to sanction any significant transactions with Iran's financial sector (in addition to energy, shipping, and shipbuilding sectors in the current law); (3) requiring the Treasury Department to issue a final rule that would sanction any international transaction with Iran's Central Bank; and (4) sanctioning foreign persons that supply or provide other help to Iran's efforts to establish a digital currency. The following have been introduced: Several bills similar or virtually identical to those introduced previously have been introduced, imposing sanctions on Iranian proxies in Iraq and elsewhere. These bills include H.R. 361 , the Iranian Proxies Terrorist Sanctions Act of 2019, and H.R. 571 , the Preventing Destabilization of Iraq Act of 2019. The Iranian Revolutionary Guard Corps Exclusion Act ( S. 925 ), similar to H.R. 5132 in the 115 th Congress, has been introduced in the Senate. The Iran Ballistic Missiles and International Sanctions Enforcement Act ( H.R. 2118 ). The bill includes provisions similar to H.R. 1698 in the 115 th Congress (see above). <17.3. Other Possible U.S. and International Sanctions123> There are a number of other possible sanctions that might receive consideration either in a global or multilateral framework. These possibilities are analyzed in CRS In Focus IF10801, Possible Additional Sanctions on Iran , by Kenneth Katzman. Appendix A. Comparison Between U.S., U.N., and EU and Allied Country Sanctions (Prior to Implementation Day) Appendix B. Post-1999 Major Investments in Iran's Energy Sector Appendix C. Entities Sanctioned Under U.N. Resolutions and EU Decisions Appendix D. Entities Sanctions Under U.S. Laws and Executive Orders

Successive Administrations have used sanctions extensively to try to change Iran's behavior. Sanctions have had a substantial effect on Iran's economy but little, if any, observable effect on Iran's conventional defense programs or regional malign activities. During 2012-2015, when the global community was relatively united in pressuring Iran, Iran's economy shrank as its crude oil exports fell by more than 50%, and Iran had limited ability to utilize its $120 billion in assets held abroad. The 2015 multilateral nuclear accord (Joint Comprehensive Plan of Action, JCPOA) provided Iran broad relief through the waiving of relevant sanctions, revocation of relevant executive orders (E.O.s), and the lifting of U.N. and EU sanctions. Remaining in place were a general ban on U.S. trade with Iran and U.S. sanctions on Iran's support for regional governments and armed factions, its human rights abuses, its efforts to acquire missile and advanced conventional weapons capabilities, and the Islamic Revolutionary Guard Corps (IRGC). Under U.N. Security Council Resolution 2231, which enshrined the JCPOA, nonbinding U.N. restrictions on Iran's development of nuclear-capable ballistic missiles and a binding ban on its importation or exportation of arms remain in place for several years. JCPOA sanctions relief enabled Iran to increase its oil exports to nearly pre-sanctions levels, regain access to foreign exchange reserve funds and reintegrate into the international financial system, achieve about 7% yearly economic growth (2016-17), attract foreign investment, and buy new passenger aircraft. The sanctions relief contributed to Iranian President Hassan Rouhani's reelection in the May 19, 2017, vote. However, the economic rebound did not prevent sporadic unrest from erupting in December 2017. And, Iran has provided support for regional armed factions, developed ballistic missiles, and expanded its conventional weapons development programs during periods when international sanctions were in force, when they were suspended, and after U.S. sanctions were reimposed in late 2018. The Trump Administration has made sanctions central to efforts to apply "maximum pressure" on Iran's regime. On May 8, 2018, President Trump announced that the United States would no longer participate in the JCPOA and that all U.S. secondary sanctions would be reimposed by early November 2018. The reinstatement of U.S. sanctions has driven Iran's economy into mild recession as major companies exit the Iranian economy rather than risk being penalized by the United States. Iran's oil exports have decreased significantly, the value of Iran's currency has declined sharply, and unrest has continued, although not to the point where the regime is threatened. But, the European Union and other countries are trying to keep the economic benefits of the JCPOA flowing to Iran in order to persuade Iran to remain in the accord. To that end, in January 2019 the European countries created a trading mechanism (Special Purpose Vehicle) that presumably can increase trade with Iran by circumventing U.S. secondary sanctions. On November 5, 2018, the Administration granted 180-day "Significant Reduction Exceptions" (SREs) to eight countries—enabling them to import Iranian oil without penalty as long as they continue to reduce purchases of Iranian oil. On April 22, 2019, the Administration announced it would not renew any SREs when they expire on May 2, 2019, instead seeking to drive Iran's oil exports as close to zero as possible. On May 3, 2019, the Administration ended some waivers for foreign governments to provide technical assistance to some JCPOA-permitted aspects of Iran's nuclear program. The economic difficulties and other U.S. pressure measures have prompted Iran to cease performing some of the nuclear commitments of the JCPOA. See also CRS Report R43333, Iran Nuclear Agreement and U.S. Exit, by Paul K. Kerr and Kenneth Katzman; and CRS Report R43311, Iran: U.S. Economic Sanctions and the Authority to Lift Restrictions, by Dianne E. Rennack.

crs_R45235

crs_R45235_0

This report provides an overview of economic and fiscal conditions in the U.S. Virgin Islands (USVI). The political status of the U.S. Virgin Islands and responses to Hurricanes Irma and Maria are not covered in depth here. Fiscal and economic challenges facing the USVI government raise several issues for Congress. First, Congress may choose to maintain oversight of federal policies that could affect the USVI's long-term fiscal stability. Second, Congress may consider further legislation that would extend or restructure long-range disaster assistance programs to mitigate those challenges and promote greater resiliency of infrastructure and public programs. Federal responses to the USVI's fiscal distress could conceivably affect municipal debt markets more broadly. <1. Geography> The U.S. Virgin Islands are located about 45 miles east of Puerto Rico and about 1,000 miles southeast of Miami, Florida. The three larger islands St. Croix, St. Thomas, and St. John are home to nearly all of the roughly 105,000 people living in the U.S. Virgin Islands. The USVI capital, Charlotte Amalie, is located on St. Thomas, which is the primary center for tourism, government, finance, trade, and commerce. The Virgin Islands National Park covers about two-thirds of the island of St. John, which is located to the east of St. Thomas. St. Croix situated approximately 40 miles south of St. Thomas and St. John is the agricultural and manufacturing center of the USVI. The U.S. Virgin Islands also includes a fourth smaller island Water Island as well as many other smaller islands and cays. The British Virgin Islands (BVI) are, by and large, east and slightly north of the U.S. Virgin Islands. The southern shore of Tortola, the largest island in BVI, is less than two miles north of the northern shore of St. John, USVI. <1.1. Historical Background> <1.1.1. Second Voyage of Christopher Columbus> On his second voyage to the Caribbean in November 1493, Admiral Christopher Columbus and his crew reached the archipelago of the Lesser Antilles the string of islands ranging southeast from Puerto Rico. As his ships sailed northwest toward Puerto Rico, they encountered one larger island, which Columbus named Santa Ursula, and saw to the north what they thought were at least 40-odd other islands, which were called "las once mil V rgenes." Santa Ursula, now known as St. Croix, was described as "very high ground, most of which was bare, the likes of which no one had seen before or after." Over time those islands became known as the Virgin Islands. In the decades following Columbus's voyages, the Spanish crown had nearly sole control over all trade and navigation in the Caribbean. By the mid-1500s, merchants and privateers from France, England, and Holland moved into the region to trade with colonists who chafed at the high prices and narrow restrictions of Spanish imperial rules. Spanish galleons returning to Spain with goods and gold provided an additional motivation to privateers and pirates. The Spanish shifted much of their settlements and operations to the South American mainland and to the larger Caribbean islands, where resources were easier to exploit and defenses were easier to mount. The smaller islands to the east in the Lesser Antilles were thus largely left to others. Control of many of those islands, including the Virgin Islands, shifted back and forth among European powers, as peace treaties settled in Europe seldom applied in the New World. <1.1.2. Danish Colonial Era> In 1672, the Royal Danish West Indian Company ( Det Kongelige Octroyerede Danske Vestindiske Compagnie ) took control of St. Thomas and set up plantations. The company expanded to St. John (then St. Jan) in 1718 and then purchased St. Croix from France in 1733. Sugar production and export was the primary economic sector during the period of Danish colonial control, although cotton, tobacco, indigo, and other products were also exported. In 1754, the king of Denmark established a free trading policy, which encouraged commercial activity on St. Thomas, sidestepping restrictions imposed by the main European powers of the time. Economic conditions on those islands, however, slowed in the 1830s, and a slave revolt in 1848 led to the abolition of slavery. After 1848, the Virgin Islands' economy slowed for a combination of reasons. Other Caribbean ports attracted more trade, steam-powered ships traveled more directly between North America and Europe, and the expansion of beet sugar production in Europe, Russia, and North America led to lower prices for the cane sugar industry. <1.1.3. U.S. Acquisition and Administration> In 1867, Secretary of State William Seward reached an agreement with Denmark to buy the islands. The Senate, however, declined to ratify the treaty. After other unsuccessful attempts in the first decade of the 20 th century, the U.S. government purchased the islands from Denmark in 1917, after a set of negotiations prompted by concerns that Germany might use the islands to attack American shipping. The U.S. government assumed control of the islands on March 31, 1917, just a week before the United States entered World War I. While the United States acquired the islands for strategic reasons, the islands have not generally served a strategic purpose beyond keeping them out of the control of potentially hostile powers. Naval officers administered the islands after the United States took possession and made important improvements in public health, water supply, education, and social services. Efforts to advance economic development were less successful. In 1931, governance responsibilities were transferred to the U.S. Department of the Interior. In the 1930s, civilian administrators sought largely unsuccessfully to revive sugar production and convert failing plantations into smallholder homesteads. The diversion of labor to military projects during World War II led to further declines in agricultural production. After the end of Prohibition in 1933, however, rum distilling became a growing source of manufacturing employment, and taxes on rum have been an important revenue source. <1.1.4. Post-World War II Economic Development> Other types of manufacturing once employed significant numbers, but have declined in recent years. Several watch assembly plants started up in 1959, but the last one closed in 2015. A large bauxite processing plant was built on St. Croix in the early 1960s, but closed in 2000 after several ownership changes. Near that site, Hess Oil partnered with a Venezuelan oil company to build a major oil refinery. That refinery, known as HOVENSA, for a time was one of the largest in the world, but closed in 2012. Early efforts in the 1950s to promote tourism were another success, especially after the closing of Cuba to American tourism after the 1959 Cuban Revolution. Tourism remains the major employer and economic activity in the U.S. Virgin Islands. The Revised Organic Act of 1954 (P.L. 83-517) included a provision to rebate, or "cover over," federal excise taxes on goods produced in the Virgin Islands to the island's government. The cover over of federal taxes on rum has been an especially important revenue source. <1.2. Current Structure of the Economy> <1.2.1. Income Trends and Distribution> Typical incomes in the USVI are lower than on the U.S. mainland and poverty rates are higher. <1.2.1.1. Household Incomes> Median household income in the USVI in 2009, according to the U.S. Census Bureau, was $37,254, about 75% of the mainland estimate of $50,221. Demographic and economic data for U.S. territories are typically less extensive and reported less frequently than for states. Table 1 compares the distribution of household incomes in 2009 for the USVI with the U.S. total. The distribution of household income levels in the USVI is skewed toward lower income brackets compared to U.S. totals. For example, 13.5% of USVI households had incomes below $10,000 in 2009, as compared to 7.8% for the U.S. total. <1.2.1.2. GDP per Capita and Distortions Due to Tax Avoidance> Gross domestic product (GDP) per capita provides another measure of economy activity. GDP is defined as the value of goods and services produced in a given area during a year. While income produced in an area that is repatriated elsewhere is included in GDP, it is excluded from gross national product (GNP), which reflects incomes of area residents. For areas where flows of repatriated earnings are large, GDP may be a flawed measure of local incomes. Data on such flows of repatriated earnings, which may result from tax avoidance or minimization strategies, are difficult to obtain. The European Union added the USVI to a list of "non-cooperative tax jurisdictions" in March 2018. The European Council, a body consisting of EU heads of government and senior EU officials, stated that jurisdictions added to the list "failed to make commitments at a high political level in response to all of the EU's concerns." The USVI government called that decision "unjustified." In October 2019, the European Council declined to remove the USVI from the list of noncooperative tax jurisdictions. With those caveats regarding GDP in mind, Figure 1 presents trends in per capita GDP from 2004 through 2015. Florida and Louisiana, which have both been affected by major hurricanes in that time period, are included for comparison. While USVI per capita GDP did not fall during the 2007-2009 Great Recession, it did drop sharply after the demise of the HOVENSA refinery. <1.2.2. Tourism> In recent years, tourism and related trade has been the predominant component of the economy of the Virgin Islands. In years before Hurricanes Irma and Maria, about 1.2 million cruise passengers and about 400,000 airplane passengers arrived each year. Virgin Islands tourist destinations compete with many other Caribbean destinations. Much of the growth in Caribbean tourism has taken place in all-inclusive resorts that rely on low-wage labor, such as in the Dominican Republic. Many hotels and resorts were seriously damaged or destroyed in the September 2017 hurricanes. Employment and tourist arrival data, discussed below, suggest the tourism sector has started to rebound, although that process could take years to complete. <1.2.3. Manufacturing> Manufacturing, which had played a major role in the Virgin Islands since the 1960s, now plays a minor economic role aside from two rum distilleries, which enjoy extensive public subsidies. Slightly more than 600 people were employed in manufacturing in 2015, mostly in small firms. <1.2.3.1. Rum> The Cruzan distillery, which has a capacity to produce about 9 million proof gallons per year, claims a presence in the Virgin Islands since the mid-18 th century. Cruzan was sold to Fortune Brands in 2008, after several changes in ownership. The Diageo distillery, which can produce some 20 million proof gallons per year, was built as part of a 2008 agreement with the territorial government. Diageo is a British multinational corporation specializing in the marketing of alcoholic beverages, which previously operated a distillery in Puerto Rico. A separate agreement between Cruzan and the USVI government was negotiated in 2009. In 2012, the USVI government agreed to modify the Cruzan agreement to increase subsidies, subject to set sales and marketing expense benchmarks. The agreements with the Virgin Islands Government and Diageo and Fortune Brands included an estimated $3.7 billion in subsidies and tax exemptions over 30 years, provided through proceeds of bonds that securitized "cover-over" excise taxes on rum sales rebated from the U.S. government and local tax abatements. The agreements also committed the USVI government to provide ongoing production and marketing subsidies paid from cover-over revenues. The agreement bars the USVI government from seeking reductions in rum subsidies. As noted above, federal excise taxes on rum imported into the United States from the USVI and Puerto Rico (PR), or from anywhere else, are "covered over" to the PR and the USVI governments. <1.2.3.2. The HOVENSA Refinery and Limetree Bay> The HOVENSA oil refinery, mentioned above, had been one of the USVI's largest employers, with about 1,200 workers and nearly 1,000 contractors. Since 1998, the refinery operated as a joint venture between Hess Oil and Petr leos de Venezuela, a petroleum company owned by the Venezuelan government. The refinery suddenly shut down in 2012 after running large losses. While mainland refineries had shifted to natural gas as an energy source, the HOVENSA facility relied on relatively expensive fuel oil. HOVENSA filed for bankruptcy under chapter 11 of the Bankruptcy Code in September 2015. The USVI government received $220 million as part of the agreement to resolve HOVENSA's assets, which was used to cover the government's budget deficit for 2015. Limetree Bay purchased some HOVENSA facilities to build an oil storage facility that initially employed about 80 people and which later expanded to employ about 650 people. A renovation of the HOVENSA refinery complex was reportedly three-quarters complete in late 2019, potentially allowing fuel deliveries in early 2020. <1.2.4. Agriculture> Over many decades, agriculture's role in the economy has dwindled to a marginal activity. Most of the island's food supply and essentially all of the molasses a syrup extracted from sugar cane used to produce rum is imported. <1.2.5. Energy and Water40> The high cost of electricity in the U.S. Virgin Islands is one factor that hinders economic development. Residential customers pay 40 cents per kilowatt/hour (kWh) or about three times the average cost on the mainland. Commercial electricity rates are approximately $0.47/kWh. Island power systems do not benefit from gas pipelines or electric grids that extend over large areas, thus face higher costs than mainland systems. U.S. Virgin Islands Water and Power Authority (VIWAPA) supplies electrical power and water. The bulk of power generation is fueled by oil and diesel, although initiatives to enable use of propane and natural gas have been under way. For instance, VIWAPA modified some electric generating units to allow them the option to use natural gas, propane, or fuel oil. Expanding the efficient use of renewable sources of electricity, such as wind and solar, may require upgrades in transmission and generation systems. In 2015, renewable sources made up 8% of VIWAPA's peak demand generating capacity. <1.3. Public Finances> <1.3.1. High Public Debt Levels Raise Concerns> Fiscal challenges facing the USVI government have intensified in recent years. Several news reports in 2017 posed pointed questions about the sustainability of the islands' public debts, which total about $2 billion. Those debt levels, on a per capita or on a percentage of GDP basis, are extremely high compared to other subnational governments in the United States. In addition, the most recent actuarial analysis of public pensions found a net pension liability of about $4 billion. In 2017, the Government Accountability Office (GAO) found that "more than a third of USVI's current bonded debt outstanding as of fiscal year 2015 was issued to fund government operating costs." A 2019 GAO report noted that the USVI government had been shut out of capital markets since 2017, which could hobble its ability to roll over maturing debt. The report also summarized concerns with the solvency of the public pension system, growth prospects, effects of 2017 changes in the federal tax law, and the uncertain status of federal Medicaid funding. Concerns about debt levels had led each of the three major credit ratings agencies to downgrade at least part of the islands' public debts. Others suggested that USVI's public debts would have to be restructured. In August 2017, then-Governor Mapp said that communications with credit ratings agencies had been suspended, which prompted those agencies to drop USVI's credit ratings. The U.S. Virgin Islands and other U.S. territories are not covered by the provisions of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; P.L. 114-187 ). Nonetheless, some credit ratings agencies saw enactment of PROMESA as a sign that Congress and the President could enact future legislation to enable debt adjustments in other territories. <1.3.2. USVI Fiscal Responses> Like many state governments, USVI public revenues were severely affected by the 2007-2009 Great Recession. Tourism, the mainstay of the USVI economy, was affected. In turn, government revenues, typically closely tied to economic activity, also fell. In addition, rum subsidy payments doubled from 2006 to 2007 and 2008. As noted above, the closure of the HOVENSA refinery in 2012 resulted in hundreds of lost jobs and a significant contraction of the USVI tax base. In recent years, the islands' government has run structural deficits and has used bond proceeds to cover shortfalls. Kenneth Mapp, who was inaugurated as governor in January 2015, had proposed various fiscal measures intended to reduce or eliminate those deficits. In August 2016, the islands' government took steps to issue bonds, which were to be used to cover financing shortfalls for its FY2017 budget. That issue was postponed until January 2017 and then cancelled. The loss of access to capital markets at reasonable rates left the islands' government with a narrow set of liquidity resources. In January 2017, then-Governor Mapp proposed a series of measures intended to strengthen public finances, including certain tax increases, enhanced revenue collection measures, and reductions in public spending. A package of tax measures, including higher taxes on beer, liquor, sodas, and timeshare rentals, which were part of the governor's proposals, was enacted on March 22, 2017. GAO, in an analysis of debts of U.S. territories, expressed doubts that those fiscal measures would restore access to capital markets or address shortfalls in the funding of public pensions and other retirement benefits. Then-Governor Mapp also had announced that a $40 million revenue anticipation note would soon be issued through Banco Popular, which he contended would provide the USVI government with liquidity through September 2017. It appears that issuance was also suspended. The form of USVI's public debt service, in which many funds are routed through escrow accounts before reaching government coffers, also limits options for USVI policymakers. Governor Albert Bryan Jr., who succeeded Mapp in January 2019, claimed to have stabilized government operations and finances in his first year in office, including by taking steps to reestablish relations with credit rating agencies and enhance transparency of public finances. <1.4. Aftermath of Hurricanes Irma and Maria> The USVI was hit by two powerful hurricanes in September 2017, which caused extensive damage from which island residents are continuing to recover. Hurricane Irma shown in Figure 2 was "one of the strongest and costliest hurricanes on record in the Atlantic basin." Irma passed directly over St. Thomas and St. John on September 6, 2017, causing "widespread catastrophic damage." Two weeks later, on September 20, Hurricane Maria hit St. Croix, before continuing on to devastate Puerto Rico. Figure 3 shows paths and zones of extreme wind speeds for both hurricanes in the vicinity of USVI. In November 2017, the USVI government estimated that uninsured damage from the hurricanes would exceed $7.5 billion. <1.4.1. Disaster Responses> Disaster declarations following Hurricane Irma and Hurricane Maria enabled the USVI government and its residents to receive federal assistance through various provisions of the Stafford Act ( P.L. 93-288 , as amended). Those declarations authorized the Federal Emergency Management Agency (FEMA) to assist local and territory governments, certain private nonprofit organizations, and individuals through grants, loans, and direct aid. FEMA, the U.S. Corps of Engineers, and the U.S. Coast Guard, among other federal agencies, also directly supported disaster response and recovery efforts. Other forms of federal disaster assistance have included loans and grants to individuals and small businesses, including through the Small Business Administration disaster loan program. The USVI government and two hospital authorities received Community Disaster Loans (CDLs) on January 3, 2018. The USVI government CDL totaled $10 million with a term of 20 years. CDLs were designed to provide liquidity to local governments that have suffered revenue declines due to disasters. Estimates based on USVI fiscal data suggest that public revenues were halved after the two hurricanes. <1.4.2. Disaster Funding> Funding for disaster relief has been augmented by several supplemental appropriations. The extent of federal disaster assistance received by the USVI will depend, in part, on how funds provided in response to needs resulting from hurricanes and fires in 2017 are allocated among affected areas. In the Bipartisan Budget Act of 2018 ( P.L. 115-123 ; 20301), enacted on February 9, 2018, Congress provided the USVI and Puerto Rico with additional Medicaid funding for the period January 1, 2018, through September 30, 2019. For the USVI Medicaid program, an additional $107 million was provided. Another $35.6 million would be available to the USVI subject to certain Medicaid program integrity and statistical reporting requirements. The federal medical assistance percentage (FMAP) was also raised from 55% to 100% for both the USVI and Puerto Rico Medicaid programs during that interval. On February 4, 2020, House Appropriations Chairwoman Nita M. Lowey introduced H.R. 5687 , an emergency supplemental appropriations bill. Title B of the measure includes provisions that would provide additional resources to territories, including the USVI, through support for child tax credits (and certain expansions of eligibility) and other tax credits, as well as a relaxation on limits on rum cover-over revenues directed to Puerto Rico and USVI. The House passed the measure on February 7, 2020, on a 237-161 vote. The Administration warned it would veto the measure. <1.4.2.1. VIWAPA Financial Woes Hinder Recovery from Hurricane Damage> Hurricanes Irma and Maria damaged an estimated 80% to 90% of VIWAPA's transmission and distribution lines, although power-generating plants were less affected. The U.S. Department of Energy (DOE) estimated that 93% of total USVI customers had their electric power restored by the end of January 2018. According to the U.S. Virgin Islands action plan submitted to and approved by HUD, the energy sector infrastructure needs as a result of the hurricanes totaled nearly $2.3 billion. The U.S. Department of Housing and Urban Development (HUD) allocated $67.7 million (approximately 3%) to the U.S. Virgin Islands from a $2 billion Community Development Block Grant-Disaster Recovery (CDBG-DR) appropriation included in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) "to provide enhanced or improved electrical power systems" for Puerto Rico and the USVI. Governor Bryan reportedly asked HUD to "acknowledge that the Virgin Islands needs at least $350 million of these funds to make a meaningful impact in strengthening the grid and lowering the high cost of electricity in the Virgin Islands." On September 16, 2019, $774 million in mitigation funds (CDBG-MIT funds) were allocated to the U.S. Virgin Islands; however, HUD announced that [T]he grantee is prohibited from using CDBG-MIT funds for mitigation activities to reduce the risk of disaster related damage to electric power systems until after HUD publishes the Federal Register notice governing the use of the $2 billion for enhanced or improved electrical power systems. This limitation includes a prohibition on the use of CDBG-MIT funds for mitigation activities carried out to meet the matching requirement, share, or contribution for any Federally-funded project that is providing funds for electrical power systems until HUD publishes the Federal Register notice governing the use of CDBG-DR funds to provide enhanced or improved electrical power systems. The prohibition on the use of CDBG-MIT funds combined with VIWAPA's cash flow challenges limits VIWAPA's ability to improve resiliency. Without sufficient available funds, VIWAPA is unable to meet federal funding matching requirements in order to make use of eligible mitigation funding from FEMA to permanently harden the electrical power systems. The government of the U.S. Virgin Islands VIWAPA's largest customer has been slow in providing payment for services. The UVSI legislature, however, moved to appropriate $22.2 million for hospitals to pay outstanding obligations to VIWAPA, among other provisions. Throughout 2018 and 2019, USVI policymakers expressed concerns over VIWAPA's financial stability. For instance, Delegate Stacey Plaskett called on Governor Bryan and USVI Senate President Francis to declare a state of emergency in response to the territory's "energy crisis." <1.4.3. FY2019 Budget Proposals> In his FY2019 budget proposals, Governor Mapp set forth plans to extend the solvency of the USVI public pension systems. According to those proposals, the projected insolvency of those plans would be postponed from 2024 to 2025. Additional measures, to be outlined in the future, were claimed to suffice to postpone insolvency for three additional years. The FY2019 budget proposals also called for a lifting of a hiring freeze. Additional revenues were expected from expanded federal reimbursement for health programs, along with recovery-related investment activity, although decreased tourist traffic is expected to keep accommodation tax and related collections well below prehurricane levels in FY2019. <1.4.4. Economic Prospects> The USVI economy has relied heavily on tourism and related business activity, which made it more vulnerable to the effects of hurricanes than jurisdictions with more diverse economies. <1.4.4.1. Employment Trends> Figure 4 shows employment trends in the tourism-dependent leisure and hospitality sector, the territorial government, the manufacturing sector, and the construction sector. Employment in the leisure and hospitality sector shows a steep decline after Hurricane Marilyn in 1995 and after Hurricanes Irma and Maria in September 2017, after which employment in that sector was halved. Leisure and hospitality employment took about six years to recover to pre-Marilyn levels. Increases in the construction sector offset about half of those losses in 1996 and 1997, presumably due to recovery and reconstruction work. As of December 2019, tourism sector employment has recovered somewhat, but remains well below pre-2017 levels. Construction employment also rose in 2018 and 2019, but that uptick appears much smaller than in the post-Marilyn time period. Moreover, the posthurricane increases in construction-related activity have been small relative to the loss of tourism employment after 2017. Employment in the USVI territorial government declined over the 2010-2014 period, but has remained relatively stable since then. <1.4.4.2. Tourism Trends> The severity of damage from Irma and Maria, and the subsequent disruption of the USVI tourism industry, suggest that a full economic recovery could take years. Many hotels have remained closed since the hurricanes, although some reopened in 2019. Cruise ship passenger arrivals fell from 1.8 million in calendar year (CY) 2016 to 1.3 million in 2017, but have rebounded somewhat. Air passenger arrivals fell from nearly 800,000 in 2016 to less than 500,000 in 2018. Air arrivals for the first three quarters of CY2019 ran 44% ahead of the same period in 2018. <1.4.4.3. Unemployment Claims> The economic effects of Hurricanes Irma and Maria can also be seen in initial unemployment claims data, shown in Figure 5 . The post-Irma and Maria uptick in late 2017 is more than twice the size of the 2011-2012 upticks near the time of the closure of the HOVENSA refinery. The New York Federal Reserve Bank compared the economic effects of Hurricanes Irma and Maria on the USVI and Puerto Rico, noting that the estimated percentage job loss following those hurricanes (-7.8%) was far greater than the percentage job losses in New York City (-3.3%) during the Great Recession. Researchers report that many young professionals and health care workers have left the USVI for positions on the mainland, which may complicate recovery efforts in the health care sector. Tracking the progress of USVI economic recovery is complicated as many federal statistical programs report fewer data series for U.S. territories than for states. The Virgin Islands Bureau of Economic Research (VIBER), however, reports regularly on economic, tourism, and population trends. <1.5. Considerations for Congress> The fiscal and economic challenges facing the USVI government raise several issues for Congress. First, Congress may consider further legislation that would extend or restructure long-range disaster assistance programs to mitigate those challenges and promote greater resiliency of infrastructure and public programs. Second, if fiscal pressures on the USVI intensify, Congress might consider a framework similar to that established by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; P.L. 114-187 ). In the past, however, USVI policymakers opposed making PROMESA provisions available to other territories because of concerns about borrowing costs. At present, the USVI lacks access to the federal Bankruptcy Code or other processes for debt restructuring involving judicial processes. Third, Congress might consider proposals to support initiatives to lower energy costs for the USVI. Mainland electrical power generation, to a large extent, has shifted to using more natural gas as a fuel. Construction of a liquefied natural gas (LNG) import facility and accompanying generation plants could lead to lower energy prices and an enhanced capacity to employ renewable energy sources. Other innovative energy technologies might also be used to that end. While VIWAPA has taken some steps to modernize its generating units, some major investments may be required. For example, construction of a LNG facility and further conversions of generating units could lower electricity rates, but would require financial commitments that would likely challenge the fiscal capacity of the USVI government and VIWAPA. Moreover, LNG supply contracts typically extend over decades due to the scale of required investments, arrangements which could be difficult to negotiate given the USVI's fiscal situation. Fourth, Congress may expand oversight of federal agencies that administer disaster assistance programs, including FEMA and HUD, to ensure the timely receipt of assistance by grantees. Several Members of Congress have expressed concerns that funds for federal disaster recovery efforts have been unduly delayed. Congress could also examine the interplay among federal agencies, federal rules and regulations that apply to disaster responses operations, and local governments and nonprofits in affected areas. Fifth, Congress may revisit the structure of the rum cover-over program to assess whether its current structure is appropriately fitted to public purposes. The contractual bar to USVI advocacy of changes in the cover-over program could require Congress to initiate any such alterations. Sixth, Congress may choose to promote economic and social development through a wide range of tax and social program rules, some of which treat USVI differently than states.

Fiscal and economic challenges facing the U.S. Virgin Islands (USVI) government raise several issues for Congress. Congress may choose to maintain oversight of federal policies that could affect the USVI's long-term fiscal stability. Congress also may consider further legislation that would extend or restructure long-range disaster assistance programs to mitigate those challenges and promote greater resiliency of infrastructure and public programs. Federal responses to the USVI's fiscal distress could conceivably affect municipal debt markets more broadly. Greater certainty in federal funding for disaster responses and Medicaid could support the USVI economy. The USVI, like many other Caribbean islands acquired by European powers, were used to produce sugar and other tropical agricultural products and to further strategic interests such as shipping and the extension of naval forces. Once the United States acquired the U.S. Virgin Islands shortly before World War I, they effectively ceased to have major strategic importance. Moreover, at that time the Virgin Islands' sugar-based economy had been in decline for decades. While efforts of mainland and local policymakers eventually created a robust manufacturing sector after World War II, manufacturing in the Virgin Islands has struggled in the 21 st century. In particular, the 2012 closing of the HOVENSA refinery operated by Hess Oil resulted in the loss of some 2,000 jobs and left the local economy highly dependent on tourism and related services. A renovation of the HOVENSA complex is reportedly in progress. The territorial government, facing persistent economic challenges, covered some budget deficits with borrowed funds, which has raised concerns over levels of public debt and unfunded pension liabilities. Local policymakers have proposed tax increases and austerity measures to bolster public finances, which currently operate with restricted liquidity. The Government Accountability Office (GAO) expressed doubts that those fiscal measures would restore access to capital markets or address shortfalls in the funding of public pensions. The previous governor, Kenneth Mapp, set forth measures in his FY2019 budget proposals to delay expected public pension insolvency from 2024 to 2025 and promised to outline other measures that would further delay insolvency until 2028. Governor Albert Bryan Jr. succeeded Mapp in January 2019. Damage caused by two powerful hurricanes—Irma and Maria—that hit the USVI in September 2017 created additional economic and social challenges. Public revenues, according to estimates based on USVI fiscal data, were halved after the two hurricanes. The USVI economy has relied heavily on tourism and related business activity, which made it more vulnerable to the effects of hurricanes than jurisdictions with more diverse economies. The severity of damage from Irma and Maria, and the subsequent disruption of the USVI tourism industry, suggest that a full economic recovery could take years. Federal disaster assistance has included aid to public institutions, such as long-term loans to the USVI government and two hospitals; loans and grants to individuals and small businesses; and direct operations of the Federal Emergency Management Administration (FEMA), the U.S. Army Corps of Engineers, the U.S. Coast Guard, and other federal agencies. Funding for disaster relief has been augmented by supplemental appropriations. The extent of federal disaster assistance received by the USVI will depend, in part, on how funds provided in response to needs resulting from hurricanes and fires in 2017 are allocated among affected areas. The Bipartisan Budget Act of 2018 ( P.L. 115-123 ; §20301), enacted on February 9, 2018, included additional Medicaid funding for the USVI and Puerto Rico through September 30, 2019. The U.S. Department of Housing and Urban Development (HUD) allocated $774 million in mitigation funds (CDBG-MIT funds) to the U.S. Virgin Islands and put restrictions on their use.

crs_R46317

crs_R46317_0

<1. Introduction> The President is responsible for appointing individuals to certain positions in the federal government. In some instances, the President makes these appointments using authorities granted to the President alone. Other appointments, generally referred to with the abbreviation PAS, are made by the President with the advice and consent of the Senate via the nomination and confirmation process. This report identifies, for the 115 th Congress, all nominations submitted to the Senate for full-time positions on 34 regulatory and other collegial boards and commissions. This report includes profiles on the leadership structures of each of these 34 boards and commissions as well as a pair of tables presenting information on each body's membership and appointment activity as of the end of the 115 th Congress. The profiles discuss the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether they may continue in their positions after their terms expire, whether political balance is required, and the method for selecting the chair. The first table in each pair provides information on full-time positions requiring Senate confirmation as of the end of the 115 th Congress. The second table tracks appointment activity for each board or commission within the 115 th Congress by the Senate (confirmations, rejections, returns to the President, and elapsed time between nomination and confirmation), as well as further related presidential activity (including withdrawals and recess appointments). In some instances, no appointment action occurred within a board or commission during the 115 th Congress. Information for this report was compiled using the Senate nominations database at https://www.congress.gov/ (users can click the "nominations" tab on the left-hand side of the page to search the database), the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2016 Plum Book ( United States Government Policy and Supporting Positions ). Congressional Research Service (CRS) reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other related matters are available to congressional clients at http://www.crs.gov . <1.1. Characteristics of Regulatory and Other Collegial Bodies> <1.1.1. Common Features> Federal executive branch boards and commissions discussed in this report share, among other characteristics, the following: (1) they are independent executive branch bodies located, with four exceptions, outside executive departments; (2) several board or commission members head each entity, and at least one of these members serves full time; (3) the members are appointed by the President with the advice and consent of the Senate; and (4) the members serve fixed terms of office and, except in a few bodies, the President's power to remove them is restricted. <1.1.2. Terms of Office> For most of the boards and commissions included in this report, the fixed terms of office for member positions have set beginning and end dates, irrespective of whether the posts are filled or when appointments are made. In contrast, for a few agencies, such as the Chemical Safety and Hazard Investigation Board, the full term begins when an appointee takes office and expires after the incumbent has held the post for the requisite period of time. The end dates of the fixed terms of a board's members are staggered, so that the terms do not expire all at once. The use of terms with fixed beginning and end dates is intended to minimize the occurrence of simultaneous board member departures and thereby increase leadership continuity. Under such an arrangement, an individual is nominated to a particular position and a particular term of office. An individual may be nominated and confirmed for a position for the remainder of an unexpired term to replace an appointee who has resigned (or died). Alternatively, an individual might be nominated for an upcoming term with the expectation that the new term will be under way by the time of confirmation. Occasionally, when the unexpired term has been for a relatively short period, the President has submitted two nominations of the same person simultaneously the first to complete the unexpired term and the second to complete the entire succeeding term of office. <1.1.3. Appointment of Chairs and Political Independence> On some commissions, the chair is subject to Senate confirmation and must be appointed from among the incumbent commissioners. If the President wishes to appoint, as chair, someone who is not on the commission, the President simultaneously submits two nominations for the nominee one for member and the other for chair. As independent entities with staggered membership, executive branch boards and commissions have more political independence from the President than do executive departments. Nonetheless, the President can sometimes exercise significant influence over the composition of a board or commission's membership when he designates the chair or has the opportunity to fill a number of vacancies at once. For example, President George W. Bush had the chance to shape the Securities and Exchange Commission (SEC) during the first two years of his presidency because of existing vacancies, resignations, and a member's death. Likewise, during the same time period, President Bush was able to submit nominations for all of the positions on the National Labor Relations Board because of existing vacancies, expiring recess appointments, and resignations. Simultaneous turnover of board or commission membership may result from coincidence, but it also may be the result of a buildup of vacancies after extended periods of time in which the President does not nominate, or the Senate does not confirm, members. <1.1.4. Political Affiliations and Inspectors General> Two other notable characteristics apply to appointments to some of the boards and commissions. First, for 26 of the 34 bodies discussed in this report, the law limits the number of appointed members who may belong to the same political party, usually to no more than a bare majority of the appointed members (e.g., two of three or three of five). Second, advice and consent requirements also apply to inspector general appointments in four of these organizations and general counsel appointments in three. <1.2. Appointments During the 115th Congress> During the 115 th Congress, President Donald Trump submitted nominations to the Senate for 112 of the 151 full-time positions on 34 regulatory and other boards and commissions. In attempting to fill these 112 positions, he submitted a total of 140 nominations, of which 75 were confirmed, 12 were withdrawn, and 53 were returned to the President. No recess appointments were made. Table 1 summarizes the appointment activity for the 115 th Congress. At the end of the Congress, 22 incumbents were serving past the expiration of their terms. In addition, there were 43 vacancies among the 151 positions. <1.3. Length of Time to Confirm a Nomination> The length of time a given nomination may be pending in the Senate has varied widely. Some nominations have been confirmed within a few days, others have been confirmed within several months, and some have never been confirmed. In the board and commission profiles, this report provides, for each board or commission nomination confirmed in the 115 th Congress, the number of days between nomination and confirmation ("days to confirm"). Under Senate rules, nominations not acted on by the Senate at the end of a session of Congress (or before a recess of 30 days) are returned to the President. The Senate, by unanimous consent, often waives this rule although not always. In cases where the President resubmits a returned nomination, this report measures the days to confirm from the date of receipt of the resubmitted nomination, not the original. For those nominations confirmed in the 115 th Congress, a mean of 121.0 days elapsed between nomination and confirmation. The median number of days elapsed was 91.0. <2. Organization of the Report> <2.1. Board and Commission Profiles> Each of the 34 board or commission profiles in this report is organized into three parts. First, the leadership structure section discusses the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether these members may continue in their positions after their terms expire, whether political balance is required, and the method for selecting the chair. The first table lists incumbents to full-time positions as of the end of the 115 th Congress, along with party affiliation (where applicable), date of first confirmation, and term expiration date. Incumbents whose terms have expired are italicized. Most incumbents serve fixed terms of office and are removable only for specified causes. They generally remain in office when a new Administration assumes office following a presidential election. The second table lists appointment action for vacant positions during the 115 th Congress. This table provides the name of the nominee, position title, date of nomination or appointment, date of confirmation, and number of days between receipt of a nomination and confirmation, and notes relevant actions other than confirmation (e.g., nominations returned to or withdrawn by the President). When more than one nominee has had appointment action, the second table also provides statistics on the length of time between nomination and confirmation. The average days to confirm are provided in the form of a mean number. <2.2. Additional Appointment Information> Appendix A provides two tables. Table A-1 includes information on each of the nominations and appointments to regulatory and other collegial boards and commissions during the 115 th Congress. It is alphabetically organized and follows a similar format to that of the "Appointment Action" sections discussed above. It identifies the board or commission involved and the dates of nomination and confirmation. It also indicates if a nomination was withdrawn, returned, rejected, or if a recess appointment was made. In addition, it provides the mean and median number of days taken to confirm a nomination. Table A-2 contains summary information on appointments and nominations by organization. For each of the 34 independent boards and commissions discussed in this report, it shows the number of positions, vacancies, incumbents whose term had expired, nominations, individual nominees, positions to which nominations were made, confirmations, nominations returned to the President, nominations withdrawn, and recess appointments. A list of organization abbreviations can be found in Appendix B . <3. Chemical Safety and Hazard Investigation Board10> The Chemical Safety and Hazard Investigation Board is an independent agency consisting of five members who serve five-year terms (no political balance is required), including a chair. The President appoints the members, including the chair, with the advice and consent of the Senate. When a term expires, the incumbent must leave office. <4. Commodity Futures Trading Commission11> The Commodity Futures Trading Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. At the end of a term, a member may remain in office, unless replaced, until the end of the next session of Congress. The chair is also appointed by the President, with the advice and consent of the Senate. <5. Consumer Product Safety Commission12> The statute establishing the Consumer Product Safety Commission calls for five members who serve seven-year terms. No more than three members may be from the same political party. A member may remain in office for one year at the end of a term, unless replaced. The chair is also appointed by the President, with the advice and consent of the Senate. <6. Defense Nuclear Facilities Safety Board13> The Defense Nuclear Facilities Safety Board consists of five members (no more than three may be from the same political party) who serve five-year terms. After a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair. <7. Election Assistance Commission14> The Election Assistance Commission consists of four members (no more than two may be from the same political party) who serve four-year terms. After a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and designated by the commission, change each year. <8. Equal Employment Opportunity Commission15> The Equal Employment Opportunity Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. An incumbent whose term has expired may continue to serve until a successor is appointed, except that no such member may continue to serve (1) for more than 60 days when Congress is in session, unless a successor has been nominated; or (2) after the adjournment of the session of the Senate in which the successor's nomination was submitted. The President designates the chair and the vice chair. The President also appoints the general counsel, with the advice and consent of the Senate. <9. Export-Import Bank Board of Directors16> The Export-Import Bank Board of Directors comprises the bank president, who serves as chair; the bank first vice president, who serves as vice chair; and three other members (no more than three of these five may be from the same political party). All five members are appointed by the President, with the advice and consent of the Senate, and serve for terms of up to four years. An incumbent whose term has expired may continue to serve until a successor is qualified, or until six months after the term expires whichever occurs earlier. The President also appoints an inspector general, with the advice and consent of the Senate. <10. Farm Credit Administration18> The Farm Credit Administration consists of three members (no more than two may be from the same political party) who serve six-year terms. A member may not succeed himself or herself unless he or she was first appointed to complete an unexpired term of three years or less. A member whose term expires may continue to serve until a successor takes office. One member is designated by the President to serve as chair for the duration of the member's term. <11. Federal Communications Commission19> The Federal Communications Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. <12. Federal Deposit Insurance Corporation Board of Directors20> The Federal Deposit Insurance Corporation Board of Directors consists of five members, of whom two the comptroller of the currency and the director of the Consumer Financial Protection Bureau are ex officio. The three appointed members serve six-year terms. An appointed member may continue to serve after the expiration of a term until a successor is appointed. Not more than three members of the board may be from the same political party. The President appoints the chair and the vice chair, with the advice and consent of the Senate, from among the appointed members. The chair is appointed for a term of five years. The President also appoints the inspector general, with the advice and consent of the Senate. <13. Federal Election Commission22> The Federal Election Commission consists of six members (no more than three may be from the same political party) who may serve for a single term of six years. When a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and elected by the commission, change each year. Generally, the vice chair succeeds the chair. <14. Federal Energy Regulatory Commission23> The Federal Energy Regulatory Commission, an independent agency within the Department of Energy, consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office, except that such commissioner may not serve beyond the end of the session of the Congress in which his or her term expires. The President designates the chair. <15. Federal Labor Relations Authority24> The Federal Labor Relations Authority consists of three members (no more than two may be from the same political party) who serve five-year terms. After the date on which a five-year term expires, a member may continue to serve until the end of the next Congress, unless a successor is appointed before that time. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. <16. Federal Maritime Commission25> The Federal Maritime Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. <17. Federal Mine Safety and Health Review Commission26> The Federal Mine Safety and Health Review Commission consists of five members (no political balance is required) who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. <18. Federal Reserve System Board of Governors27> The Federal Reserve System Board of Governors consists of seven members (no political balance is required) who serve 14-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair and vice chair, who are separately appointed as members, for four-year terms, with the advice and consent of the Senate. <19. Federal Trade Commission28> The Federal Trade Commission consists of five members (no more than three may be from the same political party) who serve seven-year terms. When a term expires, the member may continue to serve until a successor takes office. The President designates the chair. <20. Financial Stability Oversight Council29> The Financial Stability Oversight Council consists of 10 voting members and 5 nonvoting members, and is chaired by the Secretary of the Treasury. Of the 10 voting members, 9 serve ex officio, by virtue of their positions as leaders of other agencies. The remaining voting member is appointed by the President with the advice and consent of the Senate and serves full time for a term of six years. Of the five nonvoting members, two serve ex officio. The remaining three nonvoting members are designated through a process determined by the constituencies they represent, and they serve for terms of two years. The council is not required to have a balance of political party representation. <21. Foreign Claims Settlement Commission30> The Foreign Claims Settlement Commission, located in the Department of Justice, consists of three members (political balance is not required) who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who is appointed by the President with the advice and consent of the Senate, serves full time. <22. Merit Systems Protection Board31> The Merit Systems Protection Board consists of three members (no more than two may be from the same political party) who serve seven-year terms. A member who has been appointed to a full seven-year term may not be reappointed to any following term. When a term expires, the member may continue to serve for one year, unless a successor is appointed before that time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chair. <23. National Credit Union Administration Board of Directors32> The National Credit Union Administration Board of Directors consists of three members (no more than two members may be from the same political party) who serve six-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. <24. National Labor Relations Board33> The National Labor Relations Board consists of five members who serve five-year terms. Political balance is not required, but, by tradition, no more than three members are from the same political party. When a term expires, the member must leave office. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. <25. National Mediation Board34> The National Mediation Board consists of three members (no more than two may be from the same political party) who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. The board annually designates a chair. <26. National Transportation Safety Board35> The National Transportation Safety Board consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair from among the members for a two-year term, with the advice and consent of the Senate, and designates the vice chair. <27. Nuclear Regulatory Commission36> The Nuclear Regulatory Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, the member must leave office. The President designates the chair. The President also appoints the inspector general, with the advice and consent of the Senate. <28. Occupational Safety and Health Review Commission38> The Occupational Safety and Health Review Commission consists of three members (political balance is not required) who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. <29. Postal Regulatory Commission39> The Postal Regulatory Commission consists of five members (no more than three may be from the same political party) who serve six-year terms. After a term expires, a member may continue to serve until his or her successor takes office, but the member may not continue to serve for more than one year after the date upon which his or her term otherwise would expire. The President designates the chair, and the members select the vice chair. <30. Privacy and Civil Liberties Oversight Board40> The Privacy and Civil Liberties Oversight Board consists of five members (no more than three may be from the same political party) who serve six-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who is appointed by the President with the advice and consent of the Senate, serves full time. The Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 , Title VIII, Section 801 (121 Stat. 352), established the Privacy and Civil Liberties Oversight Board. Previously, the Privacy and Civil Liberties Oversight Board functioned as part of the White House Office in the Executive Office of the President. That board ceased functioning on January 30, 2008. <31. Railroad Retirement Board41> The Railroad Retirement Board consists of three members (political balance is not required) who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office. The President appoints the chair and an inspector general with the advice and consent of the Senate. <32. Securities and Exchange Commission43> The Securities and Exchange Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, the member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. <33. Surface Transportation Board44> The Surface Transportation Board, located within the Department of Transportation, consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office but for not more than one year after expiration. The President designates the chair. <34. United States International Trade Commission45> The United States International Trade Commission consists of six members (no more than three may be from the same political party) who serve nine-year terms. A member of the commission who has served for more than five years is ineligible for reappointment. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair for two-year terms of office, but they may not belong to the same political party. The President may not designate a chair with less than one year of continuous service as a member. This restriction does not apply to the vice chair. <35. United States Parole Commission> The United States Parole Commission is an independent agency in the Department of Justice. The commission consists of five commissioners (political balance is not required) who serve for six-year terms. When a term expires, a member may continue to serve until a successor takes office. In most cases, a commissioner may serve no more than 12 years. The President designates the chair (18 U.S.C. 4202). The commission was previously scheduled to be phased out, but Congress has extended its life several times. Under P.L. 113-47 , Section 2 (127 Stat. 572), it was extended until November 1, 2018 (18 U.S.C. 3551 note). <36. United States Sentencing Commission46> The United States Sentencing Commission is a judicial branch agency that consists of seven voting members, who are appointed to six-year terms, and one nonvoting member. The seven voting members are appointed by the President, with the advice and consent of the Senate, and only the chair and three vice chairs serve full time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chairs. At least three members must be federal judges. No more than four members may be of the same political party. No more than two vice chairs may be of the same political party. No voting member may serve more than two full terms. When a term expires, an incumbent may continue to serve until he or she is reappointed, a successor takes office, or Congress adjourns sine die at the end of the session that commences after the expiration of the term, whichever is earliest. The Attorney General (or designee) serves ex officio as a nonvoting member. The chair of the United State Parole Commission also is an ex officio nonvoting member of the commission. Appendix A. Summary of All Nominations and Appointments to Collegial Boards and Commissions Appendix B. Board and Commission Abbreviations

The President makes appointments to certain positions within the federal government, either using authorities granted to the President alone or with the advice and consent of the Senate. There are some 151 full-time leadership positions on 34 federal regulatory and other collegial boards and commissions for which the Senate provides advice and consent. This report identifies all nominations submitted to the Senate for full-time positions on these 34 boards and commissions during the 115 th Congress. Information for each board and commission is presented in profiles and tables. The profiles provide information on leadership structures and statutory requirements (such as term limits and party balance requirements). The tables include full-time positions confirmed by the Senate, incumbents as of the end of the 115 th Congress, incumbents' parties (where balance is required), and appointment action within each board or commission. Additional summary information across all 34 boards and commissions appears in Appendix A . During the 115 th Congress, the President submitted 140 nominations to the Senate for full-time positions on these boards and commissions (most of the remaining positions on these boards and commissions were not vacant during that time). Of these 140 nominations, 75 were confirmed, 12 were withdrawn, and 53 were returned to the President. At the end of the 115 th Congress, 22 incumbents were serving past the expiration of their terms. In addition, there were 43 vacancies among the 151 positions. Information for this report was compiled using the Senate nominations database at https://www.congress.gov/ , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2016 Plum Book ( United States Government Policy and Supporting Positions ). This report will not be updated.

crs_R45941

crs_R45941_0

<1. Introduction> <1.1. Budget Authority and Budgetary Resources> The Constitution reserves to Congress the power of the purse, exercised through legislation that grants federal agencies legal authority to enter into financial obligations that will result in outlays of federal funds. When Congress enacts authority for agencies to enter into financial obligations for particular purposes, it is called "budget authority." Newly enacted budget authority and unspent balances of prior year budget authority are referred to collectively as "budgetary resources." Budgetary resources include two types of spending. The first, "discretionary spending," refers to budget authority provided in annual appropriations funding bills. Discretionary spending makes up about 30% of federal spending but receives the largest share of budgetary scrutiny, because appropriations bills are subject to congressional decisionmaking each fiscal year. The other 70% of federal spending is called "mandatory" or "direct" spending, because the budget authority flows directly from multiyear authorizing laws enacted outside the annual appropriations process. Examples of mandatory spending are entitlement programs, supplemental nutrition assistance, and multiyear highway bills enacted by authorizing committees. Sequestration is a budgetary mechanism that requires automatic cancellation of budgetary resources through across-the-board reductions to programs, projects, and activities. Since the creation of the sequester mechanism in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), it has been used to enforce a variety of fiscal policy goals. <2. The BCA and the Joint Committee Sequester> The Budget Control Act of 2011 (BCA) included two parts: discretionary spending caps for an initial tranche of budgetary savings and a "Joint Committee process" to achieve broader budgetary savings. For the initial tranche of budgetary savings, the BCA placed statutory limits on discretionary spending for each fiscal year from FY2012 through FY2021. At the time of enactment, the BCA discretionary spending caps were projected to save $917 billion over the ensuing decade. To accomplish the second, and larger, tranche of savings, the BCA established a bipartisan, bicameral Joint Select Committee on Deficit Reduction (Joint Committee). The committee was to negotiate a deficit reduction package to save another $1.5 trillion through FY2021. As a fallback, the BCA provided that automatic spending reductions would be triggered if Congress did not enact at least $1.2 trillion in budget savings by January 15, 2012. The deadline was not met, and this triggered the BCA's $1.2 trillion in automatic spending reductions. The automatic reductions were designed to achieve $1.2 trillion in budgetary savings by reducing both discretionary and mandatory spending each year through FY2021: Most of the $1.2 trillion in additional budgetary savings was to be achieved by reducing the discretionary spending caps. Subsequent legislation has partially or fully rolled back these additional discretionary spending reductions. The remainder of the $1.2 trillion in savings was to be achieved through annual across-the-board cuts (sequestration) in all nonexempt mandatory spending. This portion of the automatic reductions has been fully implemented and extended for an additional eight years through FY2029 (see below, "Extension of the Joint Committee Sequester"). <3. Calculating the Joint Committee Sequester> The BCA includes detailed statutory directions for the Office of Management and Budget (OMB) to calculate, and the President to implement, the Joint Committee reductions for each fiscal year through 2021. As summarized below, the calculation of the discretionary cap reductions and the across-the-board cuts in mandatory spending are interdependent even though the discretionary spending caps have been revised by subsequent legislation. OMB must still calculate the annual spending cap reductions as set forth in the 2011 statute in order to arrive at the mandatory spending cuts. The Joint Committee reductions are calculated as follows (see Figure 1 ): In order to achieve the required $1.2 trillion of deficit reduction, the BCA first subtracts 18% ($216 billion) for debt service savings associated with the required deficit reduction. It then divides the remainder ($984 billion) over the nine years of the BCA to arrive at a required annual reduction of $109.3 billion for each fiscal year from FY2013 through FY2021. The BCA required the annual reduction of $109.3 billion to be split evenly between defense spending and nondefense spending so that each category is reduced by $54.667 billion in each fiscal year through FY2021. The required reductions of $54.667 billion were allocated between discretionary spending and mandatory spending within each category subject to exemptions and special rules for particular programs. The required reductions in discretionary spending were implemented by lowering the BCA discretionary spending limits, although the required cap reductions have been superseded by legislation revising the caps. The required reductions in mandatory spending were achieved through the mandatory sequester automatic across-the-board cuts in nonexempt mandatory spending. <3.1. FY2020 Defense Calculations> Step 1 . Under the BCA, total spending in the defense category must be reduced by $54.667 billion, allocated proportionally between discretionary appropriations and mandatory spending. OMB calculates how much of the defense spending base is discretionary versus mandatory. The BCA calculates the discretionary-to-mandatory ratio for the defense category as follows: defense discretionary spending is set by the BCA defense spending limit for FY2020, which is $630 billion; and mandatory spending is set by OMB's baseline estimate of (nonexempt) mandatory spending, which is $9.844 billion. This calculation results in a ratio of 98.46% for defense discretionary spending and 1.54% for defense mandatory spending. Step 2 . To achieve the required overall defense category reduction of $54.667 billion, these percentages result in a defense discretionary reduction of $53.825 billion and a defense mandatory reduction of $842 million. Step 3 . The required defense discretionary reduction lowers the spending cap to the adjusted cap level of $576.175 billion. This cap level is now superseded by the revised level enacted in the Bipartisan Budget Act (BBA) of 2019, which is $666.5 billion. Step 4 . The defense mandatory reduction of $842 million is achieved by dividing that amount into the nonexempt mandatory spending base of $9.844 billion. This results in an 8.6% across-the-board cut (sequestration) to be applied to all nonexempt defense budget accounts with mandatory spending. Once this uniform percentage is determined, Section 256(k)(2) of BBEDCA requires that sequestration be applied equally to all programs, projects, and activities (PPAs) within the affected budget accounts. <3.2. FY2020 Nondefense Calculations> The BCA calculations for the nondefense category have more steps than the defense calculations due to special requirements for Medicare and student loans that are explained below. Step 1 . Under the BCA, total spending in the nondefense category must be reduced by $54.667 billion with reductions in discretionary and mandatory spending. The largest portion of the mandatory sequestration comes from the Medicare program, which is subject to 2% across-the-board cuts. For FY2020, the portion of Medicare subject to the 2% sequester is estimated by OMB to have outlays of $765.495 billion, so a 2% reduction would reduce Medicare outlays by $15.310 billion. This leaves a required non-Medicare reduction of $39.357 billion from the remaining nondefense category. Step 2 . The remaining reduction of $39.357 billion is allocated proportionally between nondefense discretionary appropriations and nondefense (non-Medicare) mandatory spending. The BCA calculates the discretionary-to-mandatory ratio for the nondefense category as follows: nondefense discretionary spending is set by the BCA nondefense spending limit for FY2020, which is $578 billion; and nondefense mandatory spending is set by OMB's baseline estimate of (nonexempt, non-Medicare) mandatory spending, which is $75.518 billion. This calculation results in a ratio of 88.44% for nondefense discretionary spending and 11.56% for nondefense, non-Medicare nonexempt mandatory spending. To achieve the required non-Medicare nondefense reduction of $39.357 billion, these percentages result in a nondefense discretionary reduction of $34.807 billion and a nondefense (non-Medicare) mandatory reduction of $4.550 billion. Step 3 . The nondefense discretionary reduction is implemented by lowering the BCA spending cap by $34.807 billion to the adjusted cap level of $543.193 billion (although this cap level is now superseded by the revised level enacted in the BBA of 2019, which is $621.5 billion). Step 4 : Under OMB's calculation, the remaining reduction ($4.550 billion) to direct spending is achieved by applying a 5.9% uniform percentage reduction to non-Medicare nonexempt mandatory spending and increasing student loan fees by the same 5.9%. Once this uniform percentage is determined, Section 256(k)(2) of BBEDCA requires that sequestration be applied equally to all PPAs within the affected budget accounts. <4. Extension of the Joint Committee Sequester> As discussed above, the BCA established statutory limits on discretionary spending for FY2013-FY2021 to achieve about $900 billion in budgetary savings. The BCA triggered an additional tranche of automatic budgetary savings $1.2 trillion over FY2013-FY2021 when Congress's Joint Committee did not report, and Congress did not enact, at least $1.2 trillion in budget savings by January 15, 2012. The automatic Joint Committee reductions include changes in the discretionary spending limits and sequestration (across-the-board cuts) in mandatory spending. The requirement for a Joint Committee (mandatory) sequester in FY2013-FY2021 has been extended on five occasions to offset increases in discretionary spending and other legislation and is now required for each fiscal year through FY2029: The BBA of 2013 ( H.J.Res. 59 , P.L. 113-67 ) amended BBEDCA to increase the discretionary spending limits for FY2014 and FY2015 and added two years to the Joint Committee mandatory sequester (FY2022 and FY2023). P.L. 113-82 ( S. 25 , an Act relating to cost of living adjustments for military retirees, February 15, 2014) amended BBDECA to add one year to the Joint Committee mandatory sequester (FY2024). The BBA of 2015 ( H.R. 1314 , P.L. 114-74 ) amended BBEDCA to increase the discretionary spending limits for FY2016 and FY2017 and added one year to the Joint Committee mandatory sequester (FY2025). The BBA of 2018 ( H.R. 1892 , P.L. 115-123 ) amended BBEDCA to increase the discretionary spending limits for FY2018 and FY2019 and added two years to the Joint Committee mandatory sequester (FY2026 and FY2027). The BBA of 2019 ( H.R. 3877 , P.L. 116-37 ) amended BBEDCA to increase the discretionary limits for FY2020 and FY2021 and added two years to the Joint Committee mandatory sequester (FY2028 and FY2029). <4.1. Calculation of the Joint Committee Sequester in the Extension Years> As explained above, the Joint Committee mandatory sequester is calculated based on the statutory requirement to save $109.3 billion in each fiscal year from FY2013 through FY2021, with half of the savings coming from defense and half from nondefense programs. The defense and nondefense reductions of $54.667 billion per year are apportioned between discretionary and mandatory programs according to the formulas explained in the FY2020 illustrations above. After FY2021, there is no statutory requirement to achieve $54.667 billion in budgetary savings in defense and nondefense spending and, consequently, no specific amounts to apportion to mandatory (or discretionary) savings. Therefore, the statutes extending the Joint Committee mandatory sequester have tied the defense and nondefense mandatory savings for FY2022-FY2029 to the uniform percentage reductions to be calculated by OMB for FY2021 in the Report on the Joint Committee Reduction that is to be released concurrent with the President's budget in February 2020. This means that for FY2022-FY2029 the percentage reduction for nonexempt direct spending for the defense category is the same percent as the percentage reduction for the defense category for FY2021, and the percentage reduction for nonexempt direct spending for the nondefense category is the same percent as the percentage reduction for the nondefense category for FY2021. <5. Scope, Exemptions, and Special Rules> <5.1. Scope of the Mandatory Sequester> Sequestration is a cancellation of budgetary resources by the President required by statute in all nonexempt programs and accounts. While many programs and activities are fully or partially exempted from the mandatory sequester, the mechanism nevertheless has a broad reach. In addition to the sequestration of Medicare payments, the Joint Committee sequester automatically reduces more than 200 budget accounts impacting a broad array of programs, including Affordable Care Act cost-sharing reduction subsidies and risk adjustment; farm price and income supports; compensation and services for crime victims; citizenship and immigration services; agricultural marketing services and conservation programs; animal and plant health inspection; Federal Deposit Insurance Corporation orderly liquidation operations; vocational rehabilitation services; mineral leasing payments; Centers for Medicare and Medicaid Services (CMS) program management; social services block grants; Departments of Justice and the Treasury law enforcement activities; student loan origination fees; highway performance; school construction bonds; spectrum relocation activities; Trade Adjustment Assistance; Consumer Financial Protection Bureau; Drug Enforcement Administration operations; Tennessee Valley Authority; fish and wildlife restoration and conservation; affordable housing; the maternal, infant, and early childhood home visiting program; and Gulf Coast restoration. <5.2. Mandatory Sequester Exemptions> Many programs and activities are exempt from sequestration under Section 255 of BBEDCA (2 U.S.C. 905; see Appendix E for a complete list of exemptions). In dollar terms, three-quarters of all mandatory spending is exempt from the mandatory sequester as illustrated in Figure 2 . In addition to program exemptions, several programs are subject to special rules, including a 2% limit on sequestration reductions to Medicare, explained below. <5.2.1. 2% Sequester Limit for Medicare> Medicare is the federal health insurance program for people who are 65 or older, for younger people with permanent disabilities, and for people of any age with end-stage renal disease. It is the largest mandatory spending program subject to sequestration, although special rules limit the sequestration of Medicare benefit payments to 2% rather than the uniform percentage applied to other nonexempt mandatory spending programs (5.9% in FY2020). Most Medicare spending $765.5 billion in FY2020 is subject to the 2% sequester including payments to health care providers for hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care. Generally, Medicare's provider payment and benefit structure remains unchanged under a mandatory sequestration order, and beneficiaries see few direct impacts. However, the indirect impact on particular health care providers and beneficiaries is more complex particularly for Medicare Advantage and Part D prescription drug coverage. In "traditional Medicare," the program pays providers on a fee-for-service basis, and the 2% sequester reduction is applied directly to provider payments. Under Medicare Advantage, by contrast, private health plans are paid a per-person ("capitated") monthly amount to provide nearly all Medicare-covered benefits to beneficiaries who enroll in their plans. The Joint Committee 2% sequester is applied to Medicare's monthly capitation payment and the Medicare Advantage Organizations (MAOs) administering the plans determine how the reduced capitation payments are to be distributed among medical providers, administrative expenses, risk adjustments, and plan rebates to beneficiaries. Similarly, under Medicare Part D, the optional outpatient prescription drug benefit plans are paid through capitated monthly payments (the "direct subsidy") to private plans. The 2% Medicare sequester reduces these monthly direct subsidy amounts. A key consequence of the 2% Medicare sequester limit is that it increases the uniform percentage reduction applied to non-Medicare mandatory programs. For example, in FY2020, if there were no 2% limit on the Medicare sequester, a uniform percentage reduction applied to all nonexempt mandatory spending (including Medicare) would be 3.9% rather than the 5.9% reduction applied in the October 1, 2019, sequester order. Medicare sequester special rules follow: Part D low-income subsidies, Part D catastrophic subsidies (reinsurance), and Qualifying Individuals Part B premium assistance are exempted from sequestration. Medicare administrative expenses , if classified as mandatory spending, are subject to the full Joint Committee mandatory sequester (5.9% in FY2020) rather than protected by the 2% limit. Special rules determine whether Health Care Fraud and Abuse Control Program (HCFAC) funds are subject to the 2% limit. After a sequester order is issued, Medicare payments are sequestered beginning on the first day of the following month and remain in effect during the following one-year period, even if there is an intervening sequester order. The total amount sequestered from Medicare depends on actual Medicare spending in a given year rather than an amount based on OMB's estimate. (For example, if actual Medicare outlays exceed the estimated amount included in a sequestration order, the additional outlays would be subject to the sequester.) Medicare sequestration in FY2029 is subject to a special rule 4% during the first six months and 0% for the second six months of the order. <5.2.2. Special Rule for Student Loans27> Sequestration impacts federal student loans differently than it does other programs. For federal student loans, sequestration is applied to student loan origination fees. The origination fee is money the borrower (that is, the student or the student's parents) pays to the federal government to offset the costs of issuing the loan. The fee is calculated as a percentage of the loan's total and is subtracted from the loan amount. Direct Subsidized Loans and Direct Unsubsidized Loans generally have a fee of about 1%, and Direct PLUS loans generally have a fee of about 4%. For example, if a student's parents take out a federal PLUS loan of $16,450, with an origination fee of 4.248%, about $15,750 of the loan would go to the school and $700 to the federal government for the origination fee. Special sequestration rules (BBEDCA 256 , 2 U.S.C. 906 ) for student loans provide that the federal budgetary savings are achieved by increasing the origination fee the money going to the federal Treasury rather than reducing the overall loan amount. For example, for FY2020, the 5.9% uniform sequester percentage is to be applied as an increase to federal student loan origination fees. In the above example, the result would be that the $700 origination fee would be increased by 5.9% or about $41 the effect of which would be to reduce the amount of the loan going to the school. <5.2.3. Other Special Rules> Community and migrant health centers providing primary care to people who have financial, geographic or other barriers to health care are supported by discretionary and mandatory funding under the Affordable Care Act. In years when mandatory spending is estimated, at the time OMB calculates a sequester, the spending reductions are limited to a 2% sequester. Indian Health Service (IHS) provides health services to 2.6 million American Indians and Alaska Natives. While most IHS funding is provided through discretionary appropriations, IHS receives mandatory appropriations for programs including treatment of diabetes. In years when mandatory spending is estimated at the time OMB calculates a sequester, the spending reductions are limited to a 2% sequester. Administrative expenses : Federal administrative expenses are subject to sequestration even if they are incurred in connection with a program that is exempt or subject to a special rule. However, this special rule applies only to administrative expenses classified as mandatory spending. Defense unobligated balances: Unobligated balances of budget authority carried over from prior fiscal years in the defense category are subject to the mandatory sequester pursuant to Section 255(e) of BBEDCA. Intragovernmental payments: For intragovernmental payments, sequestration is applied to the paying account. The funds are generally exempt in the receiving account in accordance with Section 255(g)(1)(A) of BBEDCA so that the same dollars are not sequestered twice. Revo lving, trust, and special fund accounts and offsetting collections: Budgetary resources in revolving, trust, and special fund accounts and offsetting collections reduced by a mandatory sequester are not available for obligation during the fiscal year in which the sequestration occurs but are available in subsequent years to the extent otherwise provided. Appendix A. Mandatory Sequester by Fiscal Year Appendix B. FY2020 Programmatic Impact of the Joint Committee Sequester On March 18, 2019, OMB, as part of its annual budget transmittal to Congress and as required by the BCA, released the OMB Report to Congress on the Joint Committee Reductions for Fiscal Year 2020 . In addition to setting forth the calculations of the upcoming fiscal year's sequester as required by statute, the report includes account-by-account detail of the amount by which each mandatory spending account is required by statute to be reduced at the beginning of the new fiscal year. Specifically, the report identifies four mandatory spending accounts to be reduced by the 2% Medicare sequester, six mandatory spending accounts to be reduced by the 8.6% defense sequester, and 208 mandatory spending accounts to be reduced by the 5.9% nondefense sequester. For illustrative purposes, the table below displays the FY2020 mandatory sequester reductions of $20 million or more, with brief descriptions of the programs. For a complete list of mandatory spending accounts subject to sequester for FY2020, see the Appendix of the OMB Report to Congress . Appendix C. Sequestration Order for FY2020 EXECUTIVE ORDERS Sequestration Order for Fiscal Year 2020 Issued on: March 18, 2019 By the authority vested in me as President by the laws of the United States of America, and in accordance with section 251A of the Balanced Budget and Emergency Deficit Control Act (the "Act"), as amended, 2 U.S.C. 901a, I hereby order that, on October 1, 2019, direct spending budgetary resources for fiscal year 2020 in each non-exempt budget account be reduced by the amount calculated by the Office of Management and Budget in its report to the Congress of March 18, 2019. All sequestrations shall be made in strict accordance with the requirements of section 251A of the Act and the specifications of the Office of Management and Budget's report of March 18, 2019, prepared pursuant to section 251A(9) of the Act. DONALD J. TRUMP THE WHITE HOUSE March 18, 2019. Appendix D. OMB Description of Sequester Calculations Each year through FY2021, concurrent with transmittal of the President's budget, OMB transmits to Congress a report explaining the Joint Committee reductions for the upcoming fiscal year. Relevant portions of the OMB report for FY2020 are included below to illustrate how OMB calculates the mandatory sequester percentages. (The footnotes appearing in this Appendix are from the OMB report.) OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2020 March 18, 2019 The Balanced Budget and Emergency Deficit Control Act (BBEDCA) requires the Office of Management and Budget (OMB) to calculate reductions of fiscal year (FY) 2020 budgetary resources and provide them to the Congress with the transmittal of the Budget. This report provides OMB's calculations of the reductions to the discretionary spending limits ("caps") specified in section 251(c) of BBEDCA for FY 2020 and a listing of the FY 2020 reductions required through sequestration for each nonexempt budget account with direct spending. OMB calculates that the Joint Committee reductions will lower the discretionary cap for the revised security (defense) category by $54 billion and for the revised nonsecurity (nondefense) category by $35 billion. Additionally, the Joint Committee reductions require sequestration reductions to nonexempt direct spending of 2.0 percent to Medicare, 5.9 percent to other nonexempt nondefense mandatory programs, and 8.6 percent to nonexempt defense mandatory programs. Calculation of Annual Reduction by Function Group Under section 251A of BBEDCA, the failure of the Joint Select Committee on Deficit Reduction to propose, and the Congress to enact, legislation to reduce the deficit by $1.2 trillion triggers automatic reductions in FY 2020 through adjustments in the discretionary spending limits and sequestration of direct spending. As shown in Table D-1 , the total amount of deficit reduction required is specified by formula in section 251A(1), starting with the total reduction of $1.2 trillion required for FY 2013 through FY 2021, deducting a specified 18 percent for debt service savings, and then dividing the result by nine to calculate the annual reduction of $109 billion for each year from FY 2013 to FY 2021. Section 251A(2) requires the annual reduction to be split evenly between budget accounts in function 050 (defense function) and in all other functions (nondefense function), so that each function group will be reduced by $54.667 billion. Base for Allocating Reductions and Method of Reduction The annual reduction is further allocated between discretionary and direct spending within each of the function groups. Once the reductions are allocated, separate methods are used to implement the reductions for discretionary appropriations and direct spending. Discretionary Reductions. The base for allocating reductions to discretionary appropriations is the discretionary spending limit for FY 2020 set forth in section 251(c). The reductions are implemented by lowering the discretionary spending limits for the revised security (defense) category and the revised nonsecurity (nondefense) category. Direct Spending Reductions. Pursuant to paragraphs (3) and (4) of section 251A, and consistent with section 6 of the Statutory Pay-As-You-Go Act of 2010, the base for allocating reductions to budget accounts with direct spending is the sum of the direct spending outlays in the budget year and the subsequent year that would result from sequestrable budgetary resources in FY 2020. Estimates of sequestrable budgetary resources and outlays for budget accounts with direct spending are equal to the current law baseline amounts contained in the President's FY 2020 Budget, and include direct spending unobligated balances in the defense function and Federal administrative expenses that would otherwise be exempt. The majority of estimated direct spending unobligated balances in the defense function are in Department of Defense accounts. The Department of Defense estimates of unobligated balances as of October 1, 2019, are consistent with the estimates in the FY 2020 Budget. For purposes of applying the Joint Committee sequestration to direct spending under BBEDCA, "administrative expenses" for typical Government programs are defined as the object classes for personnel compensation, travel, transportation, communication, equipment, supplies, materials, and other services. For Government programs engaging in commercial, business-like activities, administrative expenses constitute overhead costs that are necessary to run a business, and not expenses that are directly tied to the production and delivery of goods or services. The reductions to direct spending are implemented through sequestration of nonexempt budgetary resources. Pursuant to sections 251A(6), 255, and 256, most direct spending is exempt from sequestration or, in the case of the Medicare program and certain other health programs, is subject to a 2 percent limit on sequestration. Defense Function Reduction Steps 1 and 2 on Table D-2 show the calculation of the reduction required for discretionary appropriations and direct spending within the defense function. Steps 3 and 4 on Table D-2 reflect the implementation of the reductions calculated in steps 1 and 2 through an adjustment to the discretionary spending limit for the defense category and a sequestration of direct spending in the defense function. The calculation of the reduction involves the following steps: Step 1 . Pursuant to section 251A(3), the total reduction of $54.667 billion is allocated proportionately between discretionary appropriations and direct spending. The total base is the sum of the FY 2020 discretionary spending limit for the defense category ($630 billion) and OMB's baseline estimates of sequestrable direct spending outlays ($9.844 billion) in the defense function in FY 2020 and FY 2021 from direct spending sequestrable resources in FY 2020. Discretionary appropriations comprise approximately 98 percent of the total base in the defense function. Step 2 . Total defense function spending must be reduced by $54.667 billion. As required by section 251A(3)(A), allocating the reduction based on the ratio of the discretionary spending limit to the total base (the sum of the defense discretionary spending limit and sequestrable direct spending) yields a $53.825 billion reduction required to be made to discretionary appropriations. Under section 251A(3)(B), the remaining $0.842 billion is the reduction required for budget accounts with direct spending. The implementation of the reductions involves the following steps: Step 3 . As required by section 251A(5)(B), the discretionary spending limit for the defense category is lowered by the amount calculated in step 2, which results in a discretionary defense cap for FY 2020 of $576.175 billion. Step 4 . As required by section 251A(6), the percentage reduction for nonexempt direct spending is calculated by dividing the direct spending reduction amount ($0.842 billion) by the sequestrable budgetary resources ($9.844 billion) for budget accounts with direct spending, which yields a 8.6 percent sequestration for budget accounts with nonexempt direct spending. Nondefense Function Reduction Steps 1 and 2 on Table D-3 show the calculation of the reduction required for discretionary appropriations and direct spending within all other functions besides 050 (nondefense function). The calculation is more complicated than the calculation for the defense function due to a two percent limit in the reduction of Medicare non-administrative spending and a special rule for applying the reduction to student loans. Steps 3 and 4 on Table D-3 reflect the implementation of the reductions calculated in steps 1 and 2 through an adjustment to the discretionary spending limit for the nondefense category and a sequestration of direct spending in the nondefense function. The calculation of the reduction involves the following steps: Step 1 . Total spending in the nondefense function must be reduced by $54.667 billion. The portion of Medicare subject to the two percent limit is estimated to have combined FY 2020 and FY 2021 outlays of $765.495 billion from FY 2020 budgetary resources, so a two percentage point reduction would reduce outlays by $15.310 billion, leaving a reduction of $39.357 billion to be taken from discretionary appropriations and other direct spending in the nondefense function. Step 2 . Pursuant to section 251A(4), the remaining reduction of $39.357 billion is allocated proportionately between discretionary appropriations and other direct spending in the nondefense function. The base ($653.518 billion) is the sum of the FY 2020 discretionary spending limit for the nondefense category ($578.000 billion) and the remaining sequestrable direct spending base ($75.518 billion). The latter amount equals OMB's 2020 Budget baseline estimates of total sequestrable direct spending outlays in the nondefense function in FY 2020 and FY 2021 from direct spending sequestrable resources in FY 2020 ($841.013 billion) minus the portion of Medicare subject to the two percent limit ($765.495 billion). Discretionary appropriations account for 88.44 percent of the remaining base in the nondefense function, and direct spending accounts for 11.56 percent. As required by section 251A(4), applying these percentage allocations to the remaining required reduction for programs in the nondefense function yields the reduction for discretionary appropriations ($34.807 billion) and for remaining direct spending ($4.550 billion). The implementation of the reductions involves the following steps: Step 3 . As required by section 251A(5)(B), the discretionary spending limit for the nondefense category is lowered by the amount calculated in step 2, which results in a discretionary nondefense cap for FY2020 of $543.193 billion. Step 4 . The remaining reduction ($4.550 billion) to direct spending is applied as a uniform percentage reduction to the remaining budget accounts with sequestrable direct spending and by increasing student loan fees by the same uniform percentage, as specified in sections 251A(6) and 256(b). Each percentage point increase in the sequestration rate is estimated to result in $0.010 billion of savings in the direct student loan program. Solving simultaneously for the percentage that would achieve the remaining reduction when applied to both the remaining sequestrable direct spending ($75.518 billion) and to student loan fees yields a 5.9 percent reduction. This percentage reduction yields outlay savings of $0.059 billion in the direct student loan program and $4.491 billion from the remaining budget accounts with nonexempt direct spending. Appendix E. List of Federal Programs Exempt from the Mandatory Sequester Many programs and activities are exempt from the mandatory sequester under Sections 255 and 256(d)(7) of BBEDCA (2 U.S.C. 905). In dollar terms, three-quarters of all mandatory spending is exempt from the mandatory sequester (see Figure 2 ). Exempt manda tory spending programs include Social Security benefits and Tier I railroad retirement benefits Veterans' compensation, pensions, life insurance Net interest (payments on accumulated federal debt) Refundable income tax credits Nondefense unobligated balances of budget authority carried over from prior fiscal years Claims, judgments, and relief acts Exchange Stabilization Fund Federal Deposit Insurance Corporation, Deposit Insurance Fund Federal Home Loan Mortgage Corporation (Freddie Mac) Federal Housing Finance Agency, administrative expenses Federal National Mortgage Corporation (Fannie Mae) Federal Reserve Bank Reimbursement Fund National Credit Union Administration funds Federal retirement and disability including civil service, military, foreign service, and judicial Low-income programs including Child Care Entitlement to States Child Nutrition Programs (with the exception of Special Milk) Children's Health Insurance Program Family support programs (including Child Support Enforcement) Federal Pell Grants (under Section 1070a of Title 20) Grants to states for Medicaid Medicare Part D low-income subsidies, catastrophic subsidies, and Qualified Individual premiums Payments for foster care and permanency Supplemental Nutrition Assistance Program (formerly "food stamps") Supplemental Security Income Temporary Assistance for Needy Families Economic recovery programs including GSE preferred stock purchase agreements, Office of Financial Stability Federal-Aid Highways and Safety Programs Unemployment compensation (but federal share of extended benefits is not exempt) Postal Service Fund Salaries of Article III judges Certain tribal and Indian trust accounts Universal Service Fund Various prior legal obligations of the government including Credit liquidating accounts Federal Crop Insurance Corporation Fund (however, farm price and income supports are not exempt from the Joint Committee sequester) Federal Emergency Management Agency, National Flood Insurance Fund Pension Benefit Guaranty Corporation Fund Terrorism Insurance Program. Appendix F. Additional CRS Resources on Sequestration CRS Insight IN11148, The Bipartisan Budget Act of 2019: Changes to the BCA and Debt Limit , by Grant A. Driessen and Megan S. Lynch. CRS Report R44874, The Budget Control Act: Frequently Asked Questions , by Grant A. Driessen and Megan S. Lynch. CRS Report R45106, Medicare and Budget Sequestration , by Patricia A. Davis. CRS Report R42050, Budget "Sequestration" and Selected Program Exemptions and Special Rules , coordinated by Karen Spar. CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked Questions , by Megan S. Lynch. CRS Report R43133, The Impact of Sequestration on Unemployment Insurance Benefits: Frequently Asked Questions , by Katelin P. Isaacs and Julie M. Whittaker.

The Budget Control Act of 2011 (BCA; P.L. 112-25 ) included two parts: discretionary spending caps, plus a "Joint Committee process" to achieve an additional $1.2 trillion in budgetary savings over FY2013-FY2021. For the initial tranche of savings, the BCA placed statutory limits on discretionary spending for each fiscal year from FY2012 through FY2021. At the time of enactment, the BCA discretionary spending caps were projected to save $917 billion. For the second, and larger, tranche of savings, the BCA established a bipartisan, bicameral Joint Select Committee on Deficit Reduction ("Joint Committee") to negotiate a broad deficit reduction package to save another $1.5 trillion through FY2021. As a fallback, the BCA provided that automatic spending reductions would be triggered if Congress did not enact at least $1.2 trillion in budget savings by January 15, 2012. The deadline was not met, which triggered the BCA's $1.2 trillion in automatic spending reductions. The automatic reductions were designed to achieve $1.2 trillion in budgetary savings by reducing both discretionary and mandatory spending in each year through FY2021. The largest share of the $1.2 trillion in additional savings was to be achieved by reducing the discretionary spending caps and the remainder through annual across-the-board cuts (sequestration) in all nonexempt mandatory spending. The mandatory spending portion of the automatic reductions (referred to in this report as the "Joint Committee sequester") has been fully implemented in each year since FY2013. It has been extended five times and is now, under current law, effective for each fiscal year through FY2029. This report explains the BCA provisions that established and triggered the Joint Committee sequester, the annual sequester calculations by OMB, the extension and calculation of the Joint Committee sequester through FY2029, the broad scope of the sequester across the federal budget, and sequester exemptions and special rules. The appendixes include a table summarizing each sequester since FY2013, a summary of the FY2020 sequester reductions, the text of the FY2020 sequester order, the text of the OMB sequester calculation, a list of mandatory sequester exemptions, and additional CRS resources on sequestration.

crs_R46251

crs_R46251_0

<1. Jurisdiction of House Committees> When legislation is introduced in the House or received from the Senate, it is referred to one or more committees primarily on the basis of the jurisdictional statements contained in clause 1 of House Rule X. These statements define the policy subjects on which each standing committee may exercise jurisdiction on behalf of the chamber. The statements themselves tend to address broad policy areas and not specific departments, agencies, or programs of the federal government. Many federal departments and agencies handle a wide variety of policy areas that do not fit neatly within the subject matter jurisdiction of one or another standing committee. Because committee jurisdiction often is expressed in general policy terms, it is possible for more than one committee to claim jurisdiction over different aspects of a broad subject that may encompass a myriad of specific programs and activities. Additional guidance and context to the referral of measures addressing particular policy areas can be found in notes and annotations written by the House Parliamentarian located below the jurisdictional statements of each standing committee in the House Manual . Take the subject of roads for example. When it comes to the design and planning of road construction or maintenance, the House Transportation and Infrastructure Committee exercises jurisdiction on the basis of its responsibility defined in clause 1(r)(11) of Rule X for the "Construction or maintenance of roads or post roads (other than appropriations therefor)." However, as suggested by the parenthetical in this jurisdictional statement, the amount of money made available for road construction or maintenance through the annual appropriations process is a matter within the domain of the House Committee on Appropriations, which has jurisdiction over the "Appropriation of the revenue for the support of the Government." Furthermore, in addition to federal spending that occurs through the annual appropriations process, funding for the construction and maintenance of the nation's roadways may also be drawn from the Highway Trust Fund, which accrues revenue mainly from the collection of federal gasoline taxes. The use of general revenues to fund a particular federal activity in this case, highways is by precedent considered a matter of revenue collection and within the purview of the House Committee on Ways and Means, which has jurisdiction over "Revenue measures generally." Additional committees as well may exercise jurisdiction over aspects of the nation's roadways, depending on how subjects within their jurisdictions are connected to issues involving roads. <2. Referral of Legislation in the House> When a Member introduces a bill or resolution, or when legislation from the Senate is received in the House, clause 2 of House Rule XII directs the Speaker to refer the measure to committee in such manner as to ensure to the maximum extent feasible that each committee that has jurisdiction under clause 1 of Rule X over the subject matter of a provision thereof may consider such provision and report to the House thereon. Multiple referral referring a measure to more than one committee is common in the House as a result of the standing rules governing jurisdiction (Rule X) and the referral of legislation to committee (Rule XII). When language in a measure is within a committee's jurisdiction, it will trigger ("to the maximum extent feasible") a referral of the measure to that committee. In practice, the entire bill is sent to each committee of referral with the expectation that each committee will act only on matters that fall within its jurisdiction. Committees often monitor their own legislative actions and those of their counterparts for any jurisdictional issues that may arise when a committee reports its recommended changes to the House. When legislation is multiply referred, the Speaker identifies a "primary" committee of referral, which is the panel understood to exercise jurisdiction over the main subject of the measure. House Rule XII further provides the Speaker with the authority to refer legislation to more than one committee either at the point of introduction (an "initial additional referral"), or after another committee has filed its report (a "sequential referral"). The Speaker may also divide a measure into its component parts and refer individual pieces to different House panels (a "split referral"), but split referrals are rare in current practice. The Speaker is empowered to place time limits on any referral and always does so in the case of a sequential referral. In most cases, once the primary committee has reported to the House, the Speaker will set a deadline for additional committees of referral to report or be automatically discharged from further consideration. Although the Speaker has the authority to do so, rarely are time limits established on deliberations of a primary committee, or extended beyond the deadline imposed by a sequential referral. Due to their presumed expertise on matters within their jurisdiction, committees of primary or sole referral generally enjoy deference from the House on whether or not to report legislation to the full chamber. With House approval, the Speaker may appoint Members from relevant committees of jurisdiction to a special, select, or ad hoc committee in order to receive and review specific matters and report to the House its findings or recommendations. Rule XII further indicates that the Speaker "may make such other [referral] provision as may be considered appropriate." House rules vest these powers of referral in the Speaker; in practice, the House Parliamentarian makes day-to-day referral decisions acting as the Speaker's nonpartisan and disinterested agent. Worth noting is that House rules and procedures for referring legislation have changed in recent decades. For instance, prior to January 3, 1975, House rules provided no formal mechanism for a measure to be referred to two or more committees with a jurisdictional claim to the measure's subject matter. The ability of the Speaker to refer legislation to more than one committee was first established in House rules through the adoption of H.Res. 988 (93 th Congress), the Committee Reform Amendments of 1974, which became effective at the start of the 94 th Congress (1975-1976). Furthermore, at the outset of the 98 th Congress (1983-1984), Speaker O'Neill announced a policy of identifying a "primary" committee of jurisdiction when legislation was multiply referred, and beginning in the 104 th Congress (1995-1996) the designation of a primary committee of referral by the Speaker has been a requirement of House rules. <3. Additional Factors Affecting Jurisdiction and Referral> Clause 1 of House Rule X is the main determinant of House committee jurisdiction, but other factors may also influence how legislation is referred. For instance, some committees have crafted written memoranda between them memorializing their common understanding of the jurisdictional boundaries guiding the referral of measures on topics that are jurisdictionally ambiguous, or over which multiple committees make a claim. Such memoranda cannot override the explicit jurisdictional statements of Rule X, but they can be viewed as explanations of the committees' common understanding of these statements. In some cases, committees have published these memoranda in the Congressional Record . The act of referring measures to committees also can serve as a determinant of House committee jurisdiction. According to Hinds' Precedents of the U.S. House of Representatives , when the House refers "a bill or resolution to any committee ... jurisdiction is thereby conferred." Consequently, once a measure has been referred to a committee, precedent is established for future referrals to that committee of measures of the same type. This is true even in the case of an erroneous reference to committee. If the error is not corrected, jurisdiction is conferred on the committee by the referral. If a measure is enacted into law, amendments to the law are presumed to be within the originating committee's jurisdiction. The referral of certain kinds of measures may also be defined in statute. The House rulebook contains 35 different sets of statutory legislative procedures (also called "expedited" or "fast-track" procedures) that apply only to a narrow class of items described in the statute itself. Some statutory procedures contain "automatic referral" provisions specifying the committee(s) to which a particular item would be referred if one were introduced or received by the House. For instance, if the Defense Base Closure Commission reports to Congress a recommendation to relocate or close U.S. military bases, the Defense Base Closure and Realignment Act of 1990 ( P.L. 101-510 ) allows for expedited consideration of a House or Senate joint resolution disapproving the commission's recommendation. If such a joint resolution were introduced in the House, Section 2908(b) of that act indicates that it "shall be referred to the Committee on Armed Services." <4. Jurisdiction and Referral to House Subcommittees> The jurisdictions of subcommittees are not explicitly stated in House rules. The jurisdiction of a subcommittee is generally determined by the full committee that created it. In many cases, the full committee will establish the jurisdictions of its subcommittees in the rules that committees are required to adopt during the first few months of a new Congress. If a subcommittee's jurisdiction is not defined by its parent committee, measures are generally referred to subcommittee or retained by the full committee at the discretion of its chair. Some committees rely more heavily on their subcommittees to process legislation and make recommendations than do other committees. <5. Legislative and Oversight Jurisdiction> An important distinction can be drawn between legislative and oversight jurisdiction. Legislative jurisdiction describes the authority of a committee to receive and report measures to the House. Oversight jurisdiction refers to a committee's ability to review matters within its purview, for instance by conducting hearings and investigations. Legislative jurisdiction is defined in clause 1 of Rule X, while clause 2 of the same rule directs all standing committees to "review and study on a continuing basis the application, administration, execution, and effectiveness of laws and programs addressing subjects within its [legislative] jurisdiction." Several committees are given additional oversight duties in clause 3 of Rule X, and the fourth clause of that rule specifies additional functions committees are expected to fulfill. Clause 4(f) of Rule X, for instance, instructs each standing committee to submit to the Budget Committee its "views and estimates" on policy proposals contained in the President's budget submission to Congress that fall within its jurisdiction. Some committees interpret their oversight responsibilities more broadly than others do, which can lead to jurisdictional disputes over which committee is best equipped to conduct hearings, investigations, or other oversight activities. Many policy areas are complex and multidimensional, and considering how subject matter responsibilities are allocated broadly across committees, more than one committee may be involved in overseeing specific aspects of a general subject. Similar to the example of roads explained above in which a number of committees can play a role based on their subject matter (legislative) jurisdictions, oversight of a given area might also be shared by committees exercising different Rule X responsibilities.

When legislation is introduced in the House or received from the Senate, it is referred to one or more committees primarily on the basis of the jurisdictional statements contained in clause 1 of House Rule X. These statements define the policy subjects on which each standing committee may exercise jurisdiction on behalf of the chamber. The statements themselves tend to address broad policy areas rather than specific departments, agencies, or programs of the federal government. Because comm ittee jurisdiction often is expressed in general policy terms, it is possible for more than one committee to claim jurisdiction over different aspects of a broad subject that may encompass a myriad of specific programs and activities. When referring a measure to more than one committee (a "multiple referral"), the Speaker is directed by clause 2 of House Rule XII to identify a "primary" committee of referral, which is the panel understood to exercise jurisdiction over the main subject of the measure. Rule XII further provides the Speaker with the authority to refer legislation to more than one committee either at the point of introduction (an "initial additional referral"), or after another committee has reported (a "sequential referral"). The Speaker may also divide a measure into its component parts and refer individual pieces to different House panels (a "split referral"), but split referrals are rare in current practice. The Speaker is empowered to place time limits on any referral and always does so in the case of a sequential referral. The Speaker also "may make such other [referral] provision as may be considered appropriate." House rules vest these powers of referral in the Speaker; in practice, the House Parliamentarian makes day-to-day referral decisions acting as the Speaker's nonpartisan and disinterested agent. Although clause 1 of Rule X is the main determinant of House committee jurisdiction, other factors may also influence how legislation is referred, including precedents established by past referrals; agreements between committees outlining their jurisdictional boundaries on new, evolving, or contested policy subjects; and statutes that identify how particular kinds of matters will be referred. The jurisdictions of subcommittees are not explicitly stated in House rules. The jurisdiction of a subcommittee is generally determined by the full committee that created it. If a subcommittee's jurisdiction is not explicitly defined by its parent committee, measures are generally referred to subcommittee or retained by the full committee at the discretion of its chair. A distinction can be made between legislative and oversight jurisdiction. Legislative jurisdiction describes the authority of a committee to receive and report measures to the House. Oversight jurisdiction refers to a committee's ability to review matters within its purview, for instance by conducting hearings and investigations. Legislative jurisdiction is defined in clause 1 of Rule X, while clause 2 of the same rule directs all standing committees to "review and study on a continuing basis the application, administration, execution, and effectiveness of laws and programs addressing subjects within its [legislative] jurisdiction."

crs_R46184

crs_R46184_0

Under the Endangered Species Act of 1973 (ESA or the Act), the U.S. Fish and Wildlife Service (FWS ) and the National Marine Fisheries Service (together, the Services) determine which species to "list" as "endangered species " or "threatened species ," terms defined in the Act . Species, subspecies, and distinct population segments (DPSs) may all be listed as "species" under the Act. Listing a species invokes certain protections under the Act and a requirement that the Services develop a recovery plan to conserve the species. Listed species may be reclassifie d by the Services from threatened to endangered or vice versa. The Services may also remove a species from the list, often called delisting, if it no longer meets the definition of an endangered or threatened species. The Services list, reclassify, and delist species pursuant t o statutory criteria and definitions through the agency rulemaking process. Persons may and often do challenge the legality of those final rules through litigation. When such challenges succeed, the court remands the rule to the applicable Service for further proceedings and may vacate the challenged rule. The gray wolf ( Canis lupus ) presents a useful example of the legal issues that arise with listing and delisting species as threatened and endangered under the ESA and how FWS has addressed those issues. T he gray wolf was among the first species identified by federal law as endangered after being nearly hunted to extinction in the lower 48 states . FWS has issued numerous rules in connection with its efforts to recover the gray wolf under the ESA . Many of those rules have been challenged in court, and a number of them have been vacated and remanded to FWS. FWS has addressed issues such as uncertainties in gray wolf taxonomy, ambiguous statutory terms (e.g., " foreseeable future " and "significant portion of its range " ), and the adequacy of state management plans. This r eport uses FWS's regulation of the gray wolf under the ESA and related litigation as a case study in how legal challenges have shaped FWS's interpretation of ESA provisions when listing and delisting species under the Act. The report begins by laying out general legal principles governing agency rulemaking under the ESA before reviewing the history of FWS's actions to list, recover, and delist the gray wolf and subsequent litigation . The report then uses this regulatory and litigation history to analyze specific issues that arise when listing and delisting species under the Act . <1. Listing and Delisting Species Under the Endangered Species Act> The ESA aims to accomplish its goal of conserving fish, wildlife, and plants species threatened with extinction by "listing" species the Services determine to be endangered or threatened. The ESA's provisions and protections generally apply only to these listed species. The Act's legal framework determines when and how species are listed, reclassified, and delisted. The Secretary of the Interior and the Secretary of Commerce (this report refers to "the Secretary" to mean either the Secretary of the Interior or the Secretary of Commerce, as applicable) review species' statuses under the Act on their own initiative or in response to petitions. Any person may petition the Secretary to list, reclassify, or delist a species. The ESA prescribes when and how the Secretary is required to respond to such petitions, as shown in Figure 1 . A status review, conducted pursuant to a petition that may be warranted or at the Secretary's initiative, determines whether a species should be or remain listed. Figure 2 depicts the general pathway for a species from status review and listing through post-delisting monitoring and management under the ESA framework. A brief explanation of each stage is provided below Figure 2 . Listing . As a threshold matter, the Secretary may list only groups of organisms that qualify as a "species" under the ESA, defined to include subspecies and DPSs. Because the term "species" under the Act has a distinct legal meaning that may differ from its conventional or taxonomic meaning, this report uses the term "species" to refer to species as defined by the Act (i.e., including subspecies and DPSs) and the term "full species" when referring to a taxonomic species. For species eligible for listing, the Secretary examines whether the species qualifies as an endangered species or threatened species, as defined by the Act, because of any of the five factors listed in Figure 2 . The ESA requires the Secretary to make this determination "solely" based on the "best scientific and commercial data available." Based on this evaluation, the Secretary either lists the species as endangered or threatened, as appropriate, or determines the species is ineligible for listing and, if the Secretary conducted the status review pursuant to a petition to list, denies the petition. The Secretary may also determine that a species qualifies as an endangered or threatened species but that the species cannot be listed at the time due to the Services' priorities and limited resources. In that case, the Secretary may deny a petition as warranted but precluded. The Secretary publishes listing determinations in the Federal Register and the Code of Federal Regulations. Listed. Once endangered and threatened species are listed, the ESA directs federal agencies to "conserve" them and their ecosystems. As shown in Figure 2 , the Act provides two types of mechanisms to conserve listed species and facilitate their recovery. First, as shown in the Protections box of Figure 2 , it protects the species by prohibiting certain acts with respect to endangered species; similar prohibitions may also be extended to threatened species. The Act further protects listed species by requiring federal agencies to consult with the Services when their actions, or actions they approve or fund, could affect listed species often called Section 7 consultations. Through this process, federal agencies assess the potential effects of their actions on any endangered or threatened species and evaluate, as necessary, alternatives that would mitigate the impact. Second, as shown in the Recovery Tools box in Figure 2 , the ESA provides tools to facilitate the recovery of the species. The Act generally requires the Secretary to develop and implement a recovery plan for each listed species unless such a plan would "not promote the conservation of the species." The recovery plan includes any site-specific management actions needed to conserve the species, objective and measureable criteria that would merit delisting the species if met, and estimates of timelines and costs. In addition to recovery plans, Congress amended the ESA in 1982 to allow the Services to reintroduce experimental populations of listed species, which are regulated as threatened species regardless of the listed species' status. Experimental populations must be "wholly separate geographically" from existing natural populations of the species. As shown in the Review Status box in Figure 2 , the Secretary must review the status of a listed species every five years or pursuant to a petition to reclassify or delist the species that may be warranted to determine whether it still qualifies as an endangered or threatened species. Species are reclassified or delisted based on the same criteria used to list species, as shown in the Status box in Figure 2 . Post- d elisting. Once a species is delisted, the states in which the species resides resume control over management of the recovered species. The Secretary and the states monitor the status of a recovered species for at least five years after delisting. In this period, if the Secretary determines that there is a significant risk to the well-being of the species, the Secretary must exercise emergency powers to restore the Act's protections to the species for 240 days, during which time the Secretary may begin rulemaking proceedings to relist the species. <1.1. Administrative Law and Statutory Interpretation> The Services list, reclassify, and delist species through the rulemaking process. The principles of administrative law and statutory interpretation that generally govern the agency rulemaking process and judicial review underpin the Services' actions under the ESA. Agencies use rules, among other tools, to implement and interpret statutes and promulgate regulations. The Administrative Procedure Act (APA) generally governs agency rulemaking by prescribing procedural requirements for agencies to follow and providing an opportunity for judicial review of final agency actions. The APA requires agencies to publish a proposed rule to provide notice of the agency's proposed action and provide an opportunity for public comment, then to publish a final rule that concisely states the agency's basis and purpose for the rule. The agency's statement must generally address significant comments and explain the agency's rationale for those comments not incorporated into the final rule. Any changes in the final rule must be a "logical outgrowth" of the proposed rule to comport with due process. Parties affected by an agency rule can generally seek judicial review of the agency's action. To the extent the rule relies on an agency's interpretation of a provision in a statute it administers, the court generally evaluates the agency's interpretation under the Chevron doctrine. Under the Chevron doctrine, the court first determines whether the statutory provision is ambiguous (i.e., if there are multiple permissible meanings) by relying on principles of statutory interpretation. The court may look to the plain meaning of the term in common parlance, the provision's statutory context, how the term is used elsewhere in the statute or other statutes, the statute's purpose and legislative history, and whether a particular interpretation would render a term superfluous, lead to absurd results, or raise constitutional questions. If the court determines that a statutory provision is ambiguous, then it defers to the administering agency's interpretation so long as it is a permissible (i.e., reasonable) interpretation. Under the APA, a court must set aside agency rules if it finds the rule is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." For example, a court may determine that a rule is arbitrary and capricious because the agency's interpretation of an ambiguous term is not a permissible one. A court may also hold that an agency rule is arbitrary and capricious if it is illogically reasoned, fails to consider an important aspect of the problem, or is unsupported by the administrative record. When a court overturns an agency rule, it generally vacates the rule and remands it to the agency. <2. History of Listing and Delisting the Gray Wolf> The gray wolf has a long history as a listed species under the ESA and its predecessors. As discussed in this section, from the initial listing to the present, nearly every element of the listing and delisting legal framework has been implicated in regulating the gray wolf under the Act. (See " Listing and Delisting Species Under the Endangered Species Act " section.) Table 1 includes a timeline of legislative, regulatory, and litigation actions by population, and Table A-1 in the Appendix provides a more detailed version. The substantive issues that have been raised in the various rulemakings and court opinions described in this section are discussed by topic in the " Challenges When Listing and Delisting Species " section. The gray wolf's traits and history inform much of FWS's analysis of threats to the species and pathways to recovery. Gray wolves are the largest member of the Canidae (i.e., dog) family. They are frequently found in packs and occupy defined territory, but lone gray wolves may leave their packs to join another pack or wander alone. Gray wolves are effective and adaptive predators who generally hunt large prey, such as moose, elk, caribou, bison, and deer; they also have been known to eat smaller prey. Historically, gray wolves ranged throughout most of North America, Europe, and Asia. On the North American continent, gray wolves were once found from Canada and Alaska to northern Mexico except for much of the southeastern United States (where the related but distinct red wolf lived) and parts of southern California. The arrival of European settlers and their expansion into the western frontier led to widespread persecution of wolves as a result of fear, superstition, and perceived and real conflicts between wolves and humans, such as attacks on humans, domestic animals, or livestock. Encouraged by federal, state, and local bounties, settlers poisoned, trapped, and shot wolves until they were eliminated from more than 95% of their historical range. <2.1. Listing and Recovery Efforts> FWS listed the first gray wolf subspecies, the eastern timber wolf ( C. lupus lycaon ), as endangered in 1967 under the Endangered Species Preservation Act of 1966 (ESPA). After the Endangered Species Conservation Act of 1969 (ESCA) amended the ESPA, FWS listed the northern Rocky Mountain wolf ( C. lupus irremotus ) as endangered in 1973. Under the ESPA and the ESCA, the Services could list only species or subspecies that were endangered worldwide. Enacted in 1973, the ESA allowed the Services to identify a species as endangered or threatened in all or a significant part of its range. After the ESA was enacted, FWS listed two more gray wolf subspecies the Mexican wolf ( C. lupus baileyi ) and the Texas wolf ( C. lupus monstrabilis ) as endangered in 1976. In 1978, FWS combined these listings into one listing for the gray wolf species as endangered throughout the lower 48 states except Minnesota and a separate listing the gray wolf in Minnesota as threatened. Between 1978 and 1982, FWS created recovery plans for the eastern timber wolf, the northern Rocky Mountain wolf, and the Mexican wolf that outlined management strategies and recovery criteria. It later updated each of those plans. In the 1990s, FWS reintroduced gray wolves into central Idaho and the greater Yellowstone area in the northern Rocky Mountains and the Southwest. FWS designated each population as a nonessential experimental population, meaning FWS determined the population is not essential to the conservation of the species. Protected from human-caused mortality, which FWS identified as the greatest threat to the species, gray wolf populations in the western Great Lakes region, the northern Rocky Mountains, and the Southwest increased and expanded their ranges. <2.2. Designating Distinct Population Segments (DPSs)> The term DPS is distinct to the ESA, unlike species and subspecies, which are commonly used taxonomic terms with scientific meanings. Including DPSs in the Act's definition of species has been particularly relevant to gray wolf listing and delisting rules. Because the term DPS is not defined in the ESA, the Services issued a DPS policy (DPS Policy) in 1996 explaining how they would interpret and apply the term. Under the DPS Policy, the Services evaluate the population's discreteness and significance to determine if it qualifies as a DPS and, therefore, a listable species under the Act. <2.2.1. Final Rule Designating Eastern, Western, and Southwestern DPSs in 2003> In 2000, FWS proposed to designate four DPSs of gray wolves the Western Great Lakes DPS, Western DPS, Southwestern DPS, and Northeastern DPS, as shown in Map 2 of Figure 3 and to delist the gray wolf in any state outside the range of those DPSs. FWS determined that non-DPS states were outside the gray wolf's current range and unlikely to be repopulated by gray wolves, and that wolf restoration to those areas was neither potentially feasible nor necessary for recovery. FWS also proposed to reclassify the gray wolves of the Western Great Lakes DPS, Western DPS, and Northeastern DPS from endangered to threatened. For the Western Great Lakes and Western DPSs, FWS determined that they were not in danger of extinction based on the recovery progress of the western Great Lakes and northern Rocky Mountain gray wolf populations, respectively. FWS determined that these populations were sufficient to ensure the continuing viability of the DPSs as a whole. For the Northeastern DPS, FWS proposed to reclassify it as threatened due to the regulatory flexibility afforded by a threatened status, rather than based on determining that the DPS met the definition of "threatened species." In the 2003 final rule, FWS combined and expanded the Western Great Lakes and Northeastern DPSs to create the Eastern DPS, as shown in Map 3 of Figure 3 , after not finding justification for a separate Northeastern DPS. FWS reclassified the gray wolves of the Eastern DPS and the Western DPS from endangered to threatened. The agency also determined that it could delist only based on a finding of recovery, extinction, or original listing in error. Accordingly, FWS extended the three DPSs to include 12 of the states it had proposed to delist. The agency delisted the gray wolf only in 14 states in the southeastern United States and in portions of Oklahoma and Texas that FWS determined were outside the gray wolf's historical range. District courts in Oregon and Vermont ultimately vacated the 2003 final rule. Those courts held that FWS conflated the statutory terms "all" and "a significant portion" when analyzing whether the DPSs were endangered or threatened in "all or a significant portion of [their] range." By assessing what constituted "a significant portion" of the range based on which areas ensured the continuing viability of the DPS as a whole , FWS rendered the phrase "a significant portion" superfluous by ensuring that any DPS endangered or threatened in "a significant portion" of its range would also be endangered or threatened in "all" of its range. Those courts also concluded that FWS violated the ESA and the DPS Policy by designating DPSs based on geographical rather than biological criteria and by failing to conduct the five-factor analysis for wolves outside the core recovery populations, thus reclassifying species without applying the statutory criteria. The Oregon district court further held that FWS combining the two DPSs and including states in the DPSs beyond the recovered populations' ranges was arbitrary and capricious because the gray wolf's conservation status varied across each DPS. By extending the DPSs to the gray wolf's historical range rather than "draw[ing] a line around a population whose conservation status differs from other populations within that species," the court held that FWS "invert[ed]" the DPS's purpose. Finally, the Vermont district court held that FWS violated the APA by combining the Western Great Lakes and Northeastern DPSs into a new Eastern DPS in the 2003 final rule, which did not appear in the proposed rule. The Vermont district court determined that establishing the Eastern DPS was not a "logical outgrowth" of the proposed rule and accordingly did not provide the public with adequate notice and opportunity for comment. <2.2.2. Final Rules Designating and Delisting Western Great Lakes DPS in 2007 and Northern Rocky Mountain DPS in 2008> After the district courts vacated the 2003 final rule, FWS adjusted its approach by individually designating and delisting the Western Great Lakes DPS (as shown in Figure 4 ) in 2007 and the Northern Rocky Mountain DPS (as shown in Figure 5 ) in 2008. For these and later DPS rules, FWS assessed whether each DPS met the DPS Policy's discreteness and significance criteria. FWS determined that gray wolf populations were discrete under the DPS Policy by comparing the distance between areas occupied by gray wolf populations to gray wolf dispersal data, finding that the populations were separated by more than three times the average dispersal distance and that the area in between generally was not suitable habitat for gray wolves. In the new final rules, FWS determined the populations to be significant under the DPS Policy by finding that (1) the populations occupied an unusual or unique ecological setting for the gray wolf, and (2) losing these populations would create a significant gap in the gray wolf's range. In subsequent DPS rules, FWS would rely solely on the latter finding. In its 2007 and 2008 rulemakings, FWS also assessed whether each population had met the recovery criteria in its recovery plan and was no longer in danger of extinction at the time or in the foreseeable future. FWS found that both the Western Great Lakes and Northern Rocky Mountain populations had met the objective criteria laid out in the recovery plans. It also determined that the States of Minnesota, Michigan, and Wisconsin in the Western Great Lakes DPS and the States of Montana and Idaho in the Northern Rocky Mountain DPS had adequate wolf management plans in place. However, in the proposed rule for the Northern Rocky Mountain DPS, FWS determined that Wyoming's wolf management plan was inadequate to ensure the continued recovery of the species. Among other concerns, FWS pointed to Wyoming committing to manage only seven breeding packs outside the national parks and to Wyoming designating the gray wolf as a predatory animal in most of the state. FWS stated that delisting was contingent on Wyoming implementing an adequate wolf management plan. Wyoming enacted legislation in February 2007 removing statutory obstacles to the revisions FWS required, and the Wyoming Fish and Game Commission approved the revised plan in November 2007. In the 2008 final rule, FWS determined that Wyoming's plan would adequately ensure the continued recovery of the gray wolf population there. Much like the 2003 rule, courts also vacated these final rules. For the 2007 Western Great Lakes DPS final rule, a federal district court in the District of Columbia held that the ESA was ambiguous about whether FWS could designate for delisting purposes a DPS from a listed full species if FWS had never listed the DPS specifically. However, FWS had argued that the ESA was unambiguous and the plain meaning of the text supported its authority to designate and delist a DPS from a listed full species. Because FWS had relied on the ESA's plain language rather than interpreting the text, the court determined there was no FWS interpretation to defer to under the Chevron doctrine. The court vacated the rule and remanded it to FWS to interpret the ambiguous statutory language. For the 2008 Northern Rocky Mountain DPS final rule, a federal court in Montana reviewed FWS's rule when it granted a motion to enjoin the rule while litigation proceeded. To issue a preliminary injunction, a court must find, among other things, that the plaintiffs have a likelihood of success on the merits of the case. The court determined the plaintiffs were likely to prevail based on two arguments. First, the court determined that FWS likely had been arbitrary and capricious by inadequately explaining why its final rule ignored the recovery plan criterion of genetic exchange between gray wolves from different recovery areas (i.e., central Idaho, northwestern Montana, and the greater Yellowstone area). Genetic exchange had been included as a recovery criterion in a 1994 environmental impact statement prepared to evaluate the environmental impacts of introducing the experimental gray wolf populations into central Idaho and the greater Yellowstone area. The court held that although FWS did not have to rely on recovery criteria to find that a species had recovered, the agency needed to explain its decision to ignore such criteria adequately. Second, the court determined that FWS was arbitrary and capricious in approving Wyoming's wolf management plan part of the recovery criteria because, in the court's view, FWS's reasons for rejecting previous Wyoming plans applied equally to the 2007 one. After issuing the preliminary injunction, the court granted FWS's request to vacate the rule and remand it. <2.2.3. Final Rules Designating and Delisting Western Great Lakes DPS and Northern Rocky Mountain DPS Except Wyoming in 2009> In 2009, FWS again published final rules designating and delisting the Western Great Lakes DPS and the Northern Rocky Mountain DPS, except it did not delist the gray wolf in Wyoming after finding the state's management plan inadequate. FWS issued the final Western Great Lakes DPS rule, which interpreted FWS's authority to designate and delist DPSs from listed species to address the concerns raised by the D.C. district court's 2008 ruling, without issuing a new proposed rule. Parties challenged the latest Western Great Lakes DPS rule for, among other things, violating the APA's notice and comment requirements. Pursuant to a settlement agreement, FWS ultimately withdrew the rule. The Montana district court vacated the 2009 Northern Rocky Mountain DPS rule after concluding that the ESA did not allow FWS to list a partial DPS (i.e., listing the gray wolf only in the Wyoming segment of the DPS). FWS had interpreted the statutory phrase "significant portion of its range" in the endangered species and threatened species definitions to allow a species to be listed for only that portion of its range where the Services determine the species is endangered or threatened. The court rejected this interpretation as impermissible under the Act and vacated the rule. It held that the plain language of the ESA precluded listing a smaller classification than a DPS. The court also held that FWS's interpretation rendered superfluous Congress's addition of DPS to the definition of "species" and Congress's restriction of DPSs to vertebrate species because under FWS's interpretation, the agency could simply list the full species or subspecies for only the range occupied by the DPS and achieve the same result without the DPS designation and for any species vertebrate or not. However, an act of Congress in 2011 directed FWS to reinstate the 2009 rule designating and delisting the Northern Rocky Mountain DPS without Wyoming. <2.2.4. Final Rule Designating and Delisting Western Great Lakes DPS in 2011> FWS published another final rule designating and delisting the Western Great Lakes DPS in 2011. In the proposed rule, FWS also proposed to recognize the eastern timber wolf as a full species ( C. lycaon ) rather than a subspecies of gray wolf ( C. lupus lycaon ) based on developments in taxonomic research. In recognizing the eastern timber wolf as a full species, FWS proposed to delist the gray wolf in all or part of 29 states (outside the Western Great Lakes DPS) where FWS determined that the areas were part of the historical range of the eastern timber wolf or red wolf ( C. rufus ) rather than the gray wolf ( C. lupus ). In the 2011 Western Great Lakes DPS final rule, however, FWS determined that the scientific community had not reached a consensus on whether the eastern timber wolf was a full species. FWS accordingly continued to recognize the eastern timber wolf as a subspecies of gray wolf until the scientific debate was resolved and postponed delisting in the 29 states and partial states. FWS otherwise finalized the rule as proposed, relying on data and analysis similar to what it had used in prior rules designating and delisting the Western Great Lakes DPS. A district court in the District of Columbia vacated the 2011 Western Great Lakes DPS rule in 2014. The court reviewed FWS's interpretation of its statutory authority under the ESA to designate and delist a DPS from a listed full species, which the agency adopted after the 2008 opinion vacating FWS's 2007 Western Great Lakes DPS rule that relied on the plain meaning of the ESA. On appeal, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) held in 2017 that FWS could designate and delist DPSs from listed full species but that FWS had failed to do so properly in the 2011 rule. The court concluded that the 2011 Western Great Lakes DPS rule was arbitrary and capricious because FWS had improperly conducted its analysis by failing to consider two factors: (1) the effect of delisting the DPS on the remainder of the species and (2) the loss of the gray wolf's historical range when analyzing threats to the species. <2.2.5. Final Rule Delisting the Gray Wolf in Wyoming in 2012> After approving its revised state laws and wolf management plan, FWS delisted the gray wolf in Wyoming in 2012. The federal district court in the District of Columbia vacated the rule after finding it was arbitrary and capricious for FWS to rely on nonbinding promises in Wyoming's management plan to determine the state's regulatory mechanisms were adequate. The D.C. Circuit reversed the federal district court, holding that the ESA did not limit FWS to considering only legally binding regulatory mechanisms to determine whether the regulatory mechanisms were adequate to protect the species. The rule delisting the gray wolf in Wyoming was accordingly reinstated. <2.3. Proposals to Delist the Gray Wolf Listed Entities> In 2013 and 2019, FWS proposed to delist the gray wolf except for the Mexican wolf subspecies, which FWS listed as endangered in 2015. FWS published the 2013 proposed rule when gray wolves in the Northern Rocky Mountain and Western Great Lakes DPSs were delisted. FWS considered whether the remaining listed entities qualified as "species" under the ESA thus listable under the Act. Finding they did not qualify, FWS evaluated whether the gray wolf or any subspecies or population of gray wolf merited listing as an endangered or threatened species. In its analysis, FWS revisited the gray wolf's taxonomy, determining again that scientific evidence supported recognizing the eastern wolf as a full species ( C. lycaon ) and recognizing the following three gray wolf subspecies: C. lupus nubilus (found in the coastal areas of Alaska and Canada and the Pacific Northwest to the Great Lakes region), C. lupus occidentalis (found in the interior of Canada and the northern Rocky Mountains), and C. lupus baileyi (historically found in the American Southwest and Mexico). Within these species and subspecies, FWS did not identify any listable DPSs, finding that gray wolves sighted in the Pacific Northwest did not qualify as a population and, in any event, were not discrete from the Northern Rocky Mountain DPS population. FWS proposed to list the Mexican wolf as an endangered subspecies and delist the remaining listed gray wolf entities. In 2015, FWS finalized its 2013 proposal to list the Mexican wolf separately but did not finalize the rest of the proposed rule. Before FWS finalized its proposed delisting of the gray wolf entities, as discussed above, the federal courts in the District of Columbia vacated the rule delisting the Western Great Lakes DPS and the gray wolf in Wyoming the latter was later reinstated through legislation. In 2019, FWS proposed to delist the gray wolf (aside from the Mexican wolf, listed separately) after finding that the Western Great Lakes population had met its recovery criteria and that neither the gray wolf as a species nor any subspecies or any population of gray wolf was endangered or threatened in all or a significant portion of its range in North America. FWS also returned to its position that the scientific community was not yet settled on recognizing the eastern wolf as a full species. FWS had not finalized the 2019 proposal as of this report's publication. The gray wolf is accordingly listed as endangered in the lower 48 states, except for the Northern Rocky Mountain DPS, which is delisted; the population in Minnesota, which is listed as threatened; and the Mexican wolf subspecies in New Mexico and Arizona, which is listed separately as endangered. Table 1 summarizes the history of listing, recovery, and delisting by DPS or region (described further in the " History of Listing and Delisting the Gray Wolf " section), and Table A-1 in this report's Appendix provides a more detailed timeline. <3. Challenges When Listing and Delisting Species> FWS has encountered a host of legal challenges when listing or delisting the gray wolf. This section reviews by topic the substantive challenges FWS has encountered in rulemaking and litigation. Though specific to the gray wolf, the challenges FWS has faced provide insight into the issues the Services generally encounter with listing and delisting species and how courts may react to the Services' approaches. <3.1. Identifying the Species> To identify a species as endangered or threatened, the Services must first identify what qualifies as a "species" under the Act. When the ESA was enacted in 1973, it defined a species to include "any subspecies of fish or wildlife or plants and any other group of fish or wildlife of the same species or smaller taxa in common spatial arrangement that interbreed when mature." In 1978, Congress amended the ESA to define species to include "any subspecies of fish or wildlife or plants, and any distinct population segment of any species of vertebrate fish or wildlife which interbreeds when mature." Species and subspecies are biological concepts used in taxonomic classification. As such, the Services consult experts in those fields to identify listable species and subspecies based on the best available scientific data. A DPS, however, is a statutory creation, not a biological concept. In 1996, the Services implemented the DPS Policy to outline how they would evaluate DPSs. Under the policy, a population must be discrete from other populations, significant in accordance with principles of conservation biology, and endangered or threatened to be listed as a DPS. Applying these criteria in practice has proven difficult. For the gray wolf in particular, FWS has encountered challenges with the wolf's taxonomy and with regulating segments of the wolf population. <3.1.1. Taxonomy> Many of FWS's rulemaking preambles detail the difficulties involved in identifying listable entities and analyzing them in light of disagreements over the taxonomic classification of wolf species and subspecies. Under the ESA, FWS must be able to identify a listable entity a full species, a subspecies, or a DPS to analyze its status for listing. The entity identified for analysis determines the population(s), historical and current range, and threats that the Services consider. Though FWS's determinations about gray wolf taxonomy generally have not been subject to direct legal challenges, they underpin how FWS conducts the remainder of its analyses to assess the species' status. Changing views and a lack of scientific consensus over the taxonomic classifications for the gray wolf have caused FWS to revise its analyses during or between rulemakings. The Services must base decisions about what entity to evaluate on the "best scientific and commercial data available." But scientists do not always agree on their taxonomic conclusions. Taxonomists may classify species based on distinctive physical or behavioral traits, evolutionary pathways, interbreeding capabilities, or genetic composition. Taxonomists may disagree about whether and how to recognize subspecies within a species. Differences in methodology or datasets may also lead to disagreements about the taxonomic level to assign a particular entity. For example, various scientific studies have concluded that the eastern timber wolf is a full species ( C. lycaon ), a subspecies of gray wolf ( C. lupus lycaon ), a hybrid of different wolf species, a wolf-coyote hybrid, or a distinct gray wolf population not rising to the level of a subspecies. Different methodological approaches may also affect how many entities within a species taxonomists recognize as distinct. For example, FWS has observed that scientific studies had recognized as many as 24 subspecies of wolves in North America but that other taxonomists had suggested there were actually 5 or fewer subspecies. From these divergent scientific studies, the Services must determine what classification for an entity the "best scientific and commercial data available" support. The Services may also conclude that there is no scientific consensus on an entity's taxonomic status that would be defensible based on the data. For example, twice FWS has proposed to recognize the eastern timber wolf as a full species only to conclude later that the scientific community had not reached a consensus on its classification. In each case, FWS reverted to the eastern timber wolf's original classification as a subspecies of gray wolf ( C. lupus lycaon ). It is unclear how FWS would have proceeded if it could not have reverted to a status quo. Any determination on taxonomic classification for listing purposes must be defensible based on the best scientific and commercial data available. Classifications may also change over time as scientists reevaluate their conclusions based on additional data or improved methodologies. In its 2013 proposed rule, FWS determined that it would recognize only three gray wolf subspecies out of as many as 24 identified historically C. lupus nubilus (coastal wolf), C. lupus occidentalis (interior and mountain wolf), and C. lupus baileyi (Mexican wolf). As described above, FWS has continued to evaluate the taxonomic status of the eastern timber wolf as scientific research and opinion evolves. Changing classifications and disagreements within the scientific community may result in a previously listed entity no longer qualifying as a "species" under the ESA or in the Services being unable to identify any listable entity that qualifies as endangered or threatened. Such changes and disagreements can also affect other aspects of the Services' status analysis. For example, which areas FWS recognizes as comprising the gray wolf's current and historical range depends on whether the eastern timber wolf is a subspecies of gray wolf or a separate full species. Any areas solely occupied by the eastern timber wolf would be included in the gray wolf's range only if the eastern timber wolf is a subspecies. When FWS proposed to recognize the eastern timber wolf as a full species in 2011, it also proposed removing certain areas from the gray wolf listing that FWS considered listed in error because it determined that the wolves occupying those areas were eastern timber wolves rather than gray wolves. In addition, the Services use a species' current range to determine the species' status (i.e., whether it is endangered or threatened in "all or a significant portion of its range " ) and use the historical range to assess threats against the species' continued existence. Accordingly, changes to how a species is classified and defined can affect the Services' analysis of the species' status. <3.1.2. Defining DPSs> FWS's efforts to designate and delist gray wolf DPSs have given rise to multiple legal challenges and vacated rules. To designate gray wolf DPSs, FWS has applied the DPS Policy. Under the policy, the Services may designate a DPS if it is discrete from the remainder of the species and significant to the species. The Services determine a population is discrete if it is "markedly separate" from other populations based on "physical, physiological, ecological, or behavioral factors" or international boundaries. The Services determine that a population is significant biologically and ecologically based on whether the population persists in an unusual setting for the species, differs markedly from the rest of the species genetically, represents the only naturally occurring population in the wild (i.e., excluding reintroduced populations), or would create a gap in the species range if the population were lost. The Services imposed the significance criteria to ensure they use the DPS designation authority "sparingly," consistent with congressional guidance, to avoid potential abuse, such as listing numerous populations of otherwise abundant species. If the Services determine a population meets the discreteness and significance criteria, they evaluate the DPS's status to determine whether it is endangered or threatened in accordance with the ESA definitions and factors. For the gray wolf, FWS has generally evaluated discreteness by determining the distance between the areas occupied by different populations against average dispersal distances. The agency determined that the distances between the Western Great Lakes, Northern Rocky Mountain, and Mexican wolf populations were all greater than three times the average dispersal distance for a lone wolf, leading FWS to determine that each population is discrete. FWS also has used the Canada-U.S. border to demarcate DPSs based on the different regulatory regimes in the two countries. FWS determined the Western Great Lakes and Northern Rocky Mountain DPSs were significant because losing either population would leave a significant gap in the gray wolf's range. In the 2003 rulemaking, FWS also determined that the Western Great Lakes, Western (later Northern Rocky Mountain), and Mexican wolf populations each displayed distinct morphological traits that could represent different subspecies, presumably meaning they were genetically distinct. In the 2007 rule, FWS also concluded that the Western Great Lakes DPS persisted in a unique environment due to its presence in the Laurentian Mixed Forest Province where the boreal forest transitions to the broadleaf deciduous forest. However, it did not rely on those factors in later rules. FWS's determinations that gray wolf populations meet the DPS Policy's discreteness and significance criteria generally have not been the subject of legal challenge. Instead, parties have challenged FWS's determination of DPSs' geographic boundaries. The Oregon district court vacated FWS's rule designating the Western, Eastern, and Southwestern DPSs because it determined that FWS had inappropriately delineated the DPSs. In that 2003 final rule, FWS had combined the proposed Western Great Lakes DPS and Northeastern DPS into the Eastern DPS after it did not obtain sufficient evidence of gray wolves inhabiting the Northeast to designate a DPS. The agency also extended each DPS to include surrounding states such that the historical range of the gray wolf was carved up into DPSs. The court determined that FWS had inverted the DPS Policy's purpose by combining populations with dramatically different statuses into one DPS based on geography. The court held that FWS must delineate DPSs carefully to include only discrete, significant populations that qualify as DPSs and their occupied ranges. The Services' decisions to list a full species rather than a subspecies or DPS may also affect their ability to delist the species. Most of the challenges FWS has encountered with gray wolf DPSs have arisen when the agency has designated DPSs from listed full species for delisting purposes. Plaintiffs have argued that FWS can only designate a DPS to increase protections either listing a DPS of a species or subspecies that is not listed or reclassifying a DPS to endangered if the species or subspecies is listed as threatened and therefore can only delist a previously listed DPS. FWS has contended that it has authority to delist a DPS from a listed species or subspecies based on (1) the statutory definition of species including DPSs and (2) its authority to review species' statuses and revise listings pursuant to new determinations or designations. FWS has argued that its interpretation enables the flexibility Congress intended to provide the Services through the DPS category and is consistent with the Act's purposes by allowing the Services to direct resources to conserve those species or populations most in need of assistance. Courts have concluded that the ESA is ambiguous as to whether FWS may designate and delist a DPS from a listed species or subspecies. District courts had initially agreed with plaintiffs that FWS's interpretation was impermissible because DPSs are a "one-way ratchet" and FWS may only delist a DPS it had previously listed. But the D.C. Circuit reversed the district court's opinion in 2017, holding that it is reasonable to interpret the ESA as authorizing FWS to revise a full species or subspecies listing by designating and removing a DPS from the listed species. The D.C. Circuit also concluded, however, that FWS had improperly executed designating and delisting the Western Great Lakes DPS in the 2011 rule because the agency must consider the effects of removing the DPS on the status of the listed remnant of the species in its analysis. Thus although this most recent decision determined that FWS has the legal authority to designate and delist DPSs from listed species and subspecies, the agency has yet to do so in practice in a way that survives judicial review. <3.1.3. Experimental Populations> The ESA allows the Secretary to release specimens of listed species into the wild and designate the population as an "experimental population" if it is "wholly separate geographically" from existing populations of the species. Experimental populations may be designated as essential or nonessential to the conservation of the species. An experimental population is protected as a threatened species even if the species is listed as endangered, allowing the Services to limit which acts are prohibited with respect to the experimental population. Additionally, federal agencies are not required to enter into Section 7 consultations if their actions are likely to affect only nonessential experimental populations. These more limited protections afforded to experimental populations reduce the regulatory burden on the local community where the specimens are released, which may reduce public opposition to introducing (or reintroducing) the species to the wild in that area. The Services must ensure that the released population is "wholly separate geographically" from existing populations to qualify as experimental and be subject to these reduced protections. FWS implemented two rules in 1994 establishing experimental populations of gray wolves in (1) the greater Yellowstone area and (2) central Idaho and southwestern Montana. FWS evaluated whether these populations would be "wholly separate geographically" based on the areas occupied by existing gray wolf populations , not where any individual gray wolves lone dispersers from the pack might be found. In the rules, FWS stated that it would treat any individual gray wolves found in the experimental population area as part of that population. Farm bureaus, researchers, and conservation groups challenged this approach. A federal district court in Wyoming vacated the rules on three grounds, all centered on FWS's use of populations rather than individuals to evaluate geographic separation. First, the court held that FWS's interpretation was inconsistent with clear congressional intent by potentially lessening protections for individual members of the species that ventured from protected populations into the experimental population's range. Second, the court held that the rules conflicted with FWS's own regulations, which require that any overlapping experimental and nonexperimental animals all be treated as endangered under the Act. Third, it held that treating all gray wolves in the experimental area as part of the experimental population, including naturally occurring wolves who migrated there, effected a de facto delisting of those wolves contrary to the ESA. On appeal, the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit) disagreed. It found that Congress left the phrase "wholly separate geographically from nonexperimental populations" to the Services to interpret. Reviewing FWS's interpretation, the court observed that FWS's regulations define the term "population" as a group "in common spatial arrangement." FWS had relied on this definition to conclude that individual dispersers would never be part of a "population" and therefore need not be accounted for when assessing geographic separation of populations . The court held that this interpretation was reasonable and consistent with the Act. It pointed to the use of species, subspecies, and DPSs rather than individuals as evidence that the Act's purpose is to conserve groups of organisms, not individual specimens. Consistent with that approach, the Tenth Circuit found that FWS reasonably determined the gray wolf's current range based on where populations were located rather than where individuals might disperse. Observing that wildlife particularly wolves moves, the court concluded that protecting specimens based on where they are rather than where they came from was a reasonable enforcement approach. The Tenth Circuit also held that the plaintiffs' contrary interpretation would require FWS to ensure that no individual specimens might cross between experimental and nonexperimental populations and would unnecessarily limit FWS's flexibility and discretion. The court determined that such a restrictive interpretation would prevent FWS from making full use of the experimental population tool and could hinder the conservation of the species, undermining the purposes of the Act. Accordingly, the Tenth Circuit reversed the district court's decision, allowing the central Idaho and greater Yellowstone area experimental populations to remain in place. Pursuant to the court's opinion, the Services may rely on areas occupied by populations rather than individuals to determine whether an experimental population would be "wholly separate geographically" as the Act required. <3.2. Qualifying as Endangered or Threatened> Determining whether a species qualifies as endangered or threatened for purposes of listing or delisting requires the Services to examine whether the species is in danger of extinction (1) currently or in the foreseeable future, (2) in all or a significant portion of its range, and (3) due to one or more of the five statutory factors categorizing types of threats. Though some commenters have disagreed with FWS's analyses of threats under the five statutory factors, those analyses have not generally been a focal point in gray wolf litigation except for FWS's assessment of state management plans' adequacy under the five statutory factors. <3.2.1. "All or a Significant Portion of Its Range"> FWS has had difficulty in successfully interpreting "significant portion of its range" particularly the "significant" component in connection with gray wolf rulemakings. Plaintiffs and commenters have repeatedly challenged FWS's interpretation of "significant portion of its range" in such rulemakings. Following an adverse court decision, FWS currently treats "significant portion of its range" as an independent basis for listing a species, meaning FWS will list the species in all of its range if it finds that the species is endangered or threatened in either (1) all or (2) a significant portion of its range. FWS has successfully defended its interpretation of "range" by interpreting the phrase to mean current rather than historical range. But courts have recently rejected FWS's interpretation of which portions are "significant." FWS has not yet issued a revised policy on the meaning of "significant portion of its range" or how it interprets "significant" in light of the new decisions. <3.2.1.1. Interpreting the Terms "Significant" and "Range"> In its 2003 rule, plaintiffs challenged FWS's interpretation of "significant" using the current "range" of the species. FWS had used the gray wolf's current range (i.e., the areas occupied by the Western Great Lakes and Northern Rocky Mountain populations) as the "significant" areas when reclassifying the Eastern DPS and Western DPS as threatened. An Oregon district court held that FWS failed to adequately justify why the areas occupied by these populations were the only "significant" ones. The court determined that FWS had instead relied on the gray wolf's current range, without considering the areas where the gray wolf "is no longer viable but once was." Based in part on this conclusion, the court vacated the rule and remanded it to FWS. On remand, FWS revisited its interpretation of the terms "range" and "significant" in its 2007 Western Great Lakes DPS rule: Interpreting " Range . " FWS explicitly interpreted "range" to refer to the species' current rather than historical range. FWS based its interpretation on the fact that the ESA defines an endangered species or threatened species as one that " is in danger of extinction" at the time or in the foreseeable future. FWS determined that while a species may be extinct in its historical range, it could only be in danger of extinction in all or part of its current range. The District of Columbia district court vacated this rule on other grounds, but the D.C. Circuit subsequently upheld FWS's interpretation of range as reasonable. FWS has since clarified that although it evaluates the current rather than historical range for purposes of determining the species' status, it considers the effect of losing the species' historical range when evaluating the statutory factors in listing decisions. Interpreting " Significant . " FWS explained in the 2007 rule that it would determine what constituted a "significant" part of a species range on a case-by-case basis depending on the biological needs of the species. To conduct this analysis, FWS would consider the ecosystems on which the species depends and the values identified in the Act. Relevant factors might include the quality and quantity of habitat, the historical and current use of the habitat, specific uses for the habitat such as breeding or migration, and the role of that part of the range in maintaining genetic diversity. Though a federal district court in the District of Columbia subsequently vacated this rule, it did so on other grounds without reviewing FWS's interpretation of "significant." The Solicitor's Office of the Department of the Interior issued an opinion soon after the final rule affirming FWS's interpretation and providing a more extensive explanation of the position. FWS relied on this interpretation and the Solicitor's opinion in subsequent gray wolf rulemakings. Beginning with its 2011 Western Great Lakes DPS rule, FWS adjusted its explanation of "significant portion of its range" to incorporate principles of conservation biology. The agency interpreted the phrase to mean that the area is (1) within the current range of the species and (2) "important to the conservation of the species because it contributes meaningfully to the representation, resiliency, or redundancy of the species." An area would "contribute[] meaningfully" if loss of the area would negatively affect FWS's ability to conserve the species. In 2014, the Services issued a joint policy on their interpretation of "significant portion of its range" under the ESA. The policy was generally consistent with FWS's and the Solicitor's past interpretations but contained a revised definition of "significant": A portion of the range of a species is "significant" if the species is not currently endangered or threatened throughout all of its range, but the portion's contribution to the viability of the species is so important that, without the members in that portion, the species would be in danger of extinction, or likely to become so in the foreseeable future, throughout all of its range. District courts later invalidated this definition, concluding that a species could never be listed based on a "significant portion of its range" under this interpretation, and prohibited the Services from applying it. These courts maintained that under this definition no species could be endangered or threatened in a significant portion of its range without being endangered or threatened in all its range. The courts reasoned that if a species were endangered or threatened in a "significant portion" of its range and would be endangered or threatened in all of its range without that portion, then the species would be listable as endangered or threatened in all its range. In its 2019 proposed rule to delist the remaining gray wolf entities, FWS acknowledged that the policy had been invalidated and addressed the courts' opinions by reviewing the gray wolf's range to identify any portion "that could be significant under any reasonable definition of 'significant' that relates to the conservation of the gray wolf entity." The Services have not yet issued a revised policy interpreting the phrase "significant portion of its range." <3.2.1.2. Using "Significant Portion of Its Range" for Listing> Plaintiffs have also challenged FWS's interpretation of "significant portion of its range" to allow FWS to list a species only in those parts of its range where it is endangered or threatened. In its 2009 rule designating the Northern Rocky Mountain DPS and delisting it except in Wyoming, FWS implicitly interpreted the ESA as allowing the agency to list a species only in that portion of its range where FWS determined the species was endangered or threatened. This interpretation allowed FWS to keep the DPS listed in Wyoming (based on inadequate regulatory mechanisms) but delist it elsewhere. A Montana district court vacated this rule on the grounds that FWS's interpretation was inconsistent with the ESA and its legislative history. The court determined that Congress added the phrase "significant portion of its range" to expand the circumstances under which the Services could list a species to address concerns that the ESA's predecessors limited the Services to listing species that were endangered worldwide. The court accordingly concluded that the phrase was added to change " when a species can be listed," not " what must be listed and protected." The court also concluded that FWS's interpretation rendered superfluous DPSs and the vertebrate distinction for DPSs if the agency could limit its listing of a species to the part of its range that was endangered or threatened. The court held that "significant part of its range" refers to whether , not where , a species is endangered or threatened. In light of the court's decision, FWS has subsequently interpreted this phrase to constitute an independent basis for listing a species throughout its range. <3.2.2. Foreseeable Future> To determine whether a species is threatened, the Services must determine whether it is in danger of extinction in the "foreseeable future." Though FWS's interpretation of this phrase has not been the focus of legal challenges to rules relating to the gray wolf, FWS's interpretation of the term as it applies to the gray wolf has changed over time. Originally, FWS used the term "foreseeable future" in its analyses but did not interpret it in general or with respect to the gray wolf specifically. In the 2007 Western Great Lakes DPS rule, however, FWS defined the term "foreseeable future" specifically for the gray wolf. The agency determined that 30 years was an appropriate measure of the foreseeable future for the gray wolf because wolves have 3-year generations, so 30 years represented 10 generations of wolves. FWS viewed 10 generations as a reasonable period to reliably predict the effects of threats on the species. FWS changed course again in the 2009 rules designating and delisting the Western Great Lakes DPS and Northern Rocky Mountain DPS. Rather than defining the "foreseeable future" for the species as a whole based on its reproductive patterns, FWS announced that it would determine the foreseeable future for each threat it considered based on its ability to project and predict effects of the threats reliably. For example, the agency used 30 years as the timeframe for available habitat and distribution models, but when considering the effect of genetic isolation on the species, it used a model that predicted those effects for the next 100 years. Though FWS's gray wolf rules have not been overturned based on its interpretation of "foreseeable future," its approach is information as interpretations of this term have generated challenges for rules on other species. The Services' recent revisions to their ESA regulations codify an interpretation of "foreseeable future" much like the one FWS adopted in the 2009 rules. As revised, the Services interpret "foreseeable future" to "extend[] only so far into the future as the Services can reasonably determine that both the future threats and the species responses to those threats are likely." The Services intend to evaluate "foreseeable future" on a case-by-case basis based on "considerations such as the species' life-history characteristics, threat-projection timeframes, and environmental variability." Consistent with FWS's approach in the more recent gray wolf rules, the Services state that they need not identify the foreseeable future as a specific time period. <3.3. Recovery and Delisting> The Services delist species using the same process they use to list species: They evaluate whether the species meets the definition of "endangered species" or "threatened species" due to one or more of the five statutory factors based on the best available scientific and commercial data. However, when delisting a species, the Services also generally evaluate the species' recovery pursuant to any identified objective recovery criteria in recovery plans and assesses the adequacy of state management plans following delisting. FWS has stated that a species need not meet all of the recovery criteria to be delisted. But a Montana district court has required FWS to provide an adequate explanation if it chooses to reject recovery criteria or delist a species that has not met these criteria, because FWS develops the recovery criteria pursuant to the statutory directive to establish "objective, measurable criteria which, when met , would result in a determination ... that the species be removed from the list." State management plans fall under the purview of "inadequate regulatory mechanisms" in the five-factor analysis, but the Services give them particular attention in delisting rules because the regulatory mechanisms protecting a species necessarily change when it is delisted and no longer receives federal protection under the ESA. Accordingly, this section focuses specifically on two aspects of recovery and delisting species: (1) how FWS has addressed objective recovery criteria and (2) post-delisting state management plans. <3.3.1. Objective Recovery Criteria in Recovery Plans> Plaintiffs have challenged how FWS has used recovery plan criteria when assessing the gray wolf's recovery in its delisting rules. The ESA directs the Services to develop and implement recovery plans for the conservation and survival of listed species if such a plan would promote conservation of the species. In any such plan, the Services must include "objective, measurable criteria" that, if met, would cause the Services to delist the species. The Act, however, directs the Services to determine whether a species should be reclassified or removed from the list during a status review based on the Section 4(a) and (b) criteria namely the endangered and threatened species definitions and the five statutory categories of threats as determined using the best available commercial and scientific data without mentioning recovery plan criteria. Though these two provisions do not inherently conflict, they have generated questions about the role of objective criteria in recovery plans when delisting species. Parties have challenged FWS's decision to delist a species when it had not met all of the objective recovery criteria. For example, plaintiffs challenged the 2008 rule to designate and delist the Northern Rocky Mountain DPS based in part on a study finding no evidence of genetic exchange between the greater Yellowstone area population and the other two recovery areas. The 1994 EIS included as a recovery criterion that the northern Rocky Mountain recovery areas have "[t]hirty or more breeding pairs comprising some 300+ wolves in a metapopulation (a population that exists as partially isolated sets of subpopulations) with genetic exchange between subpopulations ." The plaintiffs argued and a Montana district court agreed that this criterion required evidence of actual DNA exchange, not just the potential for genetic exchange or expectation of such exchange in the future. The court held that although the ESA did not prohibit FWS from finding that a species had recovered without meeting recovery criteria, FWS still needed to justify adequately rejecting its own recovery criteria to avoid violating the APA. FWS addressed these criticisms in its 2009 Northern Rocky Mountain DPS rule in multiple ways. The agency challenged the factual conclusion that genetic exchange had not occurred by questioning the assumptions of the underlying scientific study and identifying new studies showing wolf dispersal and genetic exchange. FWS further explained its interpretation of the recovery criterion, maintaining that the recovery criterion did not require confirmed genetic exchange and that genetic exchange need not result from natural migration and could be human-assisted. Finally, the agency explained why the criterion was not needed to find recovery, reasoning that genetic exchange was not a concern for the populations due to the high level of preexisting genetic diversity. In later rulemakings, FWS has stated that "recovery may be achieved without all recovery criteria being fully met." When there are questions about whether a species FWS seeks to delist has met objective recovery criteria, the agency may use one or more of the following approaches based on past practice: (1) explaining flaws in evidence showing the criteria have not been met; (2) finding additional evidence supporting its position; (3) explaining its understanding of the recovery criteria to explain why they have been met; or (4) explaining why it views the species as having recovered despite not explicitly meeting the objective criteria. Finally, parties have challenged the recovery criteria in comments on proposed rules as either excessive or inadequate to determine whether the species had recovered. FWS generally has concluded that its recovery criteria are adequate, and, to date, courts generally have not addressed FWS's technical expertise in selecting the criteria. <3.3.2. State Management Plans> State plans for managing a species post-delisting can enter into the Services' delisting determinations in two ways: (1) the Services examine any state management plans under "Factor D: The Inadequacy of Existing Regulatory Mechanisms," and (2) the Services may require in the recovery plan that they approve certain state management plans before delisting the species. For the gray wolf, the Eastern Timber Wolf Recovery Plan required as part of its recovery criteria that Minnesota, Michigan, and Wisconsin have in place state management plans FWS had approved as providing adequate wolf protection and management. Similarly, the Northern Rocky Mountain Gray Wolf Recovery Plan required in its recovery criteria that Montana, Wyoming, and Idaho have FWS-approved state management plans. To meet this recovery plan requirement, (1) the state must create a management plan that FWS approves, (2) FWS must adequately explain why it approved the plan, and (3) the state must implement the plan. The state or FWS failing to complete any of these steps has delayed FWS delisting gray wolf populations and caused courts to vacate final delisting rules. Formulating an Adequate Management Plan. First, the state must craft a management plan that FWS deems adequate to ensure the continued recovery of the species. In 2003, FWS designated but did not delist the Western DPS because the agency had rejected Wyoming's state management plan as inadequate. Wyoming challenged FWS's decision to not approve its management plan, but a Wyoming district court dismissed the case for failing to tie the decision to any final agency action that could be reviewed. FWS took a different approach in 2009 when it delisted the Northern Rocky Mountain DPS without Wyoming because it determined that the Wyoming plan remained inadequate and could not be approved. But a Montana district court determined that FWS could not delist the DPS only in part, effectively holding that Wyoming must enact an approved state management plan for the entire DPS to be delisted. Congress superseded this decision by enacting legislation in 2011 that directed FWS to reinstate the rule delisting the DPS except for Wyoming. Explaining the Agency 's Approval of the Management Plan. Second, FWS must adequately explain why it approved the state plan. In 2008, FWS delisted the Northern Rocky Mountain DPS after Wyoming revised its state management plan between the proposed and final rules. FWS proposed to delist the DPS only if Wyoming modified its plan to provide adequate protection for the species. Wyoming modified its statutes and wolf management plan after the proposed rule was published. In the final rule, FWS determined that the revised plan was adequate to ensure the gray wolf's continued recovery. A Montana district court, however, held that FWS's approval of Wyoming's plan was likely arbitrary and capricious and issued a preliminary injunction staying the delisting rule. The court determined that the plan suffered from the same flaws that FWS had identified in the plan it previously rejected and that FWS had failed to adequately explain why the plan was now sufficient. Several months after issuing the preliminary injunction, the court vacated and remanded the rule at FWS's request. Implementing the Management Plan. Finally, the state must enact and otherwise implement, as applicable, the approved management plan to ensure that the protections the Services rely on to delist the species are actually in place. For example, FWS stated in its 2000 proposed rule that it had intended to propose delisting the Western Great Lakes DPS as well as designating it but that the agency could not because the Minnesota legislature had failed to vote on the plan FWS had approved before FWS published its proposed rule. FWS accordingly proposed to designate the DPS but not delist it because the recovery criteria were not met without an approved Minnesota management plan in place. Once Minnesota enacted its plan, FWS moved forward with delisting the DPS (though courts ultimately vacated all the rules that followed). Similarly, FWS found Wyoming's management plan to be inadequate in the 2007 Northern Rocky Mountain DPS proposed rule because state laws and regulations prevented the Wyoming Game and Fish Commission from actually implementing certain components of the plan. Once Wyoming modified its state laws and regulations, FWS approved the plan. As the litigation over the FWS's 2012 rule illustrates, although states must enact management plans for the Services to move forward with delisting a species, the regulatory mechanisms need not all be legally binding so long as states assure the Services that adequate protections will be provided in practice. The federal district court for the District of Columbia vacated FWS's 2012 rule delisting the gray wolf in Wyoming because FWS relied on nonbinding promises from Wyoming that it would manage the population above the minimum recovery level. On appeal, the D.C. Circuit reversed the district court and restored the rule delisting the gray wolf in Wyoming, holding that "regulatory mechanisms" need not be binding with the force of law for FWS to determine they were adequate to protect the species. The Services' approval of state management plans and the adequacy of their explanations for approving the plans can accordingly play a central role in both finalizing delisting rules and surviving judicial review of those rules. For a particular species and state, the adequacy of the state's regulatory mechanisms and management plan are determined on a case-by-case basis through negotiation between the state and the Services. <4. Conclusion> The history of the gray wolf under the ESA illustrates the challenges FWS has faced in conserving the species as the Act intended. In implementing the ESA, the Services must contend with disagreements over how to interpret ambiguous terms, uncertain and ever-changing scientific data, and conflicting views on what it means to conserve species and the role of the states in that effort. These issues can complicate the Services' efforts to conserve endangered and threatened species and delist them, consistent with the Act's purposes. Difficulties that delay delisting species may frustrate certain stakeholders, such as state wildlife agencies that want more flexibility in managing the species or private entities in the species' habitat who must comply with the Act's prohibitions and Section 7 consultation requirements. Other stakeholders such as conservation groups or animal rights activists may raise concerns that species are inadequately regulated to ensure their long-term recovery or continued biodiversity due to uncertainties in the science and ambiguities in the statute. Either set of stakeholders may question whether the Act is effectively promoting the recovery of listed species. In light of the scientific and administrative challenges FWS has encountered with regulating the gray wolf under the Act, Congress could consider amending the Act to address these issues and ensure the Act is implemented in accordance with congressional intent. Such legislation could amend the Act generally or specifically with respect to a particular action, such as the Act directing FWS to reinstate the rule designating and delisting the Northern Rocky Mountain DPS except for Wyoming. Legislative proposals have been introduced in the 116th Congress that would pursue each of these approaches: amending the Act generally or specifically directing FWS to issue new rules or reissue vacated ones regarding the gray wolf. <4.1. Appendix. Timeline>

Under the Endangered Species Act of 1973 (ESA or the Act; 16 U.S.C. §§ 1531-1544), the U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) (together, the Services) determine which species to "list" as "endangered species" or "threatened species," terms defined in the Act. Species, subspecies, and distinct population segments (DPSs) may all be listed as "species" under the Act. Listing a species invokes certain protections under the Act and a requirement that the Services develop a recovery plan to conserve the species. Listed species may be reclassified by the Services from threatened to endangered or vice versa. The Services may also remove a species from the list, often called delisting, if it no longer meets the definition of an endangered or threatened species. The Services list, reclassify, and delist species pursuant to statutory criteria and definitions through the agency rulemaking process. Persons may—and often do—challenge the legality of those final rules through litigation. When such challenges succeed, the court remands the rule to the applicable Service for further proceedings and may vacate the challenged rule. The gray wolf ( Canis lupus ) presents a useful example of the legal issues that arise with listing and delisting species as threatened and endangered under the ESA and how FWS has addressed them. FWS first listed the gray wolf as endangered in 1967 under the Endangered Species Preservation Act (ESPA), a predecessor of the ESA. The gray wolf's status and regulation under the ESA and its predecessors have been the subjects of numerous FWS rules and court opinions. FWS's gray wolf rules show how the agency's approach to interpreting and implementing the ESA has evolved and highlight hurdles that may arise with species' status determinations. As American pioneers settled the West, hunting and other human-caused mortality, spurred by federal and state bounties, brought the gray wolf to near extinction. By the 1960s, the only population remaining in the lower 48 states was in the northern Minnesota forests. FWS listed the eastern timber wolf ( C. lupus lycaon , a gray wolf subspecies found in Minnesota) as endangered under the ESPA. By 1976, three more gray wolf subspecies—the Mexican wolf ( C. lupus baileyi ), the northern Rocky Mountain wolf ( C. lupus irremotus ), and the Texas wolf ( C. lupus monstrabilis )—were listed as endangered under the ESA. In 1978, FWS combined all gray wolf subspecies listings into one listing for the entire gray wolf species in the lower 48 states except Minnesota, which was listed as endangered, and a separate listing for the gray wolf in Minnesota as threatened. In the next few years, FWS created subspecies recovery plans that outlined management strategies and recovery criteria. In the 1990s, FWS reintroduced gray wolves to the northern Rocky Mountains and the Southwest as experimental populations under the ESA. Protected under the ESA from human-caused mortality, which FWS identified as the greatest threat to the species, gray wolf populations increased. In the 2000s, FWS tried on multiple occasions to reclassify or delist gray wolf DPSs it had determined were no longer in risk of extinction, but courts vacated many of the agency's rules. As of January 2020, the gray wolf is listed as endangered or threatened in the lower 48 states, except for a population in the northern Rocky Mountains. FWS's efforts to recover the gray wolf under the ESA exemplify the regulatory and legal challenges that arise when listing and delisting species under the Act. From initial listing to recovery and reintroduction efforts to more recent attempts to delist the gray wolf, FWS has addressed in its regulatory actions such issues as uncertainties in gray wolf taxonomy, ambiguous statutory terms (e.g., "foreseeable future" and "significant portion of its range"), and the adequacy of state management plans. Stakeholders have questioned FWS's choices in comments to the proposed rules and have challenged many of the agency's gray wolf rules in court. Many of the legal challenges to FWS's delisting rules have succeeded, with courts vacating the rules and remanding them to the agency. The history of FWS's regulation of the gray wolf under the ESA and related litigation serve as a useful case study in how regulatory and legal challenges have shaped FWS's interpretation and application of key terms when listing and delisting species under the Act.

crs_R46000

crs_R46000_0

<1. Introduction> In 2018, approximately 38.1 million people, or 11.8% of the population, had incomes below the official definition of poverty in the United States. The poverty rate (the percentage that were in poverty) fell from 12.3% in 2017, while the number of persons in poverty declined from 39.6 million. In this report, the numbers and percentages of those in poverty are based on the Census Bureau's estimates. While this official measure is often regarded as a statistical yardstick rather than a complete description of what people and families need to live, it does offer a measure of economic hardship faced by the low-income population: the poverty measure compares family income against a dollar amount called a poverty threshold , a level below which the family is considered to be poor. The Census Bureau releases these poverty estimates every September for the prior calendar year. Most of the comparisons discussed in this report are year-to-year comparisons. This report only considers a number or percentage to have changed from the previous year, or to be different from another number or percentage, if the difference has been tested to be statistically significant at the 90% confidence level. However, in addition to the most recent year's data, this report presents a historical perspective as well as information on poverty for demographic groups (by family structure, age, race and Hispanic origin, and work status) and by state. Over the past several decades, criticisms of the official poverty measure have led to the development of an alternative research measure called the Supplemental Poverty Measure (SPM), which the Census Bureau also computes and releases. Statistics comparing the official measure with the SPM are provided at the conclusion of this brief. The SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not. Because some types of tax credits are used to assist the poor, as are other forms of assistance, the SPM may be of interest to policymakers. However, the official measure provides a comparison of the poor population over a longer time period, including some years before many current antipoverty assistance programs had been developed. In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends. <1.1. How the Official Poverty Measure Is Computed> The Census Bureau determines a person's poverty status by comparing his or her resources against a measure of need. For the official measure, resources is defined as total family income before taxes, and the measure of "need" is a dollar amount called a poverty threshold. There are 48 poverty thresholds that vary by family size and composition. If a person lives with other people to whom he or she is related by birth, marriage, or adoption, the money income from all family members is used to determine his or her poverty status. If a person does not live with any family members, his or her own income is used. Only money income before taxes is used in calculating the official poverty measure, meaning this measure does not treat in-kind benefits such as the Supplemental Nutritional Assistance Program (SNAP, formerly known as food stamps), housing subsidies, or employer-provided benefits as income. The poverty threshold dollar amounts vary by the size of the family (from one person not living in a family, to nine or more family members living together) and the ages of the family members (how many of the members are children under 18 and whether or not the family head is 65 years of age or older). Collectively, these poverty thresholds are often referred to as the poverty line . As a rough guide, the poverty line in 2018 can be thought of as $25,701 for a family of four, $19,985 for a family of three, $16,247 for a family of two, or $12,784 for an individual not living in a family, though the official measure is actually much more detailed. The threshold dollar amounts are updated annually for inflation using the Consumer Price Index. Notably, the same thresholds are applied throughout the country: no adjustment is made for geographic variations in living expenses. The official poverty measure used in this report is the federal government's definition of poverty for statistical purposes, such as comparing the number or percentage of people in poverty over time. A related definition of poverty, the poverty guidelines published by the Department of Health and Human Services (HHS), is used for administrative purposes such as eligibility criteria for assistance programs and will not be discussed in this report. <2. Historical Perspective> Figure 1 shows a historical perspective of the number and percentage of the population below the poverty line. The number in poverty and the poverty rates are shown from the earliest year available (1959), through the most recent year available (2018). Because the total U.S. population has grown over time, poverty rates are useful for historical comparisons because they control for population growth. Poverty rates fell through the 1960s. Since then, they have generally risen and fallen according to the economic cycle, though during the most recent two expansions poverty rates did not fall measurably until four to six years into the expansion. Historically notable lows occurred in 1973 (11.1%) and 2000 (11.3) . Poverty rate peaks occurred in 1983 (15.2%), 1993 (15.1%), and 2010 (15.1%). Poverty rates tend to rise during and after recessions, as opposed to leading economic indicators such as new housing construction, whose changes often precede changes in the performance of the overall economy. The poverty rate's lag is explainable in part by the way it is measured: it uses income from the entire calendar year. Notably, the poverty rate in 2018 registered a fourth consecutive annual decrease since the most recent recession, though it remained higher than the rate in 2000, the most recent low point. <3. Poverty for Demographic Groups10> The drop in the U.S. poverty rate (from 12.3% in 2017 to 11.8% in 2018) affected some demographic groups more than others, notably people in female-householder families, children and the population aged 18 to 64, and the non-Hispanic white population. Details for selected demographic groups are described below. <3.1. Family Structure> Because poverty status is determined at the family level by comparing resources against a measure of need, vulnerability to poverty may differ among families of different compositions. In this section, poverty data by family structure are presented using the official poverty measure, with "families" defined as persons related by birth, marriage, or adoption to the householder (the person in whose name the home is owned or rented). In the " Supplemental Poverty Measure " section of this report, a different definition will be used. Families with a female householder and no spouse present (female-householder families) have historically had higher poverty rates than both married-couple families and families with a male householder and no spouse present (male-householder families). This remained true in 2018: female-householder families experienced a poverty rate of 24.9%, compared with 4.7% for married-couple families and 12.7% for male-householder families. Unlike the other two family types, however, female-householder families experienced a decline in their poverty rate of 1.3%. Their 2018 rate of 24.9%, down from 26.2% in 2017, appeared to be among the lowest poverty rates for female-householder families on record. Among individuals not living in families, the poverty rate was 20.2% in 2018, not distinguishable from the previous year. <3.2. Age> When examining poverty by age, three main groups are noteworthy for distinct reasons: under 18, 18 to 64, and 65 and older. People under age 18 are typically dependent on other family members for income, particularly young children below their state's legal working age. People aged 18 to 64 are generally thought of as the working-age population and typically have wages and salaries as their greatest source of income. People age 65 and older, referred to as the aged population, are often eligible for retirement, and those who do retire typically experience a change in their primary source of income. Children and the working-age population experienced decreases in poverty. Among children, 11.9 million, or 16.2%, were poor, down from 12.8 million or 17.4% in 2017. Among the working-age population, 21.1 million, or 10.7%, were in poverty, down from 21.9 million or 11.1% in 2017. The aged population did not register any significant changes in its number in poverty or its poverty rate from 2017 to 2018: 5.1 million, or 9.7%, were poor. From a historical standpoint, the poverty rate for those age 65 and over used to be the highest of the three groups. In 1966, people age 65 and over had a poverty rate of 28.5%, compared with 17.6% for those under 18 and 10.5% for working-age adults. By 1974, the poverty rate for people age 65 and over had fallen to 14.6%, compared with 15.4% for people under 18 and 8.3% for working-age adults. Since then, people under 18 have had the highest poverty rate of the three age groups, as shown in Figure 3 . <3.3. Race and Hispanic Origin13> Poverty rates vary by race and Hispanic origin, as shown in Figure 4 . In surveys, Hispanic origin is asked separately from race; accordingly, people identifying as Hispanic may be of any race. The poverty rate fell for non-Hispanic whites (from 8.5% in 2017 to 8.1% in 2018). Among blacks (20.8%), Asians (10.1%), and Hispanics (17.6%), the poverty rate did not register any statistically significant change from 2017. <3.4. Work Status> While having a job reduced the likelihood of being in poverty, it did not guarantee that a person or his or her family would avoid poverty. Among the 18 to 64-year-old population living in poverty, 77.2% had jobs in 2018. Poverty rates among workers in this age group were 5.1% for all workers, 2.3% for full-time year-round workers, and 12.7% for part-time or part-year workers, none of which were measurably changed from the previous year. Similarly, no significant change was detected among those who did not work at least one week in 2018 (29.7% were poor). Because poverty is a family-based measure, the change in one member's work status can affect the poverty status of his or her entire family. Among all 18 to 64-year-olds who did not have jobs in 2018, 58.9% lived in families in which someone else did have a job. Among poor 18 to 64-year-olds without jobs, 18.5% lived in families where someone else worked. <4. Poverty Rates by State19> Poverty is not equally prevalent in all parts of the country. The map in Figure 5 shows states with relatively high poverty rates across parts of the Appalachians, the Deep South, and the Southwest, with the poverty rate in Mississippi (19.7%) among the highest in the nation, not statistically different from the rate in New Mexico (19.5%). The poverty rate in New Hampshire (7.6%) was lowest. When comparing poverty rates geographically, it is important to remember that the official poverty thresholds are not adjusted for geographic variations in the cost of living the same thresholds are used nationwide. As such, an area with a lower cost of living accompanied by lower wages will appear to have a higher poverty rate than an area with a higher cost of living and higher wages, even if individuals' purchasing power were exactly the same in both areas. Puerto Rico and 14 states experienced poverty rate declines from 2017 to 2018: one in the Midwest (Illinois), three in the Northeast (Massachusetts, New Jersey, and New York); five in the South (Florida, Georgia, Louisiana, North Carolina, and West Virginia); and five in the West (Arizona, California, Colorado, Oregon, and Washington). Connecticut was the only state to experience an increase, and 35 states, as well as the District of Columbia, did not register a statistically significant change. <5. Supplemental Poverty Measure> Criticisms of the official measure have led to the development of the Supplemental Poverty Measure (SPM). Described below are the development of the official measure, its limitations, attempts to remedy those limitations, the research efforts that eventually led to the SPM's first release in November 2011, and a comparison of poverty rates in 2018 based on the SPM and the official measure. <5.1. How the Official Poverty Measure Was Developed> The poverty thresholds were originally developed in the early 1960s by Mollie Orshansky of the Social Security Administration. Rather than attempt to compute a family budget by using prices for all essential items that low-income families need to live, Orshansky focused on food costs. Unlike other goods and services such as housing or transportation, which did not have a generally agreed-upon level of adequacy, minimum standards for nutrition were known and widely accepted. According to a 1955 U.S. Department of Agriculture (USDA) food consumption survey, the average amount of their income that families spent on food was roughly one-third. Therefore, using the cost of a minimum food budget and multiplying that figure by three yielded a figure for total family income. That computation was possible because USDA had already published recommended food budgets as a way to address the nutritional needs of families experiencing economic stress. Some additional adjustments were made to derive poverty thresholds for two-person families and individuals not living in families to reflect the relatively higher fixed costs of smaller households. <5.2. Motivation for a Supplemental Measure> While the official poverty measure has been used for over 50 years as the source of official statistics on poverty in the United States, it has received criticism over the years for several reasons. First, it does not take into account benefits from most of the largest programs that aid the low-income population. For instance, it uses money income before taxes meaning that it does not necessarily measure the income available for individuals to spend, which for most people is after-tax income. Therefore, any effects of tax credits designed to assist persons with low income are not captured by the official measure. The focus on money income also does not account for in-kind benefit programs designed to help the poor, such as SNAP or housing assistance. The official measure has also been criticized for the way it characterizes families' and individuals' needs in the poverty thresholds. That is, the method used to compute the dollar amounts used in the thresholds, which were originally based on food expenditures in the 1950s and food costs in the 1960s, does not accurately reflect current needs and available goods and services. Moreover, the official measure does not take account of the sharing of expenses and income among household members not related by birth, marriage, or adoption. And, as mentioned earlier, the official thresholds do not take account of geographic variations in the cost of living. In 1995, a panel from the National Academy of Sciences issued a report, Measuring Poverty: A New Approach, which recommended improvements to the poverty measure. Among the suggested improvements were to have the poverty thresholds reflect the costs of food, clothing, shelter, utilities, and a little bit extra to allow for miscellaneous needs; to broaden the definition of "family;" to include geographic adjustments as part of the measure's computation; to include the out-of-pocket costs of medical expenses in the measure's computation; and to subtract work-related expenses from income. An overarching goal of the recommendations was to make the poverty measure more closely aligned with the real-life needs and available resources of the low-income population, as well as the changes that have taken place over time in their circumstances, owing to changes in the nation's economy, society, and public policies (see Table 1 ). After over a decade and a half of research to implement and refine the methodology suggested by the panel, conducted both from within the Census Bureau as well as from other federal agencies and the academic community, the Census Bureau issued the first report using the Supplemental Poverty Measure (SPM) in November 2011. <5.3. Official and Supplemental Poverty Findings for 201827> Compared with the official measure, the SPM takes into account greater detail of individuals' and families' living arrangements and provides a more up-to-date accounting of the costs and resources available to them. Because the SPM recognizes greater detail in relationships among household members and geographically adjusts housing costs, it provides an updated rendering, compared with the official measure, of the circumstances in which the poor live. In that context, some point out that the SPM's measurement of taxes, transfers, and expenses may offer policymakers a clearer view of how government policies affect the poor population today. However, the SPM was developed as a research measure, and the Office of Management and Budget set the expectation that it would be revised periodically to incorporate improved measurement methods and newer sources of data as they became available; it was not developed for administrative purposes. Conversely, the official measure's consistency over a longer time span makes it easier for policymakers and researchers to make historical comparisons. Under the SPM, the profile of the poverty population is slightly different than under the official measure. The SPM was 1 percentage point higher in 2018 than the official poverty rate (12.8% compared with 11.8%; see Figure 6 ). More people aged 18 to 64 are in poverty under the SPM (12.2% compared with 10.7% under the 2018 official measure), as are people age 65 and over (13.6%, compared with 9.7% under the official measure). The poverty rate for people under age 18 was lower under the SPM (13.7% in 2018) than under the official measure (16.2%, with foster children included). Again, the SPM uses a different definition of resources than the official measure: the SPM includes in-kind benefits which generally help families with children; subtracts out work-related expenses, which are often incurred by the working-age population; and subtracts medical out-of-pocket expenses, which are incurred frequently by people age 65 and older. With the geographically adjusted thresholds, the poverty rate in 2018 was lower under the SPM than under the official measure for the Midwest (9.2% compared with 10.4%), while it was higher than the official measure for the Northeast (12.2% compared with 10.3%), the West (14.4% compared with 11.2%), and the South (13.9% compared with 13.6%).

In 2018, approximately 38.1 million people, or 11.8% of the population, had incomes below the official definition of poverty in the United States. Poverty statistics provide a measure of economic hardship. The official definition of poverty for the United States uses dollar amounts called poverty thresholds that vary by family size and the members' ages. Families with incomes below their respective thresholds are considered to be in poverty. The poverty rate (the percentage that was in poverty) fell from 12.3% in 2017. This was the fourth consecutive year since the most recent recession that the poverty rate has fallen. The poverty rate for female-householder families in 2018 (24.9%, down 1.3 percentage points from the previous year) was higher than that for male-householder families (12.7%) or married-couple families (4.7%), neither of which registered a decline from 2017. Of the three age groups—children under 18, the working-age population, and those age 65 and older—the 65-and-older population used to have the highest poverty rates, but now has the lowest: 28.5% of the aged population was poor in 1966, but 9.7% was poor in 2018. People under 18, in contrast, had the highest poverty rate of the three age groups: 16.2% of this population was poor in 2018. From 2017 to 2018, poverty rates fell among children (from 17.4% to 16.2%) and the working-age population (from 11.1% to 10.7%), but not among the aged population (9.7% in 2018). Poverty was not equally prevalent in all parts of the country. The poverty rate for Mississippi (19.7%) appeared highest but was in a statistical tie with New Mexico (19.5%). New Hampshire's poverty rate (7.6%) was lowest in 2018. Criticisms of the official poverty measure have inspired poverty measurement research and eventually led to the development of the Supplemental Poverty Measure (SPM). The SPM uses different definitions of needs and resources than the official measure. The SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not. Because some types of tax credits are used to assist the poor (as are other forms of assistance), the SPM may be of interest to policymakers. The poverty rate under the SPM (12.8%) was about 1 percentage point higher in 2018 than the official poverty rate (11.8%). Under the SPM, the profile of the poverty population is slightly different than under the official measure. Compared with the official measure, poverty rates under the SPM were lower for children (13.7% compared with 16.2%) and higher for working-age adults (12.2% compared with 10.7%) and the 65-and-older population (13.6% compared with 9.7%). While the SPM reflects more current measurement methods, the official measure provides a comparison of the poor population over a longer time period, including some years before many current antipoverty assistance programs had been developed. In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends.

crs_R46182

crs_R46182_0

<1. Introduction> As Congress continues to consider reforms to secure the Social Security program's solvency, a related discussion has e merged around targeted reforms for vulnerable groups widows, low earners, caregivers, older beneficiaries, spouses, and never-married individuals who may deserve targeted benefit enhancements as part of a broader Social Security reform package. This report focuses on widows and Social Security policy levers to aid them. Researchers and policymakers have commented on both benefit adequacy and benefit equity in the context of Social Security benefits for widows. Concerns about the adequacy of Social Security benefits for widows stem from the fact that the widow has outlived the spouse and likely contends with a reduced monthly income after the spouse's death. The widow also may confront significant medical or long-term care expenses associated with the deceased spouse's end-of-life care. In addition, on average, women outlive men and today's widows face increased life expectancy relative to earlier birth cohorts, thus increasing the possibility of outliving their retirement resources and incurring significant expenses for their own long-term care. Benefit equity concerns stem from Social Security program rules that provide higher benefits to one-earner couples than to two-earner couples with identical lifetime earnings and payroll tax contributions. Social Security was designed in the era of a traditional family with a working husband and a wife devoted to home production. Marital patterns, gender roles, and work patterns have changed substantially since the 1930s. Benefit equity would be improved by providing equal benefits for equal contributions. This report seeks to discuss current-law Social Security provisions pertaining to widows; describe the characteristics of Social Security widow beneficiaries; illustrate the benefit adequacy and benefit equity concerns leading to a perceived need for targeted benefit enhancements for widows; explain policy levers that may be modified to aid widows; outline legislative proposals and proposals in the literature concerning widows, highlighting their projected effects on program solvency and estimated distributional effects; and identify other Social Security reform options that would indirectly benefit widows. <2. Social Security Widow Benefits3> <2.1. Overview> Social Security provides monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. Workers become eligible for Social Security benefits by working in Social Security covered employment. A worker generally needs 40 earnings credits (10 years of covered employment) to obtain insured status and become eligible for a Social Security retired-worker benefit. Employers and employees each contribute payroll taxes of 6.2% of covered earnings, up to an annual limit on taxable earnings ($132,900 in 2019). Monthly benefits are based on the worker's career-average earnings in covered employment. Full retired-worker benefits are available at the full retirement age (FRA), currently age 66 and gradually increasing to age 67 in 2022 for individuals born in 1960 or later. Reduced retired-worker benefits are available beginning at age 62. Workers who claim benefits after the FRA are eligible for delayed retirement credits up to age 70. The spouse of a retired worker may receive a spousal benefit of up to 50% of the retired worker's basic benefit amount, called the primary insurance amount (PIA). The widow of a deceased worker may receive a survivor benefit of up to 100% of the deceased worker's PIA. Spousal and survivor (widow) benefits are subject to adjustments based on the (surviving) spouse's age at entitlement, the retired or deceased worker's age at entitlement, the receipt of a Social Security benefit based on the (surviving) spouse's own work record, earnings prior to the FRA above certain thresholds, and earnings from employment not covered by Social Security. <2.2. Widow Benefits4> Survivor benefits are derived from the deceased worker's Social Security insurance status and lifetime covered earnings. Spouses and former spouses of fully insured deceased workers (those with 40 or more earnings credits) are eligible for survivor benefits as long as they meet the other requirements for those benefits. For example, the surviving spouse (widow) must be aged 60 or older (sometimes referred to as a nondisabled widow ) and must not have remarried before age 60. A surviving spouse with a qualifying disability who has not remarried before age 50 may begin to receive survivor benefits at age 50 (referred to as a disabled widow ). The surviving spouse also may receive disabled widow benefits if disabled within 7 years after the death of the fully insured spouse, or before age 60, whichever is earlier. A divorced surviving spouse (divorced widow) who has not remarried before age 60 (age 50 if disabled) can claim a survivors benefit beginning at age 60 (age 50 if disabled) based on a marriage that lasted at least 10 years. The widow benefit is a specified percentage of the deceased worker's PIA, depending on the widow's age and relationship to the deceased worker. If a widow qualifies for a retirement benefit based on the widow's own work record and the deceased spouse's work record, the widow has dual entitlement and receives the higher amount of the two benefits. In essence, if the widow's own worker benefit is lower than the deceased spouse's worker benefit, the widow receives the widow's own worker benefit plus a reduced widow benefit equal to the difference between the full widow benefit and the widow's retired worker benefit. Monthly benefits are adjusted each year by the cost-of-living adjustment that is applied to all Social Security benefits. Widow benefits are payable in the month of the deceased spouse's death, regardless of when the death occurred during the month. <2.3. Reductions for Early Claiming> A widow's benefit is affected by both the widow's own claiming age and the deceased spouse's claiming age. A widow who begins to collect a widow benefit at the FRA will receive 100% of the deceased spouse's PIA. A widow who begins collecting benefits before the FRA will receive reduced benefits. A nondisabled widow who claims benefits at age 60 or a disabled widow who claims at age 50 will receive 71.5% of the deceased worker's PIA, the largest reduction possible. If the deceased worker claimed reduced benefits before the FRA, the widow benefit will be reduced as well, because it cannot exceed the deceased worker's reduced benefit amount. This provision is referred to as the widow(er)'s limit , under which the widow benefit may be reduced to a floor of 82.5% of the deceased worker's full PIA. Conversely, if the deceased worker claimed benefits after the FRA, the deceased worker's delayed retirement credits increase the widow benefit. In considering the reduction for the widow claiming benefits before the widow's FRA and the widow(er)'s limit reduction if the deceased worker claimed benefits before the deceased worker's FRA, the widow receives the smaller of the two benefit amounts. Among nondisabled widow beneficiaries in December 2018, about 52.2% had their benefits reduced by claiming benefits before their own FRA, about 23.1% had their benefits reduced because their deceased spouse claimed benefits before the FRA, and about 4.1% had their benefits reduced because both the widow and the deceased spouse claimed benefits before their respective FRAs. <2.4. Other Benefit Adjustments> The total amount of survivor benefits paid on a deceased worker's account to qualifying family members is capped at 150% to 188% of the deceased worker's PIA, depending on the value of the PIA. If total survivor benefits exceed this family maximum , each person's benefit is reduced proportionately. In addition, if a widow claims benefits before the FRA and is working, the benefit may be reduced by the retirement earnings test, depending on the amount of earnings. Finally, widows with earnings not covered by Social Security may face reduced benefits due to the government pension offset. <2.5. Characteristics of Social Security Widow Beneficiaries14> In December 2018, 3.91 million individuals received Social Security widow benefits, representing about 6.2% of the 62.9 million Social Security beneficiaries ( Table 1 ). Women accounted for 96.3% of widow beneficiaries. More than 41% of nondisabled widow beneficiaries are aged 80 or older. In total, Social Security paid $5.26 billion in widow benefits in December 2018, averaging $1,388 per month for nondisabled widows and $747.41 per month for disabled widows ( Table 1 ). Among nondisabled widow beneficiaries, 12.1% had a monthly benefit less than $750, whereas 11.2% had a monthly benefit of $2,000 or more. About 79.4% of nondisabled widow beneficiaries aged 65 or older had their monthly benefit reduced because of their own early retirement (52.2%), early retirement by their deceased spouse (23.1%), or both (4.1%). <3. Perceived Need for Targeted Benefit Enhancements for Widows> Researchers and policymakers have raised concerns about both benefit adequacy and benefit equity in the context of Social Security benefits for widows. Concerns about benefit adequacy stem from the facts that the widow has outlived the spouse, may contend with a reduced monthly income after the spouse's death, may confront significant medical and long-term care expenses associated with the deceased spouse's end-of-life care, and is at risk of outliving retirement resources and incurring significant expenses for long-term care. Concerns about benefit equity stem from Social Security program rules that provide higher benefits to one-earner couples than to two-earner couples with identical lifetime earnings and Social Security payroll tax contributions. More equitable program rules, reflecting changes in family structure and the work patterns of husbands and wives, would provide equal benefits for equal contributions. <3.1. Benefit Adequacy Concerns> A widow is at risk of a substantial income reduction after the spouse's death, compared with the couple's total income prior to the spouse's death. The widow's Social Security benefit may be 33% to 50% lower than the combined couple's Social Security benefit. The deceased spouse's pension from work may be lost or cut in half. The widow also may confront depleted assets from the deceased spouse's medical or long-term care expenses. In addition, on average, women outlive men and today's widows face increased life expectancy relative to earlier cohorts, potentially incurring significant expenses for their own long-term care and increasing the risk of outliving their retirement resources. These factors contribute to high observed poverty rates among widows and concerns about the adequacy of Social Security benefits in widowhood. Table 2 provides hypothetical examples of the differing benefit reductions experienced by widows depending on the relative earnings of the husband and wife. In Example 1, spouse A (worker) in a single-earner couple receives a Social Security benefit at the FRA of $1,770 per month and spouse B (nonworker) receives a Social Security spouse benefit at the FRA of $885 per month (50% of the worker's benefit). The combined couple's retirement benefit is $2,655, or 150% of the worker's PIA (100% of the worker's PIA plus a spouse benefit equal to 50% of the worker's PIA). After the worker's death, the widow (spouse B) receives a widow benefit equal to 100% of the deceased worker's benefit, which is 67% of the combined couple's benefit while both were alive (or a 33% reduction). For the two-earner couple in Example 2, where spouse A and spouse B have equal earnings and both claim benefits at the FRA, their combined benefit is 200% of either worker's PIA ($1,120 for spouse A plus $1,120 for spouse B equals $2,240 combined for the couple). After spouse A's death, the widow (spouse B) continues to receive a worker benefit (which is equivalent to the widow benefit from the deceased husband). The total monthly benefit is 50% of the combined couple's benefit while both spouses were alive (or a 50% reduction). Example 3 shows a two-earner couple with unequal earnings. Spouse A receives a Social Security retirement benefit at the FRA of $1,770 per month. Spouse B, with lower earnings, receives a worker benefit at the FRA of $1,120 per month. The combined couple's benefit is $2,890 per month. Upon spouse A's death, the widow (spouse B) continues to receive a worker benefit, increased by the widow benefit to equal $1,770 per month, or 100% of the deceased worker's benefit. The widow's monthly benefit is 61% of the combined couple's benefit while both were alive (or a 39% reduction). Placing the Social Security benefit reduction experienced by a widow upon the spouse's death in the broader context of benefit adequacy requires assessing a single person's consumption needs relative to a couple's. Clearly, a single person's consumption (and thus income) needs are lower than a couple's. The precise amount of the reduction depends upon the extent of economies of scale experienced by a couple relative to a single person, that is, the degree to which a single person needs more than half the income of a couple to sustain the same standard of living. One way to operationalize this concept is to look at the differences between poverty thresholds for one-person and two-person families. The federal poverty threshold in 2018 for a one-person family over the age of 65 was 79% of the federal poverty threshold for a two-person family over the age of 65. The Census Bureau's Supplemental Poverty Measure results in a threshold for a one-adult family equal to about 70% of the threshold for a two-adult family. These measures suggest that Social Security widow benefits equaling between 50% and 67% of the combined couple's benefit while both spouses were alive may not be sufficient to sustain the widow's consumption. In addition to reduced Social Security benefits, widows are likely to lose part or in some cases, all of any private pension payments that were received by the deceased spouse. Prior to the Employee Retirement Income Security Act (ERISA) reforms in 1974, the default pension payout scheme was a single-life annuity that ended upon the retired worker's death. ERISA changed the default to a joint-and-survivor benefit that would continue payments to the widow, albeit at a reduced rate (typically 50%). Further reforms under the Retirement Equity Act of 1984 require the signatures of both the worker and the spouse when choosing a single-life benefit instead of the (default) joint-and-survivor benefit. In either case, the reduction in pension income upon widowhood can be substantial. Pension income also tends to decrease in real value over time, with very few private-sector defined-benefit pensions offering postretirement cost-of-living adjustments. Widows may experience significant reductions in wealth and private savings following their spouse's death because of medical and long-term care expenses at the end of life. One study finds that end-of-life out-of-pocket medical expenses are large both in absolute terms and relative to income. Among those in the lowest 25% of the income distribution, end-of-life medical expenses were found to equal roughly 70% of income. On average, women live longer than men, and women today live longer than women from earlier cohorts. Remaining life expectancy at retirement is projected to be 2.5 years greater for women reaching age 65 in 2019 compared with men reaching age 65 in 2019. In addition, remaining life expectancy at retirement has increased substantially across birth cohorts. For example, remaining cohort life expectancy for a woman reaching age 65 in 2019 is projected to be 21.5 years, compared with 20.0 years for a woman reaching age 65 in 1999 and 18.8 years for a woman reaching age 65 in 1979. However, these life expectancy gains are not shared equally by all men and women. Greater improvements in life expectancy have been experienced by those in the upper portions of the income distribution relative to those with lower incomes, resulting in a growing gap in life expectancy by income. With that as background, consider that in 2017, about 18% of all individuals aged 60 or older were widows; however, nearly 26% of individuals aged 60 or older who lived in families with income below the federal poverty threshold were widows, as shown in Table 3 . Table 4 shows the poverty rate in 2017 among individuals aged 60 or older by Social Security beneficiary status and marital status. Among individuals aged 60 or older, the poverty rate among widows was 13.7%, compared with 9.5% for all individuals, 4.4% for married individuals living together, 17.6% for divorced or separated individuals, and 23.7% for never-married individuals. Poverty rates were lower across the board for individuals aged 60 or older who receive Social Security benefits, but still relatively high for widows (10.1%). Never-married individuals had the highest poverty rate among Social Security beneficiaries aged 60 or older, at 19.8%, whereas 2.4% of married individuals living together and receiving Social Security benefits lived in poverty. Although considerably smaller in number, non-Social Security beneficiaries aged 60 or older had substantially higher poverty rates, reaching 30.5% among widows (not shown). Older women in general and among Social Security beneficiaries; among widowed women in particular as well as women who are divorced or separated had higher poverty rates than older men. In 2017, the poverty rate was 14.6% for widowed women aged 60 or older and 10.8% for widowed women aged 60 or older receiving Social Security benefits, compared with 10.5% and 7.7%, respectively, for men aged 60 or older (see Table 5 ). Table 5 also provides the poverty rate for widows and widowers aged 60 or older, and widows and widowers aged 60 or older receiving Social Security benefits by age, race, ethnicity, educational attainment, and earnings in 2017. The poverty statistics provide clear evidence that widows are more vulnerable than widowers across all subgroups. The poverty statistics also show that receipt of Social Security benefits reduces poverty overall and, for many subgroups, narrows the gap in poverty rates between widows and widowers. Focusing on widows receiving Social Security benefits, young widows (aged 60-64) have a higher poverty rate (19.5%), and older widows (aged 75 or older) have moderately higher poverty rates (10%-11%), compared with widows aged 65-74 (roughly 8%). White, Asian, and non-Hispanic widows aged 60 or older receiving Social Security benefits have substantially lower poverty rates (around 9%) than black and Hispanic widows aged 60 or older receiving Social Security benefits (20.4% and 19.6%, respectively). Better-educated widows aged 60 or older receiving Social Security benefits have lower poverty rates. Among the small fraction of widows aged 60 or older receiving Social Security benefits who had any earnings in 2017, the poverty rate was 0.9%. Considering changes in all income sources, studies find that widows experience an income reduction of 35% to 40% upon their spouse's death. The reduction in income leads to significant increases in poverty rates among widows, the effects of which may compound over time for women who become widowed at younger ages and experience widowhood for longer time periods. Moreover, a substantial fraction of older adults living alone (which may include widows as well as divorced or separated individuals and never-married individuals) has income above the poverty threshold but still below a level that achieves long-term economic stability. Estimates from the CPS show that, in 2017, 16.7% of all widows aged 60 or older and 18.3% of all widows aged 60 or older receiving Social Security benefits lived in near poverty , meaning their family income is above the federal poverty threshold but below 150% of the federal poverty threshold. <3.2. Benefit Equity Concerns> Changes over the past 80-plus years in family structure and the work patterns of husbands and wives are not reflected in current Social Security program rules, leading to some concerns about benefit equity. Benefit equity suggests that equal lifetime earnings should yield equal benefits. However, under existing program rules, some two-earner couples with substantially higher earnings and contributions receive only slightly higher retirement and widow benefits than traditional one-earner couples with a working husband and a wife devoted to home production. Social Security benefits for a spouse with no labor market earnings were designed to be relatively generous. Thus, a traditional one-earner couple receives higher benefits than a two-earner couple with identical lifetime earnings and payroll tax contributions. Consider the examples in Table 6 , which follow the same couples from Table 2 but add detail about their underlying earnings and Social Security payroll taxes paid. As before, the examples assume that both spouses retire at their full retirement age and receive unreduced benefits. Example 1 is the traditional one-earner couple, where spouse A earns wages in the workforce and spouse B specializes in home production (no wage earnings). Example 2 is a two-earner couple, with the same total annual earnings and payroll taxes as in Example 1, earned and paid in equal proportions by spouse A and B. Despite paying equal payroll taxes, the couple in Example 2 receives lower Social Security benefits during retirement and the total monthly benefit to the widow (spouse B) is substantially lower. In Example 3, spouse A's earnings are the same as in Example 1, but now spouse B also has earnings and makes payroll tax contributions. Although the combined benefit in retirement is somewhat higher in Example 3 than in Example 1, reflecting spouse B's earnings, the total monthly benefit to the widow is equal in both examples. Spouse B's earnings in example 3 do not increase the total monthly benefit in widowhood. <4. Social Security Policy Options to Aid Widows> Driven by concerns about Social Security benefit adequacy and benefit equity for widows, researchers, advocates, and policymakers have considered several approaches to modifying Social Security benefits to aid widows. One approach is to adjust the Social Security program policy levers that most directly affect widows. These levers include the fraction of the deceased worker's PIA that the surviving spouse would receive under the widow(er)'s limit, the provision of credits for delayed claiming, the parameters around benefits for disabled widows, and the lump-sum death benefit. Another approach is to develop an alternative widow benefit, envisioned as a percentage of the couple's combined Social Security benefits while both were alive, with the widow receiving the higher of this alternative benefit amount and the current-law widow benefit. This section looks to the research and policy literature, and previously introduced legislation in some cases, to describe policy options. The discussion identifies potential effects on benefit adequacy and benefit equity, and highlights projected effects on program solvency and estimated distributional effects. <4.1. Widow(er)'s Limit> As described earlier, the widow(er)'s limit reduces the widow benefit by as much as 17.5%, to a floor of 82.5% of the deceased worker's full PIA, if the deceased worker claimed reduced benefits before the FRA. The idea behind the widow(er)'s limit is that the widow's benefit cannot exceed the deceased worker's reduced benefit amount. The widow(er)'s limit also provides incentives for married workers to delay claiming Social Security benefits. However, it negatively affects benefit adequacy for widows, some of whom may have limited access to non-Social Security sources of income. Although the widow(er)'s limit is a little-known feature of the Social Security program, it affected the benefits of about 27% of Social Security nondisabled widow beneficiaries aged 65 or older in December 2018, or 857,135 beneficiaries. The effects of eliminating or modifying the widow(er)'s limit were estimated in a 2001 Social Security Administration (SSA) study, with data pertaining to the mid- to late 1990s. Eliminating the widow(er)'s limit would produce the largest estimated effects, increasing the total amount of widow benefit payments by about 5%. For widows who experience the maximum benefit reduction of 17.5% under the widow(er)'s limit, eliminating the widow(er)'s limit would substantially improve benefit adequacy. However, the SSA study estimated that only 14% of the increased benefit payments would be received by widows in poverty and that 40% would be received by widows near poverty (with income under 150% of the federal poverty threshold). Adjustments to the widow(er)'s limit could be designed to direct more of the increased benefit payments to widows in or near poverty, but then would affect fewer widows and would do less to improve benefit adequacy. Other options explored in the SSA study to modify the widow(er)'s limit, again affecting fewer widows, focus on individuals who are widowed before the FRA or cases in which the worker dies before the FRA. Eliminating the widow(er)'s limit would mean that the widow would receive better survivor protection from Social Security than the (deceased) worker, considering that, if the spouse were to die before the worker, the worker would continue to receive a reduced worker benefit (for claiming before the FRA). None of the potential changes to the widow(er)'s limit address the equity concerns with current-law widows benefits. <4.2. Credits for Delayed Claiming> Two bills S. 345 and H.R. 4123 have been introduced in the 116 th Congress that would provide credits, or increased benefits, for widows who delay claiming or temporarily suspend receipt of benefits on their deceased spouse's work record. Among other changes, S. 345 would modify widow benefits as follows: For widows whose current-law benefit would be less than 100% of the deceased spouse's PIA, it would increase benefits by between 0.34% and 0.39% per month (up to 4.1% to 4.7% annually), depending on the widow's FRA, for each month of delayed claiming or suspension beyond age 60, up to 100% of the deceased spouse's PIA. For widows whose current-law benefit would be equal to or greater than 100% of the deceased spouse's PIA, it would increase monthly benefits at the retired-worker delayed retirement credit rate (0.67% per month, up to 8% annually, for individuals born in 1944 and later) for each month of delayed claiming or suspension, up to 124% of PIA if the deceased spouse's FRA was 67 or 132% of PIA if the deceased spouse's FRA was 66. Under H.R. 4123 , monthly widow benefits would be increased at the retired-worker delayed retirement credit rate (0.67% per month, up to 8% annually, for individuals born in 1944 and later) for widows who delay claiming or suspend benefits beyond their FRA, up to age 70. SSA's Office of the Chief Actuary (OCACT) estimated the financial effects on Social Security of S. 3457 , a 115 th Congress version of S. 345 . The estimates are based on the 2018 Trustees Report's intermediate assumptions and address the policy change's effects on the combined reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds. OCACT estimated that Section 4 of S. 3457 , pertaining to the increased widow benefits for delayed or suspended claiming described above, would worsen the Social Security program's actuarial balance by 0.02% of taxable payroll and would have resulted in about 400,000 widow beneficiaries receiving higher monthly benefits in 2018 if the provision had always been in effect. OCACT estimates of H.R. 4123 are not available. Both bills would improve benefit adequacy for affected widows, but would not address the equity concerns with current-law widow benefits. <4.3. Benefit Parameters for Disabled Widows> Three bills introduced in the 116 th Congress would adjust the parameters for disabled widow benefits. S. 345 , H.R. 4122 , and H.R. 4125 would expand eligibility for disabled widow benefits by eliminating the requirements that a disabled widow be at least 50 years old and that, if not disabled at the time of the spouse's death, the widow become disabled within seven years of the spouse's death (or by age 60, whichever is earlier). The bills would enhance benefits by eliminating the reduction of disabled widow benefits for those claiming before their FRA, effectively establishing a floor for disabled widow benefits equal to 100% of the deceased spouse's PIA. OCACT's estimates of S. 3457 's financial effects (mentioned above in " Credits for Delayed Claiming ") found that Section 2 of the bill, pertaining to the expanded eligibility and benefit enhancements for disabled widow benefits described above, would worsen the Social Security program's actuarial balance by 0.02% of taxable payroll and would have resulted in about 600,000 widow beneficiaries receiving higher monthly benefits, or additionally receiving benefits, in 2018 if the provision had always been in effect. Although not directly addressed in the OCACT estimates, these eligibility expansions and benefit expansions could induce some widows with disabilities to apply for benefits who would not have done so under current law. OCACT did not produce estimates for H.R. 4122 and H.R. 4125 . These bills would improve benefit adequacy for affected disabled widows, but would not address the equity concerns with current-law widow benefits. <4.4. Lump-Sum Death Benefit38> When a Social Security-insured worker dies, the surviving spouse who was living with the deceased worker is entitled to a one-time, lump-sum death benefit of $255. The dollar value of the lump-sum death benefit has not changed since 1954, meaning that its real value, after adjusting for inflation, has eroded significantly over time. Over the years, proposals have been put forward to modify or eliminate the lump-sum death benefit, including several proposals to increase it. In the context of aiding widows as a vulnerable group, even a substantial increase in the lump-sum death benefit would provide only partial relief through a one-time payment for the deceased spouse's end-of-life expenses (medical and burial). As such, it would address the adequacy concerns with current-law widow benefits in only a limited fashion. As an across-the-board increase for all widows, it would not be targeted to those in poverty or near poverty. Moreover, it would not alleviate the equity concerns with current-law widow benefits. <4.5. An Alternative Widow Benefit> Another approach to modifying Social Security benefits to aid widows is to calculate an alternative widow benefit. Many authors in the research and policy literature envision the alternative widow benefit as a percentage of the sum of the widow's own worker benefit (including any actuarial reductions or delayed retirement credits) and the deceased spouse's PIA (potentially including any actuarial reductions or delayed retirement credits). The widow would receive the higher of this alternative benefit amount and the current-law widow benefit. This approach is thought to both increase benefit adequacy and improve benefit equity. The alternative widow benefit could be capped at a specified level to improve targeting to low- and moderate-income widows and reduce cost. Current-law spouse benefits also could be reduced to offset the alternative widow benefit's cost. When calculating the combined benefit, the widow's own worker benefit would be reduced for claiming before the FRA, if applicable. Some proposals include the spouse benefit for this portion of the calculation as well, while others use only the widow's own worker benefit. Including the spouse benefit would broaden eligibility to include single-earner couples and provide greater improvements to benefit adequacy. Using only the widow's worker benefit would do more to improve the proposal's effects on benefit equity. If the deceased spouse claimed benefits before the FRA, the calculation could use the deceased spouse's reduced worker benefit, or it could use the full PIA as if the deceased spouse had claimed benefits at the FRA. The latter approach would effectively eliminate the widow(er)'s limit for those who receive the alternative widow benefit, and is more effective at improving benefit adequacy for lower earners. Most proposals for an alternative widow benefit specify that the widow would receive the greater of 75% of the couple's combined worker benefits when both were alive and the current-law widow benefit, as illustrated in Table 7 following the example couples from Table 2 and Table 6 . For the single-earner couple in Example 1a, assuming that both spouses claim benefits at the full retirement age, the alternative widow benefit would be 75% of $1,770, or $1,327.50. Since the alternative widow benefit is less than the current-law widow benefit of $1,770, the widow would continue to receive the current-law amount (equal to 67% of the combined couple's benefit). Note that if spouse benefits were included in the alternative widow benefit computation, and assuming that both spouses claim benefits at the full retirement age, the widow in Example 1b would receive 75% of the combined couple's benefit of $2,655, or about $1,991.25 per month, compared with 67% of the combined couple's benefit while both were alive under current law. For a two-earner couple where the husband and wife have equal earnings, and again assuming that both spouses claim benefits at the full retirement age, the widow benefit would increase from 50% of the combined couple's benefit while both spouses were alive to 75%, as shown in Example 2. The monthly widow benefit would increase from $1,120 under current law to $1,680 under the alternative widow benefit proposal. Example 3 shows a two-earner couple where the husband and wife have unequal earnings. Again assuming that both spouses claim benefits at the full retirement age, the widow benefit would increase from 61% of the combined couple's benefit while both spouses were alive to 75%. Although the monthly widow benefit would increase from $1,770 under current law to $2,167.50 under the alternative widow benefit proposal, the percentage increase in the widow benefit would be smaller than for the couple with equal earnings. The examples in Table 7 show that the alternative widow benefit proposal, which does not include the value of the spouse benefit, would not improve widow benefits for nonworking survivors in single-earner couples. It would provide the greatest benefit to two-earner couples with roughly equal earnings. Including spouse benefits in the alternative widow benefit calculation would magnify the favorable treatment of nonworking spouses under current law. From the perspective of benefit equity, excluding the spouse benefit would allow the widow's own worker benefit to contribute to the alternative widow benefit on an equal footing with the deceased spouse's worker benefit. Without a cap on the alternative widow benefit, one study found that most of the proposal's benefits would go to higher-earning couples. Imposing a cap on the alternative widow benefit can improve benefit adequacy by targeting benefit increases to widows at the lower end of the income distribution. Several approaches are available, such as setting the cap at the PIA of a career average earner, the average benefit of all retired workers, or the average benefit of newly retired workers. The solvency and distributional analyses below impose a cap based on the PIA of a career average earner who becomes eligible for retired worker benefits in the same year the deceased spouse became entitled to worker benefits. As explained in detail below, based on SSA analysis, the alternative widow benefit's cost is modest and the distributional effects point to improvements in both benefit adequacy and benefit equity. The alternative widow benefit proposal would not reduce benefits for anyone. Thus, no transition period would be needed and it could be applied to new widow beneficiaries as well as current widow beneficiaries. If other changes to the Social Security program were desired to offset the alternative widow benefit's cost, policymakers could consider raising revenue (e.g., increasing the payroll tax), reducing cost (e.g., reducing spouse benefits, other benefit reductions), or both. However, depending on the alternative widow benefit's exact formulation, some approaches may be less desirable. For example, if the widow's spouse benefit is not included in the alternative widow benefit calculation, then offsetting the proposal's cost by reducing spouse benefits would not be appropriate. Additional solvency and distributional analyses could help policymakers to refine the details of any formal proposals. <4.5.1. Cost and Solvency Effects> Three bills introduced in the 116 th Congress contain a provision for the alternative widow benefit, constructed largely as described above. OCACT estimated the financial effects on Social Security of previous versions of two of these bills. OCACT also updates alternative widow benefit estimates after the Trustees Report is released each year. The estimates are based on the Trustees Report's intermediate assumptions and address the policy change's effects on the combined reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds. OCACT's latest estimates of the alternative widow benefit proposal's cost and solvency effects reflect the 2019 Trustees Report's intermediate assumptions. The estimates assume the proposal would be implemented for widows receiving benefits at the beginning of 2021 and those becoming eligible after 2021. The alternative widow benefit estimated by OCACT would be 75% of the couple's combined worker benefits when both were alive (the widow's own worker benefit and the deceased worker's PIA). It would apply actuarial reductions or delayed retirement credits to the widow's own worker benefit and the deceased spouse's PIA. Finally, it would impose a cap defined by the PIA of a hypothetical worker who earns the SSA average wage index every year and becomes eligible for retired worker benefits in the same year the deceased spouse became entitled to worker benefits. Under these alternative widow benefit parameters, the long-range actuarial balance would worsen by 4%. However, the changes are not large enough to change the year of reserve depletion, estimated to be 2035 in the 2019 Trustees Report under both current law and the alternative widow benefit proposal. <4.5.2. Distributional Effects> SSA's Office of Research, Evaluation, and Statistics (ORES) estimated the alternative widow benefit proposal's distributional effects using the same underlying proposal parameters modeled by OCACT. The ORES estimates are derived from the Modeling Income in the Near Term, Version 7 (MINT7) microsimulation model. The estimates pertain to current-law beneficiaries aged 60 or older in 2030, 2050, and 2070. Outcomes of interest from the ORES MINT estimates include changes in benefits, household income, and poverty, among all beneficiaries and affected beneficiaries, disaggregated by gender, marital status, educational attainment, and household income quintile. Among current-law beneficiaries aged 60 or older in 2030, the ORES MINT estimates suggest that 8% of beneficiaries will experience higher benefits under the alternative widow benefit relative to current law, including 10% of female beneficiaries, 11% of beneficiaries whose education was limited to high school, and 14% of beneficiaries with less than a high school education. The proposal would result in higher benefits for nearly one-third of current-law widow beneficiaries, with gains concentrated among those in poverty and in the bottom two-fifths of the household income distribution (due to the cap at the PIA of a career average wage worker). Similar, though slightly stronger, results are obtained for current-law beneficiaries aged 60 or older in 2050 and 2070. Among beneficiaries affected by the alternative widow benefit in 2030, the median benefit increase is 17%, again with the largest gains among those in poverty. The poverty rate is estimated to decrease by 10.2% (or 0.5 percentage points) among all current-law beneficiaries aged 60 or older in 2030, and by 38% (or 1.9 percentage points) among current-law widow beneficiaries aged 60 or older in 2030. In 2070, 43% of current-law widow beneficiaries aged 60 or older are estimated to experience a benefit increase. While the gains continue to be concentrated among the lowest income quintiles in 2050 and 2070, the poverty effects are muted in 2070 relative to 2030 and 2050. Gains relative to payable benefits (rather than scheduled benefits) in 2050 and 2070 are orders of magnitude larger but follow the same general patterns. When considering the alternative widow benefit's distributional effects, some of the proposal's limitations are worth noting. First, a person must have a qualifying marital history to receive widow benefits. As such, the alternative widow benefit would not improve benefit adequacy for a growing group of women who do not have a marital history that would qualify for widow benefits, including never-married women, who have a high poverty rate ( Table 4 ). Further, if the alternative widow benefit is based only on the widow's own worker benefit (not also including the spouse benefit), then both members of the couple would need to have a work history sufficient to earn Social Security worker benefits. Under this scenario, the alternative widow benefit would not improve benefit adequacy for nonworking survivors in single-earner couples. Finally, a higher Social Security widow benefit could lead to reduced or lost Supplemental Security Income payments for some widows, which in turn could lead to lost eligibility for other means-tested programs, such as Medicaid, the Supplemental Nutrition Assistance Program (formerly known as Food Stamps), and the Low Income Home Energy Assistance Program. Policymakers may wish to consider offsets or exclusions (hold-harmless provisions) in these programs to prevent loss of eligibility. <5. Other Policy Changes That May Benefit Widows> Several other policy changes proposed for other vulnerable groups would aid widows who are members of those targeted groups. Brief descriptions follow, along with references for more detailed information. <5.1. Enhanced Benefits for Low Earners> Under current law, the Social Security program has a special minimum benefit (SMB) for workers with many years of low earnings. However, the SMB grows with prices rather than wages, and thus affects fewer beneficiaries every year. In December 2018, 35,505 beneficiaries received the SMB, with an average monthly benefit of just over $900. In addition, the SMB is computed based on years of coverage, rather than lifetime earnings. The earnings threshold for a year of coverage in 2019 is $14,805 (by comparison, in 2019 a worker earns four quarters of coverage for traditional Social Security benefits with annual earnings of $5,440). A worker must have at least 11 years of coverage to qualify for the SMB, and the maximum SMB is obtained with 30 years of coverage. Proposals to improve benefit adequacy by providing an enhanced minimum benefit under Social Security take many forms and may serve to increase retirement income and reduce poverty among some older women and widows. Some proposals would reform the SMB to apply to a larger group of workers with substantial work histories and low earnings. The initial SMB could be tied to wage growth rather than price growth, the amount of earnings required for a year of coverage could be reduced, partial years of coverage could be allowed, and the amount of the SMB could be tied to a fraction of the federal poverty threshold, increasing with the number of years of coverage. Others point out that workers with shorter working careers are a larger group at greater risk of poverty in older age and would not be aided by a reformed SMB. Some options to address this group include (1) creating a new basic minimum benefit as a supplement to traditional Social Security benefits for low-income beneficiaries above the FRA and (2) revising the bend points and PIA factors in the traditional Social Security benefit formula to increase benefits for low earners and improve progressivity. Older women and widows from birth cohorts currently of retirement age may be well represented among workers with shorter working careers, given traditional propensities to leave the workforce for raising children and potentially for providing elder care. However, recent research suggests that women's labor force participation patterns are changing, with higher levels of employment early in life, motherhood coming later in life, motherhood's impact on employment lessening, and women working longer at older ages. Among women who worked at some point during their pregnancy, the fraction who reported quitting their jobs around the time of the birth decreased substantially for those having their first child in the early 2000s compared with those having their first child in the 1980s, whereas the fraction taking paid leave increased substantially and the fraction taking unpaid leave remained constant. Cohorts of women born in the 1950s and later are expected to enter their retirement ages with more work experience and more steeply sloped earnings patterns. <5.2. Reduced Marriage Duration Requirements for Divorced Spouse and Divorced Widow Benefits> Under current law, a divorced spouse may claim Social Security spouse and/or survivor benefits if the marriage lasted at least 10 years and the person claiming benefits is unmarried. Divorced spouse benefits may be claimed beginning at age 62, whereas divorced survivor benefits may be claimed beginning at age 60 (or age 50 if disabled). Divorced spouses are entitled to the same spouse and survivor benefits as a married spouse, including applicable reductions when benefits are claimed before the divorced spouse's FRA. As shown in Table 3 , divorced individuals made up 16.6% of the population aged 60 or older in 2017, but 30.7% of the population aged 60 or older in poverty. The poverty rate among all divorced individuals aged 60 or older was 17.6% in 2017 ( Table 4 ), and 19.0% among divorced women aged 60 or older (not shown). Two studies found that the fraction of women aged 50-59 and 60-69 who are divorced from a marriage of less than 10 years and thus not eligible for Social Security divorced spouse and divorced survivor benefits under current law increased substantially between 1990 and 2004/2009. Since the 1950s, the age of first marriage (among women and men) has increased markedly, whereas the prevalence of divorce doubled between the 1960s and 1970s, with the probability of divorce substantially higher for those with some college or a high school degree compared with college graduates. Reducing the duration-of-marriage requirement for divorced spouses and survivors, for example to five, seven, or nine years, has been discussed as a way to reduce the poverty rate among this vulnerable population. One study found that, although such a policy change would affect a relatively small fraction of female retirees, the greatest potential income gain (and thus poverty reduction) would accrue to low-income divorced widows with marriages that lasted between five years and nine years. <5.3. Increased Benefits for Older Beneficiaries> As noted earlier, women tend to outlive men and remaining cohort life expectancy for a woman attaining age 65 has increased by nearly 2 years over the past 40 years, reaching 21.5 years in 2019 (compared with a greater gain of 4.4 years over the past 40 years for men, reaching 19.0 years for men attaining age 65 in 2019). With increased life expectancy comes greater risk of outliving one's non-Social Security retirement resources and, consequently, greater reliance on Social Security benefits. Poverty rates also increase with age, particularly among women (although Table 5 shows an even higher poverty rate among young widows aged 60-64). Some have outlined a modest longevity increase in Social Security benefits (specified as a percentage of the individual's benefit or a fixed dollar amount within a given retiree cohort) starting around age 80 to 85, or after 18 years to 20 years of benefit receipt. One proposal would target the benefit increase to low-income beneficiaries. Another would provide a delayed annuity for older beneficiaries whose benefit is below some minimum level relative to the federal poverty threshold and increase it with years of covered earnings. Estimates of an option to increase benefits by 5% for beneficiaries aged 85 or older (about 64% of whom are widows) in 2030 point to modest reductions in poverty. Proposals to increase the Social Security cost-of-living adjustment, for example by using the experimental Consumer Price Index for Americans 62 years of age and older (CPI-E) instead of the Consumer Price Index for urban wage earners and clerical workers (CPI-W), also tend to favor older beneficiaries. <5.4. Caregiver Credits and Paid Family Leave> Providing earnings credits for periods out of the labor force or with reduced earnings due to caregiving responsibilities has been proposed in many forms. Although not targeted toward widows, such policies would result in enhanced benefits for widows to the extent that the enhanced benefits were available for periods out of the labor force while caring for young children or elderly parents, or perhaps caring for a now-deceased spouse. Women are more likely than men to experience time out of the workforce while raising children. In March 2017, the labor force participation rate was 63.1% for mothers with children under the age of 3, 65.1% for mothers with children under the age of 6, and 76.0% for mothers with children aged 6 to 17. Comparable rates for men were 95.1%, 94.4%, and 91.5%, respectively. Women also are more likely than men to be caregivers, provide more hours of care, and provide more hands-on care. Women caregivers are less likely to be in the labor force than women who are not caregivers, whereas among men, the labor force participation rate for caregivers is essentially the same as the labor force participation rate for noncaregivers. Options include providing caregivers with a number of dropout years (e.g., up to five years) to be excluded from the Social Security benefit formula, providing earnings credits (e.g., tied to a fraction of the average wage index for a given year or a fraction of the worker's prior earnings) to caregivers for years of caregiving (e.g., up to five years), and supplementing the retired worker benefit for caregivers in households with limited income (e.g., up to 125% of the federal poverty threshold). Related are ongoing policy discussions about establishing a system for paid family leave, which refers to partially or fully compensated time away from work for specific and generally significant family caregiving needs, such as the arrival of a new child or serious illness of a close family member. The National Defense Authorization Act for Fiscal Year 2020 ( P.L. 116-92 ) conferred a paid parental-leave benefit on certain federal employees covered by the Family and Medical Leave Act of 1993 ( P.L. 103-3 , as amended). Employer provision of paid family leave in the private sector is currently voluntary, and in March 2019 such leave was available to 18% of private-industry employees, according to data from the Bureau of Labor Statistics. As of January 2020, five states California, New Jersey, New York, Rhode Island, and Washington State have active programs. Four additional programs those in Connecticut, the District of Columbia, Massachusetts, and Oregon await implementation. Several bills have been introduced in the 116 th Congress to establish a national paid family leave program. Some would implement paid family leave through the Social Security program, either by creating a new program component in which covered workers and employers pay into the program and covered workers with periods of qualified caregiving draw benefits from the program, or by allowing eligible caregivers (parents) to receive some months of Social Security benefits in exchange for deferred claiming of retirement benefits to cover the caregiver benefit's costs.

As Congress actively considers Social Security reform options, one area of interest is Social Security policy levers to aid vulnerable groups—widows, low earners, caregivers, older beneficiaries, spouses, and never-married individuals. In the context of widows, researchers and policymakers have raised concerns about both benefit adequacy and benefit equity. In 2017, about 18% of all individuals aged 60 or older were widows; however, nearly 26% of individuals aged 60 or older living in poverty were widows. Benefit adequacy concerns stem from the facts that the widow has outlived the spouse, may contend with a reduced monthly income after the spouse's death, may confront significant medical and long-term care expenses associated with the deceased spouse's end-of-life care, and is at risk of outliving retirement resources and incurring significant expenses for long-term care. The focus tends to be on widows (women) rather than widowers (men). In 2017, the poverty rate was 14.6% for widowed women aged 60 or older and 10.8% for widowed women aged 60 or older receiving Social Security benefits, compared with 10.5% and 7.7%, respectively, for widowed men aged 60 or older. Benefit equity concerns stem from Social Security program rules that provide higher benefits to one-earner couples than to two-earner couples with identical lifetime earnings and Social Security payroll tax contributions. More equitable program rules, reflecting changes in family structure and work patterns of husbands and wives, would provide equal benefits for equal contributions. Several approaches to modifying Social Security benefits to aid widows are available. One approach is to adjust the Social Security program policy levers that most directly affect widows. These levers include the widow(er)'s limit, the provision of credits for delayed claiming, the parameters around benefits for disabled widows, and the lump-sum death benefit. Another approach is to develop an alternative widow benefit, envisioned as a percentage of the couple's combined Social Security benefits while both were alive, with the widow receiving the higher of this alternative benefit amount and the current-law widow benefit. Finally, proposals that would aid other vulnerable groups—enhanced benefits for low earners, reduced marriage requirements for divorced spouse and divorced survivor benefits, increased benefits for older beneficiaries, caregiver credits, and paid family leave—also would aid widows who are members of those targeted groups.

crs_R41219

crs_R41219_0

<1. Introduction> The United States and Russia signed a new strategic arms reduction treaty known as New START on April 8, 2010. This treaty replaced the 1991 Strategic Arms Reductions Treaty (START), which expired, after 15 years of implementation, on December 5, 2009. The U.S. Senate provided its advice and consent to ratification of New START on December 22, 2010, by a vote of 71-26. The Russian parliament, with both the Duma and Federation Council voting, did so on January 25 and January 26, 2011. The treaty entered into force on February 5, 2011, after Secretary of State Clinton and Foreign Minister Lavrov exchanged the instruments of ratification. New START superseded the 2002 Strategic Offensive Reductions Treaty (known as the Moscow Treaty), which then lapsed in 2012. New START provided the parties with 7 years to reduce their forces, and it will remain in force for a total of 10 years, unless the parties agree to extend it for no more than five additional years. Both parties completed their required reductions by February 5, 2018. With the reductions now complete, questions about whether the two nations will extend the treaty have begun to dominate public discussions. The Obama Administration briefly considered pursuing an extension of New START before it left office in 2016, but did not raise the issue with Russia. Press reports indicate that the President Trump rejected a proposal from Russian President Putin to extend the treaty during their first phone call in February 2017. The Presidents reportedly discussed the treaty during their summit in Helsinki in July 2018, with President Putin presenting President Trump with a document suggesting that they extend the treaty after resolving "existing problems related to the Treaty implementation," but the two reportedly did not reach an agreement on the issue. The Administration's Nuclear Posture Review (NPR), completed in February 2018, confirmed that the United States would continue to implement the treaty, at least through 2021, but was silent on the prospects for extension through 2026. Trump Administration officials have indicated that they are reviewing the treaty and assessing whether it continues to serve U.S. national security interests before deciding whether the United States would propose or accept a five-year extension. They noted, in testimony before the Senate Foreign Relations Committee in May 2019, that an interagency review was continuing, but they refused to elaborate on the substance of that review or speculate on the implications of a decision to allow New START to lapse in 2021. During this hearing, Under Secretary of State Andrea Thompson and Deputy Under Secretary of Defense David Trachtenberg emphasized that the New START Treaty might not be sufficient to address emerging threats to U.S. national security. They noted that Russia was developing new kinds of strategic offensive arms that would not count under the treaty, that Russia was expanding its stockpile of shorter-range nonstrategic nuclear weapons that were outside the scope of the treaty, and that China was modernizing and expanding its nuclear arsenal but was not a part of the treaty at all. These comments were consistent with press reports indicating that President Trump would like to pursue a new arms control agreement that captured all types of nuclear weapons and included China's forces under the limits. The witnesses were unable, however, to articulate a reason for why China would be willing to participate in such negotiations when its nuclear arsenal of around 300 warheads was far smaller than the arsenals of several thousand warheads held by the United States and Russia. Instead, when asked, Under Secretary Thompson provided a rationale for why the United States would want China to participate in the talks, noting that China wants "to be a responsible player on the world stage. They want to be part of this great power competition. And with that comes responsibilities." Some U.S. officials, including General John Hyten, the commander of U.S. Strategic Command (STRATCOM), have noted that New START serves U.S. national security interests because its monitoring regime provides transparency and visibility existing into Russian nuclear forces and because its limits provide predictability about the future size and structure of those forces. However, in testimony before the Senate Armed Services Committee in February 2019, General Hyten also expressed concern about new kinds of nuclear forces that Russia may develop in the coming years. He noted that these weapons could eventually pose a threat to the United States and said he thought the United States and Russia should expand New START so they would count them under the treaty limits. As is noted below, Article V, paragraph 2 of the treaty provides a mechanism for the parties to address concerns about the emergence of new kinds of strategic offensive arms. It states that the parties should raise their concerns about such weapons in the Bilateral Consultative Commission (BCC) established by the treaty, and seek to reach a resolution there. In May 2019, Undersecretary of State Andrea Thompson stated that the United States had begun to have discussions with Russia about these systems at the technical expert level, but she did not specify whether these discussions were occurring in the BCC. Russian officials have stated that some of its new systems should not count under New START because they do not meet the treaty's definition of deployed missile launchers or heavy bombers. Nevertheless, the public debate about the possible extension of New START has begun to incorporate views about how to address these weapons. For example, some experts believe the United States and Russia should extend the treaty before 2021, then use the time during the extension to discuss how to include these new systems under the treaty limits. Some, however, have suggested the opposite, arguing that the United States should not agree to extend New START unless Russia agrees, before the extension takes effect, to count its new systems under the treaty limits. Others believe that the United States should agree to extend New START only if Russia agrees, before the extension takes effect, to use the time during the extension to negotiate a new treaty that not only captures the new kinds of weapons, but also imposes limits on Russia's nonstrategic nuclear forces. Russian officials have also questioned whether the United States and Russia are in a position to extend New START before it expires in 2021. At a conference in Washington in March 2019, Anatoly Antonov, Russia's ambassador to the United States, noted that Russia is not interested in expanding New START so that it would count new kinds of strategic systems and that Russia would be unwilling to discuss an extension of New START until the United States addresses Russia's concerns with U.S. implementation of the treaty's conversion and elimination procedures. Moreover, he noted that, if the two sides negotiated a new treaty to capture the systems of concern to the United States, Russia would insist on addressing U.S. systems like ballistic missile defenses and strategic conventional weapons that are of concern to Russia. <2. Background> President Obama and and Russia's President Medvedev outlined their goals for the negotiations on a new START Treaty in early April 2009. In a joint statement issued after they met in London, they indicated that the subject of the new agreement "will be the reduction and limitation of strategic offensive arms." This statement indicated that the new treaty would not address missile defenses, nonstrategic nuclear weapons, or nondeployed stockpiles of nuclear weapons. The Presidents also agreed that they would seek to reduce their forces to levels below those in the 2002 Moscow Treaty, and that the new agreement would "mutually enhance the security of the Parties and predictability and stability in strategic offensive forces, and will include effective verification measures drawn from the experience of the Parties in implementing the START Treaty." The Presidents further refined their goals for New START, and gave the first indications of the range they were considering for the limits in the treaty, in a Joint Understanding signed at their summit meeting in Moscow in July 2009. They agreed that the new treaty would restrict each party to between 500 and 1,100 strategic delivery vehicles and between 1,500 and 1,675 associated warheads. They also agreed that the new treaty would contain "provisions on definitions, data exchanges, notifications, eliminations, inspections and verification procedures, as well as confidence building and transparency measures, as adapted, simplified, and made less costly, as appropriate, in comparison to the START Treaty." The New START Treaty follows many of the same conventions as the 1991 START Treaty. It contains detailed definitions and counting rules that the parties use to identify the forces limited by the treaty. It also mandates that the parties maintain an extensive database that describes the locations, numbers, and technical characteristics of weapons limited by the treaty. It allows the parties to use several types of exhibitions and on-site inspections to confirm information in the database and to monitor forces and activities limited by the treaty. But the new treaty is not simply an extension of START. The United States and Soviet Union negotiated the original START Treaty during the 1980s, during the latter years of the Cold War, when the two nations were still adversaries and each was still wary of the capabilities and intentions of the other. Many of the provisions in the original treaty reflect the uncertainty and suspicion that were evident at that time. The New START Treaty is a product of a different era and a different relationship between the United States and Russia. In some ways, its goals remain the same the parties still sought provisions that would allow for predictability and transparency in their current forces and future intentions. But, the United States and Russia have streamlined and simplified the central limits and the monitoring and verification provisions. The new treaty does not contain layers of limits and sublimits; each side can determine its own mix of land-based intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs), and heavy bombers. Moreover, in the current environment, the parties were far less concerned with choking off avenues for potential evasion schemes than they were with fostering continued cooperation and openness between the two sides. <3. Central Limits and Key Provisions> <3.1. Central Limits> <3.1.1. Limits on Delivery Vehicles> The New START Treaty contains three central limits on U.S. and Russian strategic offensive nuclear forces; these are displayed in Table 1 , below. First, it limits each side to no more than 800 deployed and nondeployed ICBM and SLBM launchers and deployed and nondeployed heavy bombers equipped to carry nuclear armaments. Second, within that total, it limits each side to no more than 700 deployed ICBMs, deployed SLBMs, and deployed heavy bombers equipped to carry nuclear armaments. Third, the treaty limits each side to no more than 1,550 deployed warheads. Deployed warheads include the actual number of warheads carried by deployed ICBMs and SLBMs, and one warhead for each deployed heavy bomber equipped for nuclear armaments. Table 1 compares these limits to those in the 1991 START Treaty and the 2002 Moscow Treaty. According to New START's Protocol a deployed ICBM launcher is "an ICBM launcher that contains an ICBM and is not an ICBM test launcher, an ICBM training launcher, or an ICBM launcher located at a space launch facility." A deployed SLBM launcher is a launcher installed on an operational submarine that contains an SLBM and is not intended for testing or training. A deployed mobile launcher of ICBMs is one that contains an ICBM and is not a mobile test launcher or a mobile launcher of ICBMs located at a space launch facility. These deployed launchers can be based only at ICBM bases. A deployed ICBM or SLBM is one that is contained in a deployed launcher. Nondeployed launchers are, therefore, those that are used for testing or training, those that are located at space launch facilities, or those that are located at deployment areas or on submarines but do not contain a deployed ICBM or SLBM. The New START Treaty does not limit the number of nondeployed ICBMs or nondeployed SLBMs. It does, however, state that these missiles must be located at facilities that are known to be within the infrastructure that supports and maintains ICBMs and SLBMs. These include "submarine bases, ICBM or SLBM loading facilities, maintenance facilities, repair facilities for ICBMs or SLBMs, storage facilities for ICBMs or SLBMs, conversion or elimination facilities for ICBMs or SLBMs, test ranges, space launch facilities, and production facilities." Nondeployed ICBMs and SLBMs may also be in transit between these facilities, although Article IV of the treaty indicates that this time in transit should be "no more than 30 days." The parties share information on the locations of these missiles in the database they maintain under the treaty and notify each other when they move these systems. These provisions are designed to allow each side to keep track of the numbers and locations of nondeployed missiles and to deter efforts to stockpile hidden, uncounted missiles. A party would be in violation of the treaty if one of its nondeployed missiles were spotted at a facility not included on the list, or if one were found at a location different from the one listed for that missile in the database. According to the Protocol to New START, a deployed heavy bomber is one that is equipped for nuclear armaments but is not a "test heavy bomber or a heavy bomber located at a repair facility or at a production facility." Moreover, a heavy bomber is equipped for nuclear armaments if it is "equipped for long-range nuclear ALCMs, nuclear air-to-surface missiles, or nuclear bombs." All deployed heavy bombers must be located at air bases, which are defined as facilities "at which deployed heavy bombers are based and their operation is supported." If an air base cannot support the operations of heavy bombers, then the treaty does not consider it to be available for the basing of heavy bombers, even though they may land at such bases under some circumstances. Test heavy bombers can be based only at heavy bomber flight test centers and nondeployed heavy bombers other than test heavy bombers can be located only at repair facilities or production facilities for heavy bombers. Each party may have no more than 10 test heavy bombers. Heavy bombers that are not equipped for long range nuclear ALCMs, nuclear air-to-surface missiles, or nuclear bombs will not count under the treaty limits. However, the treaty does specify that, "within the same type, a heavy bomber equipped for nuclear armaments shall be distinguishable from a heavy bomber equipped for non-nuclear armaments." Moreover, if a party does convert some bombers within a given type so that they are no longer equipped to carry nuclear weapons, it cannot base the nuclear and nonnuclear bombers at the same air base, unless otherwise agreed by the parties. Hence, the United States could reduce the number of bombers that count under the treaty limits by altering some of its B-52 bombers so that they no longer carry nuclear weapons and by basing them at a separate base from those that still carry nuclear weapons. In addition, if the United States converted all of the bombers of a given type, so that none of them could carry nuclear armaments, then none of the bombers of that type would count under the New START treaty. This provision allows the United States to remove its B-1 bombers from treaty accountability. They no longer carry nuclear weapons, but they still counted under the old START Treaty and were never altered so that they could not carry nuclear weapons. The conversion rules that would affect the B-1 bombers are described below. <3.1.2. Limits on Warheads> Table 1 summarizes the warheads limits in START, the Moscow Treaty, and the New START Treaty. Two factors stand out in this comparison. First, the original START Treaty contained several sublimits on warheads attributed to different types of strategic weapons, in part because the United States wanted the treaty to impose specific limits on elements of the Soviet force that were deemed to be "destabilizing." Therefore, START sought to limit the Soviet force of heavy ICBMs by cutting in half the number of warheads deployed on these missiles, and to limit future Soviet deployments of mobile ICBMs. The Moscow Treaty and New START, in contrast, contain only a single limit on the aggregate number of deployed warheads. They provide each nation with the freedom to mix their forces as they see fit. This change reflects, in part, a lesser concern with Cold War models of strategic and crisis stability. It also derives from the U.S. desire to maintain flexibility in determining the structure of its own nuclear forces. Table 1 also highlights how the planned numbers of warheads in the U.S. and Russian strategic forces have declined in the years since the end of the Cold War. Before START entered into force in 1991, each side had more than 10,000 warheads on its strategic offensive delivery vehicles. If the parties implement the New START Treaty, that number will have declined by more than 80%. However, although all three treaties limit warheads, each uses different definitions and counting rules to determine how many warheads each side has deployed on its strategic forces. Under START, the United States and Russia did not actually count deployed warheads. Instead, each party counted the launchers ICBM silos, SLBM launch tubes, and heavy bombers deployed by the other side. Under the terms of the treaty, they then assumed that each operational launcher contained an operational missile, and each operational missile carried an "attributed" number of warheads. The number of warheads attributed to each missile or bomber was the same for all missiles and bombers of that type. It did not recognize different loadings on individual delivery vehicles. This number was listed in an agreed database that the parties maintained during the life of the treaty. The parties then multiplied these warhead numbers by the number of deployed ballistic missiles and heavy bombers to determine the number of warheads that counted under the treaty's limits. In most cases, the number of warheads attributed to each type of ICBM and SLBM was equal to the maximum number that missile had been tested with. START did, however, permit the parties to reduce the number of warheads attributed to some of their ballistic missiles through a process known as "downloading." When downloading missiles, a nation could remove a specified number of reentry vehicles from all the ICBMs at an ICBM base or from all the SLBMs in submarines at bases adjacent to a specified ocean. They could then reduce the number of warheads attributed to those missiles in the database, and therefore, the number that counted under the treaty limits. Unlike ballistic missiles, bombers counted as far fewer than the number of warheads they could carry. Bombers that were not equipped to carry long-range nuclear-armed cruise missiles counted as one warhead, even though they could carry 16 or more bombs and short-range missiles. U.S. bombers that were equipped to carry long-range nuclear-armed cruise missiles counted as 10 warheads, even though they could carry up to 20 cruise missiles. Soviet bombers that were equipped to carry long-range nuclear-armed cruise missiles counted as 8 warheads, even though they could carry up to 16 cruise missiles. These numbers were then multiplied by the numbers of deployed heavy bombers in each category to determine the number of warheads that would count under the treaty limits. In contrast with START, the Moscow Treaty did not contain any definitions or counting rules to calculate the number of warheads that counted under the treaty limit. Its text indicated that it limited deployed strategic warheads, but the United States and Russia could each determine its own definition of this term. The United States counted "operationally deployed" strategic nuclear warheads and included both warheads on deployed ballistic missiles and bomber weapons stored near deployed bombers at their bases. Russia, in contrast, did not count any bomber weapons under its total, as these weapons were not actually deployed on any bombers. Moreover, because the Moscow Treaty did not contain any sublimits on warheads deployed on different categories of delivery vehicles, the two parties only had to calculate an aggregate total for their deployed warheads. In addition, while they exchanged data under START on the numbers of accountable launchers and warheads every six months, they only had to report the number of warheads they counted under the Moscow Treaty once, on December 31, 2012, at the end of the treaty's implementation period. Like START, the New START Treaty contains definitions and counting rules that will help the parties calculate the number of warheads that count under the treaty limits. For ballistic missiles, these rules follow the precedent set in the Moscow Treaty and count only the actual number of warheads on deployed delivery vehicles. For bombers, however, these rules follow the precedent set in START and attribute a fixed number of warheads to each heavy bomber. Article III of the New START Treaty states that "for ICBMs and SLBMs, the number of warheads shall be the number of reentry vehicles emplaced on deployed ICBMs and on deployed SLBMs." Missiles will not count as if they carried the maximum number of warheads tested on that type of missile. Each missile will have its own warhead number and that number can change during the life of the treaty. The parties will not, however, visit each missile to count and calculate the total number of warheads in the force. The New START database will list total number of warheads deployed on all deployed launchers. The parties will then have the opportunity, 10 times each year, to inspect one missile or three bombers selected at random. At the start of these inspections, before the inspecting party chooses a missile or bomber to view, the inspected party will provide a list of the number of warheads on each missile or bomber at the inspected base. The inspecting party will then choose a missile at random, and confirm that the number listed in the database is accurate. This is designed to deter the deployment of extra warheads by creating the possibility that a missile with extra warheads might be chosen for an inspection. As was the case under START, this inspection process does not provide the parties with the means to visually inspect and count all the deployed warheads carried on deployed missiles. Under START, this number was calculated by counting launchers and multiplying by an attributed number of warheads. Under New START, as was the case in the Moscow Treaty, each side simply declares its number of total deployed warheads and includes that number in the treaty database. Unlike the Moscow Treaty, however, the parties will provide and update these numbers every six months during the life of the treaty, rather than just once at the end of the treaty. Under the New START Treaty, each deployed heavy bomber equipped with nuclear armaments counts as one nuclear warhead. This is true whether the bomber is equipped to carry cruise missiles or gravity bombs. Neither the United States nor Russia deploys nuclear weapons on their bombers on a day-to-day basis. Because the treaty is supposed to count, and reduce, actual warheads carried by deployed delivery vehicles, the bomber weapons that are not deployed on a day-to-day basis are excluded. In addition, because the parties will use on-site inspections to confirm the actual number of deployed warheads on deployed delivery vehicles, and the bombers will have no warheads on them during inspections, the parties needed to come up with an arbitrary number to assign to the bombers. That number is one. <3.2. Conversion and Elimination> According to New START, ICBM launchers, SLBM launchers, and heavy bombers equipped to carry nuclear armaments shall continue to count under the treaty limits until they are converted or eliminated according to the provisions described in the treaty's Protocol. These provisions are far less demanding than those in the original START Treaty and will provide the United States and Russia with far more flexibility in determining how to reduce their forces to meet the treaty limits. <3.2.1. ICBM Launchers> Under START, ICBM launchers were "destroyed by excavation to a depth of no less than eight meters, or by explosion to a depth of no less than six meters." If missiles were removed from silos, and the silos were not eliminated in this fashion, then the silos still counted as if they held a deployed missile and as if the deployed missile carried the attributed number of warheads. New START lists three ways in which the parties may eliminate ICBM silo launchers. It states that silo launchers "shall be destroyed by excavating them to a depth of no less than eight meters or by explosion to a depth of no less than six meters." It also indicates that the silos can be "completely filled with debris resulting from demolition of infrastructure, and with earth or gravel." Finally, it indicates the party carrying out the elimination can develop other procedures to eliminate its silos. It may have to demonstrate this elimination alternative to the other party, but that party cannot dispute or deny the use of that method. Hence, instead of blowing up the silos or digging them out of the ground, the parties to the treaty might choose to disable the silo using measures it identifies itself, so that it can no longer launch a missile. This could be far less costly and destructive than the procedures mandated under START, and would help both nations eliminate some silos that have stood empty for years while continuing to count under the old START Treaty. For the United States, this would include the 50 silos that held Peacekeeper missiles until 2005 and the 50 silos that held Minuteman III missiles until 2008. The United States has never destroyed these silos, so they continued to count under START. It can now disable theses silos and remove them from its tally of launchers under the New START Treaty. According to the recent reports, the Air Force Global Strike Command began preparations to eliminate these silos in March 2011, and plans to fill them with gravel. It expects to complete this process by 2017. <3.2.2. Mobile ICBM launchers> Under START, the elimination process for launchers for road-mobile ICBMs required that "the erector-launcher mechanism and leveling supports shall be removed from the launcher chassis" and that "the framework of the erector-launcher mechanism on which the ICBM is mounted and erected shall be cut at locations that are not assembly joints into two pieces of approximately equal size." It also required that the missile launch support equipment be removed from the launcher chassis, and that the "mountings of the erector-launcher mechanism and of the launcher leveling supports shall be cut off the launcher chassis" and cut into two pieces of approximately equal size. START also required that 0.78 meters of the launcher chassis be cut off and cut into two parts, so that the chassis would be too short to support mobile ICBMs. Under New START, the elimination process for launchers for road mobile ICBMs is far more simple and far less destructive. As was the case under START, the elimination "shall be carried out by cutting the erector-launcher mechanism, leveling supports, and mountings of the erector-launcher mechanism from the launcher chassis and by removing the missile launch support equipment ... from the launcher chassis." But neither the framework nor the chassis itself have to be cut into pieces. If the chassis is going to be used "at a declared facility for purposes not inconsistent with the Treaty" the surfaces of the vehicle that will be visible to national technical means of verification must be painted a different color or pattern than those surfaces on a deployed mobile ICBM launcher. <3.2.3. SLBM Launchers> Under START, the SLBM launch tubes were considered to be eliminated when the entire missile section was removed from the submarine; or when "the missile launch tubes, and all elements of their reinforcement, including hull liners and segments of circular structural members between the missile launch tubes, as well as the entire portion of the pressure hull, the entire portion of the outer hull, and the entire portion of the superstructure through which all the missile launch tubes pass and that contain all the missile launch-tube penetrations" were removed from the submarine. The missile launch tubes then had to "be cut into two pieces of approximately equal size." Under New START, SLBM launch tubes can be eliminated "by removing all missile launch tube hatches, their associated superstructure fairings, and, if applicable, gas generators." In other words, the missile section of the submarine and the individual launch tubes can remain in place in the submarine, and cease to count under the treaty limits, if they are altered so that they can no longer launch ballistic missiles. Moreover, according to the Ninth Agreed Statement in the New START Protocol, SLBM launch tubes that have been converted in accordance with this procedure and are "incapable of launching SLBMs may simultaneously be located on a ballistic missile submarine" with launch tubes that are still capable of launching SLBMs. After a party completes this type of conversion, it "shall conduct a one-time exhibition of a converted launcher and an SLBM launcher that has not been converted" to demonstrate, to the other party, "the distinguishing features of a converted launcher and an SLBM launcher that has not been converted." The United States plans to use this procedure to reduce the number of launch tubes on each SSBN from 24 to 20. According to recent reports, it will begin this process in 2015, so that it will have no more than 240 operational launchers for SLBMs by the treaty deadline of February 2018. Under START, the United States had to essentially destroy an entire submarine to remove its launch tubes from accountability under the treaty limits. With these provisions in New START, the United States cannot only convert ballistic missile submarines to other uses without destroying their missile tubes and missile compartments; it can also reduce the number of accountable deployed SLBM launchers on ballistic missile submarines that continue to carry nuclear-armed SLBMs. These provisions will provide the United States a great deal of flexibility when it determines the structure of its nuclear forces under New START. During the past decade, the United States converted four of its Trident ballistic missile submarines so that they no longer carry ballistic missiles but now carry conventional cruise missiles and other types of weapons. These are now known as SSGNs. Because the United States did not remove the missile compartment from these submarines, they continued to count as if they carried 24 Trident missiles, with 8 warheads per missile, under the old START Treaty. These submarines will not count under the New START Treaty. In the Second Agreed Statement in the New START Protocol, the United States has agreed that, "no later than three years after entry into force of the Treaty, the United States of America shall conduct an initial one-time exhibition of each of these four SSGNs. The purpose of such exhibitions shall be to confirm that the launchers on such submarines are incapable of launching SLBMs." Moreover, if an SSGN is located at an SSBN base when a Russian inspection team visits that base, the inspection team will have the right to inspect the SSGN again to confirm that the launchers have not been converted back to carry SLBMs. Russia can conduct six of these re-inspections during the life of the treaty, but no more than two inspections of any one of the SSGNs. <3.2.4. Heavy Bombers> Under START, heavy bombers were eliminated by having the tail section cut off of the fuselage at a location that obviously was not an assembly joint; having the wings separated from the fuselage at any location by any method; and having the remainder of the fuselage cut into two pieces, with the cut occurring in the area where the wings were attached to the fuselage, but at a location obviously not an assembly joint. START also allowed the parties to remove heavy bombers from treaty accountability by converting them to heavy bombers that were not equipped to carry nuclear armaments. According to the elimination and conversion Protocol in START, this could be done by modifying all weapons bays and by removing or modifying the external attachment joints for either long-range nuclear ALCMs or other nuclear armaments that the bombers were equipped to carry. The elimination procedure for heavy bombers has also been simplified under New START. To eliminate bombers, the parties must cut "a wing or tail section from the fuselage at locations obviously not assembly joints," or cut "the fuselage into two parts at a location obviously not an assembly joint." It no longer has to remove the wings from the fuselage. In addition, to convert a bomber counted under the treaty to a heavy bomber no longer equipped to carry nuclear armaments, the parties can either modify the weapons bays and external attachments for pylons so that they cannot carry nuclear armaments, or modify all internal and external launcher assemblies so that they cannot carry nuclear armaments, or develop any other procedure to carry out the conversion. As was the case with the conversion and elimination of missile launchers, the party may have to demonstrate its conversion procedure, but the other party does not have the right to object or reject the procedure. The United States no longer equips its B-1 bombers with nuclear weapons, and has no plans to do so in the future. It has not, however, converted these bombers to nonnuclear heavy bombers using the procedures outlined in START. As a result, they continued to count as one delivery vehicle and one warhead under the counting rules in START. The United States does not, however, want to count these bombers under the New START Treaty. As a result, in the First Agreed Statement, the United States and Russia agreed, during the first year that the treaty is in force, the United States will conduct a "one-time exhibition" to demonstrate to Russia that these bombers are no longer equipped to carry nuclear weapons. The bombers that no longer carry nuclear weapons will have a "distinguishing feature" that will be recorded in the treaty database and will be evident on all B-1 bombers that are no longer equipped to carry nuclear weapons. After all the B-1 bombers have been converted in this manner, they will no longer count against the limits in the New START Treaty. <3.3. Mobile ICBMs> <3.3.1. Mobile ICBMs in START> Mobile ICBMs became an issue in the original START negotiations in the mid-1980s, as the Soviet Union began to deploy a single-warhead road-mobile ICBM, the SS-25, and a 10-warhead rail-mobile ICBM, the SS-24. The United States initially proposed that START ban mobile ICBMs because the United States would not be able to locate or target these systems during a conflict. Some also questioned whether the United States would be able to monitor Soviet mobile ICBM deployments well enough to count the missiles and verify Soviet compliance with the limits in START. Some also argued that the Soviet Union might be able to stockpile hidden missiles and launchers, and to reload mobile ICBM launchers during a conflict because the United States could not target and destroy them. The Soviet Union refused to ban mobile ICBMs. As a result, START limited the United States and Soviet Union to 1,100 warheads on mobile ICBMs. The treaty also limited the numbers of nondeployed missiles and nondeployed launchers for mobile ICBMs. Each side could retain 250 missiles and 110 launchers for mobile ICBMs, with no more than 125 missiles and 18 launchers for rail mobile ICBMs. This did not eliminate the risk of "breakout," which refers to the rapid addition of stored missiles to the deployed force, but it did limit the magnitude of the breakout potential and the number of missiles that the Soviet Union could "reload" on deployed launchers during a conflict. START also contained a number of complementary, and sometimes overlapping, monitoring mechanisms that were designed to help the parties keep track of the numbers and locations of permitted missiles. Each side could monitor the final assembly facility for the missiles to count them as they entered the force. The parties also agreed to record the serial numbers, referred to in the treaty as "unique identifiers," for the mobile ICBMs, and to list these numbers in the treaty's database. These numbers were used to help track and identify permitted missiles because the parties could check the serial numbers during on-site inspections to confirm that the missiles they encountered were those that they expected to see at the facility during the inspection. The parties also had to provide notifications when mobile ICBMs moved between permitted facilities and when mobile ICBMs moved out of their main operating bases for an exercise. These notifications were designed to complicate efforts to move extra, hidden missiles into the deployed force. Finally, missiles and launchers removed from the force had to be eliminated according to specific procedures outlined in the treaty. This not only helped the parties keep an accurate count of the deployed missiles, but served as a further deterrent to efforts to hide extra missiles outside the treaty regime. <3.3.2. Mobile ICBMs in New START> The New START Treaty contains many limits and restrictions that will affect Russia's force of mobile ICBMs, but it does not single them out with many of the additional constraints that were contained in START. Russia pressed for an easing of the restrictions on mobile ICBMs in New START, in part because these restrictions were one sided and only affected Russian forces. But Russian officials also noted, and the United States agreed, that mobile ICBMs could enhance the survivability of Russia's nuclear forces, and therefore strengthen strategic stability under the new treaty. The United States was also willing to relax the restrictions on mobile ICBMs because it is far less concerned about Russia's ability to break out of the treaty limits than it was in the 1980s. After 15 years of START implementation, the United States has far more confidence in its knowledge of the number of deployed and nondeployed Russian mobile ICBMs, as it kept count of these missiles as they entered and left the Russian force during START. There is also far less concern about Russia stockpiling extra missiles while New START is in force. During the 1980s, the Soviet Union produced dozens of new missiles each year; Russia now adds fewer than 10 missiles to its force each year. Some estimates indicate that, with this level of production, Russia will find it difficult to retain the 700 deployed missiles permitted by the treaty. In such a circumstance, it would have neither the need nor the ability to stockpile and hide extra missiles. Moreover, where the United States was once concerned about Russia's ability to reload its mobile launchers with spare missiles, after launching the first missiles during a conflict, this scenario no longer seems credible. It would mean that Russia maintained the ability to send extra missiles and the equipment needed to load them on launchers out on patrol with its deployed systems and that it could load these missiles quickly, in the field, in the midst of a nuclear war, with U.S. weapons falling all around. Yet, Russia has not practiced or exercised this capability and it is hard to imagine that it would try it, for the first time, in the midst of a nuclear war. The New START Treaty does not contain a sublimit on mobile ICBMs or their warheads. It also does not contain any limits on the number of nondeployed mobile ICBMs or the number of nondeployed mobile ICBM launchers. These launchers and warheads will, however, count under the aggregate limits set by the treaty, including the limit of 800 deployed and nondeployed launchers. As a result, the United States will still need to count the number of mobile ICBMs in Russia's force. New START will not permit perimeter and portal monitoring at missile assembly facilities. The parties must, however, provide notification at least 48 hours before the time when solid-fuel ICBMs and solid-fuel SLBMs leave the production facilities. Moreover, the parties will continue to list the serial numbers, or unique identifiers, for mobile ICBMs in the shared database. New START limits the locations of mobile ICBMs and their launchers, both to help the United States keep track of the missiles covered by the treaty and to deter Russian efforts to hide extra missiles away from the deployed force. Deployed mobile ICBMs and their launchers must be located only at ICBM bases. All nondeployed launchers for mobile ICBMs must be located at "production facilities, ICBM loading facilities, repair facilities, storage facilities, conversion or elimination facilities, training facilities, test ranges, and space launch facilities." The locations of nondeployed mobile ICBMs are also limited to loading facilities, maintenance facilities, repair facilities, storage facilities, conversion or elimination facilities test ranges, space launch facilities, and production facilities. Some of these facilities may be at bases for operational mobile ICBMs, but, in that case, the nondeployed missiles must remain in the designated facility and cannot be located in deployment areas. Moreover, when deployed or nondeployed missiles or launchers move from one facility to another, the parties will have to update the database so each facility contains a complete list of each item located at that facility, and of the unique identifier associated with each item. Then, according to the Protocol to the Treaty, "inspectors shall have the right to read the unique identifiers on all designated deployed ICBMs or designated deployed SLBMs, non-deployed ICBMs, non-deployed SLBMs, and designated heavy bombers that are located at the inspection site." Hence, the parties will have the opportunity to confirm that items located at the facilities are supposed to be there. This is designed not only to increase transparency and understanding while the treaty is in force, but also to discourage efforts to hide extra missiles and break out of the treaty limits. The treaty does not limit the number of nondeployed missiles, but it does provide the United States with continuous information about their locations and the opportunity, during on-site inspections, to confirm that these missiles are not mixed into the deployed force. Moreover, the number of nondeployed launchers for these missiles is limited, under the 800 limit on deployed and nondeployed launchers. So, even if Russia did accumulate a stock of nondeployed missiles, the number that it could add to its force in a relatively short amount of time would be limited. Some have questioned whether Russia might use these stored mobile ICBMs to break out of the treaty by deploying them on mobile launchers that are not limited by the treaty. Specifically, they have questioned whether the New START Treaty would count rail-mobile ICBMs, and, if not, whether Russia could develop and deploy enough of these launchers to gain a military advantage over the United States. This concern derives from the definition of mobile launcher in the paragraph 45 of the Protocol to the Treaty, which indicates that a mobile launcher is "an erector-launcher mechanism for launching ICBMs and the self-propelled device on which it is mounted [emphasis added]." This definition clearly captures road-mobile launchers, such as those that Russia uses for its SS-25 and SS-27 missiles, because the transporters for these missiles are self-propelled. But a rail car that carried an erector-launcher for an ICBM would not be self-propelled; it would be propelled by the train's locomotive. Others, however, point to several provisions in the treaty that indicate that rail-mobile launchers of ICBMs would count under the treaty limits. First, they note that the treaty limits all deployed and nondeployed ICBM launchers. It defines ICBM launcher, in paragraph 28 of the Protocol to the Treaty, as "a device intended or used to contain, prepare for launch, and launch an ICBM." Any erector-launcher for ICBMs would be covered by this definition, regardless of whether it was deployed on a fixed site, on a road-mobile transporter, or on a railcar. Moreover, the article-by-article analysis of the treaty specifically states that "all of the defined terms are used in at least one place elsewhere in the Treaty documents." Article III, paragraph 8 of the treaty lists the current types of weapons deployed by each side and notes that these all count against the limits. It does not list any missiles deployed on rail-mobile launchers, and, therefore, the Protocol does not define rail-mobile launchers, because Russia no longer deploys any missiles on rail-mobile launchers. It had deployed SS-24 missiles on such launchers during the 1980s and 1990s, but these were all retired in the past decade, and the last operating base for these missiles and railcars was closed in 2007. The treaty would not prohibit Russia from deploying these types of systems again in the future. Article V specifically states that "modernization and replacement of strategic offensive arms may be carried out." However, the second paragraph of this article indicates that, "when a party believes a new kind of strategic offensive arms is emerging, that party shall have the right to raise the question of such a strategic offensive arm for consideration in the Bilateral Consultative Commission." Section 6 of the Protocol to the Treaty, which describes the Bilateral Consultative Commission, states that this body should "resolve questions related to the applicability of provisions of the treaty to a new kind of strategic offensive arm." In addition, Article XV of the treaty states that "if it becomes necessary to make changes in the Protocol ... that do not affect the substantive rights or obligations under this Treaty," the parties can use the BCC to reach agreement on these changes without amending the treaty. Hence, if Russia were to deploy ICBMs on rail-mobile launchers, the parties could modify the definition to "mobile launcher" to confirm that these weapons count under the treaty limits. New START does not define rail-mobile launchers for ICBMs because neither the United States nor Russia currently deploys these systems and the treaty does not specifically prohibit their deployment in the future. If, however, either party installs an erector-launcher for an ICBM on a rail car, that launcher would count under the treaty limits, and the new type of strategic arm, represented by the launcher on a railcar, would be covered by the limits in the treaty. The parties would then use the BCC to determine which of the monitoring provisions and elimination and conversion rules applied to that type of weapons system. <3.4. Monitoring and Verification29> The original START Treaty included a comprehensive and overlapping set of provisions that was designed to allow the United States and Soviet Union to collect a wide range of data on their forces and activities and to determine whether the forces and activities were consistent with the limits in the treaty. While each party would collect most of this information with its own satellites and remote sensing equipment known as national technical means of verification (NTM) the treaty also called for the extensive exchange of data detailing the numbers and locations of affected weapons, numerous types of on-site inspections, notifications, exhibitions, and continuous monitoring at assembly facilities for mobile ICBMs. Further, in START, the parties agreed that they would not encrypt or otherwise deny access to the telemetry generated during missile flight tests, so that the other side could record these data and use them in evaluating the capabilities of missile systems. The New START Treaty contains a monitoring and verification regime that resembles the regime in START, in that its text contains detailed definitions of items limited by the treaty, provisions governing the use of NTM to gather data on each side's forces and activities, an extensive database that identifies the numbers, types, and locations of items limited by the treaty, provisions requiring notifications about items limited by the treaty, and inspections allowing the parties to confirm information shared during data exchanges. At the same time, the verification regime has been streamlined to make it less costly and complex than the regime in START. It also has been adjusted to reflect the limits in New START and the current circumstances in the relationship between the United States and Russia. In particular, it focuses on maintaining transparency, cooperation, and openness, as well as on deterring and detecting potential violations. Under New START, the United States and Russia continue to rely on their NTM to collect information about the numbers and locations of their strategic forces. They may also broadcast and exchange telemetry the data generated during missile flight tests up to five times each year. They do not need these data to monitor compliance with any particular limits in New START, but the telemetry exchange will provide some transparency into the capabilities of their systems. The parties also exchange a vast amount of data about their forces, specifying not only their distinguishing characteristics, but also their precise locations. They will notify each other, and update the database, whenever they move forces between declared facilities. The treaty also requires the parties to display their forces, and allows each side to participate in exhibitions, to confirm information listed in the database. New START permits the parties to conduct up to 18 short-notice on-site inspections each year. These inspections began in early April 2011, 60 days after the treaty entered into force. These inspections can occur at facilities that house both deployed and nondeployed launchers and missiles. The treaty divides these into Type One inspections and Type Two inspections. Each side can conduct up to 10 Type One inspections and up to 8 Type Two inspections. Moreover, during each Type One inspection, the parties will be able to perform two different types of inspection activities these are essentially equivalent to the data update inspections and reentry vehicle inspections in the original START Treaty. As a result, the 18 short-notice inspections permitted under New START are essentially equivalent to the 28 short-notice inspections permitted under START. <3.4.1. Type One Inspections> Type One inspections are those that occur at ICBM bases, submarine bases, and air bases that house deployed or nondeployed launchers, missiles, and bombers. The parties use these inspections "to confirm the accuracy of declared data on the numbers and types of deployed and non-deployed strategic offensive arms subject to this treaty. During Type One inspections, the parties may also confirm that the number of warheads located on deployed ICBMs and deployed SLBMs and the number of nuclear armaments located on deployed heavy bombers" are consistent with the numbers declared deployed on those specific launchers. The inspections used to confirm the number of deployed warheads in New START will be distinctly different from the inspections in START because the counting rules for ballistic missiles have changed. Under START, the treaty database listed the number of warheads attributed to a type of missile, and each missile of that type counted as the same number of warheads. The parties then inspected the missiles to confirm that the number of warheads on a particular missile did not exceed the number attributed to that type of missile. The database in New START will list the aggregate number of warheads deployed on all the missiles at a given base, but before beginning a Type One inspection, the team will receive a briefing on the actual number of warheads deployed on each missile at the base. During the inspections, the parties will have the right to designate one ICBM or one SLBM for inspection, and, when inspecting that missile, the parties will be able to count the actual number of reentry vehicles deployed on the missile to confirm that it equals the number provided for that particular missile prior to the inspection. The inspected party can cover the reentry vehicles to protect information not related to the number of warheads, but the party must use covers that allow the inspectors to identify the actual number of warheads on the missile. Because these inspections are random, and occur on short notice, they provide the parties with a chance to detect an effort by the other party to deploy a missile with more than its listed number of warheads. As a result, the inspections may deter efforts to conceal extra warheads on the deployed force. These inspections, by allowing the parties to count the actual number of deployed warheads, provide added transparency. <3.4.2. Type Two Inspections> Type Two inspections occur at facilities that house nondeployed or converted launchers and missiles. These include "ICBM loading facilities; SLBM loading facilities; storage facilities for ICBMs, SLBMs, and mobile launchers of ICBMs; repair facilities for ICBMs, SLBMs, and mobile launchers of ICBMs; test ranges; and training facilities." The parties will perform these inspections "to confirm the accuracy of declared technical characteristics and declared data, specified for such facilities, on the number and types of non-deployed ICBMs and non-deployed SLBMs, first stages of ICBMs and SLBMs, and nondeployed launchers of ICBMs." In addition, they can conduct these inspections at formerly declared facilities, "to confirm that such facilities are not being used for purposes inconsistent with this Treaty." They can also use Type II inspections to confirm that solid-fueled ICBMs, solid-fueled SLBMs, or mobile launchers of ICBMs have been eliminated according to treaty procedures. <3.5. Ballistic Missile Defense> Presidents Obama and Medvedev had agreed, when they met in April 2009, that the two nations would address Russia's concerns with U.S. missile defense programs in a separate forum from the negotiations on a New START Treaty. However, during their meeting in Moscow in July 2010, Presidents Obama and Medvedev agreed that the treaty would contain a "provision on the interrelationship of strategic offensive arms and strategic defensive arms." This statement, which appears in the preamble to New START, states that the parties recognize "the existence of the interrelationship between strategic offensive arms and strategic defensive arms, that this interrelationship will become more important as strategic nuclear arms are reduced, and that current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the parties." Russia and the United States each issued unilateral statements when they signed New START that clarified their positions on the relationship between New START and missile defenses. Russia stated that the Treaty can operate and be viable only if the United States of America refrains from developing its missile defense capabilities quantitatively or qualitatively. Consequently, the exceptional circumstances referred to in Article 14 of the Treaty include increasing the capabilities of the United States of America's missile defense system in such a way that threatens the potential of the strategic nuclear forces of the Russian Federation. In its statement, the United States stated that its missile defense systems are not intended to affect the strategic balance with Russia. The United States missile defense systems would be employed to defend the United States against limited missile launches, and to defend its deployed forces, allies and partners against regional threats. The United States intends to continue improving and deploying its missile defense systems in order to defend itself against limited attack and as part of our collaborative approach to strengthening stability in key regions. These statements do not impose any obligations on either the United States or Russia. As Senator Lugar indicated before New START was signed, these statements are, "in essence editorial opinions." Under Secretary of State Ellen Tauscher also stated that "Russia's unilateral statement on missile defenses is not an integral part of the New START Treaty. It's not legally-binding. It won't constrain U.S. missile defense programs." These statements also do not provide Russia with "veto power" over U.S. missile defense systems. Although Russia has said it may withdraw from the treaty if the U.S. missile defenses threaten "the potential of the strategic nuclear forces of the Russian Federation," the United States has no obligation to consult with Russia to confirm that its planned defenses do not cross this threshold. It may develop and deploy whatever defenses it chooses; Russia can then determine, for itself, whether those defenses affect its strategic nuclear forces and whether it thinks the threat to those forces justifies withdrawal from the treaty. Article V, paragraph 3 of New START also mentions ballistic missile defense interceptors. It states that the parties cannot convert ICBM launchers and SLBM launchers to launchers for missile defense interceptors and that they cannot convert launchers of missile defense interceptors to launchers for ICBMs and SLBMs. At the same time, the treaty makes it clear that the five ICBM silos at Vandenberg Air Force Base that have already been converted to carry missile defense interceptors are not affected by this prohibition. It states that "this provision shall not apply to ICBM launchers that were converted prior to signature of this Treaty for placement of missile defense interceptors therein." This provision is designed to address Russian concerns about the U.S. ability to "break out" of the treaty by placing ICBMs in silos that had held missile defense interceptors or by converting ICBM silos to missile interceptor silos then quickly reversing that conversion to add offensive missiles to its forces with little warning. Russia began to express this concern after the United States converted the five ICBM silos at Vandenberg for missile defense interceptors. It initially sought to reverse this conversion, or at least to count the silos under the New START limits. The United States refused, but, in exchange for Russia accepting that the five converted silos would not count under New START, the United States agreed that it would not convert additional silos. The provision will also protect U.S. missile defense interceptors from the START inspection regime. If the parties were permitted to convert missile defense silos to ICBM silos, they would also have been able to visit and inspect those silos to confirm that they did not hold missiles limited by the treaty. The ban on such conversions means that this type of inspection is not only unnecessary, but also not permitted. The Obama Administration has stated on many occasions that the New START Treaty does not contain any provisions that limit the numbers or capabilities of current or planned U.S. ballistic missile defense systems. The ban on launcher conversion does not alter this conclusion because the United States has no plans to use any additional ICBM launchers or any SLBM launchers to hold missile defense interceptors. It is constructing new launchers for its missile defense systems. Some have questioned, however, whether the ban on silo conversion may limit missile defenses in the future, particularly if the United States wanted to respond to an emerging missile threat by quickly expanding its numbers of missile defense interceptors. General Jim Jones, President Obama's National Security Adviser during the negotiations, stated that this provision is a "limit in theory, but not in reality." It is not just that the United States has no plans to convert ICBM silos to missile defense interceptor silos, it is that it would be quicker and less expensive for the United States to build new silos for missile defense interceptors than to remove the ICBMs and all their equipment, reconfigure the silo, and install all the equipment for the missile defense interceptors. Moreover, given that the missile defense interceptor launched from the central United States, where U.S. ICBM silos are located, would drop debris on U.S. territory, the United States might prefer to locate its missile defense interceptors in new launchers near the U.S. coast. General Patrick O'Reilly, then the Director of the Missile Defense Agency, also stated that his agency "never had a plan to convert additional ICBM silos at Vandenberg and intends to hedge against increased BMDS [ballistic missile defense system] requirements by completing construction of Missile Field 2 at Fort Greely. Moreover, we determined that if more interceptors were to be added at Vandenberg AFB, it would be less expensive to build a new GBI [ground-based interceptor] missile field (which is not prohibited by the treaty)." He went on to note that "some time ago we examined the concept of launching missile defense interceptors from submarines and found it an unattractive and extremely expensive option." Putting missile defense interceptors in SLBM launchers would undermine the primary mission of the submarine, which is designed to patrol deeply and quietly to remain invulnerable to attack, by requiring it to remain in one place near the surface while it sought to track and engage attacking missiles. <3.6. Conventional Long-Range Strike> During their summit meeting in July 2009, Presidents Obama and Medvedev agreed that the New START Treaty would contain "a provision on the impact of intercontinental ballistic missiles and submarine-launched ballistic missiles in a non-nuclear configuration on strategic stability." This statement, which is in the preamble to the treaty, simply states that the parties are "mindful of the impact of conventionally armed ICBMs and SLBMs on strategic stability." During the negotiations on New START, Russia voiced concerns about U.S. plans to deploy conventional warheads on ballistic missiles that now carry nuclear warheads. Russian officials have argued that these weapons could upset stability for several reasons. First, even if Russia were not the target of an attack with these missiles, it might not know whether the missile carried a nuclear warhead or a conventional warhead, or whether it was headed toward a target in Russia. Moreover, ballistic missiles armed with conventional warheads could destroy significant targets in Russia and, therefore, they might provide the United States with the ability to attack such targets, with little warning, without resorting to nuclear weapons. Finally, some argued that the United States might replace the conventional warheads with nuclear warheads to exceed the limits in a treaty. Russia initially sought to include a provision in New START that would ban the deployment of conventional warheads on strategic ballistic missiles. The United States rejected this proposal. It was considering this capability as a way to attack targets around the world promptly, and did not envision using these weapons against Russia. As a result, as the White House noted in its Fact Sheet on New START, "the Treaty does not contain any constraints on ... current or planned United States long-range conventional strike capabilities." However, if the United States deployed conventional warheads on missiles that are covered by the limits in START, the warheads on these missiles would count under the treaty limit on deployed warheads. Because the United States expected to deploy very small numbers of these systems, this trade-off would not have a significant effect on U.S. nuclear capabilities. Moreover, if the United States deployed conventional warheads on new types of long-range strike systems, these systems would not necessarily count under or be affected by the limits in New START. The United States would likely consider these to be a "new type of strategic offensive arms." Under Article V, paragraph 2, Russia would have the right to raise its concerns about these weapons within the Bilateral Consultative Commission (BCC), but the United States would not have to accept Russia's interpretation or accede to any requests to count the systems under the treaty. The same procedures would apply if Russia were to develop new types of strategic offensive arms with either nuclear or conventional warheads. The United States could raise its concerns with these weapons in the BCC, but Russia would not have to accept a U.S. request to count these weapons under the treaty. <4. U.S. and Russian Forces Under New START> <4.1. U.S. Forces> According to the 2010 Nuclear Posture Review (NPR), which was released by DOD on April 6, 2010, the United States planned to maintain a triad of ICBMs, SLBMs, and heavy bombers under New START. The 2010 NPR did not specify how many ICBMs would remain in the force, but indicated that each would be deployed with only one warhead. It also indicated that the United States would, initially at least, retain 14 Trident submarines. It might, however, reduce its fleet to 12 submarines after 2015. The NPR did not indicate whether the Trident submarines would continue to be deployed with 24 missiles on each submarine, or if the Navy would eliminate some of the launchers on operational submarines in accordance with the treaty's Ninth Agreed Statement. Finally, the NPR indicated that the United States would convert some of its 76 dual-capable B-52 bombers to a conventional-only role. The Obama Administration clarified its plans for U.S. forces under New START in the 1251 plan that it submitted to the Senate with the treaty documents on May 13, 2010. This plan indicated that the United States would eliminate at least 30 deployed ICBMs, retaining a force of up to 420 deployed launchers under the treaty limits. It would also retain 14 Trident submarines, but each submarine would contain only 20 launchers, and two of the submarines would be in overhaul at any time, so only 240 launchers would count under the limit on deployed launchers. In addition, the report indicated that the United States would retain up to 60 deployed bombers equipped for nuclear weapons, including all 18 B-2 bombers in the current force. This force would have included up to 720 deployed ICBMs, SLBMs, and heavy bombers, a number that exceeds the 700 deployed missiles and bombers permitted by the treaty. In a hearing before the Senate Armed Services Committee on June 17, 2010, Secretary of Defense Gates and Admiral Mullen, then Chairman of the Joint Chiefs of Staff, acknowledged that the United States would have to make a small number of further reductions, or convert a small number of additional systems to nondeployed status, to meet the treaty limits. However, they noted that because the United States would have seven years to reduce its forces to these limits, they saw no reason to identify a final force structure at that point. Secretary Gates noted that DOD was considering a number of options for the final force structure, and would make a decision on this force structure after considering the international security environment and Russia's force structure in the treaty's later years. The Obama Pentagon released its plans for the New START force structure in April 8, 2014. As was indicated in May 2010, this force will include 14 submarines with 20 launchers on each submarine. Because two submarines will be in overhaul at any time, these submarines will count as carrying 240 deployed launchers within a total of 280 deployed and nondeployed launchers. The force also calls for a reduction in the number of deployed ICBMs from 450 to 400, with the retention of all 50 empty launchers, for a total force of 450 deployed and nondeployed ICBM launchers. The Air Force will also count 4 ICBM test launchers as nondeployed launchers within the total. Finally, New START force will include 60 deployed bombers and 6 nondeployed bombers. Even before it determined the final force structure, the Pentagon had requested funding to pursue activities that would enable these reductions, regardless of the specific force structure decisions. For example, in the FY2014 budget, the Pentagon requested funding for an environmental assessment (EA) that would be needed before it could eliminate ICBM silos. Several Members of Congress objected to this study, arguing that it would allow the Administration to eliminate an ICBM squadron regardless of whether this turned out to be the preferred option for force reductions. Several Members strongly supported the retention of all 450 ICBM silos, even if a portion of them were nondeployed, with the missiles removed to meet the New START limit of 700 deployed launchers. The Pentagon responded to this criticism by noting that the EA would not predetermine the outcome of the force structure decision. However, if it were not initiated by the end of 2013, it would not be completed in time to support reductions by 2018, if the Pentagon chose to pursue those reductions. In other words, even if the study were completed, the ICBM silos could remain in the force, but if the study was not begun in time, the ICBM silos could not be eliminated, even if that proved to be the preferred force structure option. In response to these concerns, Congress included a provision in the National Defense Authorization Act for 2014 ( H.R. 3304 , 1056) that limited the Pentagon's ability to reduce U.S. forces under New START. Specifically, the legislation states that "the Secretary of Defense may only use funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2014 to carry out activities to prepare for such reductions." Further, the legislation states that only 50% of the funds authorized for the EA can be obligated or expended until the Secretary of Defense submits the required plan that describes preferred force structure option under New START. The Pentagon has now submitted the plan, but it is unclear whether the EA will proceed. Table 2 , below, contains an estimated force structure of the United States prior to New START's entry into force; the force structure as of February 5, 2018 (when the reductions were required to meet the treaty limits); and the New START force outlined by the Administration in April 2014. As these data demonstrate, the United States reached the reduced force level required by the treaty. Within these limits, the United States retains a triad of ICBMs, SLBMs, and heavy bombers. It has reduced the number of deployed nuclear-armed B-52 bombers by converting many to conventional missions. It has reduced the number of launchers on its Trident submarines and retains 400 Minuteman III missiles. An additional 54 Minuteman III launchers do not hold ICBMs and therefore do not count under the 700 limit for deployed launchers. As noted below, when two additional Trident submarines return to the fleet, the United States will have the treaty-permitted 700 deployed launchers and it will adjust the number of warheads on deployed SLBMs to meet the treaty limit of 1,550 warheads. The United States did not have to destroy many ICBM or SLBM launchers to reach the limits in New START. The treaty includes provisions that allowed the United States to exempt many of its existing nondeployed launchers, including 94 B-1 bombers, and 4 ballistic missile submarines that have been converted to carry cruise missiles, from treaty limits. Moreover, as it reduced its deployed forces, the United States did not have to destroy either ICBM or SLBM launchers; it could deactivate them so that they could no longer launch ballistic missiles. Instead of eliminating missiles and launchers, the United States reached the limits in New START by deploying its missiles with far fewer than the maximum number of warheads that each could be equipped to carry. The Air Force has completed the deactivation of 50 Minuteman III missiles that will be removed from the force under New START, and the Navy has completed the elimination of four launch tubes on all 14 of its Trident submarines. <4.2. Russian Forces> On February 5, 2018, when the treaty reductions were complete, Russia announced that it had reduced its forces to 1,444 warheads on 527 deployed ICBMs, SLBMs, and heavy bombers, within a total of 779 deployed and nondeployed launchers. During the implementation of New START, the number of warheads deployed on Russian missiles and bombers climbed above the New START limits, leading some to express concerns about Russia's intention to comply with the treaty. Others noted that this was a reflection of Russia's modernization program, as it deployed new multiple-warhead ballistic missiles in place of older single-warhead missiles, and waited until late in the implementation process to eliminate older multiple-warhead land-based missile. Russia also retired many of its older ballistic missile submarines, replacing them with several new Borey-class submarines; three of these have entered the force, and three more are under construction. This submarine is deployed with the new Bulava missile. The missile failed many of its early flight tests, and continues to experience some failed tests, although it has had more several successful tests since late 2010. Table 3 , below, presents estimates of Russia's force structure in 2010, before New START entered into force, and potential forces that it might deploy under the New START Treaty. It does not contain an estimate of the current force structure, as the New START data only include aggregate totals across the force and provides no information about the current structure of this force. This table assumes that, under New START, Russia's new RS-24 missile would carry four warheads. However, according to accounts in the Russian press this missile will carry "no fewer than 4" warheads. If each of these missiles were to carry 6-7 warheads, Russia could retain the 1,550 warheads permitted by the treaty. Russia has announced plans to deploy a new heavy, liquid-fueled multiple-warhead missile to replace the SS-18, although this missile is not likely to enter the force until at least 2020. Table 3 indicates that Russia may deploy fewer than the permitted number of deployed and nondeployed launchers under New START. This is evident in the data provided by the Russian Ministry of Foreign Affairs on February 5, 2018. Because it still had significant numbers of warheads on older missiles that it eliminated late in the implementation process, it was able to reach the New START limits. But, as is discussed below, observers disagree about whether Russia can remain at the New START limits through 2021. <5. Ratification> <5.1. U.S. Ratification Process> The Obama Administration submitted the New START Treaty to the Senate on May 13, 2010. The treaty package included the treaty text, the Protocol, the Annexes, the Article-by-Article analysis prepared by the Administration, and the 1251 report on future plans and budgets for U.S. nuclear weapons required by Congress. It also included the text of the unilateral statements made by the United States and Russia when they signed the treaty. The Senate offered its advice and consent to the ratification of the treaty by voting on a Resolution of Ratification. The treaty's approval requires a vote of two-thirds of the Senate, or 67 Senators. The Senate Foreign Relations Committee held 12 hearings on the treaty. These began in April 2009, with testimony from former Secretaries of Defense William Perry and James Schlesinger. In total, the committee received testimony from more than 20 witnesses from both inside and outside the Obama Administration. It received testimony from current senior officials from the State Department, the Defense Department, and the Department of Energy, and from several former officials from past Administrations. The committee completed its hearing process in mid-July, after receiving a National Intelligence Estimate on the future of Russian forces and a report on the verifiability of the treaty. The Senate Armed Services Committee held a total of eight hearings and briefings on the treaty. The Armed Services Committee heard testimony from Secretary of State Clinton, Secretary of Defense Gates, Secretary of Energy Chu, and Admiral Mullen on June 17, 2010. It also received testimony and briefings from other Administration officials and from experts from outside the government. The Intelligence Committee also held a closed hearing to discuss U.S. monitoring capabilities and the verifiability of the treaty. The Senate Foreign Relations Committee held a business meeting to mark up the Resolution of Ratification for New START on September 16, 2010. The committee began its consideration with a draft proposed by Senator Lugar, then addressed a number of amendments proposed by members of the committee. Both the Lugar draft and many of the proposed amendments addressed the members' concerns with U.S. missile defense programs, U.S. conventional prompt global strike capabilities, monitoring and verification, and Russian nonstrategic nuclear weapons. Most of these amendments were defeated, although the committee did modify and incorporate some into the resolution. The Senate Foreign Relations Committee approved the Resolution of Ratification by a vote of 14-4, and sent the resolution to the full Senate. The Senate did not address the treaty before the November elections. The Administration pressed the Senate to debate the treaty during the lame-duck session of Congress in December 2010. Many Senators supported this goal. Some, however, suggested that the Senate would not have time to debate the treaty during the lame-duck session, and indicated that they preferred the Senate wait until 2011 to debate the treaty. The Senate began the debate on New START on December 16, 2010. During the debate, some Senators proposed amendments to the treaty, both to strike language related to ballistic missile defenses and to add language related to nonstrategic nuclear weapons. The treaty's supporters argued that these amendments would "kill" the treaty because they would require Russian approval and could lead to the reopening of negotiations on a wide range of issues addressed in the treaty. The Senate rejected these amendments, but it did accept amendments to the Resolution of Ratification that underlined the U.S. commitment to modernizing its nuclear weapons infrastructure and its commitment to deploying ballistic missile defenses. In addition, President Obama sent a letter to the Senators confirming his view that the New START Treaty places "no limitations on the development or deployment of our missile defense programs," highlighting his commitment to proceed with the deployment of all four phases of the missile defense system planned for Europe, and noting that the continued development and deployment of U.S. missile defenses would not threaten the strategic balance with Russia and would not "constitute the basis for questioning the effectiveness and viability of the New START Treaty." The Senate gave its advice and consent to ratification of New START on December 22, 2010, approving the Resolution of Ratification by a vote of 71-26. President Obama signed the instruments of ratification in early February 2011. <5.2. Russian Ratification Process> Russia's President Medvedev submitted the New START Treaty to the Russian Parliament on May 28, 2010. Both houses of the Russian Parliament, the Duma and the Federation Council, will vote on the treaty, with a majority vote required to approve the law on ratification. Russia's president said he hoped that the two sides could "synchronize" their ratification, voting on the treaty at about the same time. This would avoid the circumstances that existed on the second START Treaty in the late 1990s, when the U.S. Senate gave its consent to ratification of START II in January 1996, but by the time the Russian Parliament voted in 2000, the parties had negotiated a Protocol to the Treaty that also required ratification. The Senate never voted on the new version of the treaty, and START II never entered into force. Most experts agreed that President Medvedev should be able to win approval for the treaty in the Russian Parliament with little difficulty. The Foreign Affairs Committee of the Russian Duma had initially supported the treaty. However, in early November 2010, Konstantin Kosachev, the head of the committee, indicated that the committee would reconsider the treaty. He indicated that this was in response to both the delay in the U.S. Senate's consideration of the treaty and the conditions and understandings that the Senate Foreign Relations Committee included in the U.S. Resolution of Ratification. Nevertheless, after the Senate voted on the treaty on December 22, members of the Duma called for the prompt ratification of New START. Reports indicated they received the documents from the Senate on December 23, and they held their first vote on the Draft Law on Ratification by Friday, December 24. The Duma then crafted amendments and declarations to the Federal Law on Ratification, and, after two more votes, approved the treaty by a vote of 350-96 (with one abstention) on January 25, 2011. The upper chamber of Russia's parliament, the Federation Council, also voted on the ratification of the treaty. Sergei Mironov, the Speaker of the Federation Council, indicated that the vote would take place after the vote in the Duma. This occurred on January 26, 2011, when the Federation Council unanimously approved the ratification of the treaty. President Medvedev signed the instruments of ratification on January 28, 2011. Russia's Federal Law on Ratification contains a number of declarations and understandings that highlight the Duma and Federation Council's concerns with the New START Treaty. These do not alter the text of the treaty and, therefore, did not require U.S. consent or agreement. Many of the provisions in the law call on Russia's leadership to pursue funding for the modernization and sustainment of Russia's strategic nuclear forces. They also reiterate Russia's view that the preamble to the treaty, and its reference to the relationship between offensive and defense forces, is an integral part of the treaty. The law does not indicate that this language imposes any restrictions on the United States. It does, however, reiterate that Russia has a right to withdraw from the treaty, and could do so if the United States deploys defenses that undermine Russia's strategic deterrent. In addition, the law indicates that new kinds of strategic offensive weapons, such as the potential U.S. conventional prompt global strike weapons, should count under the treaty limits. The law indicates that the parties should meet in the BCC and agree on how to count these systems before either party deploys the system. This differs from the U.S. interpretation because the United States has indicated that it could deploy such systems before completing the discussions in the BCC. These differing interpretations did not delay the entry into force of the treaty, but could raise questions in the future, if the United States deploys a PGS system that it does not consider to count under the treaty limits. <5.3. Entry into Force and Implementation> Secretary Clinton and Foreign Minister Lavrov exchanged the instruments of ratification for the New START Treaty on February 5, 2011. This act brought the treaty into force and started the clock on early activities outlined in the treaty. For example, the United States and Russia conducted their initial data exchange, 45 days after the treaty entered into force, on March 22, 2011, within 45 days of entry into force. They also had the right to begin on-site inspection activities in early April, 60 days after the treaty entered into force. Reports indicate that this process began in the United States with the display of a B-1 bomber and in Russia with the display of Russia's new RS-24 missile. <5.3.1. Consultations> The United States and Russia also met in Geneva, from March 28 through April 8, 2011, in the first meeting of the treaty's Bilateral Consultative Commission. The representatives issued two joint statements at the conclusion of the meeting that addressed procedures that would be used during the on-site inspection process. The parties met for the second session of the BCC from October 19 to November 2, 2011. The third meeting of the BCC occurred in late January 2012. During that meeting, the parties signed several statements on the sharing telemetry on missile test launches. They agreed that they would exchange telemetric data on one ICBM or SLBM launch that had occurred between February 5, 2011, when the treaty entered into force, and the end of 2011. They also agreed on when they would begin and end the sharing of telemetric data during the flight test of an ICBM or SLBM. They also agreed on the procedures they would use when demonstrating the recording media and playback equipment used when providing telemetric information. The BCC met for a fourth time in September 2012. During this meeting, the two sides agreed on the use of tamper detection equipment during on-site inspections. The BCC met again in February 2013. At this meeting, the two sides signed an agreement indicating that they would exchange telemetry on the launch of ICBM or one SLBM during the time between January 1 and December 31, 2012. The BCC met again in January 2014, with the two sides, again, agreeing that they would exchange telemetric information on the launch of one ICBM or SLBM from 2013. They also agreed to use an additional measuring device during reentry vehicle inspections at SSBN bases. In October 2016, the parties met in the 12 th session of the BCC; the State Department did not provide any public details about the substance of the meeting. The 13 th session of the BCC met from late March to mid-April 2017; the State Department, again, did not offer any details about the substance of the meeting. According to a State Department Fact Sheet released at the conclusion of the reduction period, on February 5, 2018, the two sides conducted a total of "14 meetings of the Treaty's Bilateral Consultative Commission (twice each Treaty year) to discuss issues related to implementation, with no interruption to the Parties' work during global crises causing friction elsewhere in the bilateral relationship." Two sessions also occurred in 2018. <5.3.2. Reductions> In a data exchange released in February 2011, with numbers drawn from the treaty's initial data exchange, the U.S. State Department noted that the United States had 1,800 warheads on 882 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. These deployed forces were within a total of 1,124 deployed and nondeployed launchers of ICBMs and SLBMs, and deployed in nondeployed heavy bombers. By September 2011, the United States had reduced these numbers to 1,790 warheads on 882 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. The total number of deployed and nondeployed launchers had declined to 1,043. The reduction in 81 nondeployed launchers likely reflects the conversion or elimination of some of the "phantom" launchers that remained in the U.S. force but no longer carried nuclear warheads. In the most recent exchange, with data current as of April 1, 2014, the United States indicated that it had 778 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 952 deployed and nondeployed launchers. It also indicated that these deployed forces carry a total of 1,585 warheads. In data released on January 1, 2015, from the exchange that occurred on September 1, 2014, the United States had 794 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 912 deployed and nondeployed launchers. It also indicated that these deployed forces carry a total of 1,642 warheads. The increase in deployed forces reported in this exchange likely reflected the return to service of one SSBN, after it completed its overhaul process. The numbers declined again, by the time of the October 2015 exchange, both because another SSBN has begun its overhaul and because the U.S. Air Force has completed the "de-MIRVing" of the ICBM force. Each Minuteman III missile now carries a single warhead. In addition, in September 2015, the Air Force announced that it had begun to convert a portion of the B-52H bomber force from nuclear to conventional-only capability, thus removing 30 operational bombers from accountability under New START. While the Air Force has not provided any public statements about the changes made to the B-52 bombers, these changes are likely consistent with the objective of rendering the bombers unable to carry or launch nuclear-armed cruise missiles. According to the State Department, as of September 1, 2016, the United States had a force of 1,367 warheads on 681 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 848 deployed and nondeployed launchers. This included 416 deployed ICBM launchers, with a total of 454 deployed and nondeployed ICBM launchers; 209 deployed SLBM launchers within a total of 320 deployed and nondeployed launchers; 10 deployed B-2 bombers, within a total of 20 deployed and nondeployed B-2 bombers; and 46 deployed B-52 bombers, within a total of 54 deployed and nondeployed B-52 bombers. These data show that the United States has continued to convert B-52 bombers from nuclear to conventional-only capability; to remove ICBMs from operational launchers, on the path to 400 deployed ICBM launchers; and to reduce the number of launchers from 24 to 20 on each ballistic missile submarine. The data released in April 2017, from the March 1, 2017, data exchange, show that the United States counted 1,411 warheads on 673 deployed launchers, within a total of 820 deployed and nondeployed launchers. The increase in warheads possibly reflects the return to service of ballistic missile submarines, following the elimination of the four excess launchers. The data exchange from September 2017, which shows the U.S. aggregate numbers of warheads and launchers, indicates that United States has met the New START limits. It now has 1,393 warheads on 660 deployed launchers, within a total of 800 deployed and nondeployed launchers. Some analysts questioned whether the U.S. reductions through September 2016, which placed the United States below the New START limits of 1,550 warheads on 700 deployed launchers, indicated that the Obama Administration had decided to reduce U.S. nuclear forces, unilaterally, to levels below the New START limits. However, these reductions were temporary, and the number of deployed launchers and warheads has now risen and should reach the levels permitted by the treaty when implementation is complete in 2018. For example, while the United States was reducing the number of launch tubes on deployed submarines, it removed them from deployment and removed the missiles from the launchers. These launchers and warheads did not count in the deployed force. Because each submarine now counts as 20 launchers, the September 2017 total of 660 deployed launchers can be read to indicate that two submarines, with 40 launchers, were still in nondeployed status at the time. The data exchanges from 2018 and 2019 show that the United States continues to have fewer than the permitted number of deployed missiles and warheads, as it continues to remove systems from deployment for short periods of time. In September 2018, it reported that it had 1,398 warheads deployed on 659 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 800 deployed and nondeployed launchers for missiles and bombers. On March 1, 2019, it reported that it had 1,365 warheads deployed on 656 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 800 deployed and nondeployed launchers for missiles and bombers. The State Department fact sheets also include the summary of Russia's force data. In February 2011, Russia reported that it had 1,537 warheads on 521 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. Russia also reported a total of 865 deployed and nondeployed delivery vehicles. At the time of this report, analysts expressed surprise that Russian forces were already below the treaty limits in New START when the treaty entered into force. Some argued that this indicated the United States did not have to sign the treaty to bring about reductions in Russian forces, and that the treaty represented unilateral concessions by the United States. Others noted that the number of deployed warheads possibly reflected the ongoing retirement of older Russian missiles and could change in the future as Russia deployed new, multiple-warhead land-based missiles. In September 2011, in the second treaty data exchange, Russia reported that it had 1,566 deployed warheads on 516 deployed ICBMs, deployed SLBMs, and deployed heavy bombers. Hence, although the number of deployed delivery vehicles declined, the number of warheads increased by a small amount, and then exceeded the treaty limit of 1,550 warheads. Because the data provide no details of the force composition, this increase could have either been due to the deployment of the new MIRVed RS-24 missiles, which carry more warheads than the single-warhead SS-25 missile they replace, or due to variations in the numbers of warheads carried on deployed SLBMs. The number of deployed and nondeployed delivery vehicles had increased slightly, to 871. This could reflect the retirement of some of Russia's older missiles, which would move their delivery vehicles from the deployed to nondeployed column in the data. In the data exchange from April 1, 2014, Russia reported that it had 498 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 906 deployed and nondeployed launchers. It also indicated that these deployed forces carry a total of 1,512 warheads. In the data exchanged in September 2014, and released in January 2015, Russia reported a force of 528 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 911 deployed and nondeployed launchers. It also indicated that these deployed forces carried a total of 1,643 warheads. Within these totals, Russia continued to deploy some new ICBMs and SLBMs while retiring older systems. However, as all categories had increased since the last data exchange, new deployments seemed to be outpacing retirements. This continued over the past year, as, in March 2016 when Russia reported that it had 1,735 warheads on 521 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 856 deployed and nondeployed launchers. The pattern shifted a little in September 2016 when Russia reported that it had 1,796 warheads on 508 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 847 deployed and nondeployed launchers as the number of warheads continues to rise while the number of deployed and nondeployed launchers has declined. The data exchanged in March 2017 show that Russia had begun to reduce the number of deployed warheads while increasing the number of deployed launchers at that point it counted 1,765 warheads on 523 deployed launchers, within a total of 816 deployed and nondeployed launchers. The September 2017 data reinforce this trend. Russia reported a force 1,561 warheads, only 11 over the limit of 1,550 deployed warheads, on 503 deployed launchers. Hence, Russia appeared to be reducing older systems with larger numbers of warheads, while still deploying new missiles with fewer warheads, as it headed toward the New START limits by February 2018. On February 5, 2018, Russia reported that it had met the New START limits, with 1,444 warheads on 527 deployed ICBMs, SLBMs, and heavy bombers, within a total of 779 deployed and nondeployed launchers. The data exchanges from 2018 and 2019 show that the Russia continues to comply with the New START limits. In September 2018, it reported that it had 1,420 warheads deployed on 517 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 775 deployed and nondeployed launchers for missiles and bombers. On March 1, 2019, it reported that it had 1,461 warheads deployed on 524 deployed ICBMs, deployed SLBMs, and deployed heavy bombers, within a total of 760 deployed and nondeployed launchers for missiles and bombers. Some analysts questioned whether the increase in Russian warheads reported in March 2016 and September 2016 indicated that Russia would eventually withdraw from New START without reducing to its limit of 1,550 deployed warheads. Others, however, noted that Russia did not need to meet the limits until February 2018, so the warhead levels in 2016 should not be of concern. They also noted that Russia continues to deploy new systems, like a third new submarine and new multiple-warhead land-based missiles, at a faster pace than it has retired older systems. Hence, as Russia retired older multiple-warhead missiles before the deadline, it succeeded in reducing its forces below the limit of 1,550 warheads. Some have also suggested that Russia's continuing deployment of new missiles systems, and its plans for modernization through the next 5-10 years, indicate that Russia may be prepared to exceed the limits under New START, either before or shortly after the treaty's 2021 expiration. They have suggested that the United States respond to Russia's plans with its own plans to modernize and expand its nuclear forces. Others, however, while agreeing with assessments of Russia's ability to expand its nuclear forces, argue that the United States should respond by pressing Russia to extend New START through 2026 so that limits on Russian forces remain in place. <5.3.3. Monitoring, Verification, and Compliance> The United States has not raised any questions, in public, about Russia's compliance with the New START Treaty. In the January 2016 version of the Annual Report on Implementation of the New START Treaty, the State Department reported that "the United States certifies the Russian Federation to be in compliance with the terms of the New START Treaty." The report indicated that the United States "has raised implementation-related questions with the Russian Federation through diplomatic channels and in the context of the Bilateral Consultative Commission (BCC)." Russia has also raised questions about U.S. implementation during BCC sessions. In its statement released on February 5, 2018, the Russian Ministry of Foreign Affairs indicated that it had concerns with the conversion procedures the United States had used to eliminate some missile launchers and B-52 bombers from its force structure. It noted that Russia could not verify that the conversions had been done in a way that permanently "rules out the use of Trident II submarine-launched ballistic submarines and nuclear weapons of heavy bombers." The Protocol to New START states the parties must demonstrate their elimination procedures if there is a question about whether the method meets the treaty terms, but it does not allow for the other party to object and require changes in the procedures. As a result, although the United States has insisted that its procedures are sufficient, Russia continues to question this conclusion. Russian officials have indicated that the United States should address Russia's concerns with these procedures before the two parties agree to extend New START before it expires in 2021. In a joint briefing provided by the United States and Russia in October 2011, the parties that, in the first six months of treaty implementation, they had exchanged almost 1,500 notifications and had conducted demonstrations of telemetric information playback equipment. By the end of the first year of implementation, on February 5, 2012, the parties had exchanged over 1,800 notifications. They had also conducted three required exhibitions, with Russia exhibiting the RS-24 missile and its launcher, and the United States exhibiting the B-1 and B-2 bombers. During the year, both parties had also conducted all 18 of the permitted inspections at facilities in the other nation. These inspections occurred at ICBM, SLBM, and heavy bomber bases; storage facilities; conversion and elimination facilities; and test ranges. In late November 2012, the State Department reported that the United States and Russia had each, as of November 26, conducted 15 of the 18 permitted inspections under the treaty. Both nations also completed their full complement of 18 inspections before the end of the second year of implementation, in February 2013. According to the State Department, the United States and Russia have both completed all 18 of their permitted Type 1 and Type 2 inspections during each of the eight full years of treaty implementation. They continued to conduct these inspections in spite of growing tensions after Russia's annexation of Crimea and aggression against Ukraine in early 2014. According to the State Department, the two sides also exchanged 17,516 notifications by early April 2019. These notifications report on the location, movement, and disposition of strategic offensive arms. They have also "completed 14 exhibitions to demonstrate distinguishing features and technical characteristics of new types of strategic offensive arms or demonstrate the results of a conversion of a strategic offensive arm subject to New START." These monitoring activities will continue through 2021, or 2026 if New START is extended. <6. Issues for Congress> <6.1. New START and Strategic Stability> When the Obama Administration released the 2010 Nuclear Posture Review, it indicated that the United States would retain a triad of ICBMs, SLBMs, and heavy bombers under the New START Treaty. The NPR indicates that this force structure supports strategic stability because it allows the United States to maintain an "assured second-strike capability" with warheads on survivable ballistic missile submarines and allows the United States to retain "sufficient force structure in each leg to ... hedge effectively ... if necessary due to unexpected technological problems or operational vulnerabilities." The Trump Administration, in the 2018 NPR, also reaffirmed the support for the nuclear triad. Although it offered a more detailed rationale for the maintenance of a triad, the underlying themes of strengthening deterrence and supporting stability were part of the discussion. Obama Administration officials also indicated that New START promoted strategic stability by "discounting" the weapons on heavy bombers. As President Reagan argued during his commencement address at Eureka College in 1982, ballistic missiles are the "most destabilizing nuclear systems." As a result, in his START proposals, President Reagan sought deep reductions in ballistic missile warheads, but lesser reductions in the weapons on heavy bombers. The counting rules in New START reflect this logic. Because bomber weapons would take hours or days to reach their targets, and because they could be recalled after they were launched, they pose less of a threat to strategic stability than do ballistic missiles. As a result, some argue that, even if the United States and Russia retain hundreds of bomber weapons that do not count against the treaty limits, the reductions required in ballistic missile warheads will enhance strategic stability. Some have also noted that New START may strengthen strategic stability from the Russian perspective by removing the specific limits and restrictions on mobile ICBMs. Russia does not deploy many submarines at sea, and, therefore, lacks an assured second-strike capability on that leg of its triad. Instead, it has sought to improve the survivability of its forces by deploying ICBMs on mobile launchers. Under START, the United States sought to restrict these systems because it feared it would not be able to count them in peacetime and target them in wartime. In the current environment, concerns about wartime targeting played less of a role in the negotiations. Consequently, instead of limiting their numbers and restricting their operations, New START seeks to provide transparency and openness, so the United States can be confident in its ability to count these weapons in peacetime even though it might not be able to attack them during a conflict. Critics of the New START Treaty have questioned whether it serves U.S. security interests even if it did promote strategic stability. Some argued, during the negotiations, that the United States did not need to negotiate a new treaty to maintain its own triad, as this was possible with or without arms control. They also argued that the United States did not need to reduce its forces to bring about reductions in Russia's forces, as Russia would reduce its forces over the next decade as it retired aging systems, even in the absence of a new arms control agreement. Moreover, they questioned whether arms control should even be a part of the U.S.-Russian relationship, as arms control is a symbol of a Cold War, antagonistic relationship between the two nations. They believe that the United States and Russia should not measure their relationship with each other using Cold War-era measures like strategic stability and survivable warheads. This last argument has faded as the U.S.-Russian relationship has changed over the past decade. Few now argue that arms control is irrelevant in the absence of an antagonistic relationship. Instead, they dispute the value of arms control precisely because the major-power rivalry has returned and the United States and Russia now have a more antagonistic relationship. They note that this change has occurred in spite of the presence of New START, and, therefore, is evidence of the failure of arms control to either support or strengthen strategic stability. Moreover, they note that New START did not include any limits on Russian shorter-range nonstrategic nuclear weapons, and, therefore, failed to capture the full scope of threats that Russia presents to the United States and its allies. <6.2. Monitoring and Verification in New START> Monitoring and verification were among the central concerns addressed in the Senate committees during their review of the New START Treaty. The cooperative monitoring measures in the treaty received special scrutiny, as many observers of the arms control process specifically measured the value of the monitoring and verification regime in the original START Treaty by its widespread use of notifications, on-site inspections, and other cooperative measures. Some critics of New START questioned whether the monitoring provisions in the new treaty were sufficient to provide the United States with enough information to either confirm Russian compliance with the treaty or to detect efforts to violate its terms. They pointed to differences between the verification regime in the original START Treaty and those in New START to argue that the new verification regime is less robust than the old regime. They noted that the United States would no longer maintain a monitoring presence outside the Votkinsk facility where Russia assembles its mobile ICBMs, which, they argued, could weaken the U.S. ability to count these missiles as they entered Russia's forces. They also noted that the United States and Russia would no longer exchange telemetry data on all their ballistic missile flight tests, which, over time, could lessen the U.S. ability to understand and evaluate the capabilities of Russian ballistic missiles. The Obama Administration and others who supported the new treaty argued that the verification regime in New START would be more than sufficient to provide the United States with confidence in Russia's compliance with the treaty. They acknowledged that the regime is different from the regime in the original START Treaty, but noted that this was, in part, due to improvements in the relationship between Russia and the United States and differences between the limits and restrictions in the two treaties. They argued that the monitoring regime in New START was streamlined, both to reduce its costs and to ease the disruptions caused by monitoring for U.S. and Russian military forces. They also noted that it relied on as much or more cooperation between the two parties, which would continue to build confidence and reduce suspicions. Moreover, many in the Obama Administration noted that the United States had not had any opportunity to monitor Russian forces on Russian territory since the original treaty expired in December 2009. They argued that continuing delays in Senate consideration of New START could further reduce U.S. and Russian confidence in their knowledge of each other's forces, leading to worst-case assessments and possible instabilities. They further reminded those who contend that the verification regime in New START is less robust than the regime in old START that the absence of a treaty would have meant the absence of any monitoring and verification regime. The United States did not have the option of returning the regime of the original START Treaty; nor should it have wanted to do so since the new treaty has different limits and restrictions than the old treaty. Many U.S. officials, including Admiral Mullen and General Chilton, included their concerns about the absence of monitoring in their appeals for the prompt ratification of the New START Treaty. Questions about the monitoring and verification regime in New START go beyond concerns about the specific monitoring mechanisms and the U.S. ability to confirm Russian compliance with individual limits in the treaty. Most experts agree that neither party can be absolutely certain that the other is in perfect compliance with all the limits and restrictions in the treaty. This is due, in some cases, to ambiguities in the treaty language and varying interpretations of the treaty requirements. It is also due to the fact that both sides may have gaps in their knowledge about the details of the other side's forces and activities. These uncertainties do not, by themselves, indicate that the parties should not ratify and implement the treaty. The broader question often asked by experts on treaty monitoring and verification is whether the parties, in general, and the United States, in particular, will have high confidence in Russia's compliance with the treaty, and, in those cases when compliance concerns may come up, whether the United States will be able to detect evidence of potential violations that might undermine U.S. security with enough warning to respond and adjust U.S. forces to offset those security concerns. The Obama Administration indicated, in documents submitted to the Senate in July 2010, that the New START Treaty met this standard. The Administration concluded that the benefits to Russia of cheating would be minimal, as the United States, by maintaining a triad of ICBMs, SLBMs, and bombers, would be able to respond to any attempt to shift the strategic balance by adding significant numbers of warheads to its own forces. Moreover, if Russia were to cheat to any significant degree, it would undermine its relationship with the United States and interfere with any possible future arms control agreements. Therefore, in a letter sent to the Senate Foreign Relations Committee in September 2010, Secretary of Defense Gates concluded that Russia would not be able to achieve "militarily significant cheating" under the New START Treaty. A review of the verification regime in New START, and summary of some of the differences between the verification regime in the original START Treaty and the regime in New START can be found in CRS Report R41201, Monitoring and Verification in Arms Control . <6.3. New START and Ballistic Missile Defenses> As was noted above, during the debate over New START the Obama Administration testified repeatedly that the New START Treaty imposes no limits on current or planned ballistic missile defense programs in the United States. Some critics have claimed, however, that the United States might impose those limits itself, to ensure that Russia does not withdraw from New START, as it said it might do in the unilateral statement it released when it signed the treaty. Officials from the Obama Administration argued that this concern was unfounded. They noted that the Soviet Union issued a similar statement when it signed the original START Treaty, threatening to withdraw if the United States withdrew from the 1972 Anti-ballistic Missile (ABM Treaty). Yet, when the United States withdrew from the ABM Treaty in 2002, Russia not only did not withdraw from START, it continued to participate in negotiations on the 2002 Strategic Offensive Reductions Treaty. Moreover, in the 1990s, when the United States might have altered its missile defense plans in response to the Soviet letter, the United States actually expanded its missile defense activities and increased spending on missile defense programs. As a result, there is little reason, based on historical data, to expect the United States to restrain its missile defense programs. Moreover, officials from the Obama Administration have highlighted that the Ballistic Missile Defense Review, the Nuclear Posture Review, and the 2011 budget all offer strong support for continuing U.S. missile defense programs. Some critics have also claimed that Russia might seek, and the United States might agree to, new limits on U.S. missile defense capabilities in the Bilateral Consultative Commission established by the treaty. According to the Protocol to New START, this commission is designed "to promote the implementation of the provisions of the Treaty." The Protocol indicates that the United States and Russia will meet in the commission to "resolve questions relating to compliance with the obligations assumed by the Parties," agree on "additional measures as may be necessary to improve the viability and effectiveness of the Treaty," and "discuss other issues raised by either Party." Some have claimed that because this agenda is somewhat open-ended, Russia may raise its concerns about U.S. missile defenses in the commission and propose limits on those systems. The Obama Administration insisted that the parties could not, and would not use the BCC to negotiate new limits on ballistic missile defenses or any other elements of the U.S. strategic arsenal. In a fact sheet that accompanies the treaty, the State Department has indicated that the parties would use the BCC "to reach agreement on changes in the Protocol to the Treaty, including its Annexes, that do not affect substantive rights or obligations. The BCC may in no way make changes that would affect the substantive rights and obligations contained in the New START Treaty." The parties may use the BCC to "agree upon such additional measures as may be necessary to improve the viability and effectiveness of the Treaty" but these measures would address concerns that came up while implementing the existing limits and restrictions in the treaty. They would not be able to impose new limits or restrictions without amending the treaty, and any amendment to the treaty would be subject to the same ratification process as the treaty itself. The Senate would have to offer its advice and consent. Although the Obama Administration pursued discussions with Russia on missile defense issues for several years, it never accepted any limitations on U.S. missile defense programs and insisted, repeatedly, that U.S. missile defense programs were not designed or capable of undermining Russia's ballistic missile defenses. Russia, however, continued to question U.S. intentions and press for limits on ballistic missile defenses. It has insisted that any negotiations on further reductions in nuclear weapons include discussions about limits on ballistic missile defenses. Congress remains concerned about the possibility that the United States might accept limits on missile defenses in exchange for limits on offensive nuclear forces. Senator Barrasso raised this issue in a hearing before the Senate Foreign Relations Committee on September 18, 2018. He asked officials from the State Department and Defense Department to assure him that "in any arms control discussions with Russia for which you're responsible that the United States will not agree to limiting our own missile defense programs." Both Under Secretary of State Andrea Thompson and Under Secretary of Defense David Trachtenberg provided those assurances. <6.4. Modernization> The New START Treaty does not limit or restrict the ability of the United States or Russia to modernize strategic offensive nuclear forces. It specifically states, in Article V, paragraph 1, that, "Subject to the provisions of this Treaty, modernization and replacement of strategic offensive arms may be carried out." Both nations are currently modernizing their forces and replacing aging missiles, submarines, and bombers. Moreover, while some Members of the Senate insisted that the Obama Administration commit to modernizing the U.S. nuclear arsenal before voting in support of the treaty, many have also indicated that their continuing support for the modernization programs is linked to ongoing implementation of New START. Several Senators emphasized this linkage during a hearing in the Senate Foreign Relations Committee in September 2018. Senator Menendez noted that "bipartisan support for nuclear modernization is tied to maintaining an arms-control process that controls and seeks to reduce Russian nuclear forces." Senator Corker pointed out that, when the Senate gave its consent to the ratification of New START, "there was no doubt" about the "tie between the two." He stated that "the essence of this is that the modernization piece, and the reduction in warheads piece go hand in hand." <6.4.1. U.S. Modernization> The United States is currently recapitalizing all three legs of its nuclear triad, with replacements planned for its bombers, air-delivered cruise missiles, land-based ballistic missiles, and ballistic missile submarines over the next 20 years. It is also pursuing life extension programs for many of the warheads in the U.S. stockpile, to ensure that the weapons remain safe, secure, and effective. The Obama Administration outlined much of this modernization program in a report, known as the 1251 Report, mandated by Congress in the FY2010 Defense Authorization Act ( P.L. 111-84 , 1251). This provision required the Administration to submit a report to Congress when it submitted the New START Treaty to the Senate that described how it planned to "enhance the safety, security, and reliability of the nuclear weapons stockpile of the United States; modernize the nuclear weapons complex; and maintain the delivery platforms for nuclear weapons." In this 1251 report, the Administration stated that the United States planned to spend $180 billion over the next 10 years to meet these objectives, with $80 billion allocated to the U.S. nuclear weapons complex and nuclear warheads and $100 billion allocated to the Navy and Air Force for the maintenance and modernization of their delivery systems. The program has expanded over the years, and, although cost estimates vary, the Congressional Budget Office has estimated that the United States is likely to spend around $350 billion over 10 years and $1.2 trillion over 30 years to modernize its nuclear arsenal. In the 2018 Nuclear Posture Review, the Trump Administration reaffirmed its support for the continuing modernization of the U.S. nuclear triad, advocating for the completion of all the programs initiated under the Obama Administration, while adding two new systems to the plan. During the debate over New START's ratification, some Members of Congress and analysts outside government questioned whether the Obama Administration was sufficiently committed to modernizing and maintaining its strategic nuclear forces, nuclear weapons complex, and nuclear warheads. Some also questioned whether the funding in the program would be sufficient to maintain and sustain the U.S. nuclear arsenal. Some argued that the totals did not add enough above the previously planned program to go far in expanding the U.S. capability to maintain and modernize its forces. Others questioned whether the Administration would sustain its commitment for more than a year or two, particularly in an era of tight defense budgets. These concerns grew as the fiscal constraints imposed through the Budget Control Act in 2011 reduced the resources available for modernization in the nuclear enterprise and have led to delays in some programs. Others, however, argued that the Administration's budget for the nuclear weapons complex in FY2011 and the added funding outlined in the 1251 report demonstrated a strong commitment to recapitalizing the U.S. nuclear weapons complex, maintaining nuclear warheads, and maintaining and modernizing the delivery vehicles. The Administration added nearly 10%, or over $700 million, to the DOE budget for nuclear weapons in FY2011. Ambassador Linton Brooks, who had served as the Director of the National Nuclear Security Administration during the Bush Administration, indicated that he would have "killed" for a budget of that magnitude when he was managing the nuclear weapons complex for DOE. While the 2011 Budget Control Act required some delays in planned spending on nuclear weapons modernization, the Obama and Trump Administrations' budget proposals have continued to show increases above the levels expected before the ratification of New START. <6.4.2. Russian Modernization> Russia is also deploying new missiles, submarines, and bombers to replace aging systems within the limits of New START. At the same time, it may be developing new types of strategic offensive arms that might not be captured by the limits in the treaty. In his annual address on March 1, 2018, Russian President Putin announced that Russia was developing several new nuclear delivery vehicles that could evade or penetrate U.S. ballistic missile defenses. One of the new weapons mentioned in the speech, the large, multiple-warhead ICBM known as the Sarmat, would by most estimates clearly count under the New START Treaty. However, other systems including a long-range nuclear-powered cruise missile, a long-range nuclear-armed underwater drone, and an air-delivered hypersonic cruise missile may not be covered by the treaty's definitions of existing types of strategic offensive systems. As was noted above, the treaty addresses the possible emergence of new types of strategic offensive arms in paragraph 2 of Article V, where it states that the parties should raise their concerns about such weapons in the BCC. It does not, however, indicate how the parties will resolve such questions or whether they must agree before a weapon is included or excluded from the treaty limits. According to Under Secretary of State Thompson, in September 2018, the United States had not yet questioned Russia about these systems. However, these weapons would only raise concerns under New START if they were deployed before the treaty expired. Many analysts doubt that this will happen since most of the weapons mentioned in the speech seem to be in the early stages of development. <6.5. Nonstrategic Nuclear Weapons> Presidents Obama and Medvedev agreed, in April 2009, when they initiated the negotiations on the New START Treaty, that this agreement would address only strategic nuclear forces, the long-range weapons that each side could use to reach the territory of the other side. It would not seek to limit or restrict the shorter-range nonstrategic nuclear weapons in either side's arsenal. This agreement derived not only from the fact that the existing START Treaty, and nearly all past bilateral arms control treaties, had addressed only strategic nuclear weapons, but also from the fact that many of the issues that would need to be addressed in a treaty that limited nonstrategic nuclear weapons would likely prove too complex to resolve in the near term, when both sides sought to replace the existing START Treaty. There was widespread agreement in Congress, in the Obama Administration, and within the arms control community, that the United States and Russia should seek to negotiate a treaty that increases transparency and possibly imposes limits on nonstrategic strategic nuclear weapons. However, there is also widespread agreement that negotiating such a treaty would prove extremely difficult, as Russia maintains a far larger stock of these weapons than the United States, in part to compensate for perceived weaknesses in its conventional forces, and because U.S. nonstrategic nuclear weapons are a part of the U.S. commitment to NATO, and the United States believes that any changes in their deployment should be addressed by the alliance before they are addressed in an arms control negotiation. Some analysts and Senators questioned whether the United States should agree to further reductions in its strategic nuclear weapons in the absence of any limits on Russian nonstrategic nuclear weapons. They noted that Russia retains more than 2,000 operational nonstrategic nuclear weapons while the United States has around 200 in Europe, and that the value of these weapons could grow as the numbers of U.S. and Russian strategic nuclear weapons decline. They also noted that these weapons could seem particularly threatening to some of the new NATO states that are located near the periphery of Russia. Others however, argued that Russian nonstrategic nuclear weapons do not pose a threat to the United States or NATO, as Russia has indicated that these weapons would only be used in response to an attack on Russian territory. So, these analysts noted, as long as NATO does not initiate such an attack, NATO members would not be threatened by these weapons. Moreover, as Senator Lugar noted in his response to former Massachusetts Governor Mitt Romney's critique of New START, most of Russia's nonstrategic nuclear weapons do not pose a missile threat to Europe. Senator Lugar stated that "most of Russia's tactical nuclear weapons either have very short ranges, are used for homeland air defense, are devoted to the Chinese border, or are in storage." Many of the experts who testified in support of the New START Treaty agreed that the United States and Russia should pursue negotiations on a treaty on nonstrategic nuclear weapons. However, most agreed that Russia would be unwilling to participate in such discussions, and the United States and Russia would be unlikely to find common ground on such an agreement, unless both sides ratified and implemented the New START Treaty first. For example, in testimony before the Senate Foreign Relations Committee on April 29, 2010, former Secretaries of Defense James Schlesinger and William Perry both indicated that nonstrategic nuclear weapons should be an issue for the next treaty, and that the United States should ratify New START as a step on the path to get to reduction in nonstrategic nuclear weapons. The Trump Administration, in the Nuclear Posture Review released on February 2, 2018, also expressed concerns about Russia's stockpile of nonstrategic nuclear weapons. While it did not advocate for the negotiation of a treaty specifically limiting these weapons, it did indicate that Russia would have to address these concerns before the United States would be willing to negotiate further reductions in strategic nuclear weapons. <6.6. New START and the U.S. Nuclear Nonproliferation Agenda> The Obama Administration argued that U.S.-Russian cooperation on arms control, in general, and the New START Treaty, specifically, could help move forward the U.S. and international nuclear nonproliferation agenda. No one has argued that the treaty will convince nations who are seeking their own nuclear weapon that they should follow the U.S. and Russian lead and reduce those weapons or roll back those programs. However, some have argued that U.S.-Russian cooperation on arms control could strengthen the U.S.-Russian cooperation on a broader array of issues and that, "cooperation is a prerequisite for moving forward with tough, internationally binding sanctions on Iran." Moreover, some have noted that U.S.-Russian cooperation on arms control would also demonstrate that these nations are living up to their obligations under the Nuclear Nonproliferation Treaty (NPT). Most nations that are parties to the NPT believe that reductions in the number of deployed nuclear weapons are a clear indicator of U.S. and Russian compliance with their obligations under Article VI of the NPT. During the preparatory committee meetings (PrepComs) leading up to the 2010 Review Conference of the NPT, many of the participants called on the United States and Russia to complete negotiations on a New START Treaty. While the completion of this treaty may not assure the United States of widespread agreement on U.S. goals and priorities at the NPT review conference, many argue that the absence of an agreement would have certainly complicated U.S. efforts and reduced the chances for a successful conference. In contrast, some have argued that the New START Treaty will do little to advance U.S. nonproliferation goals. They noted that the parties at the NPT review conference may express their approval of the New START, but their positions on substantive issues would reflect their own national security interests and goals. Moreover, some critics argue that New START might undermine U.S. nonproliferation goals by calling into question U.S. security commitments and the continuing salience of U.S. nuclear weapons. The State Department, in its press releasing announcing that the United States had met its obligation to reduce to the New START limits, noted that "the United States continues to demonstrate its commitment to fulfilling its arms control obligations, including under the Treaty on the Non-Proliferation of Nuclear Weapons" through its adherence to the New START limits. <6.7. Arms Control after New START> <6.7.1. Prospects for Further Reductions> In 2010, when it signed the New START Treaty, the Obama Administration indicated that it hoped this would be the first step in a renewed arms control process with Russia. In his statement on April 8, 2010, President Obama indicated that "this treaty will set the stage for further cuts. And going forward, we hope to pursue discussions with Russia on reducing both our strategic and tactical weapons, including nondeployed weapons." In his State of the Union Address on February 12, 2013, the President stated that, as a part of the "effort to prevent the spread of the world's most dangerous weapons," the United States would "engage Russia to seek further reductions in our nuclear arsenals." Then, on June 19, 2013, in a speech in Berlin, President Obama stated that, after a comprehensive review, he had "determined that we can ensure the security of America and our allies, and maintain a strong and credible strategic deterrent, while reducing our deployed strategic nuclear weapons by up to one-third." He stated that he intended "to seek negotiated cuts with Russia to move beyond Cold War nuclear postures." Many analysts outside government supported the idea of further reductions beyond New START. They had hoped New START would cut more deeply into U.S. and Russian forces, reducing them to perhaps 1,000 warheads on each side. Others focused their concern on the absence of limits on nonstrategic nuclear weapons and nondeployed nuclear warheads. They expected a second treaty to address some of these concerns. Some have suggested that the two sides pursue a single, comprehensive treaty that would limit strategic, nonstrategic, and nondeployed warheads. This is similar to the approach that the Obama Administration appeared willing to pursue in 2013. Others suggested that the United States and Russia accelerate their reductions under New START, amend the treaty to reduce the numbers of permitted weapons, or agree informally to reduce their forces below New START levels. They argued that these steps, if the nations took them together, could enhance stability and reduce nuclear dangers, without waiting for the completion a new, lengthy treaty negotiation process. Some have also suggested that the United States and Russia work to increase transparency on their nonstrategic nuclear weapons, even if they are not yet ready to agree to limits or reductions in these systems. Others, however, disputed the notion that New START should be the first step in an ongoing process of further reductions in nuclear weapons. While some were willing to support the modest reductions of New START, they would not have supported a treaty that imposed deeper reductions on deployed nuclear weapons or limits on nondeployed nuclear weapons. They also objected to the broader arms control agenda that President Obama had outlined in his speech in Prague on April 5, 2009, including his call for the ratification of the Comprehensive Test Ban Treaty and his vision of a world free of nuclear weapons. Hence, some who concluded that the New START Treaty would not harm U.S. security by itself objected to its ratification because they believed its defeat would close the door on the rest of the President's arms control agenda. The prospects of additional reductions below the New START levels were further dimmed by the fact that Russia has been uninterested in negotiating another treaty. Shortly after New START entered into force, Russian Foreign Minister Sergei Lavrov stated that Russia would not want to pursue further negotiations until New START had been implemented. Russian officials have stated, repeatedly, that a treaty mandating further reductions would not only have to include limits on U.S. ballistic missile defenses and nonnuclear strategic strike systems, but would also have to limit the forces of the other major nuclear powers. Most experts agree that a new treaty that addressed each of these issues raised by both parties would likely be extremely difficult to complete. Russia has been unwilling to negotiate reductions in its nonstrategic nuclear weapons, and neither side may be willing to adopt the amount of transparency necessary to negotiate verifiable limits on nondeployed warheads in storage. The United States has firmly rejected Russia's proposals for limits on ballistic missile defense and is unwilling to include conventional-armed cruise missiles or other long-range missiles in nuclear arms control negotiations. Moreover, Britain, France, and China the other declared nuclear weapons states under the NPT have not shown any willingness to participate in the U.S.-Russian arms control process. Prospects for the negotiation of a follow-on treaty dimmed further in 2014, following Russia's annexation of Crimea and incursion into Ukraine. In addition, in July 2014, the Obama Administration in its Annual Report on Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments stated that the United States "has determined that the Russian Federation is in violation of its obligations under the [1987] Intermediate Range Nuclear Forces (INF) Treaty not to possess, produce, or flight-test a ground-launched cruise missile (GLCM) with a range capability of 500 km to 5,500 km, or to possess or produce launchers of such missiles." While Russia appeared to be complying with New START, most agreed that further negotiations would be unwise; some also suggested that the United States suspend its implementation of New START until Russia returned to compliance with the INF Treaty. Others, however, have argued that the United States should continue to implement New START, as the limits on the size of Russia's strategic forces and the transparency provided by its verification regime continue to serve U.S. national security interests. <6.7.2. Prospects for New START Extension> Absent an agreement between the United States and Russia to extend New START for a period of no more than five years, the treaty will lapse in 2021. As was noted above, President Trump and President Putin reportedly discussed the treaty during their summit in Helsinki in July 2018, with President Putin presenting President Trump with a document suggesting that they extend the treaty after resolving "existing problems related to the Treaty implementation," but the two did not reach an agreement on the issue. In the 2018 Nuclear Posture Review, the Trump Administration noted that the United States had met the treaty's central limits, and that it would "continue to implement the New START Treaty and verify Russian compliance." It did not, however, indicate whether it might seek an extension of the treaty and made it clear that it was unlikely to negotiate a new treaty before New START's expiration in 2021. It noted that the United States is committed to "arms control efforts that advance U.S., allied, and partner security; are verifiable and enforceable; and include partners that comply responsibly with their obligations." But it also noted that Russian actions, including its noncompliance with the INF Treaty and other arms control agreements, and its actions in Crimea and Ukraine made further progress difficult. The Trump Administration is reportedly conducting an interagency review of New START to determine whether it continues to serve U.S. national security interests, and that this review will inform the U.S. approach to the treaty's extension. Among the issues that might be under consideration are whether the United States should be willing to extend New START following Russia's violation of the INF Treaty, whether the limits in the treaty continue to serve U.S. national security interests, whether the insights and data that the monitoring regime provides about Russian nuclear forces remain of value for U.S. national security, and whether an extension of the treaty should be linked to Russia's development of new kinds of strategic offensive arms. Administration officials addressed this review during testimony before the Senate Foreign Relations Committee on September 18, 2018. Both Under Secretary of State Andrea Thompson and Deputy Under Secretary of Defense David Trachtenberg emphasized how Russia's violation of the INF Treaty and its more general approach to arms control undermined U.S. confidence in the arms control process. Under Secretary Thomson noted that "the value of any arms control agreement is derived from our treaty partners maintaining compliance with their obligations and avoiding actions that result in mistrust and the potential for miscalculation." She also said that Russia's noncompliance "has created a trust deficit that leads the United States to question Russia's commitment to arms control as a way to manage and stabilize our strategic relationship and promote greater transparency and predictability." Deputy Under Secretary Trachtenberg also emphasized that "arms control with Russia is troubled because the Russian Federation apparently believes it need only abide by the agreements that suit it. As a result, the credibility of all international agreements with Russia is at risk." He went on to state that "It is that overall kind of behavior that I think from a national security perspective we at least need to consider." Several Senators questioned whether the Administration's review would include a broader assessment of whether the provisions in New START contributed to U.S. national security. They focused on both the benefits of the limits on U.S. and Russian nuclear forces and the value of the transparency provided by the monitoring and verification regime. Deputy Under Secretary Trachtenberg acknowledged that "the verification and monitoring and on-site inspection provisions provide a level of openness and transparency that is useful and beneficial not just to the United States but to our allies as well." But he reiterated that "any decision on extending the treaty will, and should be, based on a realistic assessment of whether the New START treaty remains in our national security interests in light of overall Russian arms control behavior." Senators held a similar conversation with Under Secretary Thompson and Deputy Under Secretary Trachtenberg during a hearing before the Senate Foreign Relations Committee on May 15, 2019. While the two witnesses repeated many of the same concerns about Russian compliance with its arms control obligations and the need for an atmosphere of trust between the treaty parties, they also addressed concerns about Russia's development of new kinds of strategic offensive arms that would fall outside the New START limits, Russia's nonstrategic nuclear weapons that are not covered by the Treaty, and China's nuclear modernization programs. They were unwilling to offer insights into the progress of the review Under Secretary Thompson refused to speculate about possible changes in Russian forces if the treaty were to expire, and Deputy Under Secretary Trachtenberg declined to offer insights into how the United States might alter its nuclear forces or how it might recover the data and information provided by New START's verification regime if the treaty were to expire. Analysts outside government have offered several reasons why the United States should support the extension of New START. They note that extension would not only maintain limits on the number of deployed strategic nuclear weapons in Russia, but would also retain the predictability offered by the treaty's limits, maintain the monitoring and verification regime that provides the United States with insights into Russian nuclear forces and nuclear modernization programs, and avoid misperceptions that could upset strategic stability, exacerbate a crisis, or lead to a costly arms race. They also note that such an extension would provide the United States and Russia with an additional five years to resume negotiations and possibly reach new agreements on further reductions or transparency measures. Others, however, believe the United States and Russia should allow the New START Treaty to lapse, both to relieve the United States of its obligations and because they believe that Russia's interest in retaining limits on U.S. forces would provide the United States with leverage when negotiating a treaty to replace New START. Some also argue that the treaty better serves Russian than U.S. interests because, as was noted above, Russia is pursuing the development of weapons that may not be captured by the treaty limits. Some have questioned whether the treaty's extension will eventually constrain the ongoing U.S. nuclear modernization program. While the United States plans to recapitalize all three legs of its nuclear triad, each program is sized to fit within the limits of New START. But, with growing concerns about the challenges the United States might face from Russia and China, along with growing concerns about the scope of their nuclear modernization programs, the United States might eventually seek to expand its forces beyond the limits in New START. The 2018 Nuclear Posture Review hints at this possibility by noting that the plan for rebuilding the sea-based leg of the nuclear triad will include at least 12 Columbia-class submarines, thus leaving open the possibility of a larger program. Nevertheless, based on the pace of modernization, New START may not interfere with the U.S. modernization program, even if the treaty were extended for five years. Most of the new U.S. systems are not scheduled to enter the force until the late 2020s, after New START's 2026 expiration. Moreover, the new systems are to replace existing, older systems, which would keep the U.S. force within the New START limits for many years. Any expansion beyond those limits would not occur until later in the 2030s. On the other hand, if New START were to expire in 2021, the United States might feel compelled to both accelerate and expand its modernization programs if Russia were to expand its nuclear programs when released from the constraints of the treaty. President Trump's National Security Advisor, Ambassador John Bolton, addressed the question of New START extension in a press conference following his meeting with President Putin's National Security Advisor, Nikolai Patrushev, in August 2018. He noted that, instead of simply extending New START, the United States and Russia could either renegotiate the treaty or replace it with something more like the 2002 Moscow Treaty signed during the George W. Bush Administration. President Trump has also proposed that the United States and Russia replace New START with a new, broader treaty that would capture all types of nuclear weapons and include China's forces under the limits. Those who favor renegotiating New START believe it would provide the United States with the opportunity to press Russia to include limits on its new types of long-range nuclear delivery systems and to accept limits on shorter-range, nonstrategic delivery vehicles. But this approach envisions a more complicated treaty and could take years to complete the negotiations. A return to the Moscow Treaty envisions a more simple approach. The Moscow Treaty did not contain any detailed definitions or restrictions on deployed forces, and, instead, included a simple pledge by each side to reduce the number of deployed warheads within a 10-year period. Bolton both supported this approach and participated in the negotiations when he served as an Under Secretary of State in the Bush Administration. These options, however, may not provide a capable or timely response to the impending expiration of New START. As noted above, Russia has been unwilling to accept limits on its nonstrategic nuclear delivery vehicles in the past, and any attempt to convince them to do so in the future may require the United States to agree to the elimination of its nuclear weapons deployed in Europe. Moreover, while limits on nonstrategic nuclear weapons have long been a U.S. priority for the next arms control agreement, Russia has stated that the next agreement should include limits on U.S. ballistic missile defense programs, limits on nonnuclear strategic-range delivery systems (specifically, U.S. sea-launched cruise missiles), and limits on other nations' (specifically British and French) nuclear forces. Because neither side is likely to accept the demands of the other, an effort to renegotiate or replace New START would almost certainly fail to produce a new treaty before its 2021 expiration or a replacement treaty after its expiration. Russia has not rejected U.S. proposals to address its new kinds of long-range delivery systems, but it has refused to count them under New START. Instead, it has suggested that the two sides discuss these weapons in a separate forum that addresses concerns about strategic stability. It has indicated that this forum could meet in the years after the parties extend New START. Russia has not yet produced any of these weapons, and may produce only a small number between 2021 and 2026. So, even if these weapons were not captured by New START, such discussions could occur before the weapons posed a significant threat to the United States or its allies. The Trump Administration has not offered any details about how China could participate in the arms control process. Specifically, it has not indicated whether it would seek limits in a new treaty closer to the size of the Chinese arsenal, or whether it would invite China to expand its forces to levels closer to the New START limits of 1,550 warheads on 700 deployed missiles and bombers. While China has not offered any details about the size of is nuclear force, the 2019 version of the Pentagon's Annual Report to Congress on Military and Security Developments Involving the People's Republic of China notes that China's force missiles with a range greater than 5,500 kilometers (the range of missiles that count under New START) "currently consists of approximately 90 ICBMs" deployed on land and 48 missiles deployed four ballistic missile submarines. The Pentagon report does not include an estimate of the number of warheads carried by these missiles. Unclassified estimates, however, indicate that the submarine-launched ballistic missiles and most of the land-based missiles carry a single warhead, while some of the land-band based missiles may carry three warheads per missile. As a result, the Chinese missiles that would count under New START likely carry around 130 warheads. This is within a total estimated arsenal of around 280 nuclear warheads. China, in the past, has firmly rejected suggestions that it join in the nuclear arms control process. Chinese officials have noted that they deploy far fewer nuclear forces than the United States and Russia, that they do not engage in arms races with other nations, and that they support eventual nuclear disarmament. A spokesman for the Chinese Foreign Ministry reiterated its objections in May 2019, after the Trump Administration suggested that China join the arms control process. According to press reports, Geng Shuang said that the country's nuclear forces were at the "lowest level" of its national security needs, and that they could not be compared to the United States and Russia. He noted that "China believes that countries with the largest nuclear arsenals have a special responsibility when it comes to nuclear disarmament and should continue to further reduce nuclear weapons in a verifiable and irreversible manner, creating conditions for other countries to participate." A return to the 2002 Moscow Treaty raises different issues. Ambassador Bolton and others who support this approach to arms control note that this treaty provided the United States with the maximum amount of flexibility in sizing and structuring its nuclear forces. The limits in the treaty were consistent with the force levels the United States had already decided to pursue, and did not require that the United States match its force levels to those acceptable to Russia. It also was set to expire, on December 31, 2012, at the same time as both sides were required to reach the limits in the treaty, thereby imposing no real restrictions on U.S. force levels over the course of its implementation. Moreover, the treaty contained no specific definitions of forces covered by the limits, so each side could count and declare its force levels according to its own interpretation of the limits. But the absence of agreed definitions and counting rules, along with the absence of any specific provisions that would allow each side to monitor the other's forces, meant that neither side could verify that the other was complying with the limits in the treaty. While this issue was mitigated because the 1994 START Treaty, with its complex verification regime, remained in force through December 2009 and was soon after replaced by New START, such a solution would not be possible if a treaty of this type were to replace New START after its expiration. The monitoring regime under New START would also expire, leaving the United States and Russia with no data exchanges, declarations, or inspections that provide transparency into each other's forces and operations.

The United States and Russia signed the New START Treaty on April 8, 2010. After more than 20 hearings, the U.S. Senate gave its advice and consent to ratification on December 22, 2010, by a vote of 71-26. Both houses of the Russian parliament—the Duma and Federation Council—approved the treaty in late January 2011 and it entered into force on February 5, 2011. Both parties met the treaty's requirement to complete the reductions by February 5, 2018. The treaty is due to expire in February 2021, unless both parties agree to extend it for no more than five years. New START provides the parties with 7 years to reduce their forces, and will remain in force for a total of 10 years. It limits each side to no more than 800 deployed and nondeployed land-based intercontinental ballistic missile (ICBM) and submarine-launched ballistic missile (SLBM) launchers and deployed and nondeployed heavy bombers equipped to carry nuclear armaments. Within that total, each side can retain no more than 700 deployed ICBMs, deployed SLBMs, and deployed heavy bombers equipped to carry nuclear armaments. The treaty also limits each side to no more than 1,550 deployed warheads; those are the actual number of warheads on deployed ICBMs and SLBMs, and one warhead for each deployed heavy bomber. New START contains detailed definitions and counting rules that will help the parties calculate the number of warheads that count under the treaty limits. Moreover, the delivery vehicles and their warheads will count under the treaty limits until they are converted or eliminated according to the provisions described in the treaty's Protocol. These provisions are far less demanding than those in the original START Treaty and will provide the United States and Russia with far more flexibility in determining how to reduce their forces to meet the treaty limits. The monitoring and verification regime in the New START Treaty is less costly and complex than the regime in START. Like START, though, it contains detailed definitions of items limited by the treaty; provisions governing the use of national technical means (NTM) to gather data on each side's forces and activities; an extensive database that identifies the numbers, types, and locations of items limited by the treaty; provisions requiring notifications about items limited by the treaty; and inspections allowing the parties to confirm information shared during data exchanges. New START does not limit current or planned U.S. missile defense programs. It does ban the conversion of ICBM and SLBM launchers to launchers for missile defense interceptors, but the United States never intended to pursue such conversions when deploying missile defense interceptors. Under New START, the United States can deploy conventional warheads on its ballistic missiles, but these will count under the treaty limit on nuclear warheads. The United States may deploy a small number of these systems during the time that New START is in force. The Obama Administration and outside analysts argued that New START strengthens strategic stability and enhances U.S. national security. Critics, however, questioned whether the treaty serves U.S. national security interests, as Russia was likely to reduce its forces with or without an arms control agreement and because the United States and Russia no longer need arms control treaties to manage their relationship. Secretary of State-designate Tillerson offered support for the treaty during his confirmation hearings, noting that he supports "the long-standing bipartisan policy of engaging with Russia and other nuclear arms states to verifiably reduce nuclear stockpiles" and that it is important for the United States "to stay engaged with Russia [and] hold them accountable to commitments made under the New START." The 2018 Nuclear Posture Review confirmed that the United States would continue to implement the treaty, at least through 2021. The Administration has not yet determined whether it will request or support an extension of the treaty through 2026.

crs_R45832

crs_R45832_0

<1. Introduction> The federal government is the largest energy consumer in the United States. Within the federal government, the U.S. Department of Defense (DOD) consumes more energy than any other agency. In FY2017, DOD consumed 707.9 trillion British thermal units (Btu) of energy roughly 16 times that of the second largest consumer in the federal government, the U.S. Postal Service ( Figure 1 ). In FY2017, DOD spent approximately $11.9 billion on energy, roughly 76% of the entire federal government's energy expenditures, and roughly 2% of DOD's FY2017 budget. Energy efficiency providing the same or an improved level of service with less energy over time can lead to a reduction in agency expenses. DOD uses energy for a variety of purposes across the various services of the military. For example, DOD's efficient management of energy can also lead to less refueling and fewer fuel convoys. Reducing the frequency and duration of fueling in combat zones could reduce exposure and risk which could save lives. This report provides an introduction to federal energy management rules applicable to DOD. The report includes an overview of federal statutes and executive orders that govern DOD energy management, and presents data on the status and trends for DOD energy use. Further, the scope of this report excludes nuclear energy for the propulsion of aircraft carriers, submarines, and energy used for military space operations. The report also references agency level guiding documents that provide the basis for how DOD implements these policies. Finally, this report identifies selected considerations for Congress. <2. DOD Energy Management Requirements> Federal energy management requirements include reductions in fossil fuel consumption, increases in renewable energy use, and energy efficiency targets for government fleets and buildings. In addition to the energy management requirements that apply to federal agencies, DOD's energy policy is designed to ensure the readiness of U.S. armed forces through energy security and resilience. DOD, through statute (e.g., 10 U.S.C. 2922e), has authority to suspend certain requirements to meet established operational military demands. <2.1. Legislation> In the 1970s, Congress began mandating energy use reductions for federal agencies, directing agencies to improve the efficiency of buildings and facilities and reduce fossil fuel dependence. Legislation aimed at reducing federal agency energy consumption can be traced back to the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) as shown in Table 1 . Among other provisions, EPCA directed the President to implement a 10-year plan for energy conservation and efficiency standards for government procurement. In 1977, Congress passed into law an act establishing the Department of Energy ( P.L. 95-91 ). The following year, Congress enacted the National Energy Conservation Policy Act (NECPA, P.L. 95-619 ), which, among other actions, established a program to retrofit federal buildings to improve energy efficiency. The Energy Policy Act of 1992 (EPAct92, P.L. 102-486 ) amended NECPA and authorized alternative financing methods for federal energy projects, including energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs), among other provisions. Since NECPA and EPAct92, two laws contain provisions that set energy management requirements for all federal agencies the Energy Policy Act of 2005 (EPAct05, P.L. 109-58 ) and the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ). EPAct05 and EISA amended and addressed additional energy management targets for the federal government, among other things. Federal agencies report energy consumption annually to the Department of Energy's (DOE) Federal Energy Management Program (FEMP). EISA Section 527 (42 U.S.C. 17143), requires federal agencies to report to the Office of Management and Budget (OMB) on the status and implementation of energy efficiency improvements, energy reduction costs, and greenhouse gas (GHG) emissions. Subsequently, EISA Section 528 (42 U.S.C. 17144) directs OMB to provide a summary of this information and an evaluation of progress for the federal government to the Committee on Oversight and Government Reform of the House of Representatives and the Committee on Governmental Affairs of the Senate. The Director of OMB compiles the compliance status of the EISA requirements and description of each into an agency scorecard. Appendix B contains a selected compilation of federal energy management requirements for all agencies. The annual National Defense Authorization Act (NDAA) has included provisions related to DOD energy management and authorities. For example, Congress, by enacting the Department of Defense Authorization Act for FY1985 ( P.L. 98-525 ), granted the Secretary of Defense waiver authority for the acquisition of petroleum. NDAA for FY2000 Section 803 ( P.L. 106-65 ) amended this waiver authority to extend beyond petroleum to "a defined fuel source." This authority permits the Secretary of Defense to waive any provision that would otherwise prescribe terms and conditions of a defined fuel purchase contract if market conditions have affected or will adversely affect the acquisition of the fuel source; and if the waiver will expedite acquisition for government needs (10 U.S.C. 2922e). With one exception, the NDAA for FY2018 ( P.L. 115-91 ), every NDAA since 1993 contains a section on "authorized energy conservation projects." For instance, NDAA for FY2007 ( P.L. 109-364 ) added a section regarding renewable energy production or procurement goals to 10 U.S.C. 2911. As amended by several NDAAs, this DOD specific goal requires DOD to consume 25% of total facility energy from renewable sources by FY2025 ( Appendix A ). Further, NDAAs have contributed to a number of internal DOD energy management protocols. For instance, the NDAA for FY2011 Section 2832 ( P.L. 111-383 ) directs the Secretary of Defense to develop an Energy Performance Master Plan (including metrics for measurement, use of a baseline standard, separate plans for each branch, etc.) to achieve performance goals set by law, executive orders, and DOD policies. The NDAA for FY2015 requires an annual report that certifies whether or not the President's budget is adequate to meet objectives of the Operational Energy Strategy as outlined in 10 U.S.C. 2926. NDAAs continue to address energy security and resilience for DOD. In 2018, for example, Congress enacted the NDAA for FY2019 ( P.L. 115-232 ), authorizing appropriations of $193 million for energy resilience and conservation investment programs. Multiple statutes, in addition to those above, establish the legislative authority for DOD energy management. Selected sections of the U.S. Code applicable to DOD energy management are delineated in Appendix A . <2.2. Executive Orders> Over several administrations, Presidents have issued executive orders to establish energy management guidelines and targets for the federal government. Executive orders applied specifically to government vehicles, buildings, and computer equipment. Since 1991, 12 executive orders have been issued on federal energy management ( Appendix C ). Only Executive Order 13834, "Efficient Federal Operations" (E.O. 13834), is currently in effect. All the others have been revoked by subsequent orders. On May 17, 2018, President Trump issued E.O. 13834, revoking E.O. 13693 and its specific targets for federal agencies. E.O. 13834 directs the heads of agencies to meet "statutory requirements in a manner that increases efficiency, optimizes performance, eliminates unnecessary use of resources, and protects the environment," but contains no specific targets. The White House Council on Environmental Quality Office of Federal Sustainability issued implementing instructions for E.O. 13834 in April 2019. The Office of Federal Sustainability's website provides resources, guidance documents, and reported energy performance data across federal agencies to support implementation of E.O. 13834. The Office of Federal Sustainability also lists other relevant U.S. code provisions, public laws, and other resources that federal agencies are required to follow. <2.3. Agency Policies and Procedures> DOD issues directives, memorandums, manuals, and guidance instructions to military departments and agencies on complying with statues and executive orders. For instance, DOD Instruction (DODI) 4170.11, Installation Energy Management, and DOD Directive (DODD) 4180.01, DOD Energy Policy , provide guidance for energy planning, use, implementation and management. These and other guidance documents outline best practices to meet federal goals within the context of the agency's mission, while giving flexibility to military departments for achieving goals. Military departments within DOD are tasked with following agency policies and procedures to issue internal energy strategies to meet the specific needs of their mission. The Energy Performance Master Plan tasks each military department and defense agency to develop their own master plans toward meeting federal requirements. Military departments can have their own goals and guiding documents within the parameters of statute and executive order (e.g., the Army's Energy Security and Sustainability Strategy or the Secretary of the Navy's Energy Goals). Further, 10 U.S.C. 2925 mandates DOD to submit to Congress two annual reports on the progress of meeting federal and executive energy targets: the Operational Energy Annual Report and the Annual Energy Management and Resilience Report (AEMRR), which includes the Energy Performance Master Plan. These reports compile energy use information from the various DOD departments on their progress toward meeting federal requirements. For federal-wide requirements, implementing instructions and guidance documents are often issued by DOE. For instance, EPAct05 has a renewable electricity consumption requirement of 7.5% for the federal government by FY2013. The President, acting through the Secretary of DOE, under Section 203 of EPAct05, is to ensure that the federal government meets the requirement. In order to ensure this, DOE issued guidance to federal agencies on how to meet the requirement. <3. DOD Energy Status> DOD categorizes energy as either "installation" or "operational." Installation energy refers to "energy needed to power fixed installations and enduring locations as well as non-tactical vehicles (NTVs)." Installation energy historically represents roughly 30% of DOD total energy and is subject to federal energy efficiency and conservation requirements, as reported to Congress in the AEMRR. In FY2017, DOD spent $3.48 billion on installation energy and NTV fuels. Operational energy (e.g., jet fuel) is "the energy required for training, moving, and sustaining military forces and weapons platforms for military operations and training including energy used by tactical power systems and generators at non-enduring locations." Federal energy management requirements outlined in Appendix A and Appendix B do not apply to operational energy. However, under 10 U.S.C. 2926, DOD does have an operational energy policy to promote readiness of military missions. From FY2003 to FY2017 the federal government reduced total site-delivered energy use by 19.2% compared to the FY2003 baseline in all sectors. During the same time period, DOD reduced site-delivered energy use by 20.9%. While overall, DOD has reduced energy use, its energy use has not necessarily been consistent from one year to the next. For example, during the War in Iraq (FY2003 to FY2004), energy use increased from 895 trillion Btu to 960 trillion Btu, as shown in Figure 2 . <3.1. Installation Energy> Representing roughly 30% of DOD total energy use, installation energy is subject to federal energy management requirements. Federal energy management requirements include energy efficiency targets for government buildings, renewable energy use goals, and fossil fuel reductions for the NTV fleet. According to the AEMRR FY2017, energy and cost savings compared to an FY2005 baseline resulted in $5.67 billion in total savings through FY2017. The AEMRR also notes that the DOD increased installation energy consumption levels by 0.3% from FY2016 to FY2017. <3.1.1. Building Efficiency> 42 U.S.C. 8253(a) requires federal agencies to achieve a 30% reduction from FY2003 levels in energy consumption per gross square foot (GSF) for goal federal buildings by FY2015 ( Appendix B ). Goal buildings are federal buildings subject to federal energy performance requirements. DOD examples of goal buildings include the Army's Holston Ammunition Plant in Tennessee and the Navy's Camp Lemonnier in Djibouti. Excluded facilities are federal buildings not required to meet the federal building energy performance requirement for the fiscal year according to the criteria under Section 543(c)(3) of NECPA. Federal agencies may typically exclude buildings that have a dedicated energy process that overwhelms other building consumption, such as one designed for a national security function or for the storage of historical artifacts. DOD manages nearly 300,000 buildings, most of which are subject to federal energy management. In FY2015, DOD did not meet the 30% reduction target, as DOD reduced building energy intensity by 16.5% relative to FY2003 levels. In FY2017, DOD consumed 91,709 Btu/GSF, a 21.8% decrease from baseline FY2003. Increasing building efficiencies and reducing energy intensity can be supported through alternative funding mechanisms (e.g., ESPCs, UESCs, power purchase agreements). In FY2017, the Army, for example, awarded $289.3 million in ESPC and UESC projects estimated to save 1,132 billion Btu annually. According to the AEMRR FY2017, these projects could avoid costs of $17.2 million annually from the project savings. In addition to the energy efficiency requirement, EISA Section 433 requires federal agencies to reduce fossil fuel consumption in new or majorly renovated buildings ( Table B-1 ) by specified amounts. By FY2020, these buildings are supposed to reduce fossil fuel consumption by 80% relative to a similar building's consumption levels in FY2003. DOE proposed a rulemaking for comment on this legislation on October 15, 2010. However, the rulemaking was not finalized, and no further action has been taken since December 2014 when the comment period closed. DOD has not reported on this requirement. <3.1.2. Renewables> EPAct05 requires federal agencies to reach 7.5% total renewable electricity consumption by FY2013. According to implementing instructions to comply with EPAct05, agencies must maintain ownership of renewable energy credits (RECs). If DOD sells a REC to meet state requirements, and it is not replaced with another REC, then the renewable electricity DOD produced does not receive credit toward the EPAct05 goal. Within these reporting requirements, in FY2013, DOD reached 5% renewable electricity consumption, and in FY2017, DOD reached nearly 6% of total electricity consumption from renewables. Solar photovoltaic sources contributed to this increase reaching 627,783 megawatt-hours (MWh) up from 396,268 MWh in FY2016. RECs are created when a renewable source of energy generates a megawatt-hour of electricity. Each REC has a unique identification number and provides data (e.g., the resource type, service date, location, etc.) that is traceable and certifiable. RECs can be traded and have monetary value. They are used by utilities to comply with state renewable electricity standards. Thus, RECs can help improve the return on investment for renewable projects. The ownership of these credits is often a contract stipulation associated with the project for the developer. State and/or local renewable requirements play a role in determining the contract stipulations for the credit ownership. In addition to EPAct05 goal of 7.5% renewable electricity by FY2013, DOD in accordance with 10 U.S.C. 2911(g) is required to "produce or procure" 25% renewable energy (electrical and non-electrical) by FY2025. The purchasing of RECs is not mandatory for DOD to comply with this goal. DOD's 2011 Energy Performance Master Plan set an interim goal of 15% renewable energy consumption by FY2018. Under 2911(g), in FY2017 DOD's renewable energy consumption reached approximately 8.7% of total facility energy use. <3.1.3. Non-Tactical Vehicles Fleet> In FY2017, DOD consumed around 8,764 billion Btu of NTV fuel, roughly 4.3% of DOD installation energy. EISA requires federal vehicle fleets to reduce petroleum consumption from the FY2005 baseline by 20% no later than October 1, 2015 ( Appendix B ). In FY2015, DOD complied with the EISA target with a reduction in NTV fleet petroleum consumption of 27% compared to FY2005 baseline. DOD has continued to reduce installation vehicle fleet petroleum consumption and reached a 34.5% reduction in FY2017. At the branch level, the FY2017 AEMRR states that the Air Force experienced an increase of 9.3% in consumption compared to the FY2005 baseline. Despite this increase, the Air Force, according to the AEMRR, does continue to implement programs to reduce consumption and increase alternative fuel use in research and development. In addition to the petroleum consumption reduction goal, federal agencies under EISA are to increase alternative fuel consumption by 10% compared to a FY2005 baseline no later than October 1, 2015 ( Appendix B ). According to the Office of Federal Sustainability, DOD met the alternative fuel consumption target in FY2015 reaching 10.6% of total fuel consumption. However, in FY2017, DOD's alternative fuel consumption decreased to 9.4% of the total installation fleet fuel consumed. These requirements apply only to installation energy and do not apply to operational energy. <3.2. Operational Energy> Operational energy constitutes roughly 70% of DOD's total energy use. In FY2017, DOD spent $8.2 billion on operational energy expenditures. The largest portion of this came from jet fuel at nearly 394 trillion Btu or roughly 56% of total DOD energy consumption for FY2017. DOD depends on jet fuel and other petroleum products to perform mission operations. According to DOD's FY2017 Operational Energy Annual Report , from FY2013 to FY2017, total operational energy demand remained relatively stable, around 87 million barrels of fuel per year (roughly 500 trillion Btu), while the price of crude oil fluctuated. The price of oil declined by roughly 60% in 2014, which contributed to a decrease in fuel expenditures from $14.8 billion in FY2013 to $8.2 billion in FY2017, around a 45% reduction. DOD's efficient management of fuel can also lead fewer fuel convoys. Reducing the frequency and duration of fueling in combat zones could reduce exposure and risk which could save lives. According to a 2009 report by the Army Environmental Policy Institute, for every 24 fuel-related convoys in Afghanistan there was roughly one casualty. A challenge is balancing mission operations (i.e., increasing weapons systems and combat performance) while also increasing efficiency. <4. Considerations for Congress> Some questions Congress may be interested in considering include: What kind of federal energy efficiency requirements should DOD have for operational energy, if any? To what extent do federal energy management targets need to be updated? What role is there for Congress to clarify or provide oversight on implementing federal energy management goals? How are alternative financing mechanisms supporting DOD's attainment of federal energy management goals? To what extent should Congress support these mechanisms? <4.1. Operational Energy> As noted, existing statutory energy management goals do not apply to operational energy, but DOD's operational energy policy is mandated by 10 U.S.C. 2926. As part of the operational energy policy, DOD establishes a strategy including plans and performance metrics. Further, DOD is mandated to submit to Congress both a report on the strategy (Operational Energy Strategy) and a report certifying that the proposed Presidential budget supports the implementation of the strategy (Operational Energy Budget Certification Report). Operational energy comprises 70% of energy use within DOD, much of which consists of petroleum-based fuels. Federal energy management goals do not apply to most of DOD's energy use. Congress may consider setting mission priorities for DOD. Congress could also consider mandating whether or not DOD should prioritize energy access over energy conservation, or vice versa. While making operational equipment more fuel efficient could increase range and decrease refueling convoys, the challenge is how to prioritize maintaining combat readiness and mission operations. Congress may consider legislation addressing operational energy, such as setting a standard fuel efficiency target or a requirement for alternative fuel use. Congress may also consider continuing to leave operational energy efficiency goals to be determined by DOD or each military branch. While this option could provide more flexibility, it could also lead to some challenges. For instance, in 2009, Navy Secretary Ray Mabus announced plans for the Navy to consume half of all fuel from alternative sources by 2020 (see textbox on Secretary of the Navy Energy Goals). The announcement also included a 2016 goal to deploy a carrier strike group using alternative fuels (e.g., nuclear power, biofuels) and energy conservation measures, an initiative known as the Great Green Fleet. The Great Green Fleet deployed in 2016 and conducted operations using alternative fuels and energy-efficient technologies and operating procedures. Some critics of the Navy energy goals noted that the Navy implemented these energy targets based on limited analysis. For instance, a House Armed Services Committee hearing in March 2012 inquired how the Navy determined the 50% goal for biofuel use, how it was determined that 50% was the amount the Navy should have, whether it could be attained by 2020, and what metrics were used to make this determination. A 2011 study by Logistics Management Institute (LMI) was referenced as a source that outlined the attainability of the goal; however, it had been released two years after the announcement of the energy plan. Supporters of the Navy's energy goals noted the benefits of a more diverse fuel supply and utilizing domestically produced biofuels. DOD is subject to oil price volatility, as such a more diverse fuel supply could potentially reduce dependence on the volatile market (see textbox on Department of Defense Fuel Procurement). According to Assistant Secretary of the Navy, Energy, Installations, and Environment Jackalyne Pfannenstiel's 2012 testimony, "without more domestically produced fuels, the [Navy] will continue to be subjected to fuel price volatility and be compelled to trade training, facility sustainment, and needed programs to pay for unplanned bills." If Congress were to set a target, reporting data and status updates could also be included in legislation to provide increased accountability of these programs. According to a 2016 naval announcement, the alternative fuel used for the Great Green Fleet was cost competitive and was made from 10% beef tallow and 90% marine diesel. <4.2. Adjusting Targets> In many cases, federal energy management goals in statute or executive order established targets for FY2015 (e.g., EISA petroleum and alternative fuel consumption targets were due no later than October 1, 2015). Several agencies, including DOD, did not reach the targeted goals. Congress may consider establishing new targets. Alternatively, Congress may instead remove statutory targets altogether, instead directing heads of federal agencies to establish protocols that foster efficiency and cost reductions that serve the mission of the agency. <4.2.1. Uniform Federal Energy Targets> If given the flexibility, agencies may opt to set more easily attainable targets based on budget and mission needs, which may not have as much of an impact on total federal energy use. In March 2015, then-Secretary of Energy Ernest Moniz convened a Task Force of members from the private sector, universities, and nonprofit organizations to review various components of E.O. 13693, including target setting. The Task Force argued that setting energy goals across all agencies "may drive some agencies to over-invest in the targeted area of energy-performance improvement to the detriment of other operational priorities. Conversely, uniform energy goals may understate the potential for cost-effective investments in energy efficiency for other agencies." Primary agency concerns may include their potential cost and mission impact. Congress and agencies may have different perspectives regarding these concerns. Successful attainment of established targets have varied from agency to agency. Some agencies may inherently be more energy intensive than others and as such may face challenges financing projects to reach certain targets. <4.2.2. Technology-Forcing Targets> Leaving targets to agencies may provide some flexibility, as not all agencies have the same energy needs. Agencies might choose to set ambitious targets that some may consider too costly and may not be based on consistent data. In some cases, meeting targets could come at a high cost, particularly in the early stages of development. Some may argue that the high cost for early research and development (R&D) may be acceptable, especially if in the long term it drives costs down. If Congress were to direct DOD to set a standard, DOD may set a goal that could require additional R&D to develop equipment that meets the standard, but also does not diminish combat readiness. For instance, a test of the Great Green Fleet in the summer of 2012 reportedly cost the Navy nearly $27 a gallon for 450,000 gallons of biofuel. By 2016, the Navy achieved competitive prices with conventional fuels with a 90% diesel blend with 10% biofuel. The Navy reportedly contracted with a California firm to purchase 77 million gallons of biofuel from beef fat at $2.05, including a 15 cent per gallon subsidy. The 2016 DOE Task Force report also noted the historical role of the federal government as an adopter of new technologies, providing a faster pathway toward commercial viability. While this may not always be the most economic approach, it could provide a greater benefit to a technology's deployment into the commercial market. <4.2.3. Baseline Modification> Further, Congress may consider readjusting the baselines, as some argue that the baselines may not have been properly informed using consistent data. For instance, according to a 2014 DOE report, "goals must be based on well-informed estimates of savings potential." The 2014 DOE report recommended that several criteria should be taken into consideration when establishing a baseline, such as weather, data quality and availability, consistency of agency mission operations, and varying degrees of savings. The report also noted that perhaps a three-year average should be taken to set a baseline, as this helps reduce abnormal factors experienced in any particular year. If Congress establishes a new baseline, agency reporting data and perceived progress could be affected. For example, the DOE report explains, "using a more recent baseline year and setting a lower percent reduction goal may give the impression that the federal government is not doing enough to reduce energy use, when in fact significant reductions have already been made." <4.3. Implementing Federal Requirements> <4.3.1. EISA Section 433> In regards to EISA Section 433, federal agencies are mandated to reduce fossil fuel consumption by 80% by FY2020, with an ultimate goal of 100% by FY2030. As noted, the rulemaking for this legislation has not been finalized. Without a finalized rule it is difficult to track and evaluate the progress toward this goal. DOD has not included this metric in annual reports. Congress may consider in its oversight role directing DOE to finalize this rule. Alternatively, Congress may consider updating the legislation, perhaps by either adjusting the targets, or removing the requirement entirely. While tracking energy management compliance may come at a cost (e.g., labor, data collecting, etc.), the data can be used to indicate progress toward greater efficiency and could demonstrate whether or not a program has proven effective and provided cost savings. The 2016 DOE Task Force report notes that one of the major challenges in evaluating the energy efficiency of projects in the federal government is the lack of data concerning, "building profiles, energy usage, and energy spending over time." <4.3.2. Renewable Energy Credit Ownership> Additionally, Congress may consider clarifying REC ownership in legislation, instead of directing DOE to issue guidance on qualifications to meet federal targets. For instance, DOE's implementation guidance for EPAct05 requires DOD and all federal agencies to retain ownership of RECs to count toward the 7.5% renewable electricity consumption goal. However, 10 U.S.C. 2911(g), a 25% renewable energy production goal for DOD, does not make purchasing RECs mandatory. Further, according to a 2016 Government Accountability Office (GAO) report, DOD project documentation of renewable energy goals was not always clear, especially when determining whether or not a project contributed toward a particular goal. If Congress opts to require DOD to maintain ownership of RECs to meet all relevant energy goals, proper data and measurement collection may be a factor to consider. Additionally, if Congress were to require agency ownership of RECs, DOD's progress toward 10 U.S.C. 2911(g) may decline. For instance, the 2016 GAO report reviewed documentation of 17 DOD renewable energy projects. All 17 projects contributed to 10 U.S.C. 2911(g), but 8 of those projects did not contribute to EPAct05. In practice, military services may not necessarily retain ownership of RECs associated with all projects. Some DOD services may find that relinquishing REC ownership is within the best interest of the service and the particular contract, despite not qualifying for the EPAct05 requirement. The Navy, for instance, has had difficulty meeting renewable energy consumption targets under EPAct05, noting in the FY2017 AEMRR : "The Navy's performance regarding the renewable electricity goal is a function of the strategic decision to allow other parties to monetize the value of RECs associated with its financed energy projects." In certain projects, military services might decide to relinquish REC ownership. In some instances of ESPC/UESC contracts, RECs can be leveraged to finance additional project improvements. <4.4. Financing Mechanisms> DOD has steadily decreased its buildings' energy intensity in response to mandated energy reduction goals through investment in energy conservation projects. One of the challenges DOD faces in meeting these targets is implementing appropriate financing mechanisms. ESPCs have become a preferred means of making energy efficiency improvements because, in part, funds do not have to be directly appropriated (or programmed). However, as Energy Savings Contractors (ESCOs) assume a certain risk in guaranteeing savings through ESPCs, the risk is factored into their cost. DOD has been increasing reliance on UESCs and ESPCs. With $2.9 billion awarded in FY2017, these contracts can assist with increasing efficiency and meeting renewable energy management goals without up-front appropriated funds for the investment. Congress may consider options to increase the effectiveness of these mechanisms in attaining federal energy management goals. <4.4.1. Training> One option may be to increase training and awareness of UESCs and ESPCs. A Senate Committee on Armed Services report ( S.Rept. 115-125 ) accompanying NDAA FY2018 ( S. 1519 ) directed the Secretary of Defense to assess ESPCs and the potential savings through increased training. DOD disagreed with the need for more training, noting in the AEMRR FY2017, "the financial risk is too high to implement these training improvements based on assumptions about future savings and therefore [DOD] will not commit limited resources to an assessment that would draw from efforts focused on energy resilience and mission assurance." Further, DOD has stated that training improvements do not necessarily guarantee behavioral changes that would contribute to energy and costs savings. It is difficult to determine project savings if data is not being collected appropriately and consistently. Eight reports since 2013 by GAO, DOD Inspector General (DOD IG), and U.S. Army Audit Agency evaluated challenges with DOD utilizing ESPCs. The recommendations highlighted a lack of developed guidance for ESPC training, data management, and contract administration. According to a summary DOD IG report in February 2019, the Assistant Secretary of Defense for Energy, Installation, and Environment, as well as Navy, Air Force, and DLA ESPC program managers, did not collect ESPC project data due to decentralization and not requesting performance and savings data, despite DOD instruction. Five reports noted that base contracting officials were not complying with the measurement and verification requirements under Section 432 of EISA for a number of reasons, including a lack of awareness of the requirements. Training and guidance for utilizing ESPCs and UESCs is provided to all federal agencies through FEMP. However, challenges remain. During a December 2018 House Committee on Energy and Commerce, Subcommittee on Energy hearing, Leslie Nicholls, Strategic Director for FEMP, noted that measurement and verification is "not necessarily consistently applied and utilized throughout the federal government." She further noted that FEMP would like to continue training both at the technical level and for contracting officers. As noted in the February 2019 DOD IG report, DOD branches were implementing the IG recommendations regarding ESPC guidance. Congress may consider the value of training and guidance for proper measurement and data verification, and whether better data would demonstrate accurate cost savings of ESPCs and USECs relative to the cost of training. Appendix A. Summary of DOD Energy Goals and Contracting Authority in 10 U.S.C. 2208. Working-capital funds (t) Permits up to $1,000,000,000 in Working Capital Fund, Defense for petroleum market volatility. 2 410q . Multiyear Contracts: Purchase of Electricity from Renewable Energy Sources (a) Multiyear Contracts Authorized: Authorizes the use of multiyear contracts for the Secretary of Defense for a period of 10 years from a renewable energy source, as defined in 42 U.S.C. 15852(b)(2). (b) Limitations on Contracts for Periods in Excess of Five Years: The Secretary of Defense may enter into a contract over five years on the basis that the contract is cost effective and purchasing electricity from the source would not be economic without a contract for over five years. (c) Relationship to Other Multiyear Contracting Authority: this section does not preclude DOD "from using other multiyear contracting authority of the Department to purchase renewable energy." 2911. Energy P olicy of the Department of Defense (a) General Energy Policy: directs the Secretary of Defense to "ensure the readiness of the armed forces for their military missions by pursuing energy security and energy resilience." (b) Authorities: permits the Secretary of Defense to establish metrics and standards for measuring energy resilience; authorizes the selection of facility energy projects using renewables, as well as "giving favorable consideration to projects that provide power directly to a military facility or into the installation electrical distribution network." (c) Energy Performance Goals: directs the Secretary of Defense to "submit to congressional defense committees energy performance goals" for DOD annually. (d) Energy Performance Master Plan: directs the Secretary of Defense to develop a plan annually (including metrics for measurement, use of a baseline standard, separate plans for each branch, etc.) to achieve the performance goals set by law, executive orders, and DOD policies. (e) Special Considerations: directs the Secretary of Defense to consider a set of specified factors (e.g., energy resilience, economies of scale, conservation measures) when developing the Performance Goals and Master Plan. (f) Selection of Energy Conservation Measures: the energy conservation measures are to be limited to ones that "are readily available; demonstrate an economic return on the investment; are consistent with the energy performance goals and energy performance master plan for the Department; and are supported by the special considerations specified in subsection (c)." (g) Goal Reg arding Use of Renewable Energy t o Meet Facility Energy Needs : "to produce or procure not less than 25 percent of the total quantity of facility energy it consumes within its facilities during fiscal year 2025 and each fiscal year thereafter from renewable energy sources." 2913. Energy Savings Contracts and Activities (a) Shared Energy Savings Contracts: directs the Secretary of Defense to develop a simple method to accelerate contracts for shared energy savings services. 2922 -2922h. Energy-Related Procurement : outlines contracting and procurement specifications for various energy types (e.g., natural gas, renewables, fuel derived from coal). 2922e. Acquisition of C ertain F uel S ources: A uthority to W aive C ontract P rocedures; A cquisition by E xchange; S ales A uthority : permits the Secretary of Defense to waive any provision that would otherwise prescribe terms and conditions of a fuel purchase contract if market conditions have affected or will adversely affect the acquisition of the fuel source; and if the waiver will expedite the acquisition for government needs. 2 926 Operational Energy Activities: provides DOD with an operational energy policy; delineates authorities for operational energy procurement; establishes the role for the Assistant Secretary of Defense for Energy, Installations, and Environment (ASD EI&E); requires the ASD EI&E to establish an operational energy strategy and to review and make recommendations to the Secretary of Defense on budgetary operational energy matters, as well as grants access to records and studies on military initiatives related to operational energy. Appendix B. Summary of Federal Energy Goals and Contracting Authority in 42 U.S.C. 6374e. Federal Fleet Conservation R equirements : each federal agency is directed to increase alternative fuel use and decrease petroleum fuel consumption for federal fleets, with the goal of achieving a 10% increase in annual alternative fuels and a 20% reduction in annual petroleum consumption as compared to a FY2005 baseline by October 1, 2015. 6834 . Federal Building Energy Efficiency Standards : starting August 2006, if cost-effective over the life cycle, new federal buildings must be designed to achieve energy consumption levels at least 30% below ASHRAE Standard 90.1 (for commercial buildings) or the International Energy Conservation Code (for residential buildings). In addition, starting December 2008, new federal buildings and those undergoing major renovations are to be designed so that fossil fuel consumption is reduced by 80% in 2020 compared to a similar building in FY2003, and 100% by 2030, as specified in Table B-1 . 8253. Energy Management R equirements: directs federal agencies to reduce building energy consumption per square foot by 30% compared to the FY2003 baseline by FY2015. 8256(c) Utility Incentive Program: authorizes and encourages agency participation in programs (Utility Energy Savings Contracts, or UESCs) to "increase energy efficiency and for water conservation or the management of electricity demand conducted by gas, water, or electric utilities and generally available to customers of such utilities." 8287. Authority to Enter into Contracts: authorizes the head of a federal agency to enter Energy Savings Performance Contracts (ESPCs). Each contract may be for a period not to exceed 25 years. The contract directs the contractor to incur the costs of energy savings measures, in exchange for a share of the savings resulting from the measures taken. 13212. Minimum Federal Fleet Requirement : the total percentage of alternative-fueled or "low greenhouse gas emitting" light-duty vehicles acquired by a federal fleet annually are 75% in FY1999 and thereafter. 15852 . Federal Purchase Requirement : the President, acting through the Secretary of Energy, is directed to "ensure that, to the extent economically feasible and technically practicable, of the total amount of electric energy the Federal Government consumes during any fiscal year" not less than 7.5% is renewable energy in FY2013 and each fiscal year thereafter. 16122. Federal and State P rocurement of Fuel Cell V ehicles and Hydrogen E nergy S ystems : requires the federal government to adopt fuel cell vehicles and hydrogen energy systems as soon as practicable. Appendix C. Executive Orders

The U.S. Department of Defense (DOD) consumes more energy than any other federal agency—77% of the entire federal government's energy consumption. Energy management is integral to DOD operations. From running bases and training facilities to powering jets and ships, DOD relies on energy to maintain readiness and resiliency for mission operations. Energy efficiency—providing the same or an improved level of service with less energy—over time can reduce agency expenses, particularly at an agency like DOD, where energy represents roughly 2% of the department's annual budget. Since the 1970s, Congress mandated energy requirements for federal agencies. Legislation required reductions in fossil fuel consumption and increases in renewable energy use and efficiency targets for government fleets and buildings. The National Energy Conservation Policy Act (NECPA, P.L. 95-619 ) requires federal agencies to report annually on energy management activities. The Energy Policy Act of 2005 (EPAct05, P.L. 109-58 ) and the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ) amended and addressed additional energy management targets for the federal government. As the largest energy consumer in the federal government, DOD drives total federal energy management goal achievements. The annual National Defense Authorization Act (NDAA) has included provisions related to DOD energy management and authorities. With one exception, the NDAA for FY2018 ( P.L. 115-91 ), each NDAA since 1993 contains a section on "authorized energy conservation projects." Further, NDAAs have contributed to internal DOD energy management protocol. Throughout several administrations, Presidents have issued executive orders to establish energy management guidelines and targets for the federal government. The Trump Administration's Executive Order 13834, "Efficient Federal Operations" (E.O. 13834), directs the heads of agencies to maintain annual energy reductions and efficiency measures that reduce costs and meet statutory requirements for renewables, among other things, but does not set specific targets. DOD categorizes energy into two types— installation energy and operational energy . DOD's installation energy (i.e., energy for fixed installations and non-tactical vehicles) is subject to federal energy management requirements. Although DOD energy use has trended downward since the 1970s, DOD has not met all federally mandated targets and reporting on progress has been challenging. DOD's operational energy (e.g., energy required for sustaining military forces and weapons platforms for military operations) is not subject to federal energy management requirements. This represents around 70% of total DOD energy use. Operational energy consists largely of petroleum products purchased on the open market by the Defense Logistics Agency. This leaves DOD and its spending susceptible to oil price volatility. Reviewing how these federal energy management goals impact DOD's mission could be an overarching consideration for Congress. Making operational equipment more fuel efficient could increase range and decrease refueling convoys; however, the challenge is maintaining combat readiness and mission operations. Congress may consider legislation addressing operational energy, such as setting a standard fuel efficiency target or a requirement for alternative fuel use. Congress may also consider continuing to leave operational energy efficiency goals to be determined by DOD or each military branch. In many cases, federal energy management goals in statute or executive order established targets for FY2015 (e.g., EISA petroleum and alternative fuel consumption targets were due no later than October 1, 2015). Several agencies, including DOD, did not reach the targeted goals. Congress may assess how and whether setting specific targets enhances the agency's mission and reduces costs for DOD. This approach may include addressing target dates or baselines. Congress may consider removing statutory targets altogether, and direct heads of federal agencies to establish protocols that foster efficiency and cost reductions that serve the mission of the agency. Managing an organization as large and complex as DOD presents certain challenges. One of the challenges DOD faces in meeting these targets is implementing appropriate financing mechanisms. The Energy Policy Act of 1992 (EPAct92, P.L. 102-486 ) amended NECPA and authorized alternative financing methods for federal energy projects, including energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs). ESPCs have become a preferred means of making energy efficiency improvements because, in part, funds do not have to be directly appropriated (or programmed). With $2.9 billion awarded in FY2017, these contracts can assist with increasing efficiency and meeting renewable energy management goals. Training and guidance for utilizing ESPCs and UESCs is provided to all federal agencies through the Federal Energy Management Program (FEMP). However, challenges remain, particularly in data collection and consistent measurements. One option may be to increase training and awareness of UESCs and ESPCs.

crs_R46329

crs_R46329_0

<1. Introduction1> Economic conditions have deteriorated rapidly as the spread of Coronavirus Disease 2019 (COVID-19) has led policymakers to limit or close public institutions and business operations, increasing financial hardship for many Americans due to layoffs or time off work. Financial institutions, their regulators, and other government agencies have responded by working with consumers to allow those affected by COVID-19 to temporarily alleviate their financial obligations. As losses continue to mount on businesses from lower consumer demand and rising unemployment, Congress has stepped in with legislation aimed at mitigating the economic impact of COVID-19. On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; H.R. 748 ) into law as P.L. 116-136 . The CARES Act is a wide-ranging act to provide relief to consumers, small businesses, and certain industries amid the economic fallout of COVID-19. The law contains two divisions. Division A contains six titles aimed at making funds available to different entities through various programs, including rebate checks to taxpayers; loans to small businesses for payroll; protections for consumers with outstanding payments (e.g., mortgages, student loans, and rental and healthcare payments); loans and loan guarantees and other investments to help the financial industry and other selected industries; and other public funds for federal, state, local, and tribal government programs aimed at managing the disaster recovery from the national health crisis. Division B provides FY2020 supplemental appropriations for federal agencies to respond to COVID-19. (Hereinafter, title and section references in this report refer to Division A, unless otherwise specified.) Title IV of the CARES Act contains numerous provisions aimed broadly at stabilizing the economy and helping affected households and businesses. It has received considerable attention for containing funding for industry and financial services. Specifically, Section 4003 directs the Department of the Treasury (Treasury) and the Federal Reserve (Fed) to make up to $500 billion available to support various businesses in the aviation sector, as well as the financial system. Some have characterized this as a "bailout" of private industry; others assert it is necessary to avoid employment losses and maintain economic stability the two views are not necessarily mutually exclusive. Title IV also permits federal guarantees for uninsured bank deposits and money market funds, which are beyond the scope of this report. In addition to the financial assistance provided in Title IV, the CARES Act provides financial assistance to small businesses in Title I (including the Payroll Protection Program) and assistance to states and municipalities in Title V. See CRS Report R46284, COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options , by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry for information specifically about assistance targeting small businesses found in Title I of the CARES Act. This report provides an overview of Section 4003 and related provisions and explains the terms and conditions associated with the assistance. The report's Appendix compares these provisions to the 2008 Troubled Asset Relief Program (TARP). <2. Financial Assistance in Division A, Title IV7> This report is about the Title IV provisions specifically designed to provide funding for eligible businesses, states, and municipalities, as defined by the act. In particular, Section 4027 appropriates $500 billion to the Exchange Stabilization Fund (ESF) for use by the Treasury Secretary, and Section 4003 allows Treasury to use the $500 billion to support eligible businesses, states, and municipalities that have suffered losses due to COVID-19. As discussed in the next section, Section 4003 allocates up to $46 billion for Treasury to directly provide loans and loan guarantees as follows: (1) not more than $25 billion for passenger air carriers (and certain related businesses), (2) not more than $4 billion for cargo air carriers, and (3) not more than $17 billion for businesses critical to maintaining national security. Treasury may make funds from the remaining $454 billion, plus any unpledged funding from the $46 billion, available to support Fed facilities to provide liquidity to the financial system through lending to eligible businesses, states, and municipalities (described in the " Federal Reserve Emergency Facilities Backed by the CARES Act " section, below). Section 4029 terminates this authority on December 31, 2020, and allows outstanding loans and guarantees to be modified, restructured, or otherwise amended, subject to a restriction: the duration of assistance to the passenger air industry cannot be extended beyond five years from the initial origination date. Section 4003 requires recipients to repay this assistance with interest, fees, and in some cases, compensation in the form of warrants, equity, or senior debt. Under the Federal Credit Reform Act (FCRA; P.L. 101-508 ), the Office of Management and Budget and the Congressional Budget Office are to estimate the subsidy associated with this assistance based on the difference between the present discounted value of both the assistance and income received by Treasury from principal and interest payments (along with other forms of compensation). The ultimate size of this subsidy will not be known until terms, such as interest rates and fees, have been decided and it becomes clear to what extent firms are able to repay. By contrast, Sections 4112, 4113, and 4120 provide up to $32 billion in grants to continue payment of employee wages, salaries, and benefits at airline-related industries. The Treasury Secretary has discretion whether to seek compensation for these grants. Treasury has broad discretion to decide how much of each part of the funding to make available to the specified industries or the Fed, in what form, and for what purpose. These funds are made available with certain terms and conditions, however (as discussed in the " Terms and Conditions " section, below). For example, Section 4004 sets executive compensation limits on certain companies receiving assistance; Section 4019 restricts eligible recipients of assistance to avoid conflicts of interest; Sections 4114 and 4116 limit recipient firms from taking certain actions; and Sections 4025 and 4115 prohibit conditioning assistance on entering into collective bargaining negotiations. Additionally, several provisions provide enhanced oversight for the Title IV funding programs. Sections 4018 and 4020 establish a Special Inspector General and a Congressional Oversight Commission to monitor activities made pursuant to provisions in Title IV, and Section 4026 requires reports from the key agencies namely Treasury and the Fed on their Title IV activities. The next two sections will focus on the financial assistance provisions granted to specified industries and for Fed programs. <2.1. Loans, Loan Guarantees, and Other Support for Selected Industries13> Congress chose to make direct Treasury support available to three specific industries (passenger and cargo airline industries, as well as certain national security businesses) that it deemed particularly in need of support. This assistance was unlikely to meet certain statutory requirements for a Fed program (i.e., that Fed assistance be broadly based and not for the purpose of avoiding bankruptcy), and it comes with more terms and conditions than assistance for recipients of Fed programs supported by the CARES Act. The Title IV support for these industries comes in three main forms: loans and loan guarantees, tax holidays for certain excise taxes, and payroll grants for air carrier workers. <2.1.1. Loans and Loan Guarantees> Section 4003 makes up to $46 billion available for federal loans and loan guarantees directly from Treasury to the aviation sector and to businesses critical to maintaining national security: not more than $25 billion for passenger air carriers, eligible businesses certified to perform inspection, repair, replace, or overhaul services, and ticket agents; not more than $4 billion for cargo air carriers; and not more than $17 billion for "businesses critical to maintaining national security" a term that the act does not further define. On April 10, 2020, the Treasury Secretary released information on which types of firms would be eligible under this definition. The Treasury Secretary is required under Section 4006 to coordinate with the Transportation Secretary to make these loans. Other terms and conditions applying to this assistance are discussed in " Terms and Conditions ," below. <2.1.2. Suspension of Aviation Excise Taxes> Section 4007 institutes a tax holiday under which no excise taxes will be imposed for the transportation of persons, the transportation of property (cargo), and aviation fuel after the date of enactment through calendar year 2020. These include a variety of taxes on airline passenger ticket sales, segment fees, air cargo fees, and aviation fuel taxes paid by both commercial and general aviation aircraft. They have been the primary revenue sources for the federal Airport and Airways Trust Fund. <2.1.3. Air Carrier Worker Support> Section 4120 appropriates $32 billion to assist aviation workers. From this amount, Section 4112 allows the Treasury Secretary to provide up to $25 billion for passenger air carriers, up to $4 billion for cargo air carriers, and up to $3 billion for contractors who provide ground services such as catering services or on-airport functions directly to air carriers. All such assistance must be used exclusively for continuing the payment of employee wages, salaries, and benefits. Section 4117 gives the Treasury Secretary discretion to determine what compensation to seek for this assistance. Treasury announced it would not seek compensation from recipients receiving less than a minimum amount under the program. The Treasury Secretary is required to coordinate with the Transportation Secretary in implementing the relief for aviation workers. Section 4113 indicates that eligible airlines or contractors would receive an amount equal to their 2019 second- and third-quarter (from April 1, 2019, through September 30, 2019) salaries and benefits. The law required the Treasury Secretary to publish streamlined and expedited procedures no later than 5 days from the enactment date and to make initial payments within 10 days from enactment to air carriers and contractors whose requests for such assistance are approved. If it were determined that the aggregate amount of eligible financial assistance exceeds the amount available, the Treasury Secretary would provide the available aid on a pro rata basis. On April 20, 2020, Treasury announced that airlines representing 95% of U.S. capacity were participating in the Payroll Support Program. On April 25, 2020, Treasury announced that 93 air carriers had received $12.4 billion to date. <2.2. CARES Act Funding Available to the Federal Reserve23> The Federal Reserve, as the nation's central bank, was created as a "lender of last resort" to the banking system when private sources of liquidity become unavailable. This role is minimal in normal conditions but has been important in periods of financial instability, such as the 2007-2009 financial crisis. Less frequently throughout its history, the Fed has also provided liquidity to firms that were not banks. In the financial crisis, the Fed created a series of temporary facilities to lend to or purchase securities of nonbank financial firms and markets under emergency authority found in Section 13(3) of the Federal Reserve Act (12 U.S.C. 343). It has begun to do so again in response to COVID-19, even before enactment of the CARES Act. Although the CARES Act does not preclude the Fed from independently responding to COVID-19 using its own funds, it is left to the Treasury Secretary to decide whether and how much of the CARES Act funds to provide to the Fed and on what general terms. After deducting assistance provided to the three specified industries, the remainder of the $500 billion at least $454 billion is available for Treasury to make loans, loan guarantees, or investments in programs or facilities established by the Fed to "provid(e) liquidity to the financial system that supports lending to eligible businesses, states, or municipalities." As noted in the " Financial Assistance in Division A, Title IV " section, eligible businesses and states are defined by the act. The Fed's facilities may make loans, purchase newly issued obligations (e.g., debt securities) directly from issuers in primary markets, or purchase seasoned obligations from investors in secondary markets. The act provides Treasury and the Fed broad discretion on how to structure these programs or facilities. (Terms and conditions applying to this assistance are discussed in the section titled " Terms and Conditions .") Theoretically, the transactions could be structured in many different ways. In practice, Treasury has used CARES Act funding to make equity investments in Fed facilities, presumably as a backstop to cover any future losses, as described below. <2.2.1. Federal Reserve Emergency Facilities Backed by the CARES Act> Before enactment of P.L. 116-136 , Treasury had already made equity investments through the ESF in Fed emergency programs created in response to COVID-19. Because the CARES Act appropriated $500 billion to the ESF, these Fed programs are now, in effect, backed by CARES Act funding. The programs are the following: Commercial Paper Funding Facility (CPFF). The CPFF purchases newly-issued commercial paper from all types of U.S. issuers who cannot find private sector buyers. Commercial paper is short-term debt issued by financial firms (including banks), nonfinancial firms, and "asset backed" pass-through entities that purchase loans. Money Market Fund Liquidity Facility (MMLF ). The MMLF makes nonrecourse loans to financial institutions to purchase assets that money market funds are selling to meet redemptions. This reduces the probability of runs on money market funds caused by a fund's inability to liquidate assets. Primary Market Corporate Credit Facility (PMCCF ) and Secondary Market Corporate Credit Facility (SMCCF) . The Fed created two new facilities to support corporate bond markets the PMCCF to purchase newly-issued corporate debt from issuers and the SMCCF to purchase existing corporate debt or corporate debt exchange-traded funds on secondary markets. The issuer must have material operations in the United States and cannot receive direct federal financial assistance related to COVID-19. Term Asset-Backed Securities Loan Facility (TALF). The TALF makes nonrecourse, three-year loans to private investors to purchase newly-issued, highly-rated asset-backed securities (ABS) backed by various nonmortgage loans. Eligible ABS include those backed by certain auto loans, student loans, credit card receivables, equipment loans, floorplan loans, insurance premium finance loans, small business loans guaranteed by the Small Business Administration (SBA), or servicing advance receivables. Main Street Lending Program (MSLP). The MSLP buys loans from depository institutions that are four-year loans to businesses with up to 10,000 employees or up to $2.5 billion in revenues. The loans to businesses would defer principal and interest repayment for one year, and the businesses would have to make a "reasonable effort" to retain employees. This program may be particularly attractive to businesses too large to qualify for SBA assistance. Municipal Liquidity Facility (MLF). The MLF purchases shorter-term state and municipal debt in response to higher yields and reduced liquidity in that market. The facility purchases only debt of states, larger counties (with at least 500,000 residents), and larger cities (with at least 250,000 residents). Some programs were announced with an overall size limit (see Table 1 ). During the 2008 financial crisis, however, actual activity typically did not match the announced size. These facilities extend the Fed's traditional "lender of last resort" role for banks to be the "buyer of last resort" for broad segments of financial markets that have become illiquid due to COVID-19 and "lender of last resort" for nonfinancial firms. To extend its traditional role, the Fed has used its Section 13(3) emergency lending authority. The Fed also used this authority to assist nonbank financial firms and markets in the 2008 financial crisis. The 2020 facilities go beyond the scope of the 2008 facilities by purchasing loans of nonfinancial businesses and debt of states and municipalities. In some programs, the Fed purchases securities in affected markets directly. In other programs, the Fed makes loans to financial institutions or investors to intervene in affected markets; these loans are typically made on attractive terms to incentivize activity, including by shifting the credit risk to the Fed. By law, the Fed must structure these facilities to avoid expected losses, and the facilities charge users interest and/or fees as compensation. To that end, Treasury has pledged ESF funds for each of these facilities to protect the Fed from future losses although these losses would still be borne by the federal government. The Treasury Secretary approved each facility. The loans and asset purchases of the facilities are funded by the Fed using its resources but are backed by the ESF in the event of losses. The MSLP and the MLF were created after the CARES Act's enactment; the other facilities predate the CARES Act. When the CARES Act directed $500 billion to the ESF, all of these programs, in effect, became backed by the CARES Act. Table 1 summarizes how much CARES Act funding has been pledged to each facility. In total, $215 billion has been pledged to date. There has been talk of how the Fed can "leverage" the CARES Act funding of $454 billion (or more) into greater amounts of assistance by combining it with the Fed's funds. Although the use of this term is more colloquial than technical from a financial perspective, Table 1 illustrates how this is accomplished. For example, the MLF is planned to purchase up to $500 billion of assets using $35 billion of CARES Act funding. <2.2.2. Tracking CARES Act Funding for Federal Reserve Programs> As required by law, the Fed has issued reports to Congress describing the purpose and details of each facility. Total loans or asset purchases through the facilities are published weekly as part of the Fed's balance sheet. The Fed also announced that it would publicly report on transactions under CARES Act 13(3) facilities at least every 30 days. Details of the report are to include, "names and details of participants in each facility; amounts borrowed and interest rate charged; and overall costs, revenues, and fees for each facility." In the past, the Fed has provided details on emergency facilities' activities in quarterly reports. <2.2.3. Assistance to States and Municipalities and Medium-Sized Businesses> The act envisions the Fed using CARES Act funding to help two broad groups that had not been the targets of Fed emergency lending programs up to that point: (1) states (as defined by the act) and municipalities; and (2) medium-sized businesses , defined as those with between 500-10,000 employees, including nonfinancial businesses. The Fed has not lent to or purchased the securities of nonfinancial businesses and states and municipalities since the 1930s. "Medium-sized" businesses may be too small to issue publicly-traded debt securities that the Fed is purchasing through the PMCCF and SMCCF and too large to qualify for SBA assistance provided by the CARES Act. The act encourages, but does not require, the Fed to work with the Treasury Secretary to create programs assisting these two groups and does not limit Fed assistance to these two groups only. In particular, Section 4003 presents a detailed proposal for assisting businesses with 500-10,000 employees. This proposal is not required by the act, but the Treasury Secretary "shall endeavor to seek the implementation of" a Fed facility that provides financing to banks and other lenders to make direct loans to U.S. "eligible businesses" (as defined) and nonprofits at an interest rate not higher than 2% and with no principal or interest due for six months to retain their workforces. There are a series of restrictions on the borrower. The intended recipient (businesses with up to 10,000 employees) and purpose (to maintain employment) of the proposed facility are similar to the Fed's MSLP (described above), which was formally announced on April 9, 2020, but was publicly discussed before enactment of the CARES Act. However, the terms differ. Section 4003 states that the medium-sized business proposal outlined does not preclude the Fed establishing the MSLP. <2.3. Terms and Conditions41> Section 4003 sets forth a number of terms and conditions for the assistance provided. Some of these provisions apply broadly to both assistance extended to the Fed and the specified industries, and others apply only to specified industries. Table 2 compares and contrasts the various terms and conditions for each of these programs. In addition, there are oversight and reporting requirements associated with the assistance, which are detailed in the section titled " Oversight Provisions ." <2.3.1. Loan and Loan Guarantee Terms and Conditions for Specified Industries> In an effort to ensure assistance is used to maintain employment levels and the ongoing viability of the recipient, Section 4003 loans and loan guarantees must satisfy several terms and conditions. To approve the loans, the Treasury Secretary must determine that other credit is not reasonably available to the applicant at the time of the transaction. The intended obligation must be prudently incurred by the borrower, and the loan must be sufficiently secured or made at a rate that reflects the risk of the loan or loan guarantee to the extent practicable and not less than an interest rate based on market conditions for comparable obligations prevalent prior to the outbreak of COVID-19. The duration of the loan must be as short as practicable not to exceed five years. Further, Treasury may not issue a loan or loan guarantee unless it receives warrants, senior debt, or equity in the borrower. Additional terms and conditions apply to the loan or loan guarantee recipient. The agreement must provide that neither the borrower nor any affiliate may engage in stock buybacks, unless contractually obligated to do so, or pay dividends until 12 months after the date the loan is no longer outstanding. Until September 30, 2020, the borrower must maintain its employment levels as of March 24, 2020, to the extent practicable, and may not reduce its employment levels by more than 10% from the levels on that date. The borrower must certify that it is a U.S.-domiciled business with significant operations in and a majority of its employees based in the United States. The borrower must have incurred or must expect to incur covered losses such that the continued operations of the business are or would be jeopardized, as determined by the Treasury Secretary. Section 4004 states that Treasury may enter into an agreement to make a loan only if the borrower agrees to specified limitations on the compensation and severance pay of executives and employees whose total compensation exceeded $425,000 in calendar year 2019. Total compensation, as defined in the act, is capped at the individual's 2019 compensation level, or if compensation exceeds $3 million, it is also capped at $3 million plus 50% of the 2019 compensation level above $3 million. Further, severance pay for those individuals is capped at twice the individual's 2019 compensation level. Section 4005 establishes an air carrier's service obligation. It requires an air carrier receiving financial assistance under the act to maintain scheduled air transportation service, as the Transportation Secretary deems necessary, to ensure services to any point served by that air carrier before March 1, 2020, taking into consideration the air transportation needs of small and remote communities and the needs of healthcare and pharmaceutical supply chains. Such authority and any requirements issued shall terminate on March 1, 2022. Section 4019 establishes that certain entities are ineligible to participate in Section 4003 transactions. An ineligible entity is a covered individual who owns a controlling interest in that entity (defined as "not less than 20 percent, by vote or value, of the outstanding amount of any class of equity interest in an entity"). Covered individuals are the President, the Vice President, an executive department head, a Member of Congress, or the spouse, child, or spouse of a child of any of those individuals. Section 4115 protects collective bargaining agreements for a period lasting from the time financial assistance is issued and ending on September 30, 2020. Terms and Conditions for Air Carrier Worker Support To be eligible for grants to cover employee salaries under Section 4113, an air carrier or contractor must agree to refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020; refrain from stock buybacks and dividends through September 30, 2021; comply with CARES Act provisions to protect collective bargaining agreements regarding pay or other terms of employment for a period lasting from the time financial assistance is issued and ending on September 30, 2020; and comply with limits on compensation of highly-paid employees, similar to those described above for airline loans, for a two-year period from March 24, 2020, to March 24, 2022. Additionally, the Transportation Secretary is authorized to require, to the extent practicable, that an air carrier receiving this support continue services to any point served by that carrier before March 1, 2020, considering factors similar to those described above for airline loans under Section 4005. To compensate the government for this assistance, Section 4117 provides that the Treasury Secretary may receive warrants, options, stock, and other financial instruments from recipients, as determined appropriate by the Secretary. (See the " Air Carrier Worker Support " section for more on Treasury's determination for receiving compensation.) <2.3.2. Terms and Conditions and Restrictions for the Federal Reserve Facilities> Some, but fewer, of the terms and conditions and restrictions placed on the industry assistance also apply to the Fed. Fed assistance may go only to U.S. businesses (as defined), and the conflict of interest and reporting requirements also apply to the Fed. Restrictions on executive compensation and capital distributions (stock buybacks and dividends) do not apply to Fed programs unless the Fed is providing direct loans to recipients; in the case of the Fed programs, the Treasury Secretary may waive these requirements "to protect the interests of the Federal Government." Likewise, requirements to provide the government with warrants or other forms of compensation do not apply to the Fed programs. As shown in Table 2 , fewer restrictions may have been placed on Fed programs than on the assistance to the three specified industries. Fewer restrictions may have been placed on Fed programs because of the Fed's independence from Congress and the Administration, and because most of the Fed programs are not intended to prevent recipients' imminent failure. In addition to the conditions and restrictions in the CARES Act, the Fed typically has extended assistance to nonbank entities under its emergency authority found in Section 13(3) of the Federal Reserve Act. This authority places a number of restrictions on the Fed's activities, many of which were added or augmented by the Dodd-Frank Act ( P.L. 111-203 ). For example, actions taken under Section 13(3) must be broadly based and "for the purpose of providing liquidity to the financial system, and not to aid a failing financial company." Actions must also provide security (e.g., collateral) that is sufficient to protect the taxpayer and is based on sound risk management practices. Unlike financial firms, some entities impacted by COVID-19 may not have securities that can be posted as collateral. The CARES Act only states that "any applicable requirements under section 13(3) ... shall apply" to Fed programs created under the act. Nevertheless, after the enactment of the CARES Act, the Fed created the MSLP and MLF under Section 13(3). <2.4. Oversight Provisions48> To provide oversight of Title IV, the CARES Act created a special inspector general, Congressional Oversight Commission, and various reporting requirements. <2.4.1. Special Inspector General for Pandemic Recovery49> Section 4018 establishes a Special Inspector General for Pandemic Recovery (SIGPR) within Treasury. The SIGPR is nominated by the President with the advice and consent of the Senate and may be removed from office in the manner prescribed in Section 3(b) of the Inspector General Act of 1978. The SIGPR is tasked with conducting audits and investigations of Treasury's activities pursuant to the CARES Act, including collecting and summarizing the following information regarding loans provided by Treasury: "A description of the categories of the loans guarantees, and other investments made by the Secretary"; "A listing of eligible businesses receiving loan, loan guarantees, and other investments" by category; An explanation and justification for each loan or loan guarantee; Biographical information about each person hired to manage or service the loans, loan guarantees, and other investments; and Financial information, including the total amount of each loan, loan guarantee, and other investment and the repayment status and any gains or losses. The SIGPR is empowered to hire staff, enter into contracts, and broadly exercise the same authority and status as inspectors general under the Inspector General Act of 1978. The SIGPR is required to report to the appropriate committees of Congress within 60 days of Senate confirmation, and quarterly thereafter, on the activities of the office over the preceding three months, including detailed information on Treasury loan programs. The SIGPR position terminates five years after the enactment of the CARES Act (i.e., March 27, 2025). From the $500 billion appropriated in Title IV, Section 4018 directs that $25 million shall be made available to the SIGPR as a nonexpiring appropriation. <2.4.2. Congressional Oversight Commission54> Section 4020 establishes a five-member Congressional Oversight Commission in the legislative branch. The commission is directed to oversee implementation of Subtitle A of Title IV by the federal government and to issue regular reports to Congress. The commission is directed to report to Congress "not later than 30 days after the first exercise by the Secretary and the Board of Governors of the Federal Reserve System of the authority under this subtitle and every 30 days thereafter." Such reports must include (i) The use by the Secretary and the Board of Governors of the Federal Reserve System of authority under this subtitle, including with respect to the use of contracting authority and administration of the provisions of this subtitle. (ii) The impact of loans, loan guarantees, and investments made under this subtitle on the financial well-being of the people of the United States and the United States economy, financial markets, and financial institutions. (iii) The extent to which the information made available on transactions under this subtitle has contributed to market transparency. (iv) The effectiveness of loans, loan guarantees, and investments made under this subtitle of minimizing long-term costs to the taxpayers and maximizing the benefits for taxpayers. The commission is authorized to hold hearings and gather evidence, obtain data and other information from federal agencies upon request, hire staff, obtain the services of outside experts and consultants, request the detail of federal employees, and enter into contracts to discharge its duties. Members of the commission are to be appointed by the Speaker of the House, the Senate majority leader, the House minority leader, and the Senate minority leader. Appointed commissioners who are not federal employees are to be paid "at a rate equal to the daily equivalent of the annual rate of basic pay for level I of the Executive Schedule for each day (including travel time) during which such member is engaged in the actual performance of duties vested in the Oversight Commission" and reimbursed for travel expenses. For FY2020, Level I of the Executive Schedule is $219,200 annually. Funding for the commission's expenses is to be derived in equal amounts from the contingency fund of the Senate and an "applicable" account of the House. The Treasury Secretary and the Federal Reserve Board of Governors are instructed to "promptly" transfer funds to such accounts for the reimbursement of commission expenses. <2.4.3. Schedule for Reports, Disclosures, and Testimony> In addition to the establishment of the SIGPR and the Congressional Oversight Commission, Title IV requires the Treasury Secretary and the Fed Chair to issue reports, make disclosures, and provide testimony before congressional committees for a number of specified purposes. Collectively, these provisions require disclosure to Congress and the public of financial and other details on each transaction under Section 4003(b). These requirements are detailed in Table 3 . <2.4.3.1. Appendix. Comparisons to the Troubled Asset Relief Program (TARP)58> Over a decade ago, in the financial crisis and recession of 2007-2009, businesses and individuals in the United States and across the globe faced financial uncertainty unparalleled for a generation. Although the cause of the financial uncertainty differed greatly between the current circumstances as a consequence of Coronavirus Disease 2019 (COVID-19) and the financial crisis of 2007-2009, in each instance Congress has chosen to proactively assist in economic recovery. As the financial crisis reached near panic proportions in fall 2008, Congress created the $700 billion Troubled Asset Relief Program (TARP) through the enactment in October 2008 of the Emergency Economic Stabilization Act (EESA; P.L. 110-343 ). Subsequently, Congress passed the $787 billion American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), which provided relief to certain parts of the economy. The CARES Act combines elements of both aforementioned acts. Title IV of the CARES Act, with its assistance for firms and support of Federal Reserve financial sector facilities, more closely resembles TARP; a summary of aspects of TARP that parallel Title IV will be the focus of this appendix. For a broader overview of the financial sector and industry assistance during the 2007-2009 financial crisis, please see CRS Report R43413, Costs of Government Interventions in Response to the Financial Crisis: A Retrospective , by Baird Webel and Marc Labonte. For a comparison of TARP and Title IV of the CARES Act, see Table A-1 . Implementation The EESA authorized the Treasury Secretary to either purchase or insure up to $700 billion in troubled assets owned by financial firms. The general concept was that by removing such assets from the financial system, confidence in counterparties would be restored, and the system could resume functioning. This authority granted in the EESA was broad. In particular, the definitions of both troubled assets and financial institutions allowed the Secretary wide latitude in deciding what assets might be purchased or guaranteed and what might qualify as a financial institution. In practice, most TARP funding was not used to purchase troubled assets, instead being dedicated to capital injections for financial institutions, loans to the auto industry, and assistance for homeowners at risk of foreclosure. In a limited number of cases, TARP and Federal Reserve funds were used together. The EESA was later amended to reduce the authorized amount to $475 billion, when it became clear that the amount used would not exceed this amount. Equity Compensation for Treasury Equity warrants in return for government assistance were specifically provided for in the TARP statute. The warrants were expected to provide a positive financial upside to the taxpayer if the private companies' fortunes improved as a result of the government assistance. Although resulting in positive returns for the government, the amount recouped through warrants ($9.58 billion) was less than through interest and dividends ($24.38 billion). The act did not specifically call for the government to receive large holdings of common stock. In several cases, however, the government ended up with large, sometimes controlling, equity positions in private companies. The government generally exercised little of the ownership control inherent in these large stakes. Common equity in companies was typically accepted in return for TARP assistance in order to strengthen the companies' capital positions. Such equity also provided a financial upside to the taxpayers when firms recovered, but it also had a potential downside when firms did not recover strongly. Termination Date The EESA granted the purchase authority for a maximum of two years from the date of enactment, meaning it expired on October 3, 2010. Commitments made under this authorization, however, could continue after this date, with no limit on how long assets purchased under TARP could be held by the government. At present, there continues to be funding disbursed under the housing assistance program and a small amount ($0.04 billion) of bank capital assistance outstanding. Limits on Compensation and Labor Reduction The EESA included limits on executive bonuses and golden parachutes and provided for possible compensation clawbacks. The EESA was later amended by ARRA to expand these limits and add additional corporate governance reforms, thus placing additional restrictions on participating banks in existing Capital Purchase Program contracts. The act amending the EESA also allowed for early repayment and withdrawal from the program without financial penalty. With the advent of more stringent requirements for TARP recipients, many banks began to repay, or attempt to repay, TARP funds. There was no employee retention requirement with TARP. Congressional Oversight The EESA included a number of oversight mechanisms and reporting requirements. Similar to the CARES Act, it created a TARP Congressional Oversight Panel. The TARP Oversight Panel was a five-member, independent entity established in the legislative branch, appointed by congressional leadership, and directed to submit regular reports to Congress. In exercising its duties, the TARP Congressional Oversight Panel issued 30 reports and held 26 hearings between December 2008 and March 2011, according to its final report. The panel employed a total of 46 staff, utilized 3 detailees, and expended approximately $10.7 million through April 3, 2011. The five-member panel was appointed by the House and Senate leadership. The EESA also required the Treasury Secretary to provide periodic updates to Congress, with both monthly overall reports and individual reports detailing "all transactions" made under TARP. The Comptroller General was specifically tasked with oversight responsibilities and regular audits, with the Secretary directed to provide appropriate facilities, funding, and access to records to facilitate this oversight. Special Inspector General The EESA created the Special Inspector General for TARP (SIGTARP) position with an initial $50 million in funding, which has been continued in annual appropriations since. The SIGTARP was provided similar powers and authorities as other inspectors general to conduct audits and investigations of TARP and issue quarterly reports until all assets held or insured by Treasury under TARP were disposed of. The SIGTARP issued its first report in 2010, with its latest report covering the last quarter of 2019. Congress appropriated $22 million in the Consolidated Appropriations Act, 2020 ( P.L. 116-93 ) for the SIGTARP position in FY2020. Conflicts of Interest The EESA required the Secretary to issue regulations or guidelines to "address, manage or prohibit" conflicts of interest arising in TARP, including the purchase and management of assets and the selection of asset managers and post-employment restrictions. Minimizing Costs to Taxpayers The EESA directed the Secretary to minimize the negative impact on taxpayers, including both direct and long-term costs and benefits. Market mechanism and private sector participation in operating the program were encouraged. The terms and conditions of Treasury asset purchases were to be designed to provide recompense to the taxpayer, including participation in the equity appreciation of a firm following Treasury asset purchases.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; H.R. 748 ) was signed into law as P.L. 116-136 on March 27, 2020, to assist those affected by the economic impact of Coronavirus Disease 2019 (COVID-19). This assistance is targeted to consumers, businesses, and the financial services sector. A key part of this assistance is provided to eligible businesses, states, and municipalities in Division A, Title IV of the CARES Act. Title IV allocates $500 billion to the Treasury Department (through the Exchange Stabilization Fund) to make loans and guarantees for three specified industries—passenger airlines, cargo airlines, and businesses critical to national security—and to support Federal Reserve lending facilities. Some have characterized this as a "bailout" of private industry; others assert it is necessary to avoid employment losses and maintain economic stability. Of the $500 billion, Treasury can make up to $25 billion available to passenger airlines, up to $4 billion to cargo airlines, and up to $17 billion to businesses critical to maintaining national security. Treasury can make the remainder—up to $454 billion, plus whatever is not used to assist the specified industries—available to the Federal Reserve. The authority to enter into new transactions terminates on December 31, 2020. Recipients are legally required to repay assistance with interest, although the ultimate subsidy involved will not be known until terms, such as interest rates and fees, have been decided and it becomes clear to what extent firms are able to repay. Title IV also provides up to $32 billion to continue payment of employee wages, salaries, and benefits at airline-related industries. The Treasury Secretary has discretion to determine what compensation to seek for this assistance and has reportedly chosen not to seek compensation from smaller recipients. According to Treasury, 93 air carriers had received $12.4 billion under the Payroll Support Program as of April 25, 2020. Most funding under Title IV has been used to backstop a series of Federal Reserve emergency programs created in response to COVID-19. These programs assist affected businesses or markets by making loans or purchasing assets. To date, the Fed has created programs to support markets for commercial paper, corporate bonds, municipal bonds, and asset-backed securities, as well as a loan program to help businesses with under 10,000 employees or under $2.5 billion in revenues maintain employment. To date, $215 billion of CARES Act funding has been made available by the Treasury to reimburse the Federal Reserve for potential losses on any transactions in these programs. This assistance carries a number of terms and conditions. All funding faces certain conditions, such as limiting eligibility to U.S. businesses, as defined by the act, and following rules to avoid conflicts of interest. Firms receiving loans, loan guarantees, or grants directly from Treasury must maintain at least 90% of March 24, 2020, employment levels; face controls placed on share buybacks, dividends, and executive salaries; and must provide Treasury specific compensation (e.g., warrants or equity). In addition, Title IV establishes a special inspector general and a Congressional Oversight Commission to oversee the operations carried out under the title. Finally, the key agencies involved in providing this assistance (i.e., the Federal Reserve and Treasury) and the Government Accountability Office must make available to the public and Congress a series of reports on operations under Title IV of the act.

crs_R46214

crs_R46214_0

<1. Introduction> The Congressional Research Service (CRS) regularly receives requests about spending on programs and activities that target low-income individuals and families for benefits and services. CRS has produced a series of reports that identify these programs and provides their spending amounts and recent spending trends. This current report provides an interim update of the federal spending for programs and activities identified in CRS Report R44574, Federal Benefits and Services for People with Low Income: Overview of Spending Trends, FY2008-FY2015 , extending the spending analysis through FY2018, the most recent year for which federal spending data were available as of January 2020. In FY2018, the federal government spent $917.8 billion on benefits and services for people with low income. This was an increase of 2.2% compared to FY2017, which was less than the rate of economic growth (5.4%) and nearly equal to the rate of inflation (2.3%) during FY2018. While the programs in this report share the common feature of an explicit low-income focus, the individual programs are highly diverse in their purpose, design, and target population. They were established at different times, in response to different policy challenges. In terms of target population, the largest portion of low-income assistance goes to families with children with working parents and the disabled (see CRS In Focus IF10355, Need-Tested Benefit Receipt by Families and Individuals ). <2. Trends in Federal Spending on Benefits and Services for People with Low Income> Figure 1 shows the trend in federal spending in nominal terms on benefits and services for people with low income for FY2008 through FY2018. The early portion, FY2008 through FY2011, represents a period of time where spending increased because of automatic or legislated responses to the recession of 2007 through 2009. The largest low-income assistance programs are entitlements, and their spending increased automatically as more people became eligible for their benefits as incomes fell due to the recession. Additionally, Congress and the President responded to the recession with time-limited expansions or funding increases in some of these programs in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). Total spending on these programs increased by 36% over this period. Federal spending on benefits and services for low-income people stabilized in FY2011 and FY2012 as ARRA expired and other spending increases associated with the recession abated. However, from FY2012 through FY2018, spending for these programs increased at a steady pace, stemming from increases in spending on health care for low-income people. <3. Federal Spending on Benefits and Services for Low-Income People by Category> CRS's series of reports on benefits and services for low-income people divides spending for the programs into eight categories: health care, cash aid, food aid, education, housing and development, social services, employment and training, and energy assistance. Table 1 shows federal spending for the programs by category for FY2008 through FY2018. The categories are sorted by the amount of their spending in FY2018, with the largest (health care) first and the smallest (energy aid) last. Health care represents more than half of total spending for the programs in FY2018 and more than three times the amount of the next largest category, cash aid. The two smallest categories are employment and training programs (exclusive of education spending) and energy assistance. Figure 2 breaks out total federal spending on benefits and services for people with low income into two groups: health programs and all other programs. As shown in the figure, the increase in nominal spending in the earlier portion of the period (affected by recession-related spending) stemmed from increases in both health and other program spending. However, since FY2012 the increase is attributable to higher spending on health care. Spending on all other programs (collectively) has decreased each year since FY2016. Much of the increase in health spending is from the Medicaid program, and since FY2014 reflects increases in spending due to the Patient Protection and Affordable Care Act's (ACA, P.L. 111-148 as amended) Medicaid expansion. <4. Mandatory and Discretionary Spending> The largest programs providing benefits and services to low-income people are mandatory spending programs. These are programs where spending is controlled by the terms of their authorizing laws such as entitlements either to individuals or states rather than the annual appropriation process. Discretionary spending is generally determined through annual appropriations. Figure 3 shows federal spending in FY2018 on benefits and services for people with low income by category and budget classification (mandatory, discretionary, or some programs have spending classified as both). The largest categories (health, cash aid, and food aid) are dominated by mandatory spending. Housing is almost entirely discretionary spending, determined through annual appropriations. Education is split between discretionary spending and the Pell Grant program, which has both mandatory and discretionary components. Social services and employment and training have a mix of mandatory spending (much of it coming from the broad-based Temporary Assistance for Needy Families (TANF) block grant) and discretionary funding. Energy assistance is entirely discretionary. Of the $917.8 billion spent by the federal government on benefits and services for people with low income in FY2018, $741.2 billion (81%) was spent on programs or activities receiving only mandatory funding and $139.7 billion (15%) was spent on programs or activities receiving only discretionary funding. The remaining $37.0 billion of spending occurred in programs receiving both mandatory and discretionary funding. Health care is a major source of mandatory spending: 94% of all health care spending discussed in this report was mandatory spending in FY2018. <5. Federal Spending on Benefits and Services for Low-Income People by Program> Table 2 shows spending for federal benefits and services to low-income persons by program for FY2008 to FY2018. The programs were classified into the eight categories of spending noted above, and are ranked within each category by FY2018 spending. Note that in many categories, spending is dominated by a few large programs. For example, in FY2018, Medicaid accounted for 85% of health care spending, Supplemental Security Income and two refundable tax credits for low-income workers (the Earned Income Tax Credit and the refundable portion of the Child Tax Credit) accounted for 93% of all cash aid, Supplemental Nutrition Assistance Program (SNAP) accounted for 67% of all food aid, and Pell Grants plus aid to school districts with large shares of disadvantaged children accounted for 81% of all education aid. Most programs had spending that was classified in a single category. The exceptions are the broad-purpose TANF block grant and SNAP. TANF is best known as a program that provides cash assistance to needy families with children. TANF accounted for $5.2 billion in federal spending on cash aid in FY2018, making it the fourth-largest cash program and representative of 4% of cash spending. In contrast, TANF spending on social services made it the second-largest social services program (behind only Head Start), and its employment and training expenditures made it the largest employment and training program. SNAP spending was divided into its food assistance and its employment and training components. SNAP was the largest food assistance program ($63 billion in food assistance in FY2018), but it also contributed $441 million in employment and training expenditures in FY2018.

The Congressional Research Service (CRS) regularly receives requests about federal benefits and services targeted to low-income populations. This report is the latest update in a series of CRS reports that attempt to identify and provide information about federal spending targeted to this population. The report series does not discuss social insurance programs such as Social Security, Medicare, or Unemployment Insurance, but includes only programs with an explicit focus on low-income people or communities. Tax provisions, other than the refundable portion of two tax credits, are excluded. Past reports in this series include the following: CRS Report R44574, Federal Benefits and Services for People with Low Income: Overview of Spending Trends, FY2008-FY2015 , and CRS Report R43863, Federal Benefits and Services for People with Low Income: Programs and Spending, FY2008-FY2013 . This current report is intended to provide a brief update of federal spending during FY2008-FY2018 for programs or activities identified in past reports. This report has not been updated to include information on new programs or activities; it simply provides information on the programs or activities that had previously been identified. Over the course of the 11-year period examined, federal spending on people with low income increased by 64% in nominal terms, peaking at nearly $918 billion in FY2018. Increases in recent years were largely driven by spending on health care. Key findings include the following: No single label best describes all programs with a low-income focus, and no single trait characterizes those who benefit. Programs are highly diverse in their purpose, design, and target population. Readers should use caution in making generalizations about the programs described in this report. Total federal spending on low-income programs in nominal terms rose sharply between FY2008 and FY2009 as the Great Recession took hold. Spending stabilized in FY2011, but it has increased at a fairly steady pace since FY2012 largely due to increases in health care spending. The peak spending year in this window was FY2018, when federal spending on low-income populations totaled $918 billion. This represents a nominal increase of 64% from FY2008. Health care is the single largest category of low-income spending and tends to drive overall trends. In each year, spending on health care has accounted for roughly half of all spending; since FY2015, it has accounted for just over half of all spending. The single largest program within the health category is Medicaid. After health care, cash aid and food assistance are the next largest categories, with food assistance seeing a 59% nominal increase over the 11-year period. Other categories (in descending size based on FY2018 spending) are housing and development, education, social services, employment and training, and energy assistance. Most low-income spending is classified in budgetary terms as mandatory (or direct ), which means the amount spent is a function of eligibility and payment rules established in authorizing laws. The amount spent for the remaining discretionary programs is controlled through the annual appropriations process. In some cases, programs receive both mandatory and discretionary funding. In FY2018, 81% of low-income spending was mandatory-only, 15% was discretionary-only, and 4% was spent on programs receiving both mandatory and discretionary funding. Four programs accounted for 68% of low-income spending in FY2018 and ten programs made up 82%. Medicaid alone represented 48% of the total. In addition to Medicaid, the top four include the Supplemental Nutrition Assistance Program (SNAP), the refundable portion of the Earned Income Tax Credit (EITC), and Supplemental Security Income (SSI).

crs_RL30378

crs_RL30378_0

<1. Introduction> The 116 th Congress began with 57 African American Members, the highest number ever at the beginning of a Congress. After the death of an African American House Member in October 2019, the current 56 African American Members represent the following proportions of the entire Congress, and of the House and Senate separately: 10.1% of voting Members in the Congress (54 of 535, does not include the Delegates and Resident Commissioner); 10.4% of total Members in the Congress (56 of 541, includes the Delegates and Resident Commissioner); 11.7% of voting Members in the House (51 of 435, does not include the Delegates and Resident Commissioner); 12.0% of total Members in the House (53 of 441, includes the Delegates and Resident Commissioner); and 3.0% of total Members in the Senate (3 of 100). Table 1 provides more detail on these African American Members across the 116 th Congress. In addition to data for the 116 th Congress, this report provides historical information. The report also includes an appendix with an alphabetical listing of African American Members, selected biographical information, and committee assignments during their tenure in Congress. <1.1. Source Note> Inclusion in this report, and related data, is based on entry in Black Americans in Congress, 1870-2007 , the Black Americans in Congress, 1870-2019 e-book, and the accompanying website maintained by the House Office of the Historian and Office of Art and Archives ( http://history.house.gov/Exhibitions-and-Publications/BAIC/Black-Americans-in-Congress/ ) . According to that office, the website is based on the 2008 print edition but updated to reflect the entry of new African Americans into Congress. In 2018, at the direction of the Committee on House Administration, the Historian's Office revised and updated the contextual essays of the 2008 print edition in order to prepare the 2019 e-book edition of Black Americans in Congress. This report does not include additional Members who might identify as African American, or as having African ancestry, but are not included in these sources. Additional historical information, including committee assignments, leadership positions, and dates of service, is based on Biographical Directory of the American Congress ( http://bioguide.congress.gov ), various editions of the Congressional Directory , and a broad range of Congressional Quarterly Inc. and Leadership Directories Inc. publications. <2. Brief Overview of Studies on African Americans in Congress> Numerous studies of Congress have examined the role and impact of African Americans in Congress. Many of these studies relate to larger questions about the nature of representation or about Congress as an institution. Central to these studies have been questions about the following: Descriptive representation (i.e., representation by those who share demographic characteristics with their constituents) and substantive representation (i.e., representation of policy preferences and a linkage to policy outcomes) in the representation of minority electoral and policy interests, as well as any linkage or trade-offs between the two. While the former concentrates on election outcomes (e.g., percentages of congressional seats), the latter focuses on behaviors and actions once an elected official is in office. The Voting Rights Act of 1965, impact of majority-minority districts in representing minority interests in a district, and influence of majority-minority districts on electoral and policy preferences in surrounding districts. These studies have also examined recent court rulings. The relationship of minority Members of Congress with their constituents, including any impact on turnout, electoral competitiveness or strategies, hiring of minority staff, communication styles, constituency services, and voter satisfaction and engagement. Legislative activities and influence, including work in committees, floor speeches, bill introduction and passage, cosponsorship, coalition formation, career progression and seniority, and relations with congressional leadership. Roll-call voting behavior, including voting cohesion compared to party or state delegations. Positions on various domestic or international issues. <3. African Americans in Congress Since 1870: Totals and in Each Congress> The first African American to serve in the Senate, Hiram Revels of Mississippi, was sworn in on February 23, 1870. The first African American to serve in the House, Joseph Rainey of South Carolina, was sworn in on December 12, 1870. Both chambers subsequently had periods without any African American Members. The longest period for the House stretched from the 57 th Congress (1901-1903) until the beginning of the 71 st Congress (1929-1931), or 28 years. The longest period for the Senate stretched from the beginning of the 47 th Congress (1881-1883) until the beginning of the 90 th Congress (1967-1968), or 86 years. African American membership in the House first reached 10 Members during the 91 st Congress (1969-1970), and voting membership first exceeded 5% during the 100 th Congress (1987-1988). Another large increase occurred during the 103 rd Congress (1993-1994), which was the first Congress after the redistricting that followed the 1990 U.S. Census. The 116 th Congress began with the highest number of African American Members ever for the start of a Congress: 57 (52 Representatives, 2 Delegates, and 3 Senators). Table 2 provides a summary of the 162 African Americans who have served in the House, Senate, and both chambers. Of these 162 Members, 22 began their service after the Civil War but prior to the start of the 20 th century (2 in the Senate, 20 in the House). <4. How African Americans Enter Congress: Regular Elections, Special Elections, and Appointments> Article I, Section 2 of the U.S. Constitution requires that all Members of the House of Representatives must be "chosen every second Year by the People of the several States." Therefore, all 153 of the African Americans who have served in the House entered office through election, even those who entered after a seat became open during a Congress. By contrast, the Seventeenth Amendment to the Constitution, which was ratified in 1913, gives state legislatures the option to empower governors to fill congressional Senate vacancies by temporary appointment. The Seventeenth Amendment also provides for direct elections of Senators by the "people" of a state. Previously, Senators were elected by legislative selection rather than through the direct elections by which Representatives to Congress were elected. Of the 10 African Americans who have served in the Senate, two were elected prior to the ratification of the Seventeenth Amendment to the Constitution; four initially entered Senate service by winning a regular election; one initially entered Senate service by winning a special election and was subsequently reelected; and three were appointed. Of these three, one was a candidate for reelection and served in more than one Congress. <5. The Congressional Black Caucus (CBC): A Congressional Member Organization> In 1971, the 13 African Americans then serving in the House established the Congressional Black Caucus. In the 116 th Congress, the CBC is one of more than 270 registered congressional member organizations (CMOs) in the House. House CMOs are required to register with the Committee on House Administration. CMOs do not receive separate funding, and they have not since a change in the Rules of the House adopted for the 104 th Congress. Members may use their Members' Representational Allowance (MRA) to support staff, including shared staff, assigned to CMO duties. Members, rather than the CMO, remain the employing authority, and the CMO is not an independent entity. The committee's Members' Congressional Handbook lists a number of additional regulations related to the staffing and funding of CMOs. CMOs are not required to register in the Senate. As in the House, informal congressional groups or organizations do not receive separate funding. The CBC CMO is distinct from the Congressional Black Caucus Foundation, which was established in 1976 and is a 501(c)(3) nonprofit organization. <6. African American Firsts in Congress> <7. African Americans Who Have Served in Party Leadership Positions18> A number of African Americans in Congress, listed in Table 5 , have held positions in their party's leadership. All of these party leadership positions have been in the House. The first African American Member to be elected to any party leadership position was Shirley Chisholm (D-NY), who served as House Democratic Caucus Secretary in the 95 th and 96 th Congresses (1977-1980). <8. African Americans and Leadership of Congressional Committees> As chair of the Senate Select Committee on the Levees of the Mississippi River (45 th Congress), Blanche K. Bruce was the first African American to chair any congressional committee. As chair of the House Committee on Expenditures in the Executive Departments (81 st Congress), William L. Dawson was the first African American to chair a House committee. In total, 23 African Americans have chaired a House committee; 1 African American has chaired a Senate committee; and 2 African American Representatives have chaired a joint committee. These chairmanships include standing, special, and select committees. Some African Americans have chaired multiple committees in the House. In the 116 th Congress, four African American Representatives currently chair four different House standing committees. <9. Length of Service Records> <10. African American Women in Congress> A total of 47 African American women have served in Congress. Of these, 25 serve in the 116 th Congress (including 2 Delegates), a record number. The previous record was 22 (including 2 Delegates), which was reached at the end of the 115 th Congress. The African American women Members of the 116 th Congress are listed in Table 7 . African American women comprise 25 of the 131 women currently serving in the 116 th Congress (19.1%) and 25 of the 57 African Americans currently serving in the 116 th Congress (43.9%). <11. Alphabetical Listing, Including Dates of Service and Committee Assignments23> ADAMS, ALMA S. Democrat; North Carolina, 12 th District. Elected to the 113 th Congress to fill the vacancy caused by the resignation of Melvin L. Watt, and also elected to the 114 th -116 th Congresses (served Nov. 4, 2014-present). Committee assignments: H. Agriculture (114 th -116 th Congresses) H. Education and the Workforce/Education and Labor (114 th -116 th Congresses) H. Small Business (114 th -115 th Congresses) H. Financial Services (116 th Congress) ALLRED, COLIN . Democrat; Texas, 32 nd District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Foreign Affairs (116 th Congress) H. Transportation and Infrastructure (116 th Congress) H. Veterans' Affairs (116 th Congress) BALLANCE, FRANK W., Jr. Democrat; North Carolina, 1 st District. Elected to the 108 th Congress (served Jan. 7, 2003, until his resignation June 11, 2004). Committee assignments: H. Agriculture (108 th Congress) H. Small Business (108 th Congress) BASS, KAREN. Democrat; California, 33 rd (112 th Congress) and 37 th District (113 th Congress- present). Elected to the 112 th -116 th Congresses (served Jan. 3, 2011-present). Chair of the Congressional Black Caucus, 116 th Congress. Committee assignments: H. Budget (112 th Congress) H. Foreign Affairs (112 th -116 th Congresses) H. Judiciary (113 th -116 th Congresses) BEATTY, JOYCE. Democrat; Ohio, 3 rd District. Elected to the 113 th -116 th Congresses (served Jan. 3, 2013-present). Committee assignments: H. Financial Services (113 th -116 th Congresses) BISHOP, SANFORD DIXON, Jr. Democrat; Georgia, 2 nd District. Elected to the 103 rd -116 th Congresses (served Jan. 5, 1993-present). Committee assignments: H. Agriculture (103 rd -107 th Congresses) H. Post Office and Civil Service (103 rd Congress) H. Veterans' Affairs (103 rd -104 th Congresses) H. Select Intelligence (105 th -107 th Congresses) H. Appropriations (108 th -116 th Congresses) BLACKWELL, LUCIEN EDWARD. Democrat; Pennsylvania, 2 nd District. Elected to the 102 nd Congress to fill the vacancy caused by the resignation of William Gray, and also elected to the 103 rd Congress (served Nov. 11, 1991-Jan. 3, 1995). Committee assignments: H. Merchant Marine and Fisheries (102 nd Congress) H. Public Works and Transportation (102 nd -103 rd Congresses) H. Budget (103 rd Congress) BLUNT ROCHESTER, LISA. Democrat; Delaware, At-Large. Elected to the 115 th -116 th Congresses (served Jan. 3, 2017-present). Committee assignments: H. Agriculture (115 th Congress) H. Education and the Workforce (115 th Congress) H. Energy and Commerce (116 th Congress) BOOKER, CORY ANTHONY. Democrat; New Jersey. Senator. Elected to the Senate in 2013 to fill the vacancy caused by the death of Frank Lautenberg and subsequently elected to a full term in 2014 (served October 31, 2013-present). Committee assignments: S. Commerce, Science and Transportation (113 th -114 th Congress) S. Environment and Public Works (113 th -116 th Congresses) S. Homeland Security and Government Affairs (114 th Congress) S. Foreign Relations (115 th -116 th Congresses) S. Small Business and Entrepreneurship (113 th -116 th Congresses) S. Judiciary (115 th -116 th Congresses) BROOKE, EDWARD WILLIAM, III. Republican; Massachusetts. Senator. Elected in 1966 (served Jan. 3, 1967-Jan. 3, 1979). Committee assignments: S. Aeronautical and Space Sciences (90 th Congress) S. Banking and Currency (90 th -95 th Congresses; ranking member, 95 th Congress) S. Government Operations (90 th Congress) S. Armed Services (91 st Congress) S. Select Education Opportunity (91 st -92 nd Congresses) S. Appropriations (92 nd -95 th Congresses) S. Banking, Housing and Urban Affairs (92 nd -95 th Congresses) S. Special Aging (92 nd -95 th Congresses) S. Select Standards and Conduct (93 rd -94 th Congresses) Jt. Bicentennial Arrangements (94 th Congress; vice-chair) Jt. Defense Production (94 th -95 th Congresses) BROWN, ANTHONY GREGORY. Democrat; Maryland, 4 th District. Elected to the 115 th -116 th Congresses (served Jan. 3, 2017-present). Committee assignments: H. Armed Services (115 th -116 th Congresses) H. Ethics (115 th -116 th Congresses) H. Natural Resources (115 th -116 th Congresses) H. Transportation and Infrastructure (116 th Congress) BROWN, CORRINE. Democrat; Florida, 3 rd District (103 rd -112 th Congresses), 5 th District (113 th -114 th Congress). Elected to the 103 rd -114 th Congresses (served Jan. 3, 1993-Jan. 3, 2017). Committee assignments: H. Government Operations (103 rd Congress) H. Public Works and Transportation (103 rd Congress) H. Transportation and Infrastructure (104 th -114 th Congresses) H. Veterans' Affairs (103 rd -114 th Congresses; ranking member, 114 th Congress) BRUCE, BLANCHE KELSO. Republican; Mississippi, Senator. Elected in 1874 (served March 4, 1875-March 3, 1881). Committee assignments: S. Manufactures (44 th Congress) S. Pensions (44 th -45 th Congresses) S. Education and Labor (44 th -46 th Congresses) S. Select Levees of the Mississippi River (chair, 45 th -46 th Congresses) S. Select To Investigate the Freedman's Savings and Trust Company (chair, 46 th Congress) BURKE, YVONNE BRATHWAITE. Democrat; California, 28 th (94 th -95 th Congresses) and 37 th (93 rd Congress) Districts. Elected to the 93 rd -95 th Congresses (served Jan. 3, 1973-Jan. 3, 1979). First female chair of the Congressional Black Caucus, 94 th -95 th Congresses. Committee assignments: H. Public Works (93 rd Congress) H. Interior and Insular Affairs (93 rd Congress) H. Appropriations (94 th -95 th Congresses) H. Select Committee on the House Beauty Shop (chair, 94 th -95 th Congresses) BURRIS, ROLAND. Democrat; Illinois. Senator. Appointed to the Senate in December 2008 to fill vacancy caused by the resignation of Barack Obama, but was not seated until Jan. 12, 2009 (served Jan. 12, 2009-Nov. 29, 2010). Committee assignments: S. Armed Services (111 th Congress) S. Homeland Security and Governmental Affairs (111 th Congress) S. Veteran's Affairs (111 th Congress) BUTTERFIELD, GEORGE KENNETH, Jr. (G.K.). Democrat; North Carolina, 1 st District. Elected to the 108 th Congress to fill the vacancy caused by the resignation of Frank Ballance, and also elected to the 109 th -116 th Congresses (served July 20, 2004-present). Chair of the Congressional Black Caucus, 114 th Congress. Committee assignments: H. Small Business (108 th Congress) H. Agriculture (108 th -109 th Congresses) H. Armed Services (109 th Congress) H. Energy and Commerce (110 th -116 th Congresses) H. Standards of Official Conduct (111 th Congress) H. House Administration (116 th Congress) CAIN, RICHARD HARVEY. Republican; South Carolina, At-Large. Elected to the 43 rd and 45 th Congresses (served March 4, 1873-March 3, 1875; March 4, 1877-March 3, 1879). Committee assignments: H. Agriculture (43 rd Congress) H. Private Land Claims (45 th Congress) CARSON, ANDR . Democrat; Indiana, 7 th District. Elected to the 110 th Congress to fill the vacancy caused by the death of his grandmother Julia Carson, and also elected to the 111 th -116 th Congresses (served March 11, 2008-present). Committee assignments: H. Financial Services (110 th -112 th Congresses) H. Armed Services (113 th Congress) H. Transportation and Infrastructure (113 th -116 th Congresses) H. Permanent Select Intelligence (114 th -116 th Congresses) CARSON, JULIA. Democrat; Indiana, 10 th District (105 th -107 th Congresses) and 7 th District (108 th -110 th Congresses). Elected to the 105 th -110 th Congresses (served Jan. 3, 1997, until her death Dec. 15, 2007). Committee assignments: H. Banking and Financial Services/Financial Services (105 th -110 th Congresses) H. Veterans' Affairs (105 th -107 th Congresses) H. Transportation and Infrastructure (108 th -110 th Congresses) CHEATHAM, HENRY PLUMMER. Republican; North Carolina, 2 nd District. Elected to the 51 st and 52 nd Congresses (served March 4, 1889-March 3, 1893). Committee assignments: H. Expenditures on Public Buildings (51 st -52 nd Congresses) H. Education (51 st -52 nd Congresses) H. Agriculture (52 nd Congresses) CHISHOLM, SHIRLEY ANITA. Democrat; New York, 12 th District. Elected to the 91 st -97 th Congresses (served Jan. 3, 1969-Jan. 3, 1983). Committee assignments: H. Veterans' Affairs (91 st -92 nd Congresses) H. Education and Labor (92 nd -94 th Congresses) H. Rules (95 th -97 th Congresses) CHRISTENSEN, DONNA. Democrat; Delegate from the Virgin Islands. Elected to the 105 th -113 th Congresses (served Jan. 3, 1997-Jan. 3, 2015). Committee assignments: H. Resources/Natural Resources (105 th -112 th Congresses) H. Small Business (105 th -109 th Congresses) H. Homeland Security (108 th -110 th Congresses; 112 th Congress) H. Energy and Commerce (111 th -113 th Congresses) CHRISTIAN-CHRISTENSEN, DONNA and CHRISTIAN-GREEN, DONNA . See CHRISTENSEN, DONNA . CLARKE, HANSEN. Democrat; Michigan, 13 th District. Elected to the 112 th Congress (served Jan. 3, 2011-Jan. 3, 2013). Committee assignments: H. Homeland Security (112 th Congress) H. Science, Space and Technology (112 th Congress) CLARKE, YVETTE. Democrat; New York, 11 th District (110 th -112 th Congresses) and 9 th District (113 th Congress-present). Elected to the 110 th -116 th Congresses (served Jan. 3, 2007-present). Committee assignments: H. Education and Labor (110 th -111 th Congresses) H. Homeland Security (110 th -113 th , 116 th Congresses) H. Small Business (110 th -114 th Congresses) H. Ethics (113 th -115 th Congresses) H. Energy and Commerce (114 th -116 th Congresses) CLAY, WILLIAM LACY, Jr. Democrat; Missouri, 1 st District. Elected to the 107 th -116 th Congresses (served Jan. 3, 2001-present). Committee assignments: H. Financial Services (107 th -116 th Congresses) H. Government Reform/H. Oversight and Government Reform (107 th -116 th Congresses) H. Natural Resources (115 th -116 th Congresses) CLAY, WILLIAM LACY, Sr. Democrat; Missouri, 1 st District. Elected to the 91 st -106 th Congresses (served Jan. 3, 1969-Jan. 3, 2001). Committee assignments: H. Education and Labor (91 st -106 th Congresses) H. Post Office and Civil Service (93 rd -103 rd Congresses; chair 102 nd -103 rd Congresses) H. Select to Study the Committee System (96 th Congress) H. House Administration (99 th -103 rd Congresses) Jt. Library (101 st Congress) CLAYTON, EVA. Democrat; North Carolina, 1 st District. Elected to the 102 nd Congress Nov. 3, 1992, to fill vacancy caused by death of Walter Jones; simultaneously elected to the 103 rd Congress; reelected to the 104 th -107 th Congresses (served Nov. 5, 1992-Jan. 3, 2003). Committee assignments: H. Agriculture (103 rd -107 th Congresses) H. Small Business (103 rd -104 th Congresses) H. Budget (105 th -107 th Congresses) CLEAVER, EMANUEL, II. Democrat; Missouri, 5 th District. Elected to the 109 th -116 th Congresses (served Jan. 4, 2005-present). Chair of the Congressional Black Caucus, 112 th Congress. Committee assignments: H. Financial Services (109 th -116 th Congresses) H. Select Energy Independence and Global Warming (110 th -111 th Congresses) H. Homeland Security (111 th and 116 th Congresses) H. Select Committee on the Modernization of Congress (116 th Congress) CLYBURN, JAMES ENOS. Democrat; South Carolina, 6 th District. Elected to the 103 rd -116 th Congresses (served Jan. 5, 1993-present). Chair of the Congressional Black Caucus, 106 th Congress. Committee assignments: H. Public Works and Transportation/Transportation and Infrastructure (103 rd -105 th Congresses) H. Veterans' Affairs (103 rd -105 th Congresses) H. Small Business (104 th Congress) H. Appropriations (106 th -109 th Congresses) COLLINS, BARBARA-ROSE. Democrat; Michigan, 13 th District (102 nd Congress) and 15 th District (103 rd -104 th Congresses). Elected to the 102 nd -104 th Congresses (served Jan. 3, 1991-Jan. 3, 1997). Committee assignments: H. Public Works and Transportation (102 nd -103 rd Congresses) H. Science, Space and Technology (102 nd Congress) H. Government Operations (103 rd Congress) H. Post Office and Civil Service (103 rd Congress) H. Government Reform and Oversight (104 th Congress) H. Transportation and Infrastructure (104 th Congress) H. Select Children, Youth, and Families (102 nd Congress) COLLINS, CARDISS. Democrat; Illinois, 7 th District. Elected to the 93 rd Congress in a June 5, 1973, special election to fill vacancy caused by death of husband George W. Collins; reelected to the 94 th -104 th Congresses (served June 7, 1973-Jan. 3, 1997). Chair of the Congressional Black Caucus, 96 th Congress. Committee assignments: H. Government Operations/Government Reform and Oversight (93 rd -104 th Congresses) H. International Relations/Foreign Affairs (94 th -96 th Congresses) H. District of Columbia (95 th Congress) H. Select Committee on Narcotics Abuse and Control (96 th -102 nd Congresses) H. Energy and Commerce/Commerce (97 th -104 th Congresses) COLLINS, GEORGE WASHINGTON. Democrat; Illinois, 6 th District. Elected to the 91 st Congress to fill vacancy caused by death of Daniel J. Ronan; simultaneously elected to the 92 nd Congress; reelected to the 93 rd Congress (served Nov. 3, 1970, until his death Dec. 18, 1972, before the seating of the 93 rd Congress). Committee assignments: H. Government Operations (91 st -92 nd Congresses) H. Public Works (92 nd Congress) CONYERS, JOHN, Jr. Democrat; Michigan, 1 st District (89 th -102 nd Congresses); 14 th District (103 rd -112 th Congresses); 13 th District (113 th -115 th Congresses). Elected to the 89 th -115 th Congresses (served Jan. 3, 1965, until his resignation Dec. 5, 2017). Committee assignments: H. Judiciary (89 th -115 th Congresses; chair, 110 th -111 th Congresses; ranking member, 104 th -109 th , 112 th -115 th Congresses) H. Government Operations (92 nd -103 rd Congresses; chair, 101 st -103 rd Congresses) H. Small Business (100 th -103 rd Congresses) COWAN, WILLIAM (MO). Democrat; Massachusetts. Senator. Appointed to the Senate in 2013 to fill the vacancy caused by the resignation of John F. Kerry (served Feb. 1, 2013- July 15, 2013). Committee assignments: S. Agriculture, Nutrition and Forestry (113 th Congress) S. Commerce, Science and Transportation (113 th Congress) S. Small Business and Entrepreneurship (113 th Congress) CROCKETT, GEORGE WILLIAM, Jr. Democrat; Michigan, 13 th District. Elected to the 96 th Congress to fill vacancy caused by the resignation of Charles C. Diggs Jr.; simultaneously elected to the 97 th Congress; reelected to the 98 th -101 st Congresses (served Nov. 4, 1980-Jan. 3, 1991). Committee assignments: H. Foreign Affairs (96 th -101 st Congresses) H. Judiciary (97 th -101 st Congresses) H. Small Business (97 th Congress) H. Select Aging (97 th -101 st Congresses) CUMMINGS, ELIJAH EUGENE. Democrat; Maryland, 7 th District. Elected to the 104 th Congress to fill vacancy caused by the resignation of Kweisi Mfume; reelected to the 105 th -116 th Congresses (served April 16, 1996, until his death, October 17, 2019). Chair of the Congressional Black Caucus, 108 th Congress. Committee assignments: H. Government Oversight and Government Reform/Government Reform/Oversight and Reform (104 th -115 th Congresses; ranking member, 112 th -115 th Congresses; chair, 116 th Congress) H. Transportation and Infrastructure (110 th -116 th Congresses) H. Armed Services (110 th Congress) Jt. Economic Committee (109 th -114 th Congresses) Select Terrorist Attack in Benghazi (114 th Congress; ranking member) DAVIS, ARTUR. Democrat; Alabama, 7 th District. Elected to the 108 th -111 th Congresses (served Jan. 7, 2003-Jan. 2, 2011). Committee assignments: H. Budget (108 th -109 th Congresses) H. Financial Services (108 th -109 th Congresses) H. Judiciary (110 th Congress) H. Ways and Means (110 th -111 th Congresses) DAVIS, DANNY K. Democrat; Illinois, 7 th District. Elected to the 105 th -116 th Congresses (served Jan. 7, 1997-present). Committee assignments: H. Small Business (105 th -109 th Congresses) H. Government Oversight and Government Reform/Government Reform (105 th -113 th Congresses) H. Education and the Workforce/Education and Labor (108 th -110 th Congresses) H. Ways and Means (111 th , 113 th -116 th Congresses) H. Homeland Security (112 th Congress) DAWSON, WILLIAM LEVI. Democrat; Illinois, 1 st District. Elected to the 78 th -91 st Congresses (served Jan. 3, 1943, until his death Nov. 9, 1970). Committee assignments: H. Expenditures in the Executive Departments (78 th -82 nd Congresses; chair, 81 st -82 nd Congresses) H. Government Operations (83 rd -91 st Congresses; ranking member, 83 rd Congress; chair, 84 th -91 st Congresses) H. Coinage, Weights, and Measures (78 th -79 th Congresses) H. Invalid Pensions (78 th -79 th Congresses) H. Insular Affairs (78 th -79 th Congresses) H. Irrigation and Reclamation (78 th -79 th Congresses) H. Interior and Insular Affairs (82 nd Congress) H. District of Columbia (84 th -91 st Congresses) DE LARGE, ROBERT CARLOS. Republican; South Carolina, 2 nd District. Elected to the 42 nd Congress (served March 4, 1871, until Jan. 24, 1873, when his seat was declared vacant after his election was successfully contested by former Rep. Christopher Bowen). Committee assignments: H. Manufactures (42 nd Congress) DELGADO, ANTONIO . Democrat; New York, 19 th District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Agriculture (116 th Congress) H. Small Business (116 th Congress) H. Transportation and Infrastructure (116 th Congress) DELLUMS, RONALD V. Democrat; California, 7 th District (92 nd -93 rd Congresses); 8 th District (94 th -102 nd Congresses); 9 th District (103 rd -105 th Congresses). Elected to the 92 nd -105 th Congresses (served Jan. 3, 1971, until his resignation Feb. 6, 1998). Chair of the Congressional Black Caucus, 101 st Congress. Committee assignments: H. District of Columbia (96 th -103 rd Congresses; chair, 96 th -102 nd Congresses) H. Foreign Affairs (92 nd Congress) H. Armed Services (93 rd -103 rd Congresses; chair, 103 rd Congress) H. National Security (104 th -105 th Congresses; ranking member, 104 th -105 th Congresses) H. Post Office and Civil Service (97 th -98 th Congresses) H. Select Intelligence (94 th -102 nd Congresses) DEMINGS, VAL BUTLER . Democrat; Florida, 10 th District. Elected to the 115 th -116 th Congresses (served Jan. 3, 2017-present). Committee assignments: H. Homeland Security (115 th Congress) H. Government Reform (115 th Congress) H. Judiciary (115 th -116 th Congresses) H. Permanent Select Intelligence (116 th Congress) DE PRIEST, OSCAR STANTON. Republican; Illinois, 1 st District. Elected to the 71 st -73 rd Congresses (served March 4, 1929-March 3, 1935). Committee assignments: H. Enrolled Bills (71 st -73 rd Congresses) H. Invalid Pensions (71 st -73 rd Congresses) H. Indian Affairs (71 st -73 rd Congresses) H. Post Office and Post Roads (73 rd Congress) DIGGS, CHARLES COLES, Jr. Democrat; Michigan, 13 th District. Elected to the 84 th -96 th Congresses (served Jan. 3, 1955, until his resignation on June 3, 1980). First Chair of the Congressional Black Caucus, 92 nd Congress. Committee assignments: H. Interior and Insular Affairs (84 th -85 th Congresses) H. Veterans' Affairs (84 th -85 th Congresses) H. Foreign Affairs (86 th -93 rd Congresses) H. District of Columbia (88 th -96 th Congresses; chair, 93 rd -95 th Congresses) DIXON, JULIAN CAREY. Democrat; California, 28 th District (96 th -102 nd Congresses); 32 nd District (103 rd -106 th Congresses). Elected to 96 th -107 th Congresses, but died before the commencement of the 107 th Congress (served Jan. 3, 1979, until his death on Dec. 8, 2000). Chair of the Congressional Black Caucus, 98 th Congress. Committee assignments: H. Appropriations (96 th -106 th Congresses) H. Standards of Official Conduct (98 th -101 st Congresses; chair, 99 th -101 st Congresses) H. Select Intelligence (103 rd -106 th Congresses; ranking member, 106 th Congress) DYMALLY, MERVYN MALCOLM. Democrat; California, 31 st District. Elected to the 97 th -102 nd Congresses (served Jan. 3, 1981-Jan. 3, 1993). Chair of the Congressional Black Caucus, 100 th Congress. Committee assignments: H. District of Columbia (97 th -102 nd Congresses) H. Foreign Affairs (97 th -102 nd Congresses) H. Science and Technology (97 th -98 th Congresses) H. Post Office and Civil Service (98 th -102 nd Congresses) H. Education and Labor (99 th Congress) EDWARDS, DONNA. Democrat; Maryland, 4 th District. Elected to the 110 th Congress in a June 17, 2008, special election to fill vacancy caused by the resignation of Albert Wynn; reelected to the 111 th -114 th Congresses (served June 19, 2008-Jan. 3, 2017). Committee assignments: H. Science and Technology/Science, Space and Technology (110 th -114 th Congresses) H. Transportation and Infrastructure (110 th -114 th Congresses) H. Ethics (112 th Congress) ELLIOTT, ROBERT BROWN. Republican; South Carolina, 3 rd District. Elected to the 42 nd -43 rd Congresses (served March 4, 1871, until his resignation on Nov. 1, 1874). Committee assignments: H. Education and Labor (42 nd -43 rd Congresses) H. Militia (43 rd Congress) ELLISON, KEITH. Democrat; Minnesota, 5 th District. Elected to the 110 th -115 th Congresses (served Jan. 4, 2007-Jan. 3, 2019). Committee assignments: H. Financial Services (110 th -115 th Congresses) H. Judiciary (110 th Congress) H. Foreign Affairs (111 th Congress) ESPY, ALPHONSO MICHAEL (MIKE). Democrat; Mississippi, 2 nd District. Elected to the 100 th -103 rd Congresses (served Jan. 6, 1987, until his resignation on Jan. 25, 1993). Committee assignments: H. Agriculture (100 th -102 nd Congresses) H. Budget (101 st -102 nd Congresses) H. Select Hunger (101 st -102 nd Congresses) Jt. Deficit Reduction (100 th Congress) EVANS, DWIGHT. Democrat; Pennsylvania, 2 nd District. Elected to the 114 th Congress to fill vacancy caused by the resignation of Chaka Fattah; also elected to the 115 th -116 th Congresses (served Nov. 8, 2016-present). Committee assignments: H. Agriculture (115 th Congress) H. Small Business (115 th -116 th Congresses) H. Ways and Means (116 th Congress) EVANS, MELVIN HERBERT. Republican; Delegate from the U.S. Virgin Islands. Elected to the 96 th Congress (served Jan. 3, 1979-Jan. 3, 1981). Committee assignments: H. Armed Services (96 th Congress) H. Interior and Insular Affairs (96 th Congress) H. Merchant Marine and Fisheries (96 th Congress) FATTAH, CHAKA. Democrat. Pennsylvania, 2 nd District. Elected to the 104 th -114 th Congresses (served Jan. 3, 1995, until his resignation June 23, 2016). Committee assignments: H. Government Reform and Oversight/Government Reform (104 th -106 th Congresses) H. Education and the Workforce/Economic and Education (104 th -106 th Congresses) H. Small Business (104 th Congress) H. Standards of Official Conduct (105 th -106 th Congresses) H. Administration (106 th -107 th Congresses) Jt. Printing (106 th -107 th Congresses) Appropriations (107 th -114 th Congresses) FAUNTROY, WALTER EDWARD. Democrat; Delegate from the District of Columbia. Elected to the 92 nd Congress in a special election after the District of Columbia was authorized to elect a delegate; reelected to the 93 rd -101 st Congresses (served April 19, 1971-Jan. 3, 1991). Chair of the Congressional Black Caucus, 97 th Congress. Committee assignments: H. District of Columbia (92 nd -101 st Congresses) H. Banking and Currency/Banking, Finance, and Urban Affairs (93 rd -101 st Congresses) H. Select Assassinations (94 th -95 th Congresses) H. Select Narcotics Abuse and Control (98 th -101 st Congresses) FIELDS, CLEO. Democrat; Louisiana, 4 th District. Elected to the 103 rd -104 th Congresses (served Jan. 5, 1993-Jan. 3, 1997). Committee assignments: H. Banking, Finance and Urban Affairs/Banking and Financial Services (103 rd -104 th Congresses) H. Small Business (103 rd -104 th Congresses) FLAKE, FLOYD HAROLD. Democrat; New York, 6 th District. Elected to the 100 th -105 th Congresses (served Jan. 6, 1987, until his resignation on Nov. 15, 1997). Committee assignments: H. Banking, Finance and Urban Affairs/Banking and Financial Services (100 th -105 th Congresses) H. Small Business (100 th -105 th Congresses) H. Government Operations (103 rd Congress) H. Select Children, Youth and Families (100 th Congress) H. Select Hunger (100 th -102 nd Congresses) FORD, HAROLD EUGENE, S r . Democrat; Tennessee, 8 th District (94 th -97 th Congresses); 9 th District (98 th -104 th Congresses). Elected to the 94 th -104 th Congresses (served Jan. 3, 1975-Jan. 3, 1997). Committee assignments: H. Veterans' Affairs (94 th Congress) H. Banking, Currency, and Housing (94 th Congress) H. Ways and Means (94 th -104 th Congresses) H. Select Aging (94 th -102 nd Congresses) H. Select Assassinations (94 th -95 th Congresses) FORD, HAROLD EUGENE, Jr. Democrat; Tennessee, 9 th District. Elected to the 105 th -109 th Congresses (served Jan. 7, 1997-Jan. 3, 2007). Committee assignments: H. Education and the Workforce (105 th -107 th Congresses) H. Government Reform and Oversight/Government Reform (105 th -106 th Congresses) H. Financial Services (107 th -109 th Congresses) H. Budget (108 th -109 th Congresses) FRANKS, GARY. Republican; Connecticut, 5 th District. Elected to the 102 nd -104 th Congresses (served Jan. 3, 1991-Jan. 3, 1997). Committee assignments: H. Armed Services (102 nd Congress) H. Small Business (102 nd Congress) H. Select Aging (102 nd Congress) H. Energy and Commerce (103 rd Congress) H. Commerce (104 th Congress) FRAZER, VICTOR O. Independent; Delegate from the U.S. Virgin Islands. Elected to the 104 th Congress (served Jan. 3, 1995-Jan. 3, 1997). Committee assignments: H. International Relations (104 th Congress) FUDGE, MARCIA F. Democrat; Ohio, 11 th District. Elected to the 110 th Congress in a Nov. 4, 2008, special election to fill vacancy caused by death of Stephanie Tubbs Jones; reelected to the 111 th -116 th Congresses (served Nov. 19, 2008-present). Chair of the Congressional Black Caucus, 113 th Congress. Committee assignments: H. Education and Labor/Education and the Workforce (111 th Congress; 113 th -116 th Congresses) H. Science and Technology/Science, Space and Technology (111 th -112 th Congresses) H. Agriculture (112 th -116 th Congresses) H. House Administration (116 th Congress) GRAY, WILLIAM HERBERT III. Democrat; Pennsylvania, 2 nd District. Elected to the 96 th -102 nd Congresses (served Jan. 3, 1979, until his resignation on Sept. 11, 1991). Committee assignments: H. Budget (96 th , 98 th -100 th Congresses; chair, 99 th -100 th Congresses) H. District of Columbia (96 th -102 nd Congresses) H. Foreign Affairs (96 th Congress) H. Appropriations (97 th -102 nd Congresses) H. House Administration (102 nd Congress) Jt. Deficit Reduction (100 th Congress) GREEN, AL. Democrat; Texas, 9 th District. Elected to the 109 th -116 th Congresses (served Jan. 4, 2005-present). Committee assignments: H. Financial Services (109 th -116 th Congresses) H. Science (109 th Congress) H. Homeland Security (110 th -111 th , 116 th Congresses) H. Foreign Affairs (111 th Congress) HALL, KATIE BEATRICE. Democrat; Indiana, 1 st District. Elected to the 97 th Congress in a Nov. 2, 1982, special election to fill vacancy caused by death of Adam Benjamin Jr.; reelected to the 98 th Congress (served Nov. 29, 1982-Jan. 3, 1985). Committee assignments: H. Post Office and Civil Service (98 th Congress) H. Public Works and Transportation (98 th Congress) HARALSON, JEREMIAH. Republican; Alabama, 1 st District. Elected to the 44 th Congress. (served March 4, 1875-March 3, 1877) Committee assignments: H. Public Expenditures (44 th Congress) HARRIS, KAMALA DEVI. Democrat; California, Senator. Elected in 2016 (served Jan. 3, 2017-present). Committee assignments: S. Budget (115 th -116 th Congresses) S. Environment and Public Works (115 th Congress) S. Homeland Security (115 th -116 th Congresses) S. Judiciary (115 th -116 th Congresses) S. Select Intelligence (115 th -116 th Congresses) HASTINGS, ALCEE LAMAR. Democrat; Florida, 20 th District. Elected to the 103 rd -116 th Congresses (served Jan. 5, 1993-present). Committee assignments: H. Foreign Affairs/International Relations (103 rd -107 th Congresses) H. Merchant Marine and Fisheries (103 rd Congress) H. Post Office and Civil Service (103 rd Congress) H. Science (104 th -105 th Congresses) H. Select Intelligence (106 th -111 th Congresses) H. Rules (107 th -116 th Congresses) H. Standards of Official Conduct (110 th Congress) HAWKINS, AUGUSTUS FREEMAN (GUS). Democrat; California, 21 st District (88 th -93 rd Congresses); 29 th (94 th -101 st Congresses). Elected to the 88 th -101 st Congresses (served from Jan. 3, 1963-Jan. 3, 1991). Committee assignments: H. Education and Labor (88 th -101 st Congresses; chair, 98 th -101 st Congresses) H. House Administration (91 st -98 th Congresses; chair, 97 th -98 th Congresses) Jt. Printing (95 th -98 th Congresses; chair, 96 th and 98 th Congresses) Jt. Library (97 th -98 th Congresses; chair, 97 th Congress) Jt. Economic (97 th -101 st Congresses) HAYES, CHARLES ARTHUR. Democrat; Illinois, 1 st District. Elected to the 98 th Congress in a Aug. 23, 1983, special election to fill vacancy caused by the resignation of Harold Washington; reelected to the 99 th -102 nd Congresses (served Aug. 23, 1983-Jan. 3, 1993). Committee assignments: H. Education and Labor (98 th -102 nd Congresses) H. Small Business (98 th -101 st Congresses) H. Post Office and Civil Service (101 st -102 nd Congresses) HAYES, JAHANA. Democrat; Connecticut, 5 th District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Agriculture (116 th Congress) H. Education and Labor (116 th Congress) HILLIARD, EARL FREDERICK. Democrat; Alabama, 7 th District. Elected to the 103 rd -107 th Congresses (served Jan. 5, 1993-Jan. 3, 2003). Committee assignments: H. Agriculture (103 rd -107 th Congresses) H. Small Business (103 rd -104 th Congresses) H. International Relations (105 th -107 th Congresses) HORSFORD, STEVEN. Democrat; Nevada, 4 th District. Elected to the 113 th and 116 th Congresses (served Jan. 3, 2013-Jan. 3, 2015; Jan. 3, 2019-present). Committee assignments: H. Homeland Security (113 th Congress) H. Natural Resources (113 th , 116 th Congresses) H. Oversight and Government Reform (113 th Congress) H. Budget (116 th Congress) H. Ways and Means (116 th Congress) HURD, WILLIAM BALLARD. Republican; Texas, 23 rd District. Elected to the 114 th -116 th Congresses (served Jan. 3, 2015-present). Committee assignments: H. Homeland Security (114 th -115 th Congresses) H. Oversight and Government Reform (114 th -115 th Congresses) H. Small Business (114 th Congress) H. Permanent Select Intelligence (115 th -116 th Congresses) H. Appropriations (116 th Congress) HYMAN, JOHN ADAMS. Republican; North Carolina, 2 nd District. Elected to the 44 th Congress (served March 4, 1875-March 3, 1977). Committee assignments: H. Manufactures (44 th Congress) JACKSON, JESSE L., Jr. Democrat; Illinois, 2 nd District. Elected to the 104 th Congress in a special election to fill the vacancy caused by the resignation of Mel Reynolds; reelected to the 105 th -113 th Congress, but declined to serve in the 113 th Congress (served Dec. 14, 1995, until his resignation Nov. 21, 2012). Committee assignments: H. Banking and Financial Services (104 th -105 th Congresses) H. Small Business (104 th -105 th Congresses) H. Appropriations (106 th -112 th Congresses) JACKSON LEE, SHEILA. Democrat; Texas, 18 th District. Elected to the 104 th -116 th Congresses (served Jan. 3, 1995-present). Committee assignments: H. Judiciary (104 th -116 th Congresses) H. Science (104 th -109 th Congresses) H. Homeland Security (108 th -116 th Congresses) H. Foreign Affairs (110 th -111 th Congresses) H. Budget (116 th Congress) JEFFERSON, WILLIAM JENNINGS. Democrat; Louisiana, 2 nd District. Elected to the 102 nd -110 th Congresses (served Jan. 3, 1991-Jan. 3, 2009). Committee assignments: H. Education and Labor (102 nd Congress) H. Merchant Marine and Fisheries (102 nd Congress) H. District of Columbia (103 rd Congress) H. Ways and Means (103 rd , 105 th -109 th Congresses) H. National Security (104 th Congress) H. House Oversight (104 th Congress) H. Budget (109 th Congress) H. Small Business (110 th Congress) Jt. Printing (104 th Congress) JEFFRIES, HAKEEM. Democrat; New York, 8 th District. Elected to the 113 th -116 th Congresses (served Jan. 3, 2013-present). Committee assignments: H. Budget (113 th -116 th Congresses) H. Education and the Workforce (114 th Congress) H. Judiciary (113 th -116 th Congresses) JOHNSON, EDDIE BERNICE. Democrat; Texas, 30 th District. Elected to the 103 rd -116 th Congresses (served Jan. 3, 1993-present). Chair of the Congressional Black Caucus, 107 th Congress. Committee assignments: H. Public Works and Transportation (103 rd Congress) H. Science, Space, and Technology/Science and Technology (103 rd -116 th Congresses; ranking member, 112 th -115 th Congresses; chair, 116 th Congress) H. Transportation and Infrastructure (104 th -116 th Congresses) JOHNSON, HENRY C. (HANK), Jr. Democrat; Georgia, 4 th District. Elected to the 110 th -116 th Congresses (served Jan. 4, 2007-present). Committee assignments: H. Armed Services (110 th -114 th Congresses) H. Judiciary (110 th -116 th Congresses) H. Small Business (110 th Congress) H. Transportation and Infrastructure (115 th -116 th Congresses) JONES, BRENDA. Democrat; Michigan, 13 th District. Elected to the 115 th Congress in a Nov. 6, 2018 special election to fill vacancy caused by resignation of John Conyers (served Nov. 29, 2018-Jan. 3, 2019). No committee assignments listed. JONES, STEPHANIE TUBBS. Democrat; Ohio, 11 th District. Elected to the 106 th -110 th Congresses (served Jan. 3, 1999, until her death on August 20, 2008). Committee assignments: H. Banking and Financial Services (106 th Congress) H. Financial Services (107 th Congress) H. Small Business (106 th -107 th Congresses) H. Standards of Official Conduct (107 th -110 th Congresses; chair, 110 th Congress) H. Ways and Means (108 th -110 th Congresses) JORDAN, BARBARA C. Democrat; Texas, 18 th District. Elected to the 93 rd -95 th Congresses (served Jan. 3, 1973-Jan. 3, 1979). Committee assignments: H. Judiciary (93 rd -95 th Congresses) H. Government Operations (94 th -95 th Congresses) KELLY, ROBIN. Democrat; Illinois, 2 nd District. Elected to the 113 th Congress in an April 9, 2013, special election to vacancy caused by resignation of Jesse Jackson Jr.; reelected to the 114 th -116 th Congresses (served April 11, 2013-present). Committee assignments: H. Oversight and Government Reform/Oversight and Reform (113 th -116 th Congresses) H. Science, Space, and Technology (113 th Congress) H. Foreign Affairs (114 th -115 th Congresses) H. Energy and Commerce (116 th Congress) KILPATRICK, CAROLYN CHEEKS. Democrat; Michigan, 15 th District (105 th -107 th Congresses) and 13 th District (108 th -111 th Congresses). Elected to the 105 th -111 th Congresses (served Jan. 3, 1997-Jan. 3, 2011). Chair of the Congressional Black Caucus, 110 th Congress. Committee assignments: H. Banking and Financial Services (105 th Congress) H. House Oversight (105 th Congress) Jt. Library (105 th Congress) H. Appropriations (106 th -111 th Congresses) LANGSTON, JOHN MERCER. Republican; Virginia, 4 th District. Elected to the 51 st Congress (served from September 23, 1890-March 3, 1891, after he successfully contested the election of Edward Venable). Committee assignments: H. Education (51 st Congress) LAWRENCE, BRENDA L. Democrat; Michigan, 14 th District. Elected to the 114 th -116 th Congress (served Jan. 3, 2015-present). Committee assignments: H. Oversight and Government Reform/Oversight and Reform (114 th -116 th Congresses) H. Small Business (114 th Congress) H. Transportation and Infrastructure (115 th Congress) H. Appropriations (116 th Congress) LAWSON, ALFRED, Jr. Democrat; Florida, 3 rd District. Elected to the 115 th -116 th Congresses (served Jan. 3, 2017-present). Committee assignments: H. Agriculture (115 th -116 th Congresses) H. Small Business (115 th Congress) H. Financial Services (116 th Congress) LEE, BARBARA. Democrat; California, 9 th District (105 th -112 th Congresses); 13 th District (113 th -116 th Congresses). Elected to the 105 th Congress in an April 7, 1998, special election to fill vacancy caused by resignation of Ronald Dellums; reelected to the 106 th -116 th Congresses (served April 20, 1998-present). Chair of the Congressional Black Caucus, 111 th Congress. Committee assignments: H. Banking and Financial Services (105 th -106 th Congresses) H. Financial Services (107 th -109 th Congresses) H. Science (105 th Congress) H. International Relations/Foreign Affairs (107 th -111 th Congresses) H. Appropriations (110 th -116 th Congresses) H. Budget (113 th -116 th Congresses) LELAND, GEORGE THOMAS (Mickey). Democrat; Texas, 18 th District. Elected to the 96 th -101 st Congresses (served Jan. 3, 1979, until his death Aug. 7, 1989). Chair of the Congressional Black Caucus, 99 th Congress. Committee assignments: H. District of Columbia (96 th -99 th Congresses) H. Interstate and Foreign Commerce (96 th -101 st Congresses) H. Post Office and Civil Service (96 th -101 st Congresses) H. Select Hunger (98 th -101 st Congress; chair, 98 th -101 st Congresses) H. Select Children, Youth, and Families (98 th Congress) LEWIS, JOHN R. Democrat; Georgia, 5 th District. Elected to the 100 th -116 th Congresses (served Jan. 6, 1987-present). Committee assignments: H. Public Works and Transportation (100 th -102 nd Congresses) H. Interior and Insular Affairs (100 th -102 nd Congresses) H. Select Aging (101 st -102 nd Congresses) H. District of Columbia (103 rd Congress) H. Ways and Means (103 rd -116 th Congresses) H. Budget (108 th Congress) Jt. Taxation (115 th Congress) LONG, JEFFERSON FRANKLIN. Republican; Georgia, 4 th District. Elected to the 41 st Congress after the House declared that Rep. Samuel Gove was not entitled to the seat (served Jan. 16, 1871-March 3, 1871). No committee assignments listed. LOVE, MIA B. Republican; Utah, 4 th District. Elected to the 114 th -115 th Congresses (served Jan. 3, 2015-Jan. 3, 2019). Committee assignment: H. Financial Services (114 th -115 th Congresses) LYNCH, JOHN ROY. Republican; Mississippi, 6 th District. Elected to the 43 rd , 44 th , and 47 th Congresses (served March 4, 1873-March 3, 1877 and April 29, 1882-March 3, 1883 after he successfully contested the election of James Chalmers). Committee assignments: H. Mines and Mining (43 rd -44 th Congresses) H. Militia (47 th Congress) H. Education and Labor (47 th Congress) MAJETTE, DENISE L. Democrat; Georgia, 4 th District. Elected to the 108 th Congress (served Jan. 3, 2003-Jan. 3, 2005). Committee assignments: H. Budget (108 th Congress) H. Education and the Workforce (108 th Congress) H. Small Business (108 th Congress) MCBATH, LUCY. Democrat; Georgia, 6 th District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Judiciary (116 th Congress) H. Education and Labor (116 th Congress) MCEACHIN, ASTON DONALD. Democrat; Virginia, 4 th District. Elected to the 115 th -116 th Congresses (served Jan. 3, 2017-present). Committee assignments: H. Armed Services (115 th Congress) H. Natural Resources (115 th -116 th Congresses) H. Energy and Commerce (116 th Congress) H. Select Committee on the Climate Crisis (116 th Congress) MCKINNEY, CYNTHIA. Democrat; Georgia, 11 th District (103 rd -104 th Congresses) and 4 th District (105 th -107 th Congress and 109 th Congress). Elected to the 103 rd -107 th Congresses and to the 109 th Congress (served Jan. 3, 1993-Jan. 3, 2003; Jan. 3, 2005-Jan. 3, 2007). Committee assignments: H. Agriculture (103 rd -104 th Congresses) H. Banking and Finance (104 th -105 th Congresses) H. Foreign Affairs/International Relations (103 rd -107 th Congresses) H. Armed Services/National Security (105 th -107 th Congresses; 109 th Congress) H. Budget (109 th Congress) MEEK, CARRIE. Democrat; Florida, 17 th District. Elected to the 103 rd -107 th Congresses (served Jan. 3, 1993-Jan. 3, 2003). Committee assignments: H. Appropriations (103 rd Congress; 105 th -107 th Congresses) H. Budget (104 th Congress) H. Government Reform and Oversight (104 th Congress) MEEK, KENDRICK B. Democrat; Florida, 17 th District. Elected to the 108 th -111 th Congresses (served from Jan. 7, 2003-Jan. 3, 2011). Committee assignments: H. Armed Services (108 th -111 th Congresses) H. Homeland Security (108 th -109 th Congresses) H. Ways and Means (110 th -111 th Congresses) MEEKS, GREGORY W. Democrat; New York, 5 th District. Elected to the 105 th Congress in a Feb. 3, 1998, special election to fill vacancy caused by the resignation of Floyd Flake; reelected to 106 th -116 th Congresses (served Feb. 3, 1998-present). Committee assignments: H. Banking and Financial Services/Financial Services (105 th -116 th Congresses) H. International Relations/Foreign Affairs (106 th -116 th Congresses) METCALFE, RALPH HAROLD. Democrat; Illinois, 1 st District. Elected to the 92 nd -95 th Congresses (served Jan. 3, 1971, until his death October 10, 1978). Committee assignments: H. Interstate and Foreign Commerce (92 nd -95 th Congresses) H. Merchant Marine and Fisheries (92 nd -95 th Congresses) H. Post Office and Civil Service (95 th Congress) MFUME, KWEISI. Democrat; Maryland, 7 th District. Elected to the 100 th -104 th Congresses (served Jan. 6, 1987, until his resignation on Feb. 16, 1996). Chair of the Congressional Black Caucus, 103 rd Congress. Committee assignments: H. Banking, Finance, and Urban Affairs/Banking and Financial Services (100 th -104 th Congresses) H. Small Business (100 th -104 th Congresses) H. Education and Labor (101 st Congress) H. Select Narcotics Abuse and Control (101 st -102 nd Congresses) Jt. Economic (102 nd -104 th Congresses) H. Standards of Official Conduct (103 rd Congress) H. Select Hunger (100 th Congress) MILLENDER-McDONALD, JUANITA. Democrat; California, 37 th District. Elected to the 104 th Congress in a March 26, 1996, special election to fill vacancy caused by resignation of Walter Tucker; reelected to the 105 th -110 th Congresses (served April 16, 1996, until her death April 22, 2007). Committee assignments: H. Small Business (104 th -110 th Congresses) H. Transportation and Infrastructure (104 th -110 th Congresses) H. Administration (108 th -110 th Congresses; ranking member, 109 th Congress; chair, 110 th Congress) Jt. Library (108 th -110 th Congresses) Jt. Printing (109 th -110 th Congresses) MILLER, THOMAS EZEKIEL. Republican; South Carolina, 7 th District. Elected to the 51 st Congress (served Sept. 24, 1890-March 3, 1891, after successfully contesting the election of William Elliott). Committee assignments: H. Library of Congress (51 st Congress) MITCHELL, ARTHUR WERGS. Democrat; Illinois, 1 st District. Elected to the 74 th -77 th Congresses (served Jan. 3, 1935-Jan. 3, 1943). Committee assignments: H. Post Office and Post Roads (74 th -77 th Congresses) MITCHELL, PARREN JAMES. Democrat; Maryland, 7 th District. Elected to the 92 nd -99 th Congresses (served Jan. 3, 1971-Jan. 3, 1987). Chair of the Congressional Black Caucus, 95 th Congress. Committee assignments: H. Banking and Currency/Banking, Finance and Urban Affairs (92 nd -99 th Congresses) H. Select Small Business (92 nd -93 rd Congresses) H. Small Business (94 th , 96 th -99 th Congresses; chair, 97 th -99 th Congresses) H. Budget (93 rd -95 th Congresses) Jt. Defense Production (94 th -95 th Congresses) Jt. Economic (95 th -99 th Congresses; vice chair, 95 th Congress) MOORE, GWENDOLYNNE (GWEN). Democrat; Wisconsin, 4 th District. Elected to the 109 th - 116 th Congresses (served Jan. 3, 2005-present). Committee assignments: H. Financial Services (109 th -115 th Congresses) H. Small Business (109 th -111 th Congresses) H. Budget (110 th -114 th Congresses) H. Ways and Means (116 th Congress) MOSELEY-BRAUN, CAROL. Democrat; Illinois, Senator. Elected in 1992 (served Jan. 3, 1993-Jan. 3, 1999). Committee assignments: S. Banking, Housing, and Urban Affairs (103 rd -105 th Congresses) S. Judiciary (103 rd Congress) S. Small Business (103 rd Congress) S. Finance (104 th -105 th Congresses) S. Special Aging (104 th -105 th Congresses) MURRAY, GEORGE WASHINGTON. Republican; South Carolina, 1 st District. Elected to the 53 rd -54 th Congresses (served March 4, 1893-March 3, 1895, and June 4, 1896-March 3, 1897, after successfully contesting the election). Committee assignments: H. Education (53 rd -54 th Congresses) H. Expenditures in the Department of the Treasury (54 th Congress) NASH, CHARLES EDMUND. Republican; Louisiana, 6 th District. Elected to the 44 th Congress (served March 4, 1875-March 3, 1877). Committee assignments: H. Education and Labor (44 th Congress) NEGUSE, JOE. Democrat; Colorado, 2 nd District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Judiciary (116 th Congress) H. Natural Resources (116 th Congress) H. Select Committee on the Climate Crisis (116 th Congress) NIX, ROBERT NELSON CORNELIUS, Sr. Democrat; Pennsylvania, 4 th District (85 th -87 th Congresses); 2 nd District (88 th -95 th Congresses). Elected to the 85 th -95 th Congresses (served June 4, 1958-Jan. 3, 1979). Committee assignments: H. Merchant Marine and Fisheries (85 th -86 th Congresses) H. Foreign Affairs (87 th -93 rd Congresses) H. International Relations (94 th -95 th Congresses) H. Veterans' Affairs (85 th -86 th Congresses) H. Post Office and Civil Service (88 th -95 th Congresses; chair, 95 th Congress) H. Select Standards and Conduct (89 th Congress) H. Crime (91 st Congress) NORTON, ELEANOR HOLMES. Democrat; Delegate from the District of Columbia. Elected to the 102 nd -116 th Congresses (served Jan. 3, 1991-present). Committee assignments: H. District of Columbia (102 nd -103 rd Congresses) H. Post Office and Civil Service (102 nd -103 rd Congresses) H. Public Works and Transportation/Transportation and Infrastructure (102 nd -116 th Congresses) Jt. Committee on the Organization of Congress (103 rd Congress) H. Small Business (104 th Congress) H. Oversight and Government Reform/Government Reform/Oversight and Reform (104 th -116 th Congresses) H. Homeland Security (108 th -111 th Congresses) OBAMA, BARACK. Democrat; Illinois. Senator. Elected in 2004 (served Jan. 4, 2005, until his resignation Nov. 16, 2008, after being elected President of the United States). Committee assignments: S. Environment and Public Works (109 th -110 th Congresses) S. Foreign Relations (109 th -110 th Congresses) S. Veterans' Affairs (109 th -110 th Congresses) S. Health, Education, Labor and Pensions (110 th Congress) S. Homeland Security and Governmental Affairs (110 th Congress) O'HARA, JAMES EDWARD. Republican; North Carolina, 2 nd District. Elected to the 48 th -49 th Congresses (served March 4, 1883-March 3, 1887). Committee assignments: H. Mines and Mining (48 th Congress) H. Expenditures on Public Buildings (49 th Congress) H. Invalid Pensions (49 th Congress) OMAR, ILHAN. Democrat; Minnesota, 5 th District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Budget (116 th Congress) H. Foreign Affairs (116 th Congress) H. Education and Labor (116 th Congress) OWENS, MAJOR ROBERT ODELL. Democrat; New York, 11 th District. Elected to the 98 th -110 th Congresses (served Jan. 3, 1983-Jan. 3, 2007). Committee assignments: H. Education and Labor/Economic and Educational Opportunities/Education and the Workforce (98 th -109 th Congresses) H. Government Operations/Reform and Oversight (98 th -109 th Congresses) PAYNE, DONALD MILFORD, Sr. Democrat; New Jersey, 10 th District. Elected to the 101 st -112 th Congresses (served Jan. 3, 1989, until his death March 6, 2012). Chair of the Congressional Black Caucus, 104 th Congress. Committee assignments: H. Education and Labor/Economic and Educational Opportunities/Education and the Workforce (101 st -112 th Congresses) H. Foreign Affairs/International Relations (101 st -112 th Congress) H. Government Operations (101 st -103 rd Congresses) PAYNE, DONALD MILFORD, Jr. Democrat; New Jersey, 10 th District. Elected to the 112 th Congress Nov. 6, 2012, to fill vacancy caused by death of his father Donald Payne Sr.; simultaneously elected to the 113 th Congress; reelected to the 114 th -116 th Congresses (served Nov. 6, 2012-present). Committee assignments: H. Homeland Security (113 th -116 th Congresses) H. Small Business (113 th -114 th Congresses) H. Transportation and Infrastructure (115 th -116 th Congresses) PLASKETT, STACEY E. Democrat; Delegate from the U.S. Virgin Islands. Elected to the 114 th - 116 th Congresses (served Jan. 3, 2015-present). Committee assignments: H. Agriculture (114 th -116 th Congresses) H. Oversight and Government Reform/Oversight and Reform (114 th -116 th Congresses) H. Transportation and Infrastructure (116 th Congress) POWELL, ADAM CLAYTON, Jr. Democrat; New York, 22 nd District (79 th -82 nd Congresses); 16 th District (83 rd -87 th Congresses); 18 th District (88 th -89 th and 91 st Congresses). Elected to the 79 th -90 th Congress, but was not seated in the 90 th Congress; and to the 91 st Congress (served Jan. 3, 1945-Jan. 3, 1967, and Jan. 3, 1969-Jan. 3, 1971). Committee assignments: H. Indian Affairs (79 th Congress) H. Invalid Pensions (79 th Congress) H. Labor/Education and Labor (79 th -89 th and 91 st Congresses; chair, 87 th -89 th Congresses) H. Interior and Insular Affairs (84 th -86 th Congresses) PRESSLEY, AYANNA. Democrat; Massachusetts, 7 th District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Oversight and Reform (116 th Congress) H. Financial Services (116 th Congress) RAINEY, JOSEPH HAYNE. Republican; South Carolina, 1 st District. Elected to the 41 st Congress after the seat declared vacant, and to the 42 nd -45 th Congresses (served Dec. 12, 1870- March 3, 1879). Committee assignments: H. Freedmen's Affairs (41 st -42 nd Congresses) H. Indian Affairs (43 rd Congress) H. Invalid Pensions (44 th -45 th Congresses) H. Select Celebration of Proposed National Census of 1875 (43 rd Congress) RANGEL, CHARLES B. Democrat; New York, 18 th District (92 nd Congress); 19 th District (93 rd -97 th Congresses); 16 th District (98 th -102 nd Congresses); 15 th District (103 rd -112 th Congresses); 13 th District (113 th -114 th Congresses). Elected to the 92 nd -114 th Congresses (served Jan. 3, 1971-Jan. 3, 2017). Chair of the Congressional Black Caucus, 94 th Congress. Committee assignments: H. Public Works (92 nd Congress) H. Science and Astronautics (92 nd Congress) H. Judiciary (92 nd -93 rd Congresses) H. District of Columbia (93 rd Congress) H. Ways and Means (94 th -114 th Congresses; committee chair, 110 th -111 th Congresses; ranking Member, 105 th -109 th Congresses) H. Select Crime (92 nd -93 rd Congresses) H. Select Narcotics Abuse and Control (94 th -102 nd Congresses; chair, 98 th -102 nd Congresses) Jt. Taxation (104 th -105 th , 108 th , 111 th , and 114 th Congresses; chair, 111 th Congress) RANSIER, ALONZO JACOB. Republican; South Carolina, 2 nd District. Elected to the 43 rd Congress (served March 3, 1873-March 3, 1875). Committee assignments: H. Manufactures (43 rd Congress) RAPIER, JAMES THOMAS. Republican; Alabama, 2 nd District. Elected to the 43 rd Congress (served March 4, 1873-March 3, 1875). Committee assignments: H. Education and Labor (43 rd Congress) REVELS, HIRAM RHODES. Republican; Mississippi, Senator. Elected in 1870 (served Feb. 23, 1870-March 3, 1871). Committee assignments: S. Education and Labor (41 st Congress) S. District of Columbia (41 st Congress) REYNOLDS, MEL . Democrat; Illinois, 2 nd District. Elected to the 103 rd -104 th Congresses (served Jan. 5, 1993, until his resignation October 1, 1995). Committee assignments: H. Ways and Means (103 rd Congress) H. Economic and Education Opportunities (104 th Congress) RICHARDSON, LAURA. Democrat, California, 37 th District. Elected to the 110 th Congress in an August 21, 2007, special election to fill vacancy caused by death of Juanita Millender-McDonald; reelected to the 111 th -112 th Congresses (served Sept. 4, 2007, to Jan. 3, 2013). Committee assignments: H. Science and Technology (110 th Congress) H. Transportation and Infrastructure (110 th -112 th Congresses) H. Homeland Security (111 th -112 th Congresses) RICHMOND, CEDRIC. Democrat; Louisiana, 2 nd District. Elected to the 112 th -116 th Congresses (served Jan. 3, 2011-present). Chair of the Congressional Black Caucus, 115 th Congress. Committee assignments: H. Judiciary (113 th -116 th Congresses) H. Homeland Security (112 th -116 th Congresses) H. Small Business (112 th Congress) RUSH, BOBBY L. Democrat; Illinois, 1 st District. Elected to the 103 rd -116 th Congresses (served Jan. 4, 1993-present). Committee assignments: H. Banking, Finance and Urban Affairs (103 rd Congress) H. Government Operations (103 rd Congress) H. Science, Space and Technology (103 rd Congress) H. Commerce/Energy and Commerce (104 th -116 th Congresses) SAVAGE, GUS. Democrat; Illinois. 2 nd District. Elected to the 97 th -102 nd Congresses (served Jan. 3, 1981-Jan. 3, 1993). Committee assignments: H. Post Office and Civil Service (97 th Congress) H. Public Works and Transportation (97 th -102 nd Congresses) H. Small Business (97 th -102 nd Congresses) SCOTT, DAVID. Democrat; Georgia, 13 th District. Elected to the 108 th -116 th Congresses (served Jan. 7, 2003-present). Committee assignments: H. Agriculture (108 th -116 th Congresses) H. Financial Services (108 th -116 th Congresses) H. Foreign Affairs (111 th Congress) SCOTT, ROBERT C . "Bobby" . Democrat; Virginia, 3 rd District. Elected to the 103 rd -116 th Congresses (served Jan. 4, 1993-present). Committee assignments: H. Education and Labor/Economic and Educational Opportunities/Education and the Workforce (103 rd -107 th , 109 th -116 th Congresses; chair, 116 th Congress) H. Judiciary (103 rd -113 th Congresses) H. Science, Space, and Technology (103 rd Congress) H. Select U.S. National Security and Military/Commercial Concerns with the People's Republic of China (106 th Congress) H. Budget (108 th , 110 th , 116 th Congresses) H. Standards of Official Conduct (110 th Congress) Jt. Select Solvency of Multiemployer Pension Plans (115 th Congress) SCOTT, TIM. Republican; South Carolina, 1 st District, Senator. Elected to the 112 th Congress (served in House Jan. 3, 2011, until his resignation Jan. 2, 2013). Appointed to the Senate in January 2013 to fill the vacancy caused by the resignation of Jim DeMint; reelected to the remainder of the term in 2014 and to a full term in 2016 (served in Senate Jan. 3, 2013-present). Committee assignments: H. Rules (112 th Congress) S. Armed Services (115 th Congress) S. Banking, Housing and Urban Affairs (114 th -116 th Congresses) S. Commerce, Science and Transportation (113 th Congress) S. Energy and Natural Resources (113 th Congress) S. Finance (114 th -116 th Congresses) S. Health, Education, Labor and Pensions (113 th -116 th Congresses) S. Small Business and Entrepreneurship (113 th -116 th Congresses) S. Special Aging (113 th -116 th Congresses) SEWELL, TERRYCINA ("TERRI"). Democrat; Alabama, 7 th District. Elected to the 112 th - 116 th Congresses (served Jan. 3, 2011-present). Committee assignments: H. Agriculture (112 th Congress) H. Science, Space and Technology (112 th Congress) H. Financial Services (113 th -114 th Congresses) H. Intelligence (113 th -116 th Congresses) H. Ways and Means (115 th -116 th Congresses) SMALLS, ROBERT. Republican; South Carolina, 7 th District. Elected to the 44 th -45 th and 47 th -49 th Congresses (served March 4, 1875-March 3, 1879; July 19, 1992-March 3, 1883, after he successfully contested the reelection of George Tillman, and March 18, 1884-March 3, 1887, after he was elected to fill the vacancy caused by the death of Edmund Mackey). Committee assignments: H. Agriculture (44 th , 47 th Congresses) H. Militia (45 th Congress) H. Manufactures (48 th Congress) H. War Claims (49 th Congress) STEWART, BENNETT MCVEY. Democrat; Illinois, 1 st District. Elected to the 96 th Congress. (served Jan. 3, 1979-Jan. 3, 1981) Committee assignments: H. Appropriations (96 th Congress) STOKES, LOUIS. Democrat; Ohio, 21 st District (91 st -102 nd Congresses); 11 th District (103 rd -105 th Congresses). Elected to the 91 st -105 th Congresses (served Jan. 3, 1969 to Jan. 3, 1999). Chair of the Congressional Black Caucus, 93 rd Congress. Committee assignments: H. Education and Labor (91 st Congress) H. Internal Security (91 st Congress) H. Appropriations (92 nd -105 th Congress) H. Budget (95 th -96 th Congresses) H. Standards of Official Conduct (96 th -98 th and 102 nd Congresses; chair, 97 th -98 th and 102 nd Congresses) H. Select Assassinations (94 th -95 th Congresses; chair, 95 th Congress) H. Select Intelligence (98 th -100 th Congresses) H. Select to Investigate Arms Transactions to Iran (100 th Congress) THOMPSON, BENNIE. Democrat; Mississippi, 2 nd District. Elected to the 103 rd Congress in an April 13, 1993, special election to fill the vacancy caused by the resignation of Mike Espy; reelected to the 104 th -116 th Congresses (served April 13, 1993-present). Committee assignments: H. Agriculture (103 rd -108 th Congresses) H. Merchant Marine and Fisheries (103 rd Congress) H. Small Business (103 rd -104 th Congresses) H. Budget (105 th -107 th Congresses) H. Homeland Security (108 th -116 th Congresses; chair 110 th -111 th Congresses; ranking Member, 112 th -115 th Congresses; chair, 116 th Congress) TOWNS, EDOLPHUS. Democrat; New York, 11 th District (98 th -102 nd Congresses); 10 th District (103 rd -112 th Congresses). Elected to the 98 th -112 th Congresses (served Jan. 3, 1983-Jan. 23, 2013). Chair of the Congressional Black Caucus, 102 nd Congress. Committee assignments: H. Government Operations/Government Reform and Oversight/Oversight and Government Reform (98 th -112 th Congresses; chair, 111 th Congress) H. Public Works and Transportation (98 th -104 th Congresses) H. Energy and Commerce/Commerce (101 st -110 th and 112 th Congresses) H. Select Narcotics Abuse and Control (98 th -102 nd Congresses) TUCKER, WALTER R., III. Democrat; California, 37 th District. Elected to the 103 rd -104 th Congresses (served Jan. 5, 1993, until his resignation on December 15, 1995). Committee assignments: H. Public Works and Transportation/Transportation and Infrastructure (103 rd - 104 th Congresses) H. Small Business (103 rd -104 th Congresses) TURNER, BENJAMIN STERLING. Republican; Alabama, 1 st District. Elected to the 42 nd Congress (served March 4, 1871-March 3, 1873). Committee assignments: H. Invalid Pensions (42 nd Congress) UNDERWOOD, LAUREN. Democrat; Illinois, 14 th District. Elected to the 116 th Congress (served Jan. 3, 2019-present). Committee assignments: H. Homeland Security (116 th Congress) H. Veterans' Affairs (116 th Congress) H. Education and Labor (116 th Congress) VEASEY, MARC. Democrat; Texas, 33 rd District. Elected to 113 th -116 th Congresses (served Jan. 3, 2015-present). Committee assignments: H. Armed Services (113 th -115 th Congresses) H. Science, Space and Technology (113 th -115 th Congresses) H. Energy and Commerce (116 th Congress) H. Small Business (116 th Congress) WALDON, ALTON R., Jr. Democrat; New York, 6 th District. Elected to the 99 th Congress in a June 10, 1986, special election to fill the vacancy caused by the death of Joseph P. Addabbo (served July 29, 1986-Jan. 3, 1987). Committee assignments: H. Education and Labor (99 th Congress) WALLS, JOSIAH THOMAS. Republican; Florida, At-Large (42 nd and 43 rd Congresses); 2 nd District (44 th Congress). Elected to the 42 nd -44 th Congresses (served March 4, 1871-Jan. 29, 1873, when his election was successfully contested; March 4, 1873-March 3, 1875; and March 4, 1875-April 19, 1876, when his election was successfully contested). Committee assignments: H. Militia (42 nd -43 rd Congresses) H. Mileage (44 th Congress) WASHINGTON, CRAIG ANTHONY. Democrat; Texas, 18 th District. Elected to the 101 st Congress in a Dec. 9, 1989, special election to fill the vacancy caused by the death of Mickey Leland; reelected to the 102 nd -103 rd Congresses (served Dec. 9, 1989-Jan. 3, 1995). Committee assignments: H. Education and Labor (101 st -102 nd Congresses) H. Judiciary (101 st -103 rd Congresses) H. Energy and Commerce (103 rd Congress) H. Government Operations (103 rd Congress) H. Select Committee on Narcotics Abuse and Control (102 nd Congress) WASHINGTON, HAROLD. Democrat; Illinois, 1 st District. Elected to the 97 th -98 th Congresses (served Jan. 3, 1981, until his resignation April 29, 1983). Committee assignments: H. Government Operations (97 th Congress) H. Education and Labor (97 th -98 th Congresses) H. Judiciary (97 th -98 th Congresses) WATERS, MAXINE. Democrat; California, 29 th District (102 nd Congress), 35 th District (103 rd - 112 th Congresses), and 43 rd District (113 th Congress-present). Elected to the 102 nd -116 th Congresses (served Jan. 3, 1991-present). Chair, Congressional Black Caucus, 105 th Congress. Committee assignments: H. Banking, Finance, and Urban Affairs/Banking and Financial Services/Financial Services (102 nd -116 th Congresses; ranking member, 113 th -115 th Congresses; chair, 116 th Congress) H. Veterans' Affairs (102 nd -104 th Congresses) H. Small Business (103 rd -104 th Congresses) H. Judiciary (105 th -112 th Congresses) WATSON, DIANE. Democrat; California, 32 nd District (107 th Congress) and 33 rd District (108 th - 111 th Congresses). Elected to the 107 th Congress in a June 5, 2001, special election to fill vacancy caused by death of Julian Dixon; reelected to the 108 th -111 th Congresses (served June 7, 2001-Jan. 3, 2011). Committee assignments: H. Government Reform/Oversight and Government Reform (107 th -111 th Congresses) H. International Relations/Foreign Affairs (107 th -111 th Congresses) WATSON COLEMAN, BONNIE. Democrat; New Jersey, 12 th District. Elected to the 114 th -116 th Congresses (served Jan. 3, 2015-present). Committee assignments: H. Homeland Security (114 th -116 th Congresses) H. Oversight and Government Reform (114 th -115 th Congresses) H. Appropriations (116 th Congress) WATT, MELVIN L. Democrat; North Carolina, 12 th District. Elected to the 103 rd -113 th Congresses (served Jan. 5, 1993, until his resignation Jan. 6, 2014). Chair of the Congressional Black Caucus, 109 th Congress. Committee assignments: H. Banking, Finance, and Urban Affairs/Banking and Financial Services/ Financial Services (103 rd -113 th Congresses) H. Post Office and Civil Service (103 rd Congress) H. Judiciary (103 rd -113 th Congresses) Jt. Economic (107 th -108 th Congresses) WATTS, JULIUS CAESAR, Jr . (J.C.) Republican; Oklahoma, 4 th District. Elected to the 104 th -107 th Congresses (served Jan. 3, 1995-Jan. 3, 2003). Committee assignments: H. Banking and Financial Services (104 th Congress) H. National Security (104 th -105 th Congress) H. Transportation and Infrastructure (105 th -106 th Congresses) H. Armed Services (106 th -107 th Congresses) WEST, ALLEN Republican; Florida, 22 nd District. Elected to the 112 th Congress (served Jan, 3, 2011-Jan. 3, 2013). Committee assignments: H. Armed Services (112 th Congress) H. Small Business (112 th Congress) WHEAT, ALAN DUPREE. Democrat; Missouri, 5 th District. Elected to the 98 th -103 rd Congresses (served Jan. 3, 1983-Jan. 3, 1995). Committee assignments: H. District of Columbia (98 th -103 rd Congresses) H. Rules (98 th -103 rd Congresses) H. Select Children, Youth, and Families (98 th -102 nd Congresses) H. Select Hunger (101 st -102 nd Congresses) WHITE, GEORGE HENRY. Republican; North Carolina, 2 nd District. Elected to the 55 th -56 th Congresses (served March 4, 1897-March 3, 1901). Committee assignments: H. Agriculture (55 th Congress) H. District of Columbia (55 th -56 th Congresses) WILSON, FREDERICA. Democrat; Florida, 17 th District (112 th Congress), 24 th District (113 th Congress-present). Elected to the 112 th -116 th Congresses (served Jan. 3, 2011-present). Committee assignments: H. Foreign Affairs (112 th Congress) H. Science, Space and Technology (112 th -113 th Congresses) H. Education and the Workforce (114 th -116 th Congresses) H. Transportation and Infrastructure (115 th -116 th Congresses) WYNN, ALBERT RUSSELL. Democrat; Maryland, 4 th District. Elected to the 103 rd -110 th Congresses (served Jan. 5, 1993-May 31, 2008). Committee assignments: H. Banking, Finance, and Urban Affairs/Banking and Financial Services (103 rd -104 th Congresses) H. Foreign Affairs/International Relations (103 rd -104 th Congresses) H. Post Office and Civil Service (103 rd Congress) H. Commerce/Energy and Commerce (105 th -110 th Congresses) YOUNG, ANDREW JACKSON, Jr. Democrat; Georgia, 5 th District. Elected to the 93 rd -95 th Congresses (served Jan. 3, 1973, until his resignation on Jan. 29, 1977). Committee assignments: H. Banking, Currency and Housing (93 rd Congress) H. Rules (94 th Congress)

In total, 162 African Americans have served in Congress. This total includes 152 African Americans (146 Representatives and 6 Delegates) elected only to the House of Representatives; 9 African Americans elected or appointed only to the Senate; and 1 African American who has served in both chambers. The first African American Members, Senator Hiram Revels of Mississippi and Representative Joseph Rainey of South Carolina, both took the oath of office in 1870. These first two Members were among the 22 African American Members (2 in the Senate, 20 in the House) who began their service in the period of time after the Civil War but prior to the start of the 20 th century. After these first 22, the presence of African Americans in the membership of Congress was not continuous, and there were subsequent periods in both chambers with no African American Members. Most recently, the 116 th Congress began with the highest number of African American Members ever at the start of a Congress: 57 (52 Representatives, 2 Delegates, and 3 Senators). Other information in this report includes the following: Numbers of African Americans who have served in Congress by party and type of service; Numbers of African Americans who have served in each Congress since 1870; Numbers of African Americans who have served in the House and Senate by state, district, or territory; Means of entry to Congress, including regular elections, special elections, and appointments; Brief background and selected data on the Congressional Black Caucus (CBC); Lists of selected "firsts" for African Americans in Congress; Lists of the African Americans who have served in leadership; Records for length of service in the House and Senate; and Lists of the African American women in the 116 th Congress.

crs_R46353

crs_R46353_0

<1. Introduction> The global pandemic of Coronavirus Disease 2019 (COVID-19) is affecting communities around the world and throughout the United States, with case counts growing daily. Containment and mitigation efforts by federal, state, and local governments have been undertaken to flatten the curve that is, to curb widespread transmission that could overwhelm the nation's health care system. Federal response efforts have included the enactment of laws to provide authorities and supplemental funding to prevent, prepare for, and respond to the pandemic. This report focuses on supplemental FY2020 discretionary appropriations provided to programs and activities traditionally funded by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) appropriations bill. As of the date of this report, LHHS supplemental appropriations for COVID-19 response have been provided in four separate supplemental appropriations measures: Title III, Division A, of the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 ), enacted on March 6, 2020. Title V, Division A, of the Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ), enacted on March 18, 2020. Title VIII, Division B, of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ), enacted on March 27, 2020. Title I, Division B, of the Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA, P.L. 116-139 ), enacted on April 24, 2020. In total, LHHS has received roughly $280 billion in supplemental discretionary appropriations from these COVID-19 response measures. These funds are in addition to roughly $195 billion in regular FY2020 LHHS discretionary appropriations provided in Division A of P.L. 116-94 , the FY2020 LHHS omnibus appropriations act that was enacted on December 20, 2019. Unlike the annual discretionary appropriations, however, these additional funds were designated as an "emergency requirement" and thus were effectively exempted from otherwise applicable budget enforcement requirements (such as the statutory discretionary spending limits). Overall, the COVID-19 supplemental funds have increased FY2020 LHHS discretionary appropriations by approximately 143%. <2. Legislative History> The relevant legislative history of each of the four enacted laws containing LHHS supplemental appropriations is detailed below. <2.1. P.L. 116-123 (H.R. 6074), Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020> In the weeks leading up to the supplemental appropriations action in Congress, Alex Azar, the Secretary of the U.S. Department of Health and Human Services (HHS), took administrative steps to allocate existing funding to COVID-19 response efforts. These included issuing a determination on January 25, 2020, allowing the allotment of $105 million from the Infectious Diseases Rapid Response Reserve Fund (IDRRRF). He also reportedly informed Congress on February 2 that he would potentially exercise his authority to transfer $136 million in existing funds within HHS to increase the budgetary resources of several operating divisions and offices that were tasked with COVID-19 response. In response, the Chair of the House Appropriations Committee, Representative Nita Lowey, and the Chair of the LHHS Subcommittee, Representative Rosa DeLauro, sent the Secretary a letter expressing concern that budgetary resources available to HHS at that time would not be sufficient. On February 24, 2020, the Trump Administration sent Congress a request for supplemental appropriations of $1.25 billion for the Public Health and Social Services Emergency Fund (PHSSEF) at HHS. The request letter included a number of other proposals, largely but not exclusively related to re-purposing existing funds toward response efforts. All told, the Administration estimated needing to allocate approximately $2.5 billion toward COVID-19 response efforts. (For the most part, amounts for other LHHS aspects of the request generally were unspecified in the publicly released request letter.) Several days after the Administration's request, the Chair of the House Appropriations Committee introduced H.R. 6074 on March 4, 2020. The measure passed the House that same day by a vote of 415-2, passed the Senate on March 5 by a vote of 96-1, and was signed into law ( P.L. 116-123 ) on March 6. According to the Congressional Budget Office (CBO), P.L. 116-123 provided a total of $7.8 billion in supplemental appropriations in Division A, of which roughly $6.4 billion (about 83%) was for LHHS accounts and activities. (Division B contained authorization provisions related to certain LHHS programs and activities providing the HHS Secretary authority to temporarily waive or modify the application of certain Medicare requirements with respect to telehealth services. The mandatory spending budgetary effects of these provisions are outside the scope of this report.) <2.2. P.L. 116-127 (H.R. 6201), Families First Coronavirus Response Act (FFCRA)> A second COVID-19 response measure was developed by Congress and the Administration soon after the first was enacted. Initially, H.R. 6201 was introduced by the Chair of the House Appropriations Committee on March 11, 2020. The House amended and passed the measure by a vote of 363-40 on March 14, but further alterations to the final legislative package were negotiated over the next two days. On March 16, the House (by unanimous consent) considered and agreed to a resolution ( H.Res. 904 ) that directed the Clerk to make changes to the legislation when preparing the final, official version of the House-passed bill ( engrossment ). The engrossed version was sent to the Senate and ultimately passed without amendment by a vote of 90-8 on March 18. The President signed the bill into law ( P.L. 116-127 ) the same day. Division A of P.L. 116-127 was estimated by CBO to provide a total of $2.5 billion in supplemental appropriations, of which $1.25 billion (approximately 51%) was for LHHS accounts and activities. (Other divisions of the act contained authorization provisions that in some cases relate to LHHS programs and activities for instance, provisions providing a 6.2% increase to the federal matching assistance percentage for Medicaid and certain other programs. The mandatory spending budgetary effects of such provisions are outside scope of this report.) <2.3. P.L. 116-136 (H.R. 748), Coronavirus Aid, Relief, and Economic Security Act (CARES Act)> On March 17, 2020, the Administration released a second request for FY2020 supplemental appropriations of $45.8 billion for COVID-19 response, of which $11.1 billion was for LHHS accounts and activities. Over the next several days, Congress and the Administration negotiated the scope and scale of this legislative response, which was expected to involve authorities and additional funding for numerous programs across the federal government. The legislative vehicle that was ultimately chosen for this package was H.R. 748 , an unrelated measure that had been passed previously by the House. Prior to when a deal was reached between Congress and the Administration, the Senate voted on March 22 (47-47) and March 23 (49-46) not to invoke cloture on the motion to proceed to H.R. 748 . The measure was ultimately laid before the Senate by unanimous consent and passed with a substitute amendment by a vote of 96-0 on March 25. The House subsequently took up the Senate amendment on March 27, and agreed to it by a voice vote. The bill was signed into law ( P.L. 116-136 ) by the President that same day. According to CBO, P.L. 116-136 provided about $330 billion in supplemental appropriations in Division B, of which $172.1 billion (approximately 57%) was for LHHS accounts and activities. (Division A contained authorization provisions that in some cases relate to LHHS programs and activities for instance, $1.320 billion in mandatory funds for the HRSA health centers program. The mandatory spending budgetary effects of such provisions are outside the scope of this report.) <2.4. P.L. 116-139 (H.R. 266), Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA)> About three weeks after the enactment of the CARES Act, Congress and the President came to an agreement that, among other provisions, provided additional supplemental appropriations to HHS for the Provider Relief Fund and to support COVID-19 testing. The legislative vehicle that was used for the agreement was H.R. 266 , an unrelated appropriations bill that had been passed previously by the House. On April 21, 2020, the measure was laid before the Senate by unanimous consent and passed with a substitute amendment by voice vote. The House adopted the Senate version of the proposal on April 23 by a vote of 388-5. The President signed the bill into law ( P.L. 116-139 ) the following day. According to CBO, P.L. 116-139 provided $162.1 billion in supplemental appropriations in Division B, of which $100 billion (approximately 62%) was for LHHS. (Division A contained no provisions related to LHHS programs and activities. The mandatory spending budgetary effects of the authorization provisions in Division A are outside the scope of this report.) <3. Funding Overview> As previously mentioned, LHHS has received in total roughly $280 billion in supplemental discretionary appropriations from the COVID-19 response measures ( Table 1 ). HHS received funding in all four supplemental appropriations acts, whereas the Department of Labor (DOL), the Department of Education (ED), and entities funded under the Related Agencies (RA) heading received funding in the third supplemental only. HHS received the vast majority of all LHHS COVID-19 supplemental funds $248 billion, or 89%. ED received the second-largest share $31 billion, or 11%. DOL and RA received approximately 0.1% and 0.2%, respectively. The remainder of this report provides highlights for HHS, DOL, ED, and RA, and includes a detailed table ( Table 2 ) organized by department or agency and by account, program, or activity. <3.1. Department of Labor> The majority of DOL funds ($345 million) in the third measure are for dislocated worker assistance through activities authorized by the Workforce Innovation and Opportunity Act (WIOA). Specifically, the DOL funds are for the WIOA National Reserve, which provides National Dislocated Worker Grants (NDWGs) to states and localities to assist with worker dislocation resulting from natural disasters and mass layoffs. These funds are generally expected to address workforce-related effects of the COVID-19 pandemic. <3.2. Department of Health and Human Services> The majority of HHS funds (93%) in the supplemental appropriations measures have been appropriated to the Public Health and Social Services Emergency Fund (PHSSEF). The PHSSEF account is used by the HHS Secretary for one-time or short-term funding, such as emergency supplemental appropriations, and for some ongoing public health preparedness activities in the Office of the HHS Assistant Secretary for Preparedness and Response (ASPR). Accounts at the Centers for Disease Control and Prevention (CDC) received approximately 3% of the supplemental HHS appropriations provided in the COVID-19 response measures. Accounts at the Administration for Children and Families (ACF) received a similar amount. Remaining funds were provided in smaller amounts to the National Institutes of Health (NIH), the Administration for Community Living (ACL), the Substance Abuse and Mental Health Services Administration (SAMHSA), and the Centers for Medicare and Medicaid Services (CMS). While amounts shown in Table 2 are displayed as appropriated, readers should note that the first, third, and fourth COVID-19 supplemental appropriations acts authorized HHS to transfer funds made available in these acts, provided the transfers are made to prevent, prepare for, and respond to the pandemic. (This broad authority giving HHS discretion over certain transfers is in addition to provisions in these three measures that direct HHS to make specific transfers.) The first measure broadly allowed for HHS to transfer funds among accounts at CDC, NIH, and PHSSEF. The third measure allowed for transfers among amounts at CDC, PHSSEF, ACF, ACL, and NIH. The fourth measure allowed for transfers among accounts at CDC, NIH, PHSSEF, and the Food and Drug Administration, but limited the amounts available for such transfers (e.g., it excluded from this authority $75 billion provided to the PHSSEF for the "Provider Relief Fund"). The acts require HHS to notify the House and the Senate appropriations committees 10 days in advance of such transfers. <3.2.1. PHSSEF> The PHSSEF received about $232 billion in funding across the four measures. This accounts for 83% of all LHHS funds provided in the acts (and 93% of the HHS funds in the LHHS titles of the bills). These PHSSEF funds may support various activities, including health care surge capacity and the development and purchase of medical countermeasures, including vaccines. In general, PHSSEF supplemental funding has been provided for four main sets of activities. Medical Countermeasures and Surge Capacity: The first and third measures each provided funding to support the development, and in some cases federal purchase, of COVID-19 medical countermeasures, such as diagnostic tests, treatments, vaccines, and medical supplies, as well as for healthcare workforce and other surge capacity activities. In total, approximately $30.4 billion has been provided for these activities. Note that the bills also specify that some of these funds are to be transferred elsewhere (e.g., to other federal agencies for the care of persons under federal quarantine) or reserved for specific purposes or activities (e.g., deposits to the Strategic National Stockpile). These activities may be carried out by various ASPR components, especially the Biomedical Advanced Research and Development Authority (BARDA) for countermeasure development and procurement. COVID-19 Testing for the Uninsured : The second supplemental measure included $1 billion to provide reimbursements for COVID-19 testing and related services for persons who are uninsured. In addition, the fourth measure specified that up to $1 billion out of the amounts appropriated for broader COVID-19 testing purposes (discussed below) may be used to cover the costs of testing for the uninsured. Both measures provide for these payments to be made according to the National Disaster Medical System (NDMS) definitive care reimbursement mechanism. However, the program is administered by HRSA. Provider Relief Fund: The third and fourth supplemental measures each provided funding for a "Provider Relief Fund" to assist health care providers and facilities affected by the COVID-19 pandemic. These funds are intended to reimburse eligible health care providers for health care-related expenses or lost revenues that are attributable to COVID-19. The measures define eligible providers broadly as any that provide "diagnoses, testing, or care for individuals with possible or actual cases of COVID-19." In total, $175 billion has been appropriated for the Provider Relief Fund. COVID-19 Testing , Surveillance, and Contact Tracing : The fourth supplemental measure provided $25 billion to augment national capacity for COVID-19 containment, including expanded testing capacity, and workforce and technical capacity for disease surveillance and contact tracing. The bill directed HHS to reserve some of these funds for specific purposes (e.g., not less than $11 billion is for states, localities, territories, tribes, tribal organizations, urban Indian health organizations, or health service providers to tribes). In addition, the bill specified that certain funds are to be transferred to other agencies and accounts (e.g., $600 million is to be transferred to the FDA for diagnostic, serological, antigen, and other tests). In addition to the activities specified above, PHSSEF appropriations in the first, third, and fourth supplemental measures called for some portion of the funds to be transferred to other agencies or accounts for particular activities. For instance, some PHSSEF funds are required to be transferred to the HRSA for health centers, rural health, the Ryan White HIV/AIDS program, and health care systems. <3.2.2. Other HHS Funding> Further public health-related funding for preparedness and response was appropriated to the CDC ($6.5 billion) and NIH ($1.8 billion) in the first and third supplemental measures. In addition, the fourth supplemental explicitly directed certain PHSSEF appropriations to be transferred to CDC and NIH for COVID-19 response activities. When accounting for these transfers, total funding directed to the CDC would come to not less than $7.5 billion and total funding directed to NIH would come to not less than $3.6 billion. The CDC funding was intended, among other things, to support grants, or cooperative agreements with grants to states, localities, tribes and other entities, for public health activities (e.g., surveillance, infection control, diagnostics, laboratory support, and epidemiology), as well as for global disease detection and modernization of public health data collection. The funds may also be used to support public outreach campaigns, and provide guidance to physicians, health care workers, and others. Most of the NIH funding was provided to several institutes to support basic scientific research as well as research on potential vaccines, therapeutics, and diagnostics related to COVID-19. ACL received a total of $1.2 billion in the second and third response measures. The majority of this funding ($750 million) was spread across a variety of activities that the agency undertakes to help provide meals to low-income seniors. SAMHSA received $425 million in the third measure, with $250 million for Certified Community Behavioral Health Clinics, $50 million for suicide prevention programs, and not less than $15 million for Indian Tribes. The measure specified that not less than $100 million be made available as emergency response grants for state governments for crisis intervention services, mental health and substance use disorder treatment, and recovery supports for individuals affected by the pandemic. CMS received $200 million in the third measure. At least half of this appropriation was to be spent on additional infection control surveys for federally certified facilities with populations vulnerable to severe illness from COVID-19. ACF received $6.3 billion in the third measure. These funds were directed to a number of human services programs. For instance, the Child Care and Development Block Grant received $3.5 billion to provide continued assistance to child care providers in the event of decreased enrollment or program closures. These funds may also be used to support child care facilities that are open and operating, including those providing care for the children of essential workers. Several other ACF programs received funding, including the Community Services Block Grant ($1 billion), Head Start ($750 million), and the Low Income Home Energy Assistance Program ($225 million). <3.3. Department of Education> Almost all of the $30.925 billion in supplemental ED appropriations provided in the third measure are for the Education Stabilization Fund (ESF). The ESF is composed of three emergency relief funds: (1) a Governor's Emergency Education Relief (GEER) Fund ( 18002), (2) an Elementary and Secondary School Emergency Relief Fund (ESSERF; 18003), and (3) a Higher Education Emergency Relief (HEER) Fund ( 18004). The third measure provided a total of $30.750 billion for the ESF and specified that these funds are to remain available through September 30, 2021. The GEER Fund may be used to provide emergency support through grants to local educational agencies (LEAs) that the state educational agency (SEA) or governor determines to have been the most significantly impacted by COVID-19. Emergency support may also be provided through grants to institutions of higher education (IHEs) serving students within the state that the governor determines to have been the most significantly impacted by COVID-19. A governor may also choose to provide emergency support to any other IHE, LEA, or education-related entity within the state that he or she deems "essential for carrying out emergency educational services" to students for a broad array of purposes ranging from any activity authorized under various federal education laws to the provision of child care and early childhood education, social and emotional support, and the protection of education-related jobs. Funds from the ESSERF are to be awarded to states based on their relative shares of grants awarded under Title I-A of the Elementary and Secondary Education Act (ESEA), as amended. SEAs are required to provide at least 90% of the funds to LEAs to be used for myriad purposes such as any activity authorized under various federal education laws (e.g., ESEA), coordination of preparedness and response to the COVID-19 pandemic, technology acquisition, mental health, and activities related to summer learning. Funds retained by the SEA must be used for emergency needs, as determined by the SEA, to address issues in response to the COVID-19 pandemic and for administration. The HEER Fund is to distribute funds to IHEs to address needs directly related to the COVID-19 pandemic, including, but not limited to, transitioning courses to distance education and grant aid to students for their educational costs such as food, housing, course materials, health care, and child care. <3.4. Related Agencies> The Social Security Administration (SSA) received the largest amount ($300 million) among the related agencies. These funds were provided to the SSA Limitation on Administrative Expenses account to support the salaries and benefits of all SSA employees affected as a result of office closures. The funds are also to be used for costs associated with telework, phone, and communication services for employees; for overtime costs and supplies; and for processing disability and retirement benefit workloads and backlogs. <3.5. Detailed LHHS Programs and Activities Supplemental Amounts> Table 2 displays funding directed to LHHS programs and activities, as enacted, across the four COVID-19 supplemental appropriations acts. It is organized by department or agency and by account, program, or activity. The table also indicates a number of cases in which appropriations language reserved funds within a particular account for specific programs or activities, or directed that funds be transferred to other accounts. It makes note of instances in which these reservations are for not less than (NLT) or not more than (NMT) a certain dollar amount. In cases where the bill text calls for transfers, funds are shown in the account to which they were appropriated, not in the account to which they are to be transferred.

The legislative response to the global pandemic of Coronavirus Disease 2019 (COVID-19) has included the enactment of laws to provide authorities and supplemental funding to prevent, prepare for, and respond to the pandemic. This report focuses on supplemental FY2020 discretionary appropriations provided to programs and activities traditionally funded by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) appropriations bill. As of the date of this report, LHHS supplemental appropriations for COVID-19 response have been provided in four separate supplemental appropriations measures: Title III, Division A, of the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 ), enacted on March 6, 2020, provided approximately $6.4 billion in supplemental LHHS funds. Title V, Division A, of the Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ), enacted on March 18, 2020, provided $1.25 billion in supplemental LHHS funds. Title VIII, Division B, of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ), enacted on March 27, 2020, provided $172.1 billion in supplemental LHHS funds. Title I, Division B, of the Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA, P.L. 116-139 ), enacted on April 24, 2020, provided $100 billion in supplemental LHHS funds. In total, LHHS has received roughly $280 billion in supplemental discretionary appropriations from these COVID-19 response measures. These supplemental funds are in addition to roughly $195 billion in regular FY2020 LHHS discretionary appropriations provided in Division A of P.L. 116-94 , the FY2020 omnibus appropriations act containing full-year LHHS appropriations that was enacted on December 20, 2019. Unlike the annual discretionary appropriations, however, these additional funds were designated as an "emergency requirement" and thus were effectively exempted from otherwise applicable budget enforcement requirements (such as the statutory discretionary spending limits). Overall, the COVID-19 supplemental funds have increased FY2020 LHHS discretionary appropriations by approximately 143%. The Department of Health and Human Services (HHS) received funding in all four COVID-19 supplemental appropriations acts, whereas the Department of Labor (DOL), Department of Education (ED), and entities funded under the "Related Agencies" heading received funding in the third supplemental only. In total, HHS received $248 billion, or 89% of all COVID-19 LHHS supplemental appropriations. ED received the second-largest share at $31 billion, or 11%. DOL and the Related Agencies received approximately 0.1% and 0.2% of the LHHS COVID-19 supplemental funds, respectively.

crs_R46109

crs_R46109_0

<1. Introduction> Congress maintains an ongoing interest in the pace of U.S. innovation and technological advancement due to its influence on the economy, national security, public health, and other national goals. Historically, the federal government has played a significant role in supporting research and development (R&D) especially basic research that has led to scientific breakthroughs and new technologies. The global landscape for innovation is rapidly evolving the pace of innovation has increased and the composition of R&D funding has changed (i.e., private R&D investments are larger than public R&D investments and the U.S. share of global R&D has declined). These changes have led some to call for new approaches and the expansion of existing mechanisms to help the United States maintain its leadership role in innovation and technology. One mechanism that has received some attention is the possibility of establishing additional agency-related entities that would facilitate the use of private donations in federally generated research projects. In addition, such entities might play a role in the commercialization of new technologies. The potential establishment of such entities in statute raises several questions: What kinds of organizations has Congress established in the past to address similar needs in the federal government? What are the strengths and weaknesses of these potential models? What are the opportunities and risks of developing a new entity for federal R&D using one of these models? The varied organizational arrangements of the executive branch have resulted from more than two centuries of legislative and administrative actions. These arrangements reflect a diversity of viewpoints, policy preferences, and political goals among the thousands of elected and appointed officials who have played a role in creating and shaping them. During the middle of the 20 th century, hybrid organizational forms incorporating both public and private characteristics began to grow in number. These organizational forms, sometimes collectively referred to as "quasi-governmental entities," differ from one another in their specific features, relationship to the federal government, funding mechanisms, purposes, levels of accountability to elected officials, and use of private sector incentives and efficiencies, among other characteristics. Agency-related nonprofit research foundations and corporations fall into this category of organizations. <1.1. Background on Quasi-Governmental Entities> Working with successive administrations, Congress has established, or provided for the establishment of, many quasi-governmental entities. Some of the considerations that contributed to their creation and development were linked to political and policymaking dynamics that were idiosyncratic to the specific time and issue at hand. Nonetheless, observers have identified some common purposes for, and expected benefits of, establishing such entities: providing for stable funding during federal budget tightening and uncertainty; freeing a program from general government management laws, particularly those pertaining to caps on personnel and compensation; harnessing business principles and mechanisms with the aim of providing government-driven solutions without the "red tape" associated with the federal bureaucracy; and providing authorities tailored to the desired mission and functions that allow flexible approaches not typically allowed under statutes or regulations, such as those in the area of financial management. In comparison to traditional government agencies, quasi-governmental entities of various kinds have been touted for their potential to harness business-like entrepreneurial incentives and drive, greater managerial flexibility, and increased employee input in decisionmaking to better carry out the entity's responsibilities. As quasi-governmental organizations have grown in number and variety, some observers have criticized the exemption from government management laws of many such entities. A complex legal framework has been established over time to guide government agencies so that their actions adhere to the values of democratic governance, such as accountability, transparency, and fairness. It might be difficult for stakeholders to verify on an ongoing basis that the activities of a quasi-governmental entity, established by statute and vested with the power to carry out some public purpose, are directed to the public good rather than private gain without the routine accountability and transparency provided by this legal framework. Many of these laws and regulations specify the processes by which action must be taken. Some have criticized such governmental processes as "red tape," particularly in cases where they appear to have been applied overzealously, slowly, or seemingly without regard for an individual's or business's need for a service or flexibility. Arguably, quasi-governmental entities involve a tradeoff: What appears to some to be red tape during an administrative encounter may appear to others to be an essential accountability or transparency mechanism. Most federal agencies are funded through the annual appropriations process, and Congress has sometimes used the "power of the purse" to influence agency priorities and activities. Most federal agencies are headed by appointees of the President subject to Senate advice and consent, and the confirmation process provides Senators with an opportunity to discuss agency issues and concerns with these leaders. Congress establishes, or provides for the establishment of, quasi-governmental entities, but it might not have the same level of influence over them as it does over conventional federal agencies. Congressional committees have reviewed the actions and structure of some of these entities during oversight hearings, and Congress has sometimes enacted changes to their enabling statutes. At the same time, many quasi-governmental entities do not receive appropriated funds and are not led by advice and consent appointees, shielding them from two potential avenues of congressional influence. In addition to criticisms related to oversight, accountability, and transparency, some have questioned whether private sector management techniques are always appropriate for managing government functions. Most public administration scholars have agreed that public enterprises can benefit from some general management mechanisms developed in the private sector. Some scholars have argued, however, that the blanket application of private sector management assumptions to the public sector might miss important differences between the two. These differences include, for example, the role of constitutional law. As one public administration scholar stated, "although politicians, reformers, and media pundits often call for running government like a business, constitutional law makes the public's business very different from others." Some observers also have noted differences in the "bottom line" of the two sectors, and the consequent complexity associated with measuring performance in accomplishing a public purpose. This report discusses a specific category of quasi-governmental entities: agency-related nonprofit organizations that have been established in statute for the express purpose of advancing or facilitating the R&D mission of a federal agency. It describes the characteristics of several illustrative organizations of this type. It examines the available record of these entities' performances and discusses related praise and criticism of these organizational arrangements. Finally, the report identifies potential issues for consideration related to oversight of existing quasi-governmental R&D support organizations as well as potential issues for consideration should Congress elect to establish similar organizations. <2. Existing Agency-Related Nonprofit R&D Organizations> Congress has created a number of agency-related nonprofit research foundations and corporations to advance the R&D needs of the federal government and to overcome perceived barriers associated with federal agencies' ability to partner or otherwise engage with industry, academia, and other entities. The stated goals and potential benefits of these quasi-governmental R&D support organizations are that they may: provide a flexible and efficient mechanism for establishing public-private R&D partnerships (see the box, "What Are Public-Private Partnerships?" for more information); enable the solicitation, acceptance, and use of private donations to supplement the work performed with federal R&D funds; increase technology transfer and the commercialization of federally funded R&D; improve the ability of federal agencies to attract and retain scientific talent, including through the use of fellowships, personnel exchanges, and endowed positions; and enhance public education and awareness regarding the role and value of federal R&D. The following sections provide a brief overview of the purpose and intent, governance structure, and federal funding of selected congressionally mandated, federal agency-related nonprofit research foundations and corporations. The foundations discussed include those connected with the work of the National Institutes of Health (NIH), the Centers for Disease Control and Prevention (CDC), the U.S. Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA), and the Uniformed Services University of the Health Sciences (USU). Nonprofit research and education corporations associated with the work of the Department of Veterans Affairs (VA) are also discussed. All the foundations discussed have been funded through a combination of public and private monies and foster public-private R&D partnerships. However, the level of public support received by the foundations differs, as do the composition and appointment of their governing boards. Federal agencies and Congress have also initiated the creation of other organizations and entities to advance the R&D needs of federal agencies. Federally initiated venture capital firms and strategic investment initiatives, including In-Q-Tel, are often mentioned as an effective model. See the Appendix , "Federally Initiated and Funded Venture Capital Firms," for more information and illustrative examples of such organizations. <2.1. Foundation for the National Institutes of Health (FNIH)> In 1990, Congress directed the Secretary of Health and Human Services (HHS) to establish a nonprofit corporation the National Foundation for Biomedical Research, which is now known as the Foundation for the National Institutes of Health (FNIH). Initially, the foundation was tasked with attracting and retaining internationally known scientists to NIH "by offering competitive support for salaries, equipment, and space" through privately funded endowed positions. In 1993, Congress broadened the purpose of the foundation to include "support [for] the National Institutes of Health in its mission, and to advance collaboration with biomedical researchers from universities, industry, and nonprofit organizations." According to FNIH, the foundation creates public-private partnerships and alliances to advance breakthrough biomedical discoveries that can change and improve the quality of people's lives. FNIH raises funds, provides scientific expertise, and administers research programs to address a wide range of health challenges in support of NIH's mission. FNIH also supports the training of new researchers, supports patient programs, and organizes health-related educational events and symposia. One example of an FNIH-initiated project is the Biomarkers Consortium. FNIH manages the consortium consisting of 32 companies, 15 nonprofit organizations, NIH, and FDA with the goal of increasing the identification, development, and regulatory approval of biomarkers to support and improve drug development, preventative medicine, and medical diagnostics. In 2018, FDA approved the use of a new biomarker supported by the consortium that is expected to improve the detection of kidney injury in healthy volunteers participating in clinical drug trials. FNIH's governance structure and powers are specified in its organic act and bylaws. FNIH is governed by a board of directors composed of non-voting, ex officio members and voting, appointed members with day-to-day operations overseen by an executive director. Congress designated certain Members of Congress and federal officials as ex officio board members and tasked them with appointing the initial members of the board from a list of candidates provided by the National Academy of Sciences. According to FNIH's bylaws, the number of appointed board members must be at least 6 and no more than 32; the term of an appointed member is 3 to 5 years; there is no limit on the number of terms an appointed member may serve; and any vacancies in the membership of the board shall be filled through election by the board. Congress empowered the board to establish bylaws to govern the general operations of the foundation, including policies for the acceptance, solicitation, and disposition of donations and grants. It also required the board to ensure that the bylaws do not compromise, appear to compromise, or reflect unfavorably on NIH and the ability of NIH to fulfill its responsibilities to the public. Furthermore, Congress made the board of directors accountable for "the integrity of the operations of the Foundation" through the development and enforcement of standards of conduct, financial disclosure statements, and conflict of interest policies and procedures. FNIH operations and activities have been funded through a combination of private donations and a share of NIH appropriations. According to FNIH, since its initial incorporation in 1996, the foundation has raised more than $1 billion in support of NIH's mission. According to tax filings, FNIH provided NIH with $22.6 million in assistance in 2017 and $16.9 million in 2016. Congress authorized the Director of NIH to "provide facilities, utilities and support services to the Foundation if it is determined by the Director to be advantageous to the research programs of the National Institutes of Health" and to transfer no less than $500,000 and no more than $1.25 million of the agency's annual appropriations to FNIH. Between FY2015 and FY2019, NIH transferred between $1 million and $1.25 million annually to FNIH for administrative and operational expenses (less than 0.01% of NIH's annual budget). In the President's FY2020 budget, NIH requested $1.1 million for this purpose. Additionally, since FY2008, FNIH has received $602,803 in federal grants, contracts, and other financial assistance. <2.2. National Foundation for the Centers for Disease Control and Prevention> In 1992, Congress authorized the establishment of the National Foundation for the Centers for Disease Control and Prevention (CDC Foundation) to "support and carry out activities for the prevention and control of diseases, disorders, injuries, and disabilities, and for promotion of public health." A House committee report stated: In the midst of budget restraint and personnel limitations, CDC itself is often strained to meet the basic demands of its mission. Efforts to experiment (some of which will necessarily fail), to do long-term planning, and to recruit and retain temporary staff are usually luxuries that the agency cannot afford, however productive they may ultimately be. The Committee has, therefore, undertaken to create a mechanism for the establishment of a private non-profit foundation to provide these innovative and supplementary activities in public health in association with the CDC. Once established, such a foundation could seek private support for these efforts from both individuals and organizations, and could bring charitable funds and flexibility to these goals. The CDC Foundation is authorized to support a number of activities, including using private funds to establish endowed positions at CDC; creating programs for state, local, and international public health officials to work and study at CDC; conducting forums for the exchange of public health information; and funding research and other public health studies. The foundation guidelines state that it: helps CDC pursue innovative ideas that might not be possible without the support of external partners.... CDC Foundation partnerships help CDC launch new programs, expand existing programs that show promise, or establish a proof of concept through a pilot project before scaling it up. In each partnership, external support gives CDC the flexibility to quickly and effectively connect with other experts, information and technology needed to address a public health challenge. For example, in 2018, the CDC Foundation used funding from the United Nation Children's Fund (UNICEF) to create a partnership between researchers from CDC, the Georgia Institute of Technology, and Micron Biomedical to develop a dissolving measles and rubella microneedle vaccination patch. While the current measles and rubella vaccination is effective, challenges associated with delivery of the vaccine that have impeded eradication efforts. For example, the vaccine must be refrigerated until it is injected, and it must be administered by a trained medical professional. The dissolving microneedle patch has the potential to overcome such challenges and improve vaccination coverage. The CDC Foundation's governance structure and powers are specified in statute and through the foundation's bylaws. The CDC Foundation is governed by a board of directors composed of appointed members and overseen by an executive director. Congress created a committee composed of representatives from the public health and nonprofit sectors to incorporate the foundation, to establish its general policies and initial bylaws, and to appoint the initial members of the board of directors. The term of service of a board member is five years, and any vacancies in the membership of the board are filled through appointment by the board. Congress tasked the CDC Director with serving as a liaison between the agency and the CDC Foundation, but did not designate the CDC Director as an ex officio member of the board. According to the CDC Foundation, such an arrangement guarantees that the foundation remains independent from CDC, while ensuring that the CDC Foundation's "programs and activities have the greatest possible impact for CDC and public health." Additionally, Congress required the board of directors to establish bylaws and general policies for the foundation, including policies for ethical standards, the acceptance and disposition of donations, and the general operation of the foundation. Congress required that the bylaws not reflect unfavorably upon the ability of the foundation or CDC to carry out its responsibilities or official duties in a fair and objective manner; or compromise, or appear to compromise, the integrity of any governmental program or any officer or employee involved in such program. CDC Foundation operations and activities have been funded through a combination of private donations and a share of CDC appropriations. Since 1995, the CDC Foundation has raised more than $800 million in support of CDC and its mission. In both 2015 and 2016, the CDC Foundation transferred $5.6 million to CDC. Additionally, the CDC Foundation provided the agency with $38.5 million in noncash donations (e.g., insecticides and contraceptives in response to the Zika virus) over that same period. Congress authorized the CDC to provide the CDC Foundation with $1.25 million annually (roughly 0.02% of CDC's annual budget). According to the CDC Foundation's audited financial statements, CDC has provided the foundation with a $1.25 million for operating expenses each year since 2012. Additionally, since FY2008, the CDC Foundation has received $55.4 million in federal grants, contracts, and other financial assistance. <2.3. Reagan-Udall Foundation for the Food and Drug Administration> In 2007, Congress established the Reagan-Udall Foundation for the Food and Drug Administration (Reagan-Udall Foundation) with the purpose of advancing FDA's mission "to modernize medical, veterinary, food, food ingredient, and cosmetic product development, accelerate innovation, and enhance product safety." The duties of the Reagan-Udall Foundation include identifying unmet needs and supporting regulatory science research and other programs to improve the development, manufacture, and evaluation (including post-market evaluation) of FDA-regulated products. According to the Reagan-Udall Foundation, it accomplishes its tasks by establishing public-private research collaborations, ensuring new knowledge is in the public domain, allowing broad-based participation, training the next generation of regulatory scientists, and leveraging outside resources for its activities. In 2017, the Reagan-Udall Foundation launched the Innovation in Medical Evidence Development and Surveillance (IMEDS) program which provides FDA regulated industries, universities, and nonprofits with access to distributed electronic healthcare data that can be used to evaluate medical product safety and assess drug effectiveness. Thus far, IMEDS is the largest program supported and managed by the foundation. The governing structure, purposes, and powers of the Reagan-Udall Foundation are specified in the statute establishing the foundation and further defined by the foundation's bylaws. The Reagan-Udall Foundation is governed by a board of directors composed of appointed and ex officio members, including the FDA Commissioner and the Director of NIH. A board-appointed executive director oversees the day-to-day operations of the foundation. Congress directed federal officials FDA Commissioner, NIH Director, CDC Director, and the Director of the Agency for Healthcare Research and Quality to appoint the initial board members from candidates provided by the National Academy of Sciences, patient and consumer advocacy groups, professional scientific and medical societies, and industry trade organizations. Subsequent to these initial appointments, board vacancies are to be filled through appointment by the board. According to the foundation's bylaws, the board of directors shall be composed of no more than 17 appointed members, including no more than 5 members from the general pharmaceutical, device, food, cosmetic and biotechnology industries and at least 3 members from academic research organizations, 2 members representing patient or consumer advocacy organizations, and 1 member representing health care providers. Furthermore, Congress directed the board of directors to craft bylaws for the foundation, including establishing policies for ethical standards, conflicts of interest, the acceptance, solicitation, and disposition of donations and grants, carrying out memoranda of understanding and cooperative agreements, and for review and awarding of grants and contracts. As detailed in financial reports, the Reagan-Udall Foundation has raised or received nearly $21 million in support of the foundation since 2009, including grants, contributions, and funds transferred from FDA. Congress authorized FDA to provide the Reagan-Udall Foundation with between $500,000 and $1.25 million annually. FDA transferred $1.25 million to the Reagan-Udall Foundation in 2017 and $1 million in 2016 (less than 0.03% of FDA's annual budget). Additionally, since FY2008, the Reagan-Udall Foundation has received $1 million in federal grants, contracts, and other financial assistance. <2.4. Foundation for Food and Agriculture Research (FFAR)> In 2014, Congress created the Foundation for Food and Agriculture Research (FFAR) to advance the research mission of the U.S. Department of Agriculture (USDA) by focusing on agricultural issues of national and international significance, including food security and safety. In establishing FFAR, Congress expressed the importance of American leadership in meeting the needs of a growing population, cited the difficulty associated with overcoming declining federal investments in agriculture research, and highlighted the potential role of the foundation in "supplementing USDA's basic and applied research activities." According to the conference report: The Managers do not intend for the Foundation to be duplicative of current funding or research efforts, but rather to foster public-private partnerships among the agricultural research community, including federal agencies, academia, non-profit organizations, corporations and individual donors to identify and prioritize the most pressing needs facing agriculture. It is the Managers view that the Foundation will complement the work of USDA basic and applied research activities and further advance USDA's research mission. Furthermore, the Managers do not intend in any way for the Foundation's funding to offset or allow for a reduction in the appropriated dollars that go to agricultural research. FFAR is authorized to award grants, or enter into contracts, memoranda of understanding, or cooperative agreements with universities, industry, non-profits, USDA, or consortia, to "efficiently and effectively advance the goals and priorities of the Foundation." It is required to identify unmet and emerging needs, facilitate technology transfer, and to coordinate its activities with those of USDA to minimize duplication and avoid potential conflicts with the department. The foundation currently supports research in six challenge areas soil health, sustainable water management, next generation crops, advanced animal systems, urban food systems, and the health-agriculture nexus in addition to supporting graduate fellowships and early and mid-career awards for agricultural researchers. FFAR also supports strategic initiatives with the potential to further the foundation's mission. For example, in 2017, FFAR awarded researchers at the University of Illinois $15 million to expand their work in improving photosynthesis efficiency and crop yields to soybeans and other crops critical to food security in developing countries. FFAR's investment was matched by $30 million from the Bill and Melinda Gates Foundation and the United Kingdom Department for International Development. According to FFAR, public-private partnerships are generally funded through a competitive grants process or through direct contract; however, the foundation also uses prize competitions to encourage the development of new technologies. The governance structure of FFAR is specified in the statute establishing the foundation and further defined by the foundation's bylaws. FFAR is governed by a board of directors composed of appointed and ex officio members. The day-to-day operations of FFAR are overseen by an executive director, who is appointed by the board. Congress required the ex officio members of the board the Secretary of Agriculture, the Under Secretary of Agriculture for Research, Education and Economics, the Administrator of the Agriculture Research Service, the Director of the National Institute of Food and Agriculture, and the Director of the National Science Foundation to select the initial appointed board members from lists of candidates provided by the National Academy of Sciences and by industry. According to FFAR's bylaws, the board must consist of no less than 15 and no more than 21 appointed members; any vacancies in the membership of the board shall be filled through appointment by the board; a board member's term of service is 5 years; and a board member may be reappointed, but may not serve for more than 10 years. Additionally, Congress tasked the board of directors with crafting bylaws for the general operation of the foundation and with establishing ethical standards for the acceptance, solicitation, and disposition of donations and grants. Congress also required that the bylaws and policies of FFAR preserve the integrity of the foundation and USDA, including the development and enforcement of a conflict of interest policy. In addition to the board of directors, FFAR has established advisory councils for each of the foundation's challenge areas. According to FFAR, advisory council members provide board members and foundation staff with advice and recommendations on "program development and implementation, potential partnerships and other matters of significance" and represent a diverse set of industries, professional backgrounds, and geographic areas. FFAR activities and operations have been funded through a combination of public and private funds. Through the Agricultural Act of 2014 (), Congress provided FFAR with $200 million to enter into public-private partnerships and advanced agricultural research. However, federal funds can only be expended if the foundation secures matching funds from a non-federal source. In testimony before the Senate, the executive director of FFAR, Dr. Sally Rockey, stated: What we have discovered over the past two years is that we have two distinct advantages over other government-established research foundations. First is our public funding, which gives FFAR the flexibility to seek out diverse partnerships, especially with the private sector. Rather than raising money for a government agency, which is the model for most government established research foundations, FFAR leverages public funding more than doubling that funding for the public good and, in the process, develops a new community of partners. Second is our independence, which allows us to focus almost exclusively on results. When partners are focused just on the science and equally invested in seeing measurable outcomes as soon as possible, new partnerships may develop. In 2017, FFAR awarded 39 grants and $45.8 million in funding ($110.6 million when matching funds are included). In 2018, FFAR awarded 55 grants and $32.2 million in funding (more than $60 million when matching funds are included). USDA's Agricultural Research Service (ARS) was the recipient of three grants and $1.7 million in funding from FFAR ($3.6 million when matching funds are included) in 2018. In the Agriculture Improvement Act of 2018 ( P.L. 115-334 ), Congress directed the Secretary of Agriculture to transfer an additional $185 million to FFAR "to leverage private funding, matched with federal dollars to support public agricultural research"; however, these federal funds were not to be transferred until FFAR provided Congress with a strategic plan detailing how the foundation will become self-sustaining. Congress required the strategic plan to describe agricultural research opportunities and objectives identified by FFAR's advisory councils and approved by the board, and to provide transparency into the foundation's grant review and awards process. FFAR released the required strategic plan in 2019; the plan outlines several actions that the foundation will pursue to diversify its funding base, but also indicates that federal funds are a "critical component of FFAR's model." <2.5. Henry M. Jackson Foundation for the Advancement of Military Medicine> In 1983, Congress created the Foundation for the Advancement of Military Medicine now known as the Henry M. Jackson Foundation for the Advancement of Military Medicine (HJF) to carry out and participate in cooperative medical research and education projects with the Uniformed Services University of the Health Sciences (USU). In describing the purpose and role of HJF, Congress stated: The Foundation will be a nonprofit, charitable corporation which will receive gifts, grants and legacies on behalf of both itself and the Uniformed Services University . [By] channeling private resources to the Uniformed Services University, the Foundation will help the University and military medicine maintain advanced scientific teaching and research. In addition, the Foundation will support the growing international role of the University in its cooperative research in other countries and in its programs with medical schools training military officers both here and abroad. In general, HJF implements its mandate by offering research support and services to USU and other military research centers and facilities, including proposal development, research program administration and management, regulatory compliance, technical staffing, and technology transfer assistance. P.L. 98-132 authorized HJF to enter into contracts with USU "for the purposes of carrying out cooperative enterprises in medical research, medical consultation, and medical education, including contracts for the provision of such personnel and services as may be necessary to carry out such cooperative enterprises." According to HJF, more than 1,100 of HJF's employees participated in or supported collaborative research and education projects at USU in FY2018. For example, HJF entered into a license agreement from the USU-HJF Joint Office of Technology Transfer with Profectus BioSciences to develop a human vaccine for the Nipah virus an infection that can lead to inflammation of the brain and respiratory illness based on a technology created more than 15 years ago by a USU scientist. Specifically, HJF, USU, and Profectus are collaborating on the development of a clinical assay to evaluate the Nipah virus vaccine response. The collaborative research is supported, in part, by NIH. HJF is governed by a council of directors composed of appointed and ex officio members, including the chair and ranking members of the Senate and House Committees on Armed Services and the Dean of USU. The ex officio members are responsible for appointing the other members of the council of directors. In 2018, Congress increased the number of appointed members from four to six. A council-appointed executive director oversees the day-to-day operations of HJF. In 1986, Congress appropriated $10 million to HJF "to support the purposes of the Foundation, its on-going educational and public services programs and to serve as a memorial to the late Senator Henry M. Jackson." However, HJF's revenue is generally derived from the administration of grants and contracts HJF manages or administers grants and contracts on behalf of USU or other military research centers and collects indirect costs or overhead associated with the provided services. According to HJF, in FY2018, the foundation received $483.9 million in grants and contracts and expended $468.7 million on program services associated with research grants and contracts. According to USAspending.gov, since FY2008, HJF has received $6.1 billion in federal grants, contracts, and other financial assistance, primarily from the Department of Defense. <2.6. Department of Veterans Affairs Nonprofit Research and Education Corporations> In 1988, Congress authorized the Secretary of Veterans Affairs (VA) to establish a nonprofit corporation (NPC) at any of the VA medical centers "to provide a flexible funding mechanism" and facilitate the conduct of approved research. Congress extended the authority of NPCs in 1999 to include approved education and training activities (e.g., educational courses for patients and families and training for VA employees associated with new technologies or specialties). Congress also authorized any NPC to facilitate the conduct of approved research and education activities at more than one VA medical center (such NPCs are known as multi-medical center research corporations). In general, NPCs implement their mandate by providing research and management services to VA medical researchers conducting projects using non-VA funds. In describing the need for NPCs, Congress indicated that support for research from non-VA funding sources, including NIH, DOD, private foundations, and companies, benefited veteran patients, where existing mechanisms for administering non-VA funds had disadvantages. A committee report on the authorizing legislation stated: Funds that are channeled through affiliated medical schools [to VA medical centers] are subject to the terms and conditions which the school applies to funds obtained by researchers employed by the school. In many cases, this means that a percentage, which varies from 15 to 40 percent or more, of the funds obtained is retained by the medical school for "overhead" and related expenses of the school. In contrast, by authorizing NPCs to accept, administer, retain, and spend non-VA research funding on behalf of VA investigators, indirect costs or overhead derived from such funds could be applied to the VA medical center. According to the U.S. Government Accountability Office (GAO): Nonprofit corporations support VA's research environment by funding a portion of the department's research needs, such as laboratory equipment and improvements to infrastructure, and by providing flexible personnel and contracting arrangements to respond to investigators' needs. The governance structure of NPCs is specified in the statute providing the authority for their establishment and further defined by VA procedures and instructions. Each NPC is governed by a board of directors with its day-to-day operations overseen by an executive director. The VA Secretary is responsible for appointing all members of an NPC's board of directors. Each board of directors must include the director of the VA medical center, the chief of staff, and associate chief(s) of staff of the medical center all acting within their official capacities and two non-federal members. Additionally, the board of directors of a multi-medical research corporation must include the director of each of the VA medical centers served by the NPC. The executive director of an NPC is appointed by its board of directors with the concurrence of the VA Under Secretary of Health. Congress placed NPCs under the jurisdiction of VA's Inspector General; required each NPC to conduct regular audits and provide an annual statement of operations, activities, and accomplishments to VA; and made all NPC employees, including members of the board of directors, subject to conflict of interest policies adopted by the NPC. Additionally, VA conducts oversight of NPCs through the agency's Nonprofit Program Oversight Board (NPOB), the Nonprofit Program Office (NPPO), and the Veteran Health Administration's Chief Financial Officer (VHA CFO). Specifically: The NPOB is VA's senior management oversight body for NPCs. It reviews the activities of NPCs to ensure they are consistent with VA policies and makes recommendations to the VA Secretary (through the Under Secretary of Health) regarding any changes in NPC policy. The NPPO serves as a liaison between VHA and the NPCs. It provides oversight, guidance, and education to the NPCs to ensure compliance with VA policies and regulations, conducts triennial reviews of NPCs, compiles NPC data for an annual report to Congress, and ensures any corrective measures are implemented. The VHA CFO provides financial oversight of NPCs. There are currently 83 NPCs located in 42 states, Puerto Rico, and the District of Columbia. According to VA, in 2017, NPCs generated $261 million in revenue spending 84% on research, 15% on administrative overhead, and 1% on education related activities. VA describes NPCs as "self-sustaining . [F]unds are not received into a government account. No appropriation is required to support these activities." However, approximately 70% of the revenue generated by NPCs in 2017 ($183 million) was from federal sources primarily NIH and DOD grants and contracts. VA states that from 2008 to 2017 NPCs contributed $2.2 billion to VA research. In 2018, NPCs generated $236 million in revenues. <3. Issues for Congress> In an April 2019 report, the National Institute of Standards and Technology described benefits that might be realized if Congress provided all federal R&D agencies with the authority to establish agency-related nonprofit research foundations. For example, they can actively seek "gifts and other monetary donations from private donors and organizations," and they "have facilitated technology commercialization and generated revenue to reinvest in R&D." In addition, while government agencies are, with certain exceptions, subject to management laws designed to ensure accountability, transparency, and fairness, agency-related foundations may be exempt from them. Such exemptions may facilitate flexibility, but they may also make it difficult for stakeholders to verify on an ongoing basis that the foundation's activities are directed to the public good rather than private gain. Prior to extending the authority to establish agency-related nonprofit research foundations and corporations to additional federal agencies and laboratories there are a number of issues that Congress might consider. The following sections examine some of these issues, including transparency, independence, and effectiveness. <3.1. Conflict of Interest and Industry Influence> To date, most federal agencies with affiliated nonprofit research foundations or corporations work in the area of medicine and public health an area where public trust is considered essential. The conflict of interest policies of affiliated nonprofit research foundations and corporations vary. For example, all HJF employees are required to submit annual conflict disclosure and certification forms; under its cooperative agreement with the CDC, the CDC Foundation is required to conduct a conflict of interest review prior to accepting a gift for the CDC from a potential donor; and VA employees serving as NPC directors are subject to federal conflict of interest laws and regulations. Recent media reports and investigations have nevertheless raised concerns about conflicts of interest and the potential for undue industry influence in public-private R&D partnerships formed and managed by agency-related nonprofit foundations. According to some, industry involvement in R&D partnerships has the potential to erode public trust and confidence in federal agency decisionmaking, which may be based, in part, on the results of R&D supported by the public-private partnership. Others assert that issues associated with conflict of interest are overstated and rare, that other biases beyond financial ties also influence research, and that policy responses to such concerns have been overly burdensome and are impeding the translation of R&D into new products and technologies. Three recent examples illustrate these conflict of interest and undue influence concerns. <3.1.1. R&D Partnership Between the National Football League and NIH> In 2015 and 2016, reporting by ESPN and others alleged that the National Football League (NFL) attempted to influence the selection of a grant recipient by NIH for a study on a degenerative brain disease known as CTE, or chronic traumatic encephalopathy. NIH had planned to fund the CTE study from a $30 million NFL donation to NIH through FNIH. Democratic committee staff of the House Committee on Energy and Commerce launched an investigation of the allegations and issued a report in May 2016. The report stated: Democratic Committee staff received evidence to support the allegations that the NFL inappropriately attempted to influence the selection of NIH research applicants funded by the NFL's $30 million donation to NIH . Despite the NFL's attempts to influence the selection of research applicants, the integrity of the peer review process was preserved and funding decisions were made solely based on the merit of the research applications. The report included findings and recommendations directed at FNIH and its role in the creation and management of R&D partnerships between NIH and the private sector. Specifically, the investigation found that "FNIH did not adequately fulfill its role of serving as an intermediary between NIH and the NFL" and recommended the following actions: FNIH must establish clearer guidelines regarding donor communications with NIH. FNIH must come to a mutual understanding with donors at the beginning of the process regarding their degree of influence over the research they are funding and remind donors that NIH policy prohibits them from exerting influence at any point in the grant decision-making process. FNIH should provide donors with the clear, unambiguous language from the NIH Policy Manual, which states that a donor may not dictate terms that include "any delegation of NIH's inherently governmental responsibilities or decision-making," or "participation in peer review or otherwise exert real or potential influence in grant or contract decision-making." NIH and FNIH should jointly develop a process to address concerns about donors acting improperly. FNIH issued the following statement in response to the report: The FNIH acted appropriately, with integrity and transparency, in fulfilling its mandate under SHRP [Sports and Health Research Program]. As acknowledged by the Democratic Staff report, the governing documents among the FNIH, NIH and NFL made clear that the NIH had exclusive control over the scientific and administrative aspects of the program. The report makes recommendations regarding communication issues that the FNIH has already identified and taken steps to address. The FNIH has strengthened protocols around communications among NIH, NIH researchers and FNIH donors that will prevent unauthorized contact among parties. The FNIH has had a long history of successful and productive public-private partnerships in support of the NIH mission. These adjustments to governing agreements will help ensure the success of future scientific partnerships in support of human health. On September 15, 2016, four Republican members of the House Committee on Energy and Commerce sent a letter to the Inspector General of the Department of Health and Human Services related to the allegations of undue influence by the NFL. The letter stated: There appear to be important questions and concerns related to these events that have not been adequately vetted or addressed . This grant award has become the source of tremendous public debate and, therefore, clear answers and lessons are necessary. For these the reasons, the Committee refers this matter to your attention and requests a thorough and objective review by the Office of the Inspector General to assess whether the policies and procedures concerning public-private partnerships under the authority of FNIH were followed, and if not, what revisions or reforms should be considered. This will help SHRP, and other public-private partnerships, avoid similar distractions in the future so all parties can focus on what matters most the science. <3.1.2. Opioid Epidemic Public-Private Partnership> In 2018, NIH was engaged with FNIH and potential donors, including pharmaceutical companies, regarding the development of a public-private partnership that would seek to address the opioid crisis. Potential conflicts of interest and ethical concerns were raised by both NIH and FNIH. The Director of NIH asked a working group of the Advisory Committee to the NIH Director (ACD) and the FNIH Board to examine the appropriateness of establishing a partnership between NIH, FNIH, and various pharmaceutical companies. On March 16, 2018, the FNIH Board held a meeting to discuss the possibility of forming such a partnership. The FNIH Board decided that an approach that relies disproportionately on input and financing from pharmaceutical companies is not appropriate in this circumstance. The FNIH is uncomfortable seeking or receiving monetary donations from any pharmaceutical company or industry representative at this time to support implementation of the research plan as presented. Doing so poses unacceptably high risk of public skepticism concerning the eventual scientific outcomes given the responsibility some companies may bear in having created the crisis. Also, it would likely undermine public confidence in the many other valuable public-private partnerships that the NIH and FNIH have created and will create to improve human health. The principal recommendation of the A CD working g roup was that "to mitigate the risk of real or perceived conflict of interest, it would be preferable if only Federal funds were used to support the research efforts included in this public-private partnership." The working group also offered a number of recommendations if a public-private partnership were to be established, including that any industry funding should be provided without preconditions and in full, that NIH should publicly disclose its research plan for the partnership, and that the agency should clarify and define the governance structure associated with the collaboration. In April 2018, NIH launched the Helping to End Addiction Long-term (HEAL) Initiative an agency-wide "effort to speed scientific solutions to stem the national opioid public health crisis." In a press release on the use of public-private partnerships as part of HEAL, the Director of NIH stated: I fully embrace [the ACD Working Group's] recommendation that NIH should vigorously address the national opioid crisis with government funds and decline cash contributions through partnerships from the private sector. It is clear, however, that the opioid crisis is beyond the scope of any one organization or sector. NIH and biopharmaceutical companies bring unique skills and assets to bear on this crisis. NIH will use the ACD guidance as we continue our discussions with biopharmaceutical organizations to advance focused medication development for addiction and pain We agree with and appreciate the ACD's guidance to verify donated assets and tailor the governance structures for each initiative that may be pursued through public-private partnerships to ensure appropriate oversight and guidance. Any partnerships that NIH does establish with biopharmaceutical organizations as part of the HEAL Initiative will be done with the utmost transparency. <3.1.3. Coca-Cola Funding for Obesity Research> Some have raised concerns regarding the ability of industry to influence CDC and FDA decisionmaking by way of donations to the CDC Foundation and Reagan-Udall Foundation. For example, some have questioned donations made by the Coca-Cola Company to the CDC Foundation for research and other activities associated with obesity and diet issues. In February, two members of Congress sent a letter asking the Department of Health and Human Services' Inspector General to "investigate the relationship between the CDC and Coca-Cola outlined in this report [a 2019 paper by Hessari et al.], determine whether there is a broader pattern of inappropriate industry influence at the agency, and make recommendations to address this issue." In addition to managing conflicts of interest that may result from public-private partnerships facilitated by an agency-related nonprofit foundation, a 2016 report by a working group of the Advisory Committee to the CDC Director noted the need for clarity in managing conflict of interest between the nonprofit foundation and the federal agency itself. The working group pointed out that the CDC Foundation "benefits financially from the grants it accepts and manages on the CDC's behalf," and noted that "ongoing oversight and management transparency are essential components of a conflict-of-interest policy, particularly where, as here, one of the partners is an agency whose greatest asset is the confidence of the public in its impartiality and integrity." <3.2. Transparency and Accountability> In response to concerns regarding conflict of interest and the potential for industry influence, in addition to the need to maintain public confidence in related decisionmaking, some have called for additional transparency in the development and management of public-private partnerships. These calls extend to agency-related nonprofit research foundations. For example, the Advisory Committee to the Director of the CDC recommended that the CDC should expect the CDC Foundation to provide the agency with a "complete record of evidence" and a "fully reasoned analysis" as to why a proposed public-private partnership would meet the agency's standards for entering into a private financial relationship. The advisory committee recommended that CDC only enter into a private financial relationship if the proposed project aligns with a stated CDC priority, the projected benefits to public health outweigh any potential risks to public trust in CDC, and the proposed project does not primarily benefit the private funder or position the private funder to exercise undue influence over CDC. Some have also called for the harmonization of policies, procedures, and standards used by federal agencies and agency-related nonprofit research foundations in the evaluation of proposed public-private partnerships and in addressing conflict of interest and undue influence concerns associated with such partnerships. In 2018, House appropriations report language directed both the CDC Foundation and FNIH to abide by existing reporting requirements and include in their respective annual reports the source and amount of all monetary gifts to the Foundation, as well as the source and description of all gifts of real or personal property. Each annual report shall disclose a specification of any restrictions on the purposes for which gifts to the Foundation may be used. The annual report shall not list "anonymous" as a source for any gift that includes a specification of any restrictions on the purpose for which the gift may be used. According to media reports, officials from FNIH and the CDC Foundation assert they are in compliance with existing disclosure requirements as outlined in their governing statutes and their annual reporting is similar to other nonprofit organizations. <3.3. Independence and Oversight> By design, quasi-governmental entities, including agency-related nonprofit research foundations and corporations, are independent from the federal government. Congress explicitly states in the statutes creating each of the organizations described above that the entity is "not an agency or instrumentality of the United States." In addition, these entities generally are not controlled by federal officials. However, Congress also structured these organizations so they would be associated with and in some instances largely reliant on the federal agencies they were created to support. The degree of independence an agency-related nonprofit research foundation or corporation has and by extension the degree of congressional oversight and influence varies (i.e., the more independent, the less opportunity for oversight and vice versa). This variability can be ascribed, in large part, to the primary function of the organization and the governance structure established by Congress. For example, the primary function of HJF and the VA NPCs is to provide research and grant management services to USU and VA medical researchers, respectively. These researchers are full- or part-time federal employees who are, in general, conducting approved research using federal funds from other agencies (NIH and DOD). The financial strength of these entities is thus closely tied to the ability of USU and VA researchers to compete successfully for NIH, DOD, and other research grants. Additionally, the boards governing HJF and VA NPCs include Members of Congress and federal officials. Specifically, the board of a VA NPC must include the director, chief of staff, and associate chief(s) of staff of the VA medical center all acting in their official capacities and the board of HJF includes the chair and ranking members of the Senate and House Committees on Armed Services. These factors likely make HJF and VA NPCs less independent than some of the other agency-related nonprofit foundations described in this report. However, given their dependency in particular on other federal funds several questions arise: Why are these entities needed? Are there alternative mechanisms for administering research funds from other federal agencies? Should these entities be soliciting more private funds? Comparatively, FNIH, the CDC Foundation, and the Reagan-Udall Foundation likely have more autonomy given their primary function of raising funds from the private sector to benefit and advance the mission of their affiliated federal agencies. Nonetheless, the success of these entities requires some level of interconnectedness to ensure their efforts are closely aligned with the priorities and needs of the federal agencies they support. Additionally, FNIH, the CDC Foundation, and the Reagan-Udall Foundation all receive administrative and operating costs from their affiliated federal agencies, in addition to having federal officials as ex officio members of their boards. These factors likely provide the federal agencies with the ability to influence and shape the relationship. The use of federal funds in supporting the operating expenses of these entities also provides a mechanism for congressional oversight. FFAR's purpose to advance the research mission of USDA is similar to that of FNIH, the CDC Foundation, and the Reagan-Udall Foundation. However, the way in which FFAR executes its mission primarily as a grant-making organization may offer more independence. Congress tasked FFAR with developing and pursuing an agricultural R&D agenda that minimizes the duplication of existing USDA efforts and is focused on unmet needs and emerging areas of national and international significance. Currently, FFAR executes its R&D agenda by leveraging federal funds with non-federal sources. The use of federal funds provides Congress with an effective oversight mechanism. Congressional intent, however, is for FFAR to become self-sufficient. In the Agriculture Improvement Act of 2018 ( P.L. 115-334 ), Congress made the transfer of federal funds contingent upon the development of a strategic plan detailing how FFAR will become self-sustaining. Opportunities for congressional oversight or influence may diminish as FFAR becomes self-sustaining. That being said, FFAR's strategic plan states: This strategic planning and sustainability exploration demonstrates that FFAR requires Congressional funding to remain relevant, viable, to maintain velocity, and increase impact toward conquering the food and agriculture challenges of this time . In the event that public funding for FFAR diminishes, the Foundation would be severely limited in its ability to deliver on the ambition and scale of impact that Congress originally envisioned. In this scenario, FFAR's capacity to fund ambitious, potentially transformative research projects would be restricted. Indeed, stakeholders indicate that FFAR will find it much more challenging to bring partners to the table and mobilize private funding as its credibility and matching power will be weakened without the "halo effect" of its Congressional funding and mandate. FFAR's strategic plan also indicates that the foundation will increase the non-federal matching requirement for some projects, diversify its co-funders, develop an annual fundraising program, pursue fees for services, and expand the size and number of consortia as part of its sustainability plan. <3.4. Effectiveness and Need> To date, the effectiveness of agency-affiliated nonprofit research foundations or corporations has not been formally assessed. In a 2002 report on the VA NPCs, GAO noted, "VA headquarters has not evaluated nonprofit corporations to measure their effectiveness or compare their operations. This type of high-level oversight and evaluation is a critical element of success." It is also unclear what might constitute an appropriate measure of success: number of partnerships formed? amount of private funds raised? number of technologies commercialized? Some have argued based on the amount of private funds raised that the Reagan-Udall Foundation is not meeting expectations and is less successful than the CDC Foundation and FNIH. The Reagan-Udall Foundation has raised approximately $21 million over the last decade for FDA. In comparison, FNIH provided NIH with that amount in a single year ($22 million in 2017). Lower than expected fundraising efforts have led some to question the purpose and need for the Reagan-Udall Foundation. It is difficult to determine the degree to which the partnerships developed and managed by some of the agency-affiliated nonprofit research foundations would have occurred in the absence of such foundations. Federal agencies engage in public-private partnerships through other mechanisms, including cooperative research and development agreements, and while federal agencies are not permitted to solicit gifts from the private sector, many are authorized to accept donations. Report language in the Senate energy and water appropriations bill for FY2020 directs the Department of Energy (DOE) to contract with the National Academy of Public Administration for a study that would assess existing agency-affiliated nonprofit research foundations to assist Congress in evaluating the merits of creating a DOE-related nonprofit research foundation. House appropriators included similar language in their version of the energy and water appropriations bill, but directed DOE to undertake the review on its own. <4. Concluding Observations> Congress established each of the agency-related nonprofit research foundations and corporations described in this report with the aim of advancing the R&D mission of the associated federal agency. While the way each organization pursues its mandate varies, three broad categories of activity emerge: (1) soliciting private funds to support R&D performed by federal scientists; (2) soliciting private funds (leveraged against federal funds in the case of FFAR) to support R&D performed by non-federal researchers; and (3) administering and managing research funds from federal and non-federal sources. These activities are often carried out as part of public-private R&D partnerships formed and managed by an agency-related nonprofit research foundation or corporation. While public-private partnerships are generally viewed as an effective mechanism for advancing the state of science and facilitating the transfer and commercialization of technologies to the marketplace, some say it is less clear whether agency-related nonprofit research foundations and corporations represent an effective model for the formation and management of such partnerships. Federal science agencies already have the authority to create partnerships, and many have the authority to accept gifts from individuals, nonprofits, and private sector firms in support of federal R&D and other agency activities. Federal agencies, however, are not permitted to solicit private funds, and many argue that the "red tape" associated with the establishment of public-private partnerships by federal agencies is a deterrent. This situation may cause some observers to raise the question would a federal agency have achieved similar results in the absence of its agency-related nonprofit research foundation or corporation? While this question cannot be answered with any certainty, it does offer an opportunity for consideration of potential policy options. Among the options that Congress might consider are: crafting a broad, general nonprofit research foundation authority that federal science agencies could draw on to create an entity that meets their specific needs; examining the existing authorities of individual federal science agencies and, as appropriate, supplementing those authorities to increase the flexibility of an agency to enter into public-private partnerships; creating additional agency-related nonprofit research foundations on a case-by-case basis, tailored to the specific needs of particular federal science agencies; and maintaining the status quo, i.e., allowing agency-related nonprofit research foundations and corporations that currently exist to continue, and requiring other federal agencies to use their existing authorities to enter into public-private R&D partnerships and transfer federal technologies to the marketplace. If Congress decides to create additional agency-related nonprofit research foundations, clear articulation of purpose, role, and governance structure may be needed to maintain an appropriate balance between the flexibility associated with being a nongovernmental entity and the need for accountability, transparency, and public confidence in the results of R&D partnerships and other supported activities. <4.1. Appendix. Federally Initiated and Funded Venture Capital Firms> Over the last two decades, federal agencies and Congress have established several venture capital (VC) firms. The intent of these firms, including In-Q-Tel (IQT), the Army Venture Capital Initiative (AVCI), and Red Planet Capital (RPC), has been to help ensure agency access to leading-edge technologies and input into technology development to address mission needs. Several factors have contributed to the initiation of these organizations: a long-term shift in the composition of U.S. research and development funding from the federal government to the private sector; the substantial role of small start-ups in driving innovation, especially in information technology; and expanded U.S. and global commercial market opportunities that have diminished the relative attractiveness of serving the federal government market. In-Q-Tel. The Central Intelligence Agency (CIA), with congressional approval, established the first federal government-sponsored VC firm, In-Q-Tel, in 1999 . IQT is an independent, not-for-profit, non-stock company. It is a strategic investor that works closely with intelligence community (IC) entities and the Department of Defense (DOD). IQT's portfolio includes data analytics, cybersecurity, artificial intelligence, machine learning, ubiquitous computing, information technology solutions, communications, novel materials, electronics, commercial space, remote sensing, power and energy, and biotechnology. While the CIA has broad statutory authority in how it may expend its funds, according to a RAND Corporation report, the agency reportedly used an approach based on DOD's "other transaction" authority (10 U.S.C. 2371) for developing its contract with IQT. IQT has a management team and a board of trustees. The CIA is the executive agent for IQT. Federal agencies, primarily the CIA, provide funding to IQT, which in turn provides investments to selected firms based on needs articulated by the CIA. The In-Q-Tel Interface Center (QIC), a small group of CIA employees, serves as a liaison between the CIA and IQT. IQT investments generally range from $500,000 to $3 million. IQT asserts that for each dollar it has invested, private investors have provided $16. IQT pairs its investment with a development agreement in which IQT and the company work together to adapt the technology to meet IC needs. If successful, IC customers can buy the product directly from the company. IQT asserts that its model delivers rapid, cost-effective solutions: IQT identifies and adapts "ready-soon" technologies off-the-shelf products that can be modified, tested, and delivered for use within 6 to 36 months depending on the difficulty of the problem. Approximately 75% of our deals involve multiple agencies from the [IC] and defense communities, which means a more cost efficient use of taxpayers' dollars. Profits from the liquidation of an IQT investment are allocated between additional IQT investing activity and other strategic information technology initiatives defined by the CIA, in accordance with a memorandum of understanding between the CIA and IQT. Army Venture Capital Initiative. In January 2002, Congress directed the Secretary of the Army to establish a venture capital investment corporation using $25 million previously appropriated to the Army for basic and applied research. The Army and Arsenal Venture Capital (formerly Military Commercial Technologies, Inc. (MILCOM)) jointly manage the AVCI through OnPoint Technologies, LLC (OPT), a not-for-profit corporation. In this relationship, the Army serves as strategic investor; provides guidance on technology priorities to OPT through its Communications Electronics Command (CECOM); and, through CECOM, provides administrative and contractual support to OPT. Army funds provided to OPT support investments and OPT expenses. Proceeds from the liquidation of investments are used in part to pay compensation to Arsenal Venture Capital with the balance used for new investments. In addition to providing $25 million in FY2002, Congress appropriated $12.6 million in FY2003 and $14.3 million in FY2005 for the AVCI. In addition, in FY2004, the Army reprogrammed $10 million for the AVCI. Since FY2005, Congress has not appropriated funds to the AVCI. AVCI invests alongside other VC firms at all stages of development, making investments of $500,000 to $2 million. AVCI asserts that for each dollar it has invested, private investors have provided $22. Focused initially on innovative power and energy technologies, AVCI's technology focus areas have expanded to include emerging technologies such as autonomy, cyber, health information systems, and advanced materials. AVCI seeks to foster the development of these technologies and their transfer to the soldier while attaining net returns for the investing organizations from commercial and defense markets. AVCI asserts that it is able to engage technology firms outside the traditional reach of DOD. Red Planet Capital. In September 2006, the National Aeronautics and Space Administration (NASA) announced a partnership with Red Planet Capital, Inc., a non-profit organization, to establish a venture capital fund, Red Planet Capital (RPC). The fund was "to support innovative, dual-use technologies [to] help NASA achieve its mission, [and] better position these technologies for future commercial use." NASA was to provide strategic direction and technical input to RPC, while the organization's principals were to identify investment opportunities, perform due diligence, and manage its equity investments. NASA intended to invest approximately $75 million over five years. Congress provided $6 million for RPC in FY2007. In FY2008, President George W. Bush proposed termination of the program: Government-sponsored venture capital funds provide a mechanism for Government agencies to indirectly take equity stakes in private firms, which potentially creates significant conflicts of interest and market distortions. The Administration believes that this mechanism poses difficult challenges to Government oversight and should only be used in exceptional situations . The Administration further evaluated the fund and determined that, for NASA, these funds are better directed towards current priorities that will produce cost-effective, ascertainable outcomes. Congress provided no further appropriations for RPC. According to NASA, the fund was eliminated before it took an equity stake in any company. A RAND Corporation study states that RPC made a single investment prior to its termination, though it did not specify the amount. Over the last two decades, federal agencies and Congress have established several venture capital (VC) firms. The intent of these firms, including In-Q-Tel (IQT), the Army Venture Capital Initiative (AVCI), and Red Planet Capital (RPC), has been to help ensure agency access to leading-edge technologies and input into technology development to address mission needs. Several factors have contributed to the initiation of these organizations: a long-term shift in the composition of U.S. research and development funding from the federal government to the private sector; the substantial role of small start-ups in driving innovation, especially in information technology; and expanded U.S. and global commercial market opportunities that have diminished the relative attractiveness of serving the federal government market. In-Q-Tel. The Central Intelligence Agency (CIA), with congressional approval, established the first federal government-sponsored VC firm, In-Q-Tel, in 1999 . IQT is an independent, not-for-profit, non-stock company. It is a strategic investor that works closely with intelligence community (IC) entities and the Department of Defense (DOD). IQT's portfolio includes data analytics, cybersecurity, artificial intelligence, machine learning, ubiquitous computing, information technology solutions, communications, novel materials, electronics, commercial space, remote sensing, power and energy, and biotechnology. While the CIA has broad statutory authority in how it may expend its funds, according to a RAND Corporation report, the agency reportedly used an approach based on DOD's "other transaction" authority (10 U.S.C. 2371) for developing its contract with IQT. IQT has a management team and a board of trustees. The CIA is the executive agent for IQT. Federal agencies, primarily the CIA, provide funding to IQT, which in turn provides investments to selected firms based on needs articulated by the CIA. The In-Q-Tel Interface Center (QIC), a small group of CIA employees, serves as a liaison between the CIA and IQT. IQT investments generally range from $500,000 to $3 million. IQT asserts that for each dollar it has invested, private investors have provided $16. IQT pairs its investment with a development agreement in which IQT and the company work together to adapt the technology to meet IC needs. If successful, IC customers can buy the product directly from the company. IQT asserts that its model delivers rapid, cost-effective solutions: IQT identifies and adapts "ready-soon" technologies off-the-shelf products that can be modified, tested, and delivered for use within 6 to 36 months depending on the difficulty of the problem. Approximately 75% of our deals involve multiple agencies from the [IC] and defense communities, which means a more cost efficient use of taxpayers' dollars. Profits from the liquidation of an IQT investment are allocated between additional IQT investing activity and other strategic information technology initiatives defined by the CIA, in accordance with a memorandum of understanding between the CIA and IQT. Army Venture Capital Initiative. In January 2002, Congress directed the Secretary of the Army to establish a venture capital investment corporation using $25 million previously appropriated to the Army for basic and applied research. The Army and Arsenal Venture Capital (formerly Military Commercial Technologies, Inc. (MILCOM)) jointly manage the AVCI through OnPoint Technologies, LLC (OPT), a not-for-profit corporation. In this relationship, the Army serves as strategic investor; provides guidance on technology priorities to OPT through its Communications Electronics Command (CECOM); and, through CECOM, provides administrative and contractual support to OPT. Army funds provided to OPT support investments and OPT expenses. Proceeds from the liquidation of investments are used in part to pay compensation to Arsenal Venture Capital with the balance used for new investments. In addition to providing $25 million in FY2002, Congress appropriated $12.6 million in FY2003 and $14.3 million in FY2005 for the AVCI. In addition, in FY2004, the Army reprogrammed $10 million for the AVCI. Since FY2005, Congress has not appropriated funds to the AVCI. AVCI invests alongside other VC firms at all stages of development, making investments of $500,000 to $2 million. AVCI asserts that for each dollar it has invested, private investors have provided $22. Focused initially on innovative power and energy technologies, AVCI's technology focus areas have expanded to include emerging technologies such as autonomy, cyber, health information systems, and advanced materials. AVCI seeks to foster the development of these technologies and their transfer to the soldier while attaining net returns for the investing organizations from commercial and defense markets. AVCI asserts that it is able to engage technology firms outside the traditional reach of DOD. Red Planet Capital. In September 2006, the National Aeronautics and Space Administration (NASA) announced a partnership with Red Planet Capital, Inc., a non-profit organization, to establish a venture capital fund, Red Planet Capital (RPC). The fund was "to support innovative, dual-use technologies [to] help NASA achieve its mission, [and] better position these technologies for future commercial use." NASA was to provide strategic direction and technical input to RPC, while the organization's principals were to identify investment opportunities, perform due diligence, and manage its equity investments. NASA intended to invest approximately $75 million over five years. Congress provided $6 million for RPC in FY2007. In FY2008, President George W. Bush proposed termination of the program: Government-sponsored venture capital funds provide a mechanism for Government agencies to indirectly take equity stakes in private firms, which potentially creates significant conflicts of interest and market distortions. The Administration believes that this mechanism poses difficult challenges to Government oversight and should only be used in exceptional situations . The Administration further evaluated the fund and determined that, for NASA, these funds are better directed towards current priorities that will produce cost-effective, ascertainable outcomes. Congress provided no further appropriations for RPC. According to NASA, the fund was eliminated before it took an equity stake in any company. A RAND Corporation study states that RPC made a single investment prior to its termination, though it did not specify the amount.

Federal research and development (R&D) has played a significant role in strengthening the innovative capacity of the United States to achieve goals such as economic competitiveness, national security, improved healthcare, and protection of the environment. The results of federal R&D have led to scientific breakthroughs and new technologies with broad social and economic impacts, including artificial intelligence, the internet, and magnetic resonance imaging. The global landscape for innovation is rapidly evolving—the pace of innovation has increased and the composition of R&D funding has changed (e.g., public versus private funding and the U.S. share of global R&D has declined ). These changes have led some to call for new approaches and the expansion of existing federal authorities to help the United States maintain its leadership in innovation, research, and technology. Over the years, Congress has created several agency-related nonprofit research foundations and corporations to advance the R&D needs of the federal government. The stated goals and potential benefits of these quasi-governmental entities include: (1) providing a flexible and efficient mechanism for establishing public-private R&D partnerships; (2) enabling the solicitation, acceptance, and use of private donations to supplement the work performed with federal R&D funds; (3) increasing technology transfer and the commercialization of federally funded R&D; (4) improving the ability of federal agencies to attract and retain scientific talent; and (5) enhancing public education and awareness regarding the role and value of federal R&D. This report provides an overview of the purpose and intent, governance structure, and federal funding associated with selected congressionally mandated, agency-related nonprofit research foundations and corporations: the Foundation for the National Institutes of Health, the National Foundation for the Centers for Disease Control and Prevention, the Reagan-Udall Foundation for the Food and Drug Administration, the Foundation for Food and Agriculture Research, the Henry M. Jackson Foundation for the Advancement of Military Medicine and the nonprofit research and education corporations associated with the Department of Veterans Affairs. The report also identifies potential issues for consideration related to oversight of existing agency-related nonprofit research foundations and corporations as well as potential issues for consideration should Congress elect to establish additional ones. Specifically, while government agencies are, with certain exceptions, subject to management laws and regulations designed to ensure accountability, transparency, and fairness, agency-related research foundations and corporations are generally exempt from them. This situation may raise questions about how Congress and federal agencies can protect the public interest and ensure confidence in the decisionmaking of such entities. Additionally, recent concerns that some have raised related to conflict of interest, the potential for industry influence, and questions about effectiveness may prompt further examination of these entities. Among the options that Congress might consider are: crafting a broad, general nonprofit research foundation authority that federal science agencies could draw on to create an entity that meets their specific needs; examining the existing authorities of individual federal science agencies and, as appropriate, supplementing those authorities to increase the flexibility of an agency to enter into public-private partnerships; creating additional agency-related nonprofit research foundations on a case-by-case basis, tailored to the specific needs of particular federal science agencies; and maintaining the status quo, i.e., allowing agency-related nonprofit research foundations and corporations that currently exist to continue, and requiring other federal agencies to use their existing authorities to enter into public-private R&D partnerships and transfer federal technologies to the marketplace.

crs_R40638

crs_R40638_0

<1. The Congressional Role> Over the years, the federal intergovernmental system of governance has been characterized by many scholars as becoming increasingly centralized and coercive, with the federal government using federal grants, federal mandates, and federal preemption of state authority to expand its influence in many policy areas previously viewed as being the traditional responsibility of state and local governments. In FY2019, the federal government is expected to provide state and local governments about $750 billion in federal grants encompassing a wide range of public policy areas, such as health care, transp ortation, income security, education, job training, social services, community development, and environmental protection. Federal grants account for just under one-third of total state government funding, and more than half of state government funding for health care and public assistance. Congress has a central role in determining the scope and nature of federal grant programs. In its legislative capacity, Congress first determines what it wants to accomplish and then decides whether a grant-in-aid program is the best means to achieve it. Congress then selects which of the six grant mechanisms to use (project categorical grant, formula categorical grant, formula-project categorical grant, open-end reimbursement categorical grant, block grant, or general revenue sharing), and crafts legislation to accomplish its purpose, incorporating the chosen grant instrument. As with all legislation generally, Congress oversees the grant's implementation to ensure that the federal administrating agency is held accountable for making certain that congressional expectations concerning program performance are met. Federalism scholars agree that congressional decisions concerning the scope and nature of the federal grants-in-aid system are influenced by both internal and external factors. Internal factors include congressional party leadership and congressional procedures; the decentralized nature of the committee system; the backgrounds, personalities, and ideological preferences of individual Members (especially those of party leaders and committee and subcommittee chairs and ranking minority Members); and the customs and traditions (norms) that govern congressional behavior. Major external factors include input provided by voter constituencies, organized interest groups (especially the National Governors Association, the National League of Cities, U.S. Conference of Mayors, and the National Association of Counties), the President, and executive branch officials. Although not directly involved in the legislative process, the Supreme Court, through its rulings on federalism issues, also influences congressional decisions concerning federal grant-in-aid programs. Overarching all of these factors is the evolving nature of cultural norms and expectations concerning government's role in American society. Over time, although the American public has become increasingly skeptical of government performance, they have also become increasingly accepting of government activism in domestic affairs generally, and of federal government activism in particular. Federalism scholars attribute this increased acceptance of, and sometimes demand for, government action as a reaction to the industrialization and urbanization of American society; technological innovations in communications, which have raised awareness of societal problems; and exponential growth in economic interdependencies brought about by an increasingly global economy. This report provides a historical synopsis of the evolving nature of the federal grants-in-aid system, focusing on the role Congress has played in defining the system's scope and nature. It begins with an overview of the contemporary federal grants-in-aid system and then examines its evolution over time, focusing on the internal and external factors that have influenced congressional decisions concerning the system's development. It concludes with an assessment of the scope and nature of the contemporary federal grants-in-aid system and raises several issues for congressional consideration, including possible ways to augment congressional capacity to provide effective oversight of this system. <2. Federal Grants to State and Local Governments> Different federal departments and agencies, including the U.S. Census Bureau, the Government Accountability Office (GAO), and the U.S. Office of Management and Budget (OMB), use different definitions to determine what counts as a federal grant-in-aid program. However, there is agreement on the general characteristics associated with each grant type. The three general types of federal grants to state and local governments are categorical grants, block grants, and general revenue sharing (see Table 1 ). Categorical grants can be used only for a specifically aided program and usually are limited to narrowly defined activities. Block grants can be used only for a specifically aided set of programs and usually are not limited to narrowly defined activities. General revenue sharing can be used for any purpose not expressly prohibited by federal or state law and is not limited to narrowly defined activities. The four types of categorical grants are project categorical grants, formula categorical grants, formula-project categorical grants, and open-end reimbursement categorical grants. Project categorical grants are awarded on a competitive basis through an application process specified by the federal agency making the grant. Formula categorical grants are allocated among recipients according to factors specified within enabling legislation or administrative regulations (e.g., population, median household income, per capita income, poverty, and number of miles driven). Formula-project categorical grants use a mixture of fund allocation means, typically involving the use of a formula specified within enabling legislation or administrative regulations to allocate available funds among the states, followed by an application process specified by each recipient state to allocate available funds on a competitive basis among local governments or other eligible applicants. Open-end reimbursement categorical grants, often regarded as the equivalent of formula categorical grants, provide a reimbursement of a specified proportion of recipient program costs, eliminating competition among recipients as well as the need for an allocation formula. <2.1. A Continuum of Federal Grant Administrative Conditions> Of the six grant types, project categorical grants typically impose the most restraint on recipients (see Table 1 ). Federal administrators have a high degree of control over who receives project categorical grants (recipients must apply to the appropriate federal agency for funding and compete against other potential recipients who also meet the program's specified eligibility criteria); recipients have relatively little discretion concerning aided activities (funds must be used for narrowly specified purposes); and there is a relatively high degree of federal administrative conditions attached to the grant, typically involving the imposition of federal standards for planning, project selection, fiscal management, administrative organization, and performance. General revenue sharing imposes the least restraint on recipients. Federal administrators have a low degree of discretion over who receives general revenue sharing (funding is allocated automatically to recipients by a formula or formulas specified in legislation); recipients have broad discretion concerning aided activities; and there is a relatively low degree of federal administrative conditions attached to the grant, typically involving periodic reporting criteria and the application of standard government accounting procedures. Block grants are at the midpoint in the continuum of recipient discretion. Federal administrators have a low degree of discretion over who receives block grants (after setting aside funding for administration and other specified activities, the remaining funds are typically allocated automatically to recipients by a formula or formulas specified in legislation); recipients have some discretion concerning aided activities (typically, funds can be used for a specified range of activities within a single functional area); and there is a moderate degree of federal administrative conditions attached to the grant, typically involving more than periodic reporting criteria and the application of standard government accounting procedures, but with fewer conditions attached to the grant than project categorical grants. <3. Outlays for Federal Grants to State and Local Governments> As indicated in Table 2 , outlays for federal grants to state and local governments have generally increased over the years, with a relatively rapid increase from FY2008 through FY2010 due primarily to the enactment of P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provided state and local governments $274.7 billion in grants, contracts, and loans combined. State and local governments received $52.9 billion in ARRA grants, contracts, and loans in FY2009, $111.9 billion in FY2010, $68.8 billion in FY2011, $25.6 billion in FY2012, 11.8 billion in FY2013, and $1.6 billion in FY2014 to assist their recovery from the "Great Recession" (December 2007-June 2009). As expected, after reaching $608.4 billion in FY2010, outlays for federal grants to state and local governments declined somewhat in FY2011 as ARRA funding began to unwind, and then declined further to $544.6 billion in FY2012 and to $546.2 billion in FY2013 as most of ARRA's funding expired. Outlays for federal grants to state and local governments have increased since then, primarily due to increased outlays for Medicaid. As indicated in Table 2 and Figure 1 , in FY2019 health care is anticipated to account for more than half of total outlays for federal grants to state and local governments (an estimated $453.9 billion in FY2019, or 60.6% of the total), followed by income security ($114.2 billion, or 15.2%), education, training, employment, and social services ($67.5 billion, or 9.0%), transportation ($67.2 billion, or 9.0%), community and regional development ($21.9 billion, or 2.9%), and all other ($24.9 billion, or 3.3%). Medicaid, with $418.7 billion in expected federal outlays in FY2019, has, by far, the largest budget of any federal grant-in-aid program. Ten other federal grants to state and local governments are expected to have federal outlays in excess of $10 billion in FY2019: Federal-Aid Highways ($43.9 billion), Child Nutrition ($23.9 billion), Tenant Based Rental Assistance Section 8 vouchers ($22.3 billion), the Children's Health Insurance Fund ($18.4 billion), Accelerating Achievement and Ensuring Equity (Education for the Disadvantaged $17.4 billion), Temporary Assistance for Needy Families ($16.5 billion), Special Education ($13.2 billion), State Children and Families Services Programs ($10.9 billion), Urban Mass Transportation Grants ($10.3 billion), and the Disaster Relief Fund ($10.2 billion). Table 3 provides data on outlays for federal grants to state and local governments in nominal and constant (inflation-adjusted) dollars, as a percentage of total federal outlays and as a percentage of national gross domestic product (GDP) for selected fiscal years since FY1960. It also indicates the percentage of these outlays that are payments for individuals, as opposed to payments for capital improvements and government operations. As indicated in Table 3 , total outlays for federal grants to state and local governments have generally increased since the 1960s. However, the magnitude of those increases has varied over the years. For example, outlays for federal grants to state and local governments increased, in nominal dollars, 187.3% during the 1960s, 246.4% during the 1970s, 33.4% during the 1980s, 98.0% during the 1990s, and 98.6% during the first decade of the 2000s. Outlay growth for federal grants to state and local governments has, in most years, exceeded inflation. However, as indicated in Table 3 , those outlays, expressed in constant (FY2012) dollars, did not keep pace with inflation during the early 1980s and during the early 2010s. Federalism scholars have noted that since the 1980s, the focus of federal grants to state and local governments has shifted from providing assistance to places (e.g., to build public highways, support public education, criminal justice systems, economic development endeavors, and government administration) to people (e.g., providing health care benefits, social welfare income, housing assistance, and social services). Much of this shift is attributed to Medicaid, which has experienced relatively large outlay growth over the past several decades. As shown in Table 3 , during the 1960s and 1970s about one-third of total outlays for federal grants to state and local governments were for individuals, compared with more than 75% in FY2018. <4. Number of Federal Grants to State and Local Governments> In the past, the now-defunct U.S. Advisory Commission on Intergovernmental Relations (ACIR) and OMB used information contained in the Catalog of Federal Domestic Assistance (CFDA) to count the number of federal grants to state and local governments. The CFDA "is a government-wide compendium of Federal programs, projects, services, and activities that provide assistance or benefits to the American public." It lists 15 categories of federal grants: formula grants (including formula categorical grants, formula-project categorical grants, and block grants); project grants; direct payments for specified uses to individuals and private firms; direct payments with unrestricted use to beneficiaries who meet federal eligibility requirements; direct loans; guaranteed/insured loans; insurance; sale, exchange, or donation of property and goods; use of property, facilities, and equipment; provision of specialized services; advisory services and counseling; dissemination of technical information; training; investigation of complaints; and federal employment. It lists all authorized federal grant programs, including grants that have not received an appropriation. Because the CFDA focuses on the needs of applicants, if a program uses a separate application or other delivery mechanism, the CFDA considers it a separate program. This complicates efforts to count federal grants to state and local governments. ACIR periodically published counts of funded federal grants to state and local governments during the 1960s and then for Fiscal Years 1975, 1978, 1981, 1984, 1987, 1989, 1991, 1993, and 1995. OMB provided counts of funded grants to state and local governments for FY1980-FY2003. Because they used a different methodology to determine which grant programs to include in their count, their results differed. OMB consistently identified fewer federal grants to state and local governments than ACIR. For example, in FY1995, OMB identified 608 funded federal grants to state and local governments compared to ACIR's count of 633. No authoritative count of funded federal grants to state and local governments is known to have been issued in recent years. ACIR included in its counts all direct cash grants to state or local governmental units, other public bodies established under state or local law, or their designee; payments for grants-in-kind, such as purchases of commodities distributed to state or local governmental institutions; payments to nongovernmental entities when such payments result in cash or in-kind services or products that are passed on to state or local governments; payments to state and local governments for research and development that is an integral part of their provision of services; and payments to regional commissions and organizations that are redistributed at the state or local level to provide public services. OMB counted only grants for traditional governmental operations, as defined in OMB Circular A-11. The definition covered only grants that "support State or local programs of government operations or provision of services to the public." It excluded federal grants that went directly to individuals, fellowships, most grants to nongovernmental entities, and technical research grants. A search of the CFDA's 2018 print edition and electronic version indicated that state governments, local governments, U.S. territories, and federally recognized tribal governments are eligible to apply for 1,616 federal grants (defined as authorized project grants, formula grants, cooperative agreements, direct payments for specified uses, and direct payments for unrestricted uses). Of these grants, 141 were not currently funded, 160 were research or fellowship programs that were not targeted solely at either public institutions of higher education or other public agencies, and 41 had broad eligibility extending beyond state and local governments. Removing them from the list left 1,274 funded federal grants to state and local governments (see Table 4 ). Because there is no consensus on the methodology used to count federal grants to state and local governments, the 1,274 count of federal grants to state and local governments listed in Table 4 should be viewed as illustrative, as opposed to definitive, of the current number of federal grants to state and local governments. As the data in the table suggest, the number of federal grants to state and local governments increased slowly from 1902 to 1930. Then, partly in reaction to the Great Depression, Congress doubled the number of federal grants to state and local governments during the 1930s, and continued to increase the number of federal grants to state and local governments during the 1940s and 1950s. During the mid-1960s, Congress increased the number of federal grants to state and local governments exponentially, primarily in response to national social movements concerning poverty and civil rights. Nine federal grants to state and local governments were added in 1961, 17 in 1962, 20 in 1963, 40 in 1964, 109 in 1965, 53 in 1966, 3 in 1967, and 4 in 1968. Congress continued to increase the number of federal grants to state and local governments during the 1970s, but at a relatively slow pace as it addressed budgetary constraints presented by "guns versus butter" issues associated with the Vietnam conflict. Then, at the urging of President Ronald Reagan in 1981, Congress approved the largest reduction in the number of federal grants to state and local governments in American history by creating 9 new block grants which consolidated 77 categorical grants and revised two earlier block grants. The Reagan Administration also eliminated funding for 62 categorical grants in 1981, mainly through authority provided under P.L. 97-35 , the Omnibus Budget Reconciliation Act of 1981. The number of federal grants to state and local governments increased relatively slowly during the remainder of the 1980s, as Congress faced budgetary constraints presented by demographic changes in American society that led to escalating costs for several federal entitlement programs, especially for Social Security, Medicare and Medicaid, and by the Reagan Administration's general opposition to the expansion of the federal grants-in-aid system. As the data in Table 4 indicate, the number of federal grants to state and local governments continued to increase during the 1990s, and has continued to do so, but more slowly in recent years. <5. Land Grants and "Dual Federalism": 1776-1860> The relative influence of internal versus external factors on congressional decisions affecting the federal grants-in-aid system has varied, both over time and in each specific policy area. Prior to the Civil War, external factors, especially cultural norms and expectations concerning government's role in American society, restricted congressional options concerning enactment of federal grant-in-aid programs for state and local governments. During this time period, America was primarily a rural nation of farmers. Travel conditions were, compared with today's standards, primitive. Many Americans rarely left their home state, and many others never set foot in another state. Government as we know it today, with regulations and spending programs affecting many aspects of American life, did not exist. Although ratification of the Articles of Confederation and Perpetual Union on March 1, 1781, formally established the United States of America, personal allegiance was still directed more toward the individual's home state than to the nation. It was an era of what federalism scholars have called "dual federalism," where states were expected to be the primary instrument of governance in domestic affairs. However, even before the Constitution's ratification, the federal government found ways to provide state and local governments with assistance to encourage them to pursue national policy objectives. For example, under the Articles of Confederation and Perpetual Union, Congress did not have the power to lay and collect taxes and relied heavily on state donations to fund the government. This lack of revenue, and expenses related to national defense, limited congressional spending options in domestic affairs. The Congress of the Confederation addressed that issue by adopting the Land Ordinance of 1785. The Ordinance generated revenue for the government by authorizing the sale of land acquired from Great Britain at the conclusion of the American Revolutionary War. The Ordinance also required every new township incorporated in those lands, called the Ohio Country, to be subdivided into 36 lots (or sections), each 1 mile square. Lots 8, 11, 26, and 29 were reserved for the United States. The new townships were required to use Lot 16 "for the maintenance of public schools, within the said township. " Some schools are still located in lot 16 of their respective townships, although many of the school lots were sold to raise money for public education. These land grants for public education were reauthorized by Congress in the Northwest Ordinance of 1787. Congress subsequently adopted similar legislation for all states admitted to the union from 1802 to 1910, with exceptions for Texas, which retained all of its public land, and Maine and West Virginia, which were formed from other states. From 1802 to 1848, one lot in each township was to be used for education, from 1848 to 1890 two lots, and from 1894 to 1910, with one exception, four lots. When the Framers met in Philadelphia in 1787 to rework the Articles of Confederation and Perpetual Union, the national economy was in recession, state governments were saddled with large debts left over from the Revolutionary War, the continental dollar was unstable and destined to be a national joke ("not worth a continental"), the navy could not protect international shipping, and the army proved unable to protect its own arsenal during Shay's rebellion in 1786. To address these issues, Congress was provided 17 specific powers in Article 1, Section 8 of the U.S. Constitution, ratified in 1789, including the power to coin money, establish post offices, regulate copyright laws, declare war, regulate the Armed Forces, borrow money, and, importantly, lay and collect taxes. The power to lay and collect taxes provided Congress the means to expand the federal government's role in domestic affairs. Moreover, the Supreme Court issued several rulings under Chief Justice John Marshall concerning congressional authority to regulate interstate commerce that effectively cleared the way for congressional activism in domestic policy. However, the prevailing view in Congress at this time was that any power not explicitly provided to Congress in the Constitution was excluded purposively, suggesting that in the absence of specific, supporting constitutional language the exercise of governmental police powers (the regulation of private interests for the protection of public safety, health, and morals; the prevention of fraud and oppression; and the promotion of the general welfare) was either meant to be a state or local government responsibility, or outside the scope of governmental authority altogether. Nevertheless, during the 1800s there were congressional efforts, primarily from representatives from western states, to adopt legislation to provide federal cash assistance for various types of internal improvement projects to encourage western migration and promote interstate commerce. Most of these efforts failed, primarily due to sectional divisions within Congress which, at that time, made it difficult to build coalitions large enough to adopt programs that targeted most of their assistance to western states. Some opposition came from Members of Congress who viewed reducing the national debt from the American Revolutionary War as a higher priority. Other Members opposed federal interventions as a matter of political philosophy. They viewed the provision of cash assistance for internal improvements, other than for post roads, which were specifically mentioned in the Constitution as a federal responsibility, a violation of states' rights, as articulated in the Tenth Amendment: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Given the prevailing views concerning the limited nature of the federal government's role in domestic affairs, Congress typically authorized federal land grants to states instead of authorizing direct cash assistance to states for internal improvements. For example, in 1823 Ohio received a federal land grant of 60,000 acres along the Maumee Road to raise revenue to improve that road. In 1827, Ohio received another federal land grant of 31,596 acres to raise revenue for the Columbus and Sandusky Turnpike. In 1841, nine states (Ohio, Indiana, Illinois, Alabama, Missouri, Mississippi, Louisiana, Arkansas, and Michigan) and, with three exceptions, all subsequent newly admitted states were designated land grant states and guaranteed at least 500,000 acres of federal land to be auctioned to support transportation projects, including roads, railroads, bridges, canals, and improvement of water courses, that expedited the transportation of United States mail, military personnel, and military munitions. By 1900, over 3.2 million acres of federal land were donated to these states to support wagon road construction. Congress also authorized the donation of another 4.5 million acres of federal land to Illinois, Indiana, Michigan, Ohio, and Wisconsin to raise revenue for canal construction and 2.225 million acres to Alabama, Iowa, and Wisconsin to improve river navigation. In addition, states were provided 37.8 million acres for railroad improvements and 64 million acres for flood control. States were provided wide latitude in project selection, and federal oversight and administrative regulations were minimal. Although land grants were prevalent throughout the 1800s, given prevailing views concerning states' rights, land grants, as well as cash grants, were subject to opposition on constitutional grounds. For example, in 1854, Congress adopted legislation authorizing the donation of 10 million acres of federal land to states to be sold to provide for the indigent insane. President Franklin Pierce vetoed the legislation, claiming that I cannot find any authority in the Constitution making the federal government the great almoner of public charity throughout the United States. To do so would, in my judgment, be contrary to the letter and spirit of the Constitution, and subversive of the whole theory upon which the union of these States is founded.... I respectfully submit that, in a constitutional point of view, it is wholly immaterial whether the appropriation be in money, or in land.... should this bill become a law, ... the several States instead of bestowing their own means on the social wants of their own people, may themselves ... become humble supplicants for the bounty of the Federal Government, reversing the state's true relation to this Union. One notable exception to the federal reluctance to provide cash grants to states occurred in 1837. The federal government used proceeds from western land sales to retire the federal debt in 1836. The Deposit Act of 1836 directed that, after reserving $5 million, any money in the federal Treasury on January 1, 1837, shall be distributed to states in proportion to their respective representation in the House and Senate. There were no restrictions placed on how states were to use the funds. About $30 million was distributed to states in three quarterly payments in 1837 before the banking crisis of 1837 led to a recession and payments were stopped. To avoid a promised veto from President Andrew Jackson, the legislation indicated that the funds were a deposit subject to recall, rather than an outright grant of cash. Overall, domestic policy in the United States prior to the Civil War was dominated by states. As a federalism scholar put it: With respect to the classic trinity of sovereign powers taxation, the police power, and eminent domain the states enjoyed broad autonomous authority, which they exercised vigorously. Indeed, property law, commercial law, corporation law, and many other aspects of law vital to the economy were left almost exclusively to the states.... Federalism thus provided a receptive structure for expressions of state autonomy and pursuit of state-oriented economic objectives, not only as a matter of constitutional theory and the distribution of formal authority but also as a matter of real power. <6. The Origins of the Modern Grants-In-Aid System: 1860-1932> The Union's victory in the Civil War marked the beginning of a second evolutionary era in American federalism. It effectively put to an end to the doctrine that the Constitution was a compact among sovereign states, each with the right to nullify an act of Congress that the state deemed unconstitutional, and each with the legal right to secede from the Union. It also signaled the triumph of the northern states' commercialism over the southern states' agrarianism: Unimpeded by the political opposition of the southern slavocracy, the Republican coalition of north and west carried through a program of comprehensive changes that insured the expansion of industry, commerce, and free farming.... Instead of the policies of economic laissez faire that the slavocracy had demanded ... the Republicans substituted the doctrine that the federal government would provide assistance for business, industry, and farming; the protective tariff, homestead, land subsidies for agricultural colleges, transcontinental railroads and other internal improvements, national banks. When the defeated south came back into the Union, it had to accept the comprehensive alternation in government policy and economic institutions that historian Charles A. Beard was later to name the Second American Revolution. Following the war, three constitutional amendments the Thirteenth adopted in 1865, the Fourteenth adopted in 1868, and the Fifteenth Amendment adopted in 1870 abolished slavery, prohibited states from denying due process or equal protection to any of their citizens, and banned racial restrictions on voting, respectively. In addition, Congress enacted the Reconstruction Acts of 1867 and 1868, which imposed military government on the formally secessionist states and required universal manhood suffrage. Despite this active federal presence in domestic policy in the South following the Civil War, the concept of dual federalism and deference to states in domestic affairs remained a part of American culture. For example, several Supreme Court rulings during this time period limited congressional efforts to override state laws on civil rights, in effect leaving civil and voting rights matters to states until the 1950s and 1960s. The Supreme Court also limited congressional efforts to regulate interstate commerce by limiting the Interstate Commerce Commission's authority. Reflecting prevailing views concerning dual federalism, and limited federal fiscal resources, the first on-going, federal cash grant to states, other than for the support of the National Guard, was not adopted until 1879. P.L. 45-186, the Federal Act to Promote the Education of the Blind, appropriated $250,000 to create a perpetual source of income for the purchase of teaching materials for the blind. It marked the beginning of the modern federal grants-in-aid system. The funds were used to purchase interest bearing bonds. The interest was used to purchase teaching materials for the blind. These teaching materials were then distributed among the states (and the District of Columbia) annually, with each state applying for assistance receiving a share of the available teaching materials based on the state's share of the total number of pupils enrolled in public schools of education for the blind. The second federal cash grant to states was authorized by the Hatch Act of 1887. It provided each state an annual cash grant of $15,000 to establish agricultural experiment stations. In 1888, an annual grant of $25,000 was appropriated for the care of disabled veterans in state hospitals. States were provided $100 per disabled veteran. In 1890, funding was provided to subsidize resident instruction in the land grant colleges made possible by the Morrill Act of 1862, which provided each existing and future state with 60,000 acres of federal land, plus an additional 30,000 acres for each of its congressional representatives, to be sold for the endowment, support, and maintenance of at least one college where the leading subject was agriculture and the mechanic arts. In 1902, there were five federal grants to states and local governments (in addition to funding for the National Guard): teaching materials for the blind, agricultural experiment stations, the care of disabled veterans, resident instruction in the land grant colleges, and funding to the District of Columbia. Outlays for these grants were about $7 million in FY1902, or about 1% of total federal outlays. State and local government total outlays at that time were slightly over $1 billion, evidence of the relatively limited nature of federal involvement in domestic policy at that time. An important difference between land grants and cash grants had emerged, even at this early date. Because federal grants were funded from the federal treasury, many in Congress felt that they had an obligation to ensure that the funds were spent by states in an appropriate manner. As a result, Congress began to attach an increasing number of administrative requirements to these grant programs. For example, in 1889, states were required to match federal funding for the care of disabled veterans or lose it. The Morrill Act of 1890 authorized the Secretary of the Interior to withhold payments, pending an appeal to Congress, from states that failed to meet conditions specified in the act. In 1895, expenditures authorized by the Hatch Act for agricultural experiment stations were conditioned by annual audits. In 1911, funding authorized by the Weeks Act to support state efforts to prevent forest fires was conditioned by advance approval of state plans for the funds' use, annual audits and inspections, and a state matching requirement. The Sixteenth Amendment's ratification in 1913 provided Congress the authority to lay and collect taxes on income. Although the federal income tax initially generated only modest amounts, it provided Congress an opportunity to shift from land grants to cash grants to encourage state and local governments to provide additional attention to policy areas Congress considered of national interest. Between 1913 and 1923, Congress adopted new federal grant-in-aid programs for highway construction, vocational education, public health, and maternity care. Outlays for federal grants to state and local governments increased from $12 million in FY1913 to $118 million in FY1922. In 1923, Massachusetts brought suit against the Secretary of the Treasury, Andrew Mellon, claiming that the maternal care grants authorized by the Sheppard-Towner Act of 1921 were unconstitutional infringements on states' rights. The Supreme Court dismissed the case on the grounds that it lacked jurisdiction. Nonetheless, Justice George Sutherland, writing on behalf of the unanimous Court, indicated that, in his view, this form of congressional spending was not unconstitutional because federal grants to state and local governments were optional and, as such, were not coercive instruments. As a result, although few new federal grants to state and local governments were adopted during the remainder of the 1920s, those grants were now accepted as a legal means for Congress to encourage state and local governments to pursue national goals. <7. The New Deal and the Rise of "Cooperative Federalism": 1932-1960> Political scientists contend that about once in every generation partisan affiliations realign across the nation, typically taking a few years to materialize but often becoming apparent during a "critical" presidential election. Critical elections typically result in relatively dramatic and lasting changes in the partisan composition within Congress and state governments. They also usually signal the coming to power of a new partisan coalition that dominates congressional decisionmaking for a relatively long period of time. For example, the election of 1896 ended the political stalemate between the Democratic and Republican parties and solidified the Republican Party's position as the majority party for the next 36 years. The election of 1932 signaled a new period of Democratic Party dominance, particularly in the "Solid South," that lasted until the 1970s, when partisan attachments began to weaken, southern states became increasingly Republican, and the two major political parties became increasingly competitive, each seemingly on the verge of achieving majority party status at various times, but unable to retain that status permanently. The 1932-1960 period also saw the emergence of the "congressional conservative coalition," the unofficial title given to the shifting political alliances of southern, conservative Democrats and Republican Members. The conservative coalition became an increasingly important counter-balance to large Democratic majorities in both houses of Congress. Members of the conservative coalition generally advocated balanced budgets and states' rights, especially in civil rights legislation. They used congressional procedures, such as the filibuster or threat of a filibuster, to win concessions from the Democratic majority, and, in some instances, to prevent legislation they opposed from becoming law. They also benefitted from the congressional seniority system, which, during this time period, allocated committee chairmanships according to seniority. Because many of the congressional districts in the "solid south" were noncompetitive seats, southern representatives held a disproportionate number of committee chairmanships in the House, further strengthening the conservative coalition's influence on congressional policymaking. The conservative coalition prevented civil rights legislation from being enacted during this time period, but it could not prevent Democratic majorities in the House and Senate from expanding the federal government's presence in domestic policy. However, throughout this time period, the conservative coalition actively sought concessions to ensure that any new federal programs, including any new grants to state and local governments, respected state rights. As a result, the grant-in-aid programs adopted during this time period tended to be in policy areas where state and local governments were already active, such as in education, health care, and highway construction, or where additional federal assistance was welcomed, such as job creation. Also, federal administrative conditions attached to these grants during this era focused on the prevention of corruption and fraudulent expenditures as opposed to encouraging states to move in new policy directions. As a result, federalism scholars have labeled this time period as an era of "cooperative federalism," where intergovernmental tensions were relatively minor and state and local governments were provided flexibility in project selection. Faced with unprecedented national unemployment and economic hardship, President Franklin Delano Roosevelt advocated a dramatic expansion of the federal government's role in domestic affairs during his presidency, including an expansion of federal grant-in-aid programs as a means to help state and local governments combat poverty and create jobs. Congress approved 16 new, continuing federal grants to state and local governments from 1933 to 1938, and increased funding for federal grants to states and local governments from $214 million in FY1932 to $790 million in FY1938. Congress also enacted several temporary, emergency relief grant-in-aid programs that distributed federal funds to states according to the state's fiscal capacity. Congress devised mathematical formulas, based on a variety of economic and business measures, to allocate funding to each state, resulting in the share of relief funds varying among states based on the formula's assessment of need. At their peak, in 1935, emergency relief measures provided states nearly $1.9 billion to create jobs and provide emergency assistance for the unemployed. The emergency relief programs were terminated during the 1940s, but they established a precedent for extensive federal involvement with state and local governments in areas of national concern and for the use of mathematical formulas for distributing federal assistance. The Social Security Act of 1935 (SSA) was, arguably, the most significant legislative enactment of the New Deal period. It established a federal presence in social welfare policy. New federal grant-in-aid programs were established for old age assistance, aid to the blind, aid to dependent children, unemployment compensation, maternal and child health, crippled children, and child welfare. The act also enhanced federal oversight of grants to state and local governments as auditing requirements were now required in almost all grant programs. In addition, in 1939, state employees administering SSA programs were required to be selected by merit system procedures, a major advancement for the development of professional state and local government administration and a signal of the declining influence of state and local party bosses in American society. In 1940, the Hatch Act restricted the political activities of state and local government employees paid with federal funds. Legally, New Deal legislation was based on an expanded interpretation of congressional authority to spend through grant-in-aid programs to promote the nation's welfare under Article 1, Section 8, clause 1 of the Constitution, often referred to as the congressional "spending power." Federal expenditures through grant-in-aid programs during the New Deal were made in several functional areas, including some, such as social welfare, that were traditionally viewed as state responsibilities. Opponents of an expanded role for the federal government in domestic policy argued that New Deal grant programs precluded state action in these traditionally state functional areas and, as such, violated the Constitution's Tenth Amendment. Advocates of an expansion of federal involvement in domestic affairs argued that the power of Congress to spend is more extensive than, rather than concurrent with, enumerated or even implied law-making powers. This disagreement led to a number of Supreme Court cases, a full discussion of which is beyond the scope of this report. The Supreme Court rejected the New Deal's expansion of federal authority in 8 of the first 10 cases that it decided. Then, after President Roosevelt's failed legislative proposal to "pack the Court" in 1937, the Supreme Court upheld the constitutionality of several New Deal laws, including the Social Security Act. As a federalism scholar noted, A new era of judicial construction had been launched. The commerce power was given broad interpretation in cases upholding the Labor Relations Act. The older distinction between direct and indirect effects of commercial activity was abandoned and the more realistic "stream-of-commerce" concept adopted. The scope of Federal taxing power was also broadened expansively. In sanctioning the Social Security Act, the unemployment excise tax on employers was upheld as a legitimate use of the tax power, and the grants to the states were viewed as examples of Federal-state collaboration, not Federal coercion. The act's old-age and benefit provisions were deemed to be proper because "Congress may spend money in aid of general welfare." When combined, these decisions obviously amounted to last rites for judicial dual federalism. Although the Supreme Court was no longer viewed as a major obstacle for the expansion of the federal grants-in-aid system, external factors led to a reduction in outlays for federal grants to state and local governments from FY1939 to FY1946 as Congress focused on defense-related issues during World War II. For example, outlays for federal grants to state and local governments averaged $947 million from FY1939 through FY1946, less than half of the New Deal's peak. Following the war, the number of federal grants to state and local governments began to increase at a somewhat accelerated pace, reaching 68 grants in 1950 and 132 grants in 1960. Outlays for federal grants to state and local governments also accelerated, from $859 million in FY1945, to $2.3 billion in FY1950, to $3.2 billion in FY1955, and to $7 billion in 1960. A new development was increased outlays targeted at urban areas, such as grants for airport construction (1946), urban renewal (1949), and urban planning (1954). The most significant federal grant-in-aid program enacted during the 1950s was the $25 billion, 13-year Federal-Aid Highway Act of 1956, which authorized the construction of the then-41,000 mile National System of Interstate and Defense Highways, with a 1972 target completion date. For the next 35 years, federal surface transportation policy focused on the completion of the interstate system. <8. The Great Society and the Rise of "Coercive Federalism": 1960-1980> The 1960s was a turbulent decade, marked by both political and social upheaval of historic proportions. Three leading public figures were assassinated: President John F. Kennedy in 1963, civil rights leader the Reverend Martin Luther King Jr. in 1968, and President Kennedy's brother, presidential candidate and Senator Robert Kennedy, in 1968. The civil rights movement, led by the Reverend King, was often met with violent resistance, with bombings of black churches, murders of civil rights workers, and televised police beatings of civil rights demonstrators. One of the defining moments of the civil rights movement was the march on Washington, DC, in August 1963, where the Reverend King made his famous "I Have A Dream" speech. Congress responded to the social turmoil by adopting the Civil Rights Act of 1964, which superseded state civil rights laws by prohibiting discrimination based on race, color, religion, or national origin; the Voting Rights Act of 1965, which superseded state election laws by outlawing literacy tests, poll taxes, and other means to discourage minority voting; and the Civil Rights Act of 1968, which superseded state civil rights laws by prohibiting discrimination in the sale, rental, and financing of housing. Nonetheless, race riots took place in several urban areas in 1965 and in 1967. During the latter half of the decade, the civil rights movement was joined by what has been called the hippie movement, where young people rebelled against the conservative norms of the time and disassociated themselves from mainstream liberalism and materialism. This "counterculture" movement began in the United States and sparked a social revolution throughout much of the Western world. It began as a reaction against the conservatism and social conformity of the 1950s, and the U.S. government's military intervention in Vietnam. These groups questioned authority and government, and demanded more freedom and rights for women, gays, and minorities, as well as greater awareness of the need to protect the environment and address poverty. The social movements and social unrest that swept across the nation during the 1960s had a strong impact on Congress. Reflecting the growing public demand for congressional action to address civil rights, poverty, and the environment, in 1961 the House approved, 217-212, a proposal by Speaker Sam Rayburn to enlarge the House Rules Committee from 12 to 15 Members. Prior to the change, the House Rules Committee was divided, 6 to 6, along ideological lines. Because a majority vote is necessary for the issuance of a legislative rule, the House Rules Committee served as an institutional barrier to the passage of legislation that the committee's more conservative Members believed infringed on states' rights, including civil rights legislation. The enlargement of the House Rules Committee in 1961 signaled the weakening of the conservative coalition's influence within Congress and enabled the large Democratic majorities elected during the early 1960s in the House and Senate to adopt a succession of civil rights laws, highlighted by the previously mentioned Civil Rights Act of 1964. It also enabled Congress to expand the federal grants-in-aid system, focusing on grants designed to protect the environment and address poverty, both directly through public assistance and job training programs and indirectly through education, housing, nutrition, and health care programs. These legislative efforts were both supported and encouraged by President Lyndon Baines Johnson. For example, during his commencement address at the University of Michigan on May 22, 1964, President Johnson announced that he would establish working groups to prepare a series of White House conferences and meetings to develop legislative proposals to revitalize urban America, address environmental problems, and improve educational opportunities "to begin to set our course toward the Great Society" which "demands an end to poverty and racial injustice, to which we are totally committed." The term "The Great Society" came to symbolize legislative efforts during the 1960s to address poverty and racial injustice. In concert with President Johnson's Great Society initiatives, Congress nearly tripled the number of federal grants to state and local governments during the 1960s, from 132 in 1960 to 387 in 1968. In 1965 alone, 109 federal grants to state and local governments were adopted, including Medicaid, which now has, by far, the largest budget of any federal grant-in-aid program. Outlays for federal grants to state and local governments also increased, from $7 billion in FY1960 to $20 billion in FY1969. Functionally, federal grants for health care increased from $214 million in FY1960 to $3.8 billion in FY1970, for income security from $2.6 billion to $5.7 billion, for education, training, employment, and social services from $525 million to $6.4 billion, for transportation from $3 billion to $4.6 billion, and for community and regional development from $109 million to $1.7 billion. For the most part, these legislative efforts were not opposed by state and local government officials and their affiliated public interest groups (e.g., National Governors Association, National League of Cities, U.S. Conference of Mayors, and National Association of Counties), primarily because federal grants are voluntary and, in many instances, provided funding for activities that had broad public support. However, the new grants had a number of innovative features that distinguished them from their predecessors. Previously, most federal grants to state and local governments supplemented existing state efforts and, generally, did not intrude on state and local government prerogatives. Most of the federal grants created during the 1960s, on the other hand, were designed purposively by Congress to encourage state and local governments to move into new policy areas, or to expand efforts in areas identified by Congress as national priorities, especially in environmental protection and water treatment, education, public assistance, and urban renewal. In addition, there was an increased emphasis on narrowly focused project, categorical grants to ensure that state and local governments were addressing national needs. Most of the new grants had relatively low, or no, matching requirements, to encourage state and local government participation. New incentive grants encouraged states to move into new policy areas and to diversify eligible grant recipients, including individuals, nonprofit organizations, and specialized public institutions, such as universities. A greater emphasis also was on grants to urban areas. For example, outlays for federal grants targeted at metropolitan areas more than tripled during the 1960s, and grew to include about 70% of total federal grant-in-aid funding, up from about 55% at the beginning of the decade. There was also a greater emphasis on mandated planning requirements. Although most of the federal grants adopted during the 1960s were narrowly focused project, categorical grants, the first two block grants were enacted during this time period. P.L. 89-749, the Comprehensive Health Planning and Public Health Services Amendments of 1966, later known as the Partnership for Public Health Act, created a block grant for comprehensive health care services (now the Preventive Health and Health Services Block Grant). It replaced nine formula categorical grants. Two years later, Congress created the second block grant, the Law Enforcement Assistance Administration's Grants for Law Enforcement program (sometimes referred to as the "Crime Control" or "Safe Streets" block grant) in the Omnibus Crime Control and Safe Streets Act of 1968. Unlike the health care services block grant, it was created de novo , and did not consolidate any existing categorical grants. The rapid expansion of federal grants to state and local governments during the 1960s led to a growing concern that the intergovernmental grant-in-aid system had become dysfunctional and needed to be reformed. For example, ACIR argued that along with the expansion of the federal grant system came "a rising chorus of complaints from state and local government officials" concerning the inflexibility of fiscal and administrative requirements attached to the grants. It suggested that state and local government officials were subjected to an information gap because they found it difficult to keep up with the host of new programs and administrative requirements. It also cited the need for improved coordination among programs, noting that many state and local government officials were reporting administrative difficulties dealing with federal agencies and those agencies' regional offices: Between 1962 and 1965 four new systems of regional offices were established as a consequence of grants-in-aid legislation. Adding these bodies to the separate, already existing regional structures brought the total number of regional systems to 12. Regional boundaries and field office locations varied widely. Kentucky, to cite the most extreme case, had to deal with federal agencies in ten different cities. This confusion imposed burdens on the recipients of grants and also made the task of coordinating operations by federal agencies in pursuit of national objectives more difficult. During the 1970s, President Richard Nixon and his successor, President Gerald R. Ford, argued that the intergovernmental grant-in-aid system was dysfunctional and advocated the sorting out of governmental responsibilities, with the federal government taking the lead in some functional areas and states in others. They also advocated a shift from narrowly focused categorical grants, especially project categorical grants, toward block grants and revenue sharing. They argued that block grants and general revenue sharing provided state and local governments additional flexibility in project selection and promoted program efficiency by reducing administrative costs. They, and others, believed that state and local governments should be provided additional flexibility in project selection and relief from federal administrative requirements because greater reliance on state and local governments promotes a sense of state and local community responsibility and self-reliance; state and local government officials are closer to the people than federal administrators and, as a result, are better positioned to discern and adapt public programs to state and local needs and conditions; state and local governments encourage participation and civic responsibility by allowing more people to become involved in public questions; active state and local governments encourage experimentation and innovation in public policy design and implementation; active state and local governments reduce administrative workload on the federal government, which creates program efficiencies; and active state and local governments reduce the political turmoil that sometimes results from single policies that govern the entire nation. Opponents of a shift from categorical grants to block grants and revenue sharing presented several arguments, including because funding comes from the federal Treasury, Congress has both the right and an obligation to determine how that money is spent; many state and local governments lack the fiscal resources to provide levels of government services necessary to provide the poor and disadvantaged a minimum standard of living and equal access to governmental services, such as education and health care, which are essential to economic success. Therefore, Congress must act to ensure uniform levels of essential governmental services throughout the nation; state and local governments that have the fiscal resources to provide levels of government services necessary to provide the poor and disadvantaged a minimum standard of living and equal access to governmental services essential to economic success are often unable to do so because they compete with other state and local governments for business and taxpaying residents. As a result, state and local governments tend to focus available resources on programs designed to attract business investment and taxpaying residents to their communities and states rather than on programs assisting the poor and disadvantaged. Therefore, Congress must act to ensure uniform levels of essential governmental services throughout the nation; Congress has both the right and the obligation to ensure through the carrot of grant-in-aid programs and the stick of federal requirements that certain national goals, such as civil rights, equal employment opportunities, protection for the environment, and care for the poor and aged, are met because it is difficult to achieve change when reform-minded citizens must deal with 50 state governments and more than 79,000 local governments; and some governmental services have either costs or benefits that spill over onto other localities or states. Water and air pollution controls, for example, benefit not only the local community that pays for the air or water pollution controls, but all of the communities that are located downwind or downstream from that community. Because state and local taxpayers are generally reluctant to pay for programs whose benefits go to others, state and local governments often underfund programs with significant spillover effects. Therefore, Congress must act to ensure that these programs are funded at logical levels. Opponents also asserted that the arguments presented by advocates for a shift in emphasis to block grants and revenue sharing were actually a "smoke screen" masking their true intent which, allegedly, was to shift federal resources to their core constituencies. As mentioned previously, most federal grant-in-aid funding during the 1960s and 1970s was targeted to metropolitan areas, which, at that time, were considered Democratic Party strongholds. Many observers believed that shifting from project categorical grants to block grants or general revenue sharing would result in less money for metropolitan areas and more money for suburban and rural areas, areas that were more likely to be populated by Republicans than Democrats. This shift would occur because project categorical grants are awarded on a competitive basis by federal administrators while block grant and revenue sharing funding is allocated according to pre-determined formula, often with minimum funding guarantees for each state and with a portion of the funding determined by either population or per capita income. Because block grant and revenue sharing funding tends to be more geographically dispersed than project categorical grants, congressional debates over which grant mechanism was best had partisan overtones that often transcended discussions over which grant mechanism would improve grant performance. Some federalism scholars have also suggested that Congress tends to prefer categorical grants over block grants and revenue sharing because Members take pride in the authorship of sponsored programs. They argue that categorical grants provide more opportunities for sponsorship, and more opportunities for receiving political credit for that sponsorship, than block grants or revenue sharing. In their view, constituents are more interested in a Member's ability to serve in a material way than in their competence in broad policymaking or in "the rightness of positions on issues of principle, form or structure." As a result, they argue that Members are more likely to be recognized for sponsoring or supporting specific, narrowly focused categorical grants than by championing a more general block grant or revenue sharing approach. For example, they assert that Members are more likely to receive recognition and political credit from constituents for sponsoring and supporting legislation to prevent lead-based paint poisoning among children than for legislation covering the broad area of preventive health services. Presidents Nixon's and Ford's efforts to gain congressional approval for a shift in emphasis from categorical grants to block grants and revenue sharing were only partially successful. For example, in his 1971 State of the Union speech, President Nixon announced a plan to consolidate 129 federal grant programs in six functional areas 33 in education, 26 in transportation, 12 in urban community development, 17 in manpower training, 39 in rural community development, and 2 in law enforcement into what he called six "special revenue sharing" programs. Unlike the categorical grants they would replace, the proposed special revenue sharing programs had no state matching requirements and relatively few auditing or oversight requirements, and the funds were distributed automatically by formula without prior federal approval of plans for their use. The education, transportation, rural community development, and law enforcement proposals failed to gain congressional approval, primarily because they generated opposition from interest groups affiliated with the programs who worried that the programs' future funding would be compromised. However, three block grants, the first signed by President Nixon and the remaining two signed by President Ford, were approved. The Comprehensive Employment and Training Assistance Block Grant program, created by the Comprehensive Employment and Training Act of 1973, merged 17 existing manpower training categorical grant programs. The Community Development Block Grant program (CDBG), created by the Housing and Community Development Act of 1974, consolidated six existing community and economic development categorical grant programs. Title XX social services, later renamed the Social Services Block Grant program, was created de novo and, therefore, did not consolidate any existing categorical grant programs. It was authorized by the 1974 amendments of the Social Security Act, which was signed into law on January 4, 1975. Also, in 1972, general revenue sharing was approved by Congress. General revenue sharing distributed funds to states from 1972 to 1981 and to localities from 1972 to 1986. Nevertheless, Congress retained an emphasis on the use of categorical grants. On December 31, 1980, there were 534 categorical grant programs, 5 block grant programs, and 1 general revenue sharing program. Of the categorical grant programs, 361 were project categorical grants, 42 were project, formula categorical grants, 111 were formula categorical grants, and 20 were open-ended reimbursement categorical grants. Overall, categorical grants accounted for 79.3% of the $91.3 billion in outlays for federal grants to state and local governments that year, block grants accounted for 11.3%, and general revenue sharing 9.4%. Efforts to sort out governmental responsibilities were also met with resistance in Congress. For example, President Nixon's six special revenue sharing proposals would have provided state and local governments the leading role in decisionmaking in those six functional areas. Also, his proposed Family Assistance Plan would have replaced several public assistance categorical grant programs with a national public assistance system covering all low-income families with children. Although his Family Assistance Plan was not adopted, Congress did nationalize several adult-age public assistance grant-in-aid programs in 1972, including old-age assistance, aid to the blind, and aid to the permanently and totally disabled. <8.1. Another Related Development: Federal Mandates> Another related, new development during the 1960s and 1970s was the imposition by Congress of numerous federal mandates on state and local government officials. The concept of mandates covers a broad range of policy actions with centralizing effects on the intergovernmental system, including statutory direct-order mandates, both total and partial statutory preemption of state and local government law, federal tax policies affecting state and local tax bases, and regulatory action taken by federal courts and agencies. Many federalism scholars also consider program-specific and crosscutting federal grant administrative conditions mandates, even though the grants themselves are voluntary. Crosscutting requirements are, perhaps, the most widely recognized mandate. They are a condition of federal assistance that applies across-the-board to all, or most, federal grants to advance a national social or economic goal. Title VI of the Civil Rights Act of 1964 was the first post-World War II statute to use a crosscutting requirement. It specifies that No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program receiving Federal financial assistance. In 1980, OMB counted 59 crosscutting requirements intended to further national social or economic goals in a variety of functional areas, including education and the environment. Some of the statutory direct-order mandates adopted during this era included the Equal Employment Opportunity Act of 1972, which extended the prohibitions against discrimination in employment contained in the Civil Rights Act of 1964 to state and local government employment; the Fair Labor Standards Act Amendments of 1974, which extended the prohibitions against age discrimination in the Age Discrimination in Employment Act of 1967 to state and local government employment; and the Public Utilities Regulatory Policy Act of 1978, which established federal requirements concerning the pricing of electricity and natural gas. ACIR suggested that the expansion of federal intergovernmental regulatory activity during the 1960s and 1970s fundamentally changed the nature of intergovernmental relations in the United States: During the 1960s and 1970s, state and local governments for the first time were brought under extensive federal regulatory controls.... Over this period, national controls have been adopted affecting public functions and services ranging from automobile inspection, animal preservation and college athletics to waste treatment and waste disposal. In field after field the power to set standards and determine methods of compliance has shifted from the states and localities to Washington. The continued emphasis on categorical grants, the increased emphasis on provisions encouraging states to move in new policy directions, and, especially, the increased imposition of federal mandates on state and local governments during the 1960s and 1970s led some federalism scholars to label the 1960s and 1970s as the beginnings of a shift toward "coercive federalism." Cooperative features were still present, but congressional deference to state and local government prerogatives seen in previous eras was no longer in force. Instead of focusing primarily on the "carrot" of federal assistance to encourage state and local governments to pursue policies that aligned with national goals, Congress increasingly relied on the "stick" of federal mandates. <9. Congress Asserts Its Authority: The Devolution Revolution That Wasn't, 1980-2000> By the end of the 1970s, the social turmoil that marked the previous two decades had receded. Into the 1980s, the United States and most of the Western world experienced a revival of conservative politics, the advancement of free market solutions to improve government efficiency and solve social problems, and a renewed emphasis on materialism and the possession of consumer goods. Yet, at the same time, social change continued to affect American lifestyles, as women became fixtures in the workplace, the gay rights movement become more active, environmental concerns intensified, and rock concerts featuring the leading rock bands and performers of the era were televised to millions of viewers across the nation and the world to raise money for various social causes, such as famine relief, support for family farms, and AIDS prevention and treatment. The seemingly contradictory societal trends of self-promotion and altruism that swept across American society during the 1980s and 1990s were reflected in responses to national public opinion polls concerning politics and government. These polls evidenced a growing public hostility toward government intrusion and government performance, especially the federal government's performance, despite growing support for specific programs and regulations that represented the polar opposite of these attitudes. Perhaps reflecting these seemingly contradictory trends, during this era the public tended to elect a President of one political party and a Congress of another. Moreover, nationally, the two-party political system became more competitive as the once solid Democratic South turned increasing Republican. The Republican Party's resurgence was evidenced by its winning the presidency from 1981 to 1993, and its achieving majority status in the Senate from 1981 to 1987, and in both houses of Congress from 1995 to 2001. President Ronald Reagan's election in 1980, coupled with the Republican Party's resurgence, especially its winning majority party status in the Senate that year, signaled for some the potential for a "devolution revolution" in American federalism, where unfunded federal mandates would be rescinded, "burdensome" administrative federal grant-in-aid conditions removed, and the cooperative features of the federal grants-in-aid system enhanced. This belief was based on President Reagan's commitment to reducing the federal budget deficit. Because he was convinced that it was necessary to increase defense spending, President Reagan concluded that the only way to reduce the federal budget deficit was to increase revenue by encouraging economic growth through tax reduction and regulatory relief, and limiting the growth of federal domestic expenditures. As a former governor, he trusted state and local governments' ability to provide essential government services. As a result, he advocated a sorting out of governmental responsibilities that would reduce the federal government's role in domestic affairs, increase the emphasis on block grants to provide state and local government officials greater flexibility in determining how the program's funds are spent, and impose fiscal restraint on all federal grant-in-aid programs. For example, on February 18, 1981, President Reagan addressed a joint session of Congress and proposed the consolidation of 84 existing categorical grants into 6 new block grants and requested significant funding reductions for a number of income maintenance categorical grants, including housing (rental) assistance, food stamps (now Supplemental Nutrition Assistance Program), Medicaid, and job training. Congress subsequently approved P.L. 97-35 , the Omnibus Budget Reconciliation Act of 1981, which consolidated 77 categorical grants and two earlier block grants into the following nine new block grants: Elementary and Secondary Education (37 categorical grants), Alcohol, Drug Abuse, and Mental Health Services (10 categorical grants), Maternal and Child Health Services (9 categorical grants), Preventive Health and Human Services Block Grant (merged 6 categorical grants with the Health Incentive Grants for Comprehensive Health Services Block Grant), Primary Care (2 categorical grants), Community Services (7 categorical grants), Social Services (one categorical grant and the Social Services for Low Income and Public Assistance Recipients Block Grant), Low-Income Home Energy Assistance (1 categorical grant), and a revised Community Development Block Grant program (adding an existing discretionary grant and 3 categorical grants). Overall, funding for the categorical grants bundled into these block grants was reduced 12%, about $1 billion, from their combined funding level the previous year. President Reagan argued that the funding reductions would not result in the loss of services for recipients because the reductions would be offset by administrative efficiencies. In addition, the Reagan Administration eliminated funding for 62 categorical grants in 1981, mainly through authority provided under the Omnibus Budget Reconciliation Act of 1981. Some observers were convinced that the adoption of the Omnibus Budget Reconciliation Act of 1981 was proof of the coming devolution revolution. The number of federal grants to state and local governments was reduced and outlays for federal grants to state and local governments fell for the first time since World War II, from $94.7 billion in FY1981 to $88.1 billion in FY1982. However, in retrospect, federalism scholars now consider the 1981 block grants as more "historical accidents than carefully conceived restructurings of categorical programs" because they were contained in a lengthy bill that was primarily designed to reduce the budget deficit, not to reform federalism relationships. The bill was adopted under special parliamentary rules requiring a straight up or down vote without the possibility of amendment, and it was not considered and approved by authorizing committees of jurisdiction. Nonetheless, largely due to the Omnibus Budget and Reconciliation Act of 1981, in 1984 there were 12 block grants in operation (compared to 392 categorical grants), accounting for about 15% of total grants-in-aid funding. During the remainder of his presidency, President Ronald Reagan submitted 26 block grant proposals to Congress, with only one, the Federal Transit Capital and Operating Assistance Block Grant, added in 1982. In addition, Congress approved the Job Training Partnership Act of 1982, which created a new block grant for job training to replace the block grant contained in the Comprehensive Employment and Training Act of 1973. Federalism scholars generally agree that President Reagan had unprecedented success in achieving congressional approval for block grants in 1981. However, they also note that most of President Reagan's subsequent block grant proposals failed to gain congressional approval, primarily because they were opposed by organizations that feared, if enacted, the block grants would result in less funding for the affected programs. For example, in 1982, President Reagan proposed, but could not get congressional approval for, a $20 billion "swap" in which the federal government would return to states full responsibility for funding Aid to Families With Dependent Children (AFDC) (now Temporary Assistance for Needy Families) and food stamps (now Supplemental Nutrition Assistance Program) in exchange for federal assumption of state contributions for Medicaid. As part of the deal, he also proposed a temporary $28 billion trust fund or "super revenue sharing program" to replace 43 other federal grant programs, including 19 social, health, and nutrition services programs, 11 transportation programs, 6 community development and facilities programs, 5 education and training programs, Low Income Home Energy Assistance, and general revenue sharing. The trust fund, and federal taxes supporting it, would begin phasing out after four years, leaving states the option of replacing federal tax support with their own funds to continue the programs or allowing the programs to expire. Both the swap proposal and the proposed devolution of 43 federal grants failed to gain congressional approval, primarily because they were opposed by organizations and Members who feared that, if enacted, the proposals would result in less funding for the affected programs. For example, the National Governors Association supported the federal takeover of Medicaid, but objected to assuming the costs for AFDC and food stamps. The economy was weakening at that time and governors worried that they would not have the fiscal capacity necessary to support the programs without continued federal assistance. Evidence of a coming devolution revolution proved elusive as the upward trend in outlays for federal grants to state and local programs resumed in FY1983, although at a somewhat lower rate of increase than during the previous two decades. As shown in Table 2 , outlays for federal grants to state and local governments increased from $91.4 billion in FY1980 to $135.3 billion in FY1990 and $285.9 billion in FY2000. Medicaid accounted for much of that revenue growth, increasing from $13.9 billion in FY1980 to $41.1 billion in FY1990 and $117.9 billion in FY2000. Functionally, as shown in Table 2 , outlays for federal grants to state and local governments for health care increased from $15.8 billion in FY1980 to $124.8 billion in FY2000. Also, outlays for federal grants to state and local governments for income security increased from $18.5 billion in FY1980 to $68.7 billion in FY2000; for education, training, employment, and social services from $21.9 billion to $36.7 billion; for transportation from $13.0 billion to $32.2 billion; and for community and regional development from $6.5 billion to $8.7 billion. The number of federal grants to state and local governments fell at the beginning of this era, from 541 in 1981 to an era low of 405 in 1984, but then resumed an upward trend. As indicated in Table 4 , there were 541 grants to state and local governments in 1981, 405 in 1984, 435 in 1987, 492 in 1989, 557 in 1991, 593 in 1993, 633 in 1995, and 664 in 1998. Moreover, the number of intergovernmental mandates continued to increase throughout the era. ACIR, for example, identified 36 significant federal mandates affecting state and local governments in 1980. In 1990, it identified 63. ACIR concluded that "despite efforts to constrain the growth of intergovernmental regulation, the 1980s remained an era of regulatory expansion rather than contraction." It offered the following explanation for the increased number of federal mandates during the 1980s: The causes of this continued regulatory growth are complex and varied. Many regulations address important and well documented problems from pollution to health care to civil rights. The goals associated with these programs are popular not only with the general public but with state and local government officials as well. But, whereas the Congress in the past might have responded to emerging needs with a new federal aid program, the scarcity of federal funds during a decade of historic deficits has made the alternative of federal mandates look increasingly attractive to federal policymakers. Some observers believed that the anticipated devolution revolution might be realized following the 1994 congressional elections, which resulted in the Republican Party gaining majority status in both the House and Senate. As evidence of the potential for a devolution revolution they pointed to the Unfunded Mandate Reform Act of 1995 (UMRA). Its intent was to limit the federal government's ability to impose costs on state and local governments or on the private sector through unfunded mandates. Providing relief from unfunded mandates was one of the stated goals of the Republican Party's 1994 Contract With America. Under UMRA, congressional committees have the initial responsibility to identify certain federal mandates in measures under consideration. If the measure contains a federal mandate, the authorizing committee must provide the measure to the Congressional Budget Office (CBO). It reports back to the committee an estimate of the mandate's costs. The office must prepare full quantitative estimates for each reported measure with mandate costs over pre-determined thresholds in any of the first five fiscal years the legislation would be in effect. CBO's cost estimates include the direct costs of the federal mandates contained in the measure, or in any necessary implementing regulations; and the amount of new or existing federal funding the legislation authorizes to pay these costs. The thresholds triggering a full CBO cost estimate are adjusted annually for inflation. They were originally $50 million for intergovernmental mandates and $100 million for private sector mandates. The thresholds in 2019 are $82 million for intergovernmental mandates and $164 million for private sector mandates. CBO must prepare brief statements of cost estimates for those mandates that have estimated costs below these thresholds. Members can raise a point of order if the measure containing the mandate lacks a CBO cost estimate, either because the committee failed to publish the CBO's cost estimate in its report or in the Congressional Record , or CBO determined that no reasonable estimate of the mandate's cost was feasible. Members can also raise a point of order if the measure has an intergovernmental cost estimate that exceeds the annually adjusted cost threshold in any of the first five fiscal years the mandate would be in effect. UMRA's impact on unfunded mandates has been relatively limited. For example, from 1996 to May 2019, 62 points of order were raised in the House and 4 in the Senate. One point of order, concerning a 1996 minimum wage bill, was sustained in the House and two points of order, concerning amendments relating to an increase in the minimum wage in 2005, were sustained in the Senate. In addition, UMRA covers only certain types of unfunded federal mandates. As a federalism scholar argued, UMRA primarily covers only statutory direct orders, excluding most grant conditions and preemptions whose fiscal effects fall below the threshold. Statutory direct orders dealing with constitutional rights, prohibition of discrimination, national security, and Social Security are among those excluded from coverage. Moreover, analytic and procedure requirements do not apply to appropriations bills, floor amendments or conference reports those tools of "unorthodox lawmaking" that have become increasingly prevalent in the Congress. Moreover, another federalism scholar noted that the overall record of the 104 th Congress, expected by some to decentralize and devolve federalism relationships, was more status quo than devolutionary: Shifting back to the overall record of the 104 th Congress, it is appropriate here to note the various proposed devolutionary bills that were defeated. Chief among these was the proposed Medicaid block grant with a $163 billion cut in funding over five years. Both a public housing blocking proposal and the big regulatory reform measure that would have seriously limited the Federal government's power to issue rules affecting health, safety, and the environment were scuttled. Extension of the Clean Water Act, enactment of a consolidation of eighty-odd manpower training programs, and passage of a revised Endangered Species Act, which eliminated the Federal authority to restrict threatening activities, were all successfully resisted. A rollback of affirmative action, a conservative shift in the Superfund's program and rules, and the proposed Product Liability Legal Reform Act of 1996 were also scuttled. Of the nine here, two died because of Senate rejection; three, because of a presidential veto or the threat of one; two others failed because neither chamber dared take either one up; and the last two died because of a deadlocked Conference Committee and a lack of time to consider a Conference Report. The devolution revolution never fully materialized during this era, despite growing public hostility toward the federal government. The emphasis on categorical grants and the issuance of federal mandates continued. Yet, some decentralization of decisionmaking authority did take place during the era. For example, in 1980, there were four block grants in operation. In 2000, there were 24 block grants, including the Surface Transportation Program (1991) and the Temporary Assistance for Needy Families (TANF) program (1996). Funded at $16.7 billion annually, TANF rivaled the Surface Transportation Program during this era for the largest budget of all the block grants. In addition, Congress authorized state waivers for Medicaid starting in 1981, and for child welfare assistance programs starting in 1994. The seemingly contradictory trends of centralization and decentralization that took place in the federal intergovernmental system during the 1980s and 1990s perhaps reflected the contradictory societal trends that swept across America at the time. As mentioned previously, national public opinion polls indicated that the public was increasingly dissatisfied with the performance of government, especially the federal government's performance, and expressed a growing hostility toward government (and Congress) as a whole. It could be argued that these views suggest that the public wanted Congress to devolve federal grant-in-aid programs to state and local governments or, at least, provide state and local governments greater flexibility in determining how the grants' funding should be spent. Yet, at the same time, the public also expressed relatively strong support for individual federal government programs (and individual Members of Congress). It could be argued that these views suggest that the public wanted Congress to maintain federal government control over these programs, and expressed approval of their individual Members for doing so. Another possible explanation for the continued focus on categorical grants and the imposition of federal mandates during this era is that federalism issues tend to be a second order priority for many federal policymakers. For example, it could be argued that President Reagan's commitment to strengthening federalism through program decentralization and devolution was unrivaled in the modern era. Yet, in an analysis of the Reagan Administration's federalism policies, a leading federalism scholar concluded that "devolutionary policies consistent with the president's definition of federalism reform ... consistently lost out in the Reagan Administration when they ... conflicted with the sometimes competing goals of reducing the federal deficit, deregulating the private sector, and advancing the conservative social agenda." For example, this scholar noted that President Reagan opposed the expansion of General Revenue Sharing, advocated the elimination of the deductibility of state and local taxes, supported the preemption of state laws regulating double-trailer trucks and establishing minimum drinking ages, overrode state objections to increased off-shore oil drilling and increased use of nuclear power, and supported efforts to require states to establish workfare programs for public assistance recipients and suing localities which sought to retain aggressive affirmative action hiring policies. <10. Federal Grants to State and Local Governments in the 21st Century> Some observers thought that the number of federal grants to state and local governments and outlays for federal grants to state and local governments might fall during George W. Bush's presidency (2001-2009), given federal budgetary pressures created by what many called the "war on terror" following 9/11, President Bush's commitment to reducing the annual federal budget deficit and addressing the federal debt, and the Republican Party's winning majority status in the House of Representatives from 2001 to 2007 and in the Senate for portions of 2001 and 2002, and from 2003 to 2007. Yet, outlays for federal grants to state and local governments increased during his presidency, from $285.8 billion in FY2000 to $461.3 billion in FY2008. Others thought that the "the ascendancy of George W. Bush to the presidency, in concert with a remarkably unified Republican control of the Congress, presaged a period of unified government [that would lead to] the arrest and even reversal of federal policy centralization." For example, President Bush used his authority to grant state waivers to increase state flexibility in the use of Medicaid funds and, in his second term, in complying with No Child Left Behind requirements. He also proposed grant consolidations of community development programs, state control of the Head Start program, and waivers of regulations in many low-income programs (called superwaivers). However, despite these efforts, federalism scholars argue that the federal government continued to further centralize its authority in many policy areas during his presidency, often with President Bush's approval. For example, President Bush supported the extension of "federal goals and standards to such areas as education testing, sales tax collection, emergency management, infrastructure, and elections administration" and the imposition of restrictions on partial-birth abortions, new work requirements for TANF recipients, and new standards for issuing secure driver's licenses. President Bush also supported legislative efforts to prohibit same-sex marriage. The expansion and centralization of the federal grants-in-aid system continued under President Barack Obama and has continued, albeit counter to his recommendations, under President Trump. As shown in Table 2 , outlays for federal grants to state and local governments has continued to increase in recent years (from $660.8 billion in FY2016 to $674.7 billion in FY2017, and to an anticipated $728.0 billion in FY2018), largely due to increased outlays for Medicaid (increasing from $368.3 billion in FY2016 to $374.7 billion in FY2017, and to an anticipated $400.4 billion in FY2018). However, outlays for federal grants to state and local governments has increased in other policy areas as well. As shown in Table 4 , the number of federal grants to state and local governments has also increased, from 664 in 1998, to 953 in 2009, 996 in 2012, 1,188 in 2015, and 1,274 in 2018. In addition, the emphasis on categorical grants has been retained, as 1,253 of the 1,274 funded federal grants to state and local governments in 2018 were categorical grants, and 21 were block grants. Also, despite UMRA, unfunded federal mandates have continued to be issued in many policy areas. For example, CBO reports that from January 1, 2006, to December 31, 2018, 217 laws were enacted with at least one intergovernmental mandate as defined under UMRA. These laws imposed 443 mandates on state and local governments, with 16 of these mandates exceeding UMRA's threshold, 14 with estimated costs that could not be determined, and 413 with estimated costs below the threshold. CBO reported that hundreds of other laws had an effect on state and local government budgets, but those laws did not meet UMRA's definition of a federal mandate. Grant conditions, historically the predominant means used to impose federal control over state and local government actions, have also continued to be used to promote national goals. For example, many observers consider the adoption of the No Child Left Behind Act of 2001, signed into law on January 8, 2002, to be President George W. Bush's signature federalism achievement. Although the act allows states to define the standards used for testing, it imposed federal testing, teaching, and accountability standards on states and school districts that, overall, significantly increased federal influence on public elementary and secondary education throughout the nation. In addition, during his presidency, the Help America Vote Act of 2002 instituted "sweeping new federal standards, along with new funding, that regulated significant features of state and local election processes." President Obama did not issue a formal federalism plan and did not formally advocate a major shift in funding priorities within functional categories. Instead, the Obama Administration attempted to cultivate a place-based approach, customizing support for communities based on their specific assets and challenges. This new approach seeks out communities' plans or vision for addressing a set of challenges and then works across agency and program silos to support those communities in implementing their plans. However, the expansion of Medicaid eligibility under P.L. 111-148 , the Patient Protection and Affordable Care Act (ACA), which President Obama strongly endorsed, increased health care's position as the leading category of federal assistance to state and local governments. The ACA also either authorized or amended 71 federal categorical grants to state and local governments, further enhancing the role of categorical grants in the intergovernmental grant-in-aid system. The Obama Administration did not formally advocate a major shift in funding priorities from categorical grants to block grants, or from block grants to categorical grants. However, the number of funded block grants declined somewhat during the Obama Administration, from 24 in 2009 to 20 in 2016. Also, although the Obama Administration did support ARRA's funding for two relatively significant temporary block grants (the $53.6 billion Government Services State Fiscal Stabilization Fund for public education; and the $3.2 billion Energy Efficiency and Conservation Block Grant for energy efficiency and conservation programs) and ARRA's provision of additional, temporary funding to TANF ($5 billion), the Child Care and Development Block Grant ($2 billion), the Community Development Block Grant ($1 billion), the Community Services Block Grant ($1 billion), and the Native American Housing Block Grant ($510 million) programs, the Obama Administration generally advocated enactment of new competitive categorical grant programs (e.g., TIGER surface transportation grants and Race to the Top education grants) rather than the expansion of existing block grants or the creation of new ones. However, the Obama Administration did advocate the consolidation of categorical grant programs in several functional areas as a means to reduce duplication and promote program efficiency. For example, the Obama Administration supported the consolidation of dozens of surface transportation categorical grant programs into other surface transportation categorical grant programs in P.L. 112-141 , the Moving Ahead for Progress in the 21 st Century Act of 2012 (MAP-21). The Obama Administration also advocated the merging of categorical grant programs in the Department of Homeland Security as a means to "better target these funds." The Trump Administration indicated in its FY2018 budget request that it intended to refocus federal grants on "the highest priority areas," provide "a greater role for state and local governments," "slow the growth of grant spending over the 10-year budget window," and "rein in the growth of Medicaid." This budget proposes to cap federal funding for the Medicaid program, to establish a state matching requirement for the Supplemental Nutrition Assistance Program, to eliminate the Community Development Block Grant and Social Services Block Grant programs, and to make other reductions that reestablish an appropriate federal-state fiscal relationship and contribute to achieve a balanced federal budget by 2027. Among other grant initiatives, the budget proposes to establish a 25% non-federal cost match for FEMA [Federal Emergency Management Agency] preparedness grant awards that currently require no cost match authorizes a new Federal Emergency Response Fund to rapidly respond to public health outbreaks reforms the Centers for Disease Control and Prevention through a new $500 million block grant to increase state flexibility and focus on the leading public health challenges specific to each state [and] includes $200 billion in budget authority related to the [Trump Administration's] infrastructure initiative. The Trump Administration continued to advocate for these objectives in its FY2019 and FY2020 budget requests. For example, the Administration indicated in its FY2019 budget request that Over many decades, the increasing number of grants and size of grants has created overlap between programs, and complexity for grantees, and has made it difficult to compare program performance and conduct oversight. The multiple layers of grants administration can increase the cost of administration and create inefficiencies and duplication. Less Federal control gives State and local recipients more flexibility to use their knowledge of local conditions and need to administer programs and projects more efficiently. The 2019 Budget takes steps toward limiting the Federal role, and reducing spending. This budget slows the growth of grant spending over the 10-year budget window and, in particular, starts to rein in the growth of Medicaid ... The Budget provides $749 billion in outlays for aid to State and local governments in 2019, an increase of 3% from 2018. The increase is entirely due to spending for the Administration's infrastructure initiative; all grant spending other than Medicaid and the infrastructure initiative will decline by 11% in 2019. The Trump Administration repeated its intent to slow the growth of federal aid to state and local governments in its FY2020 budget request: This budget slows the growth of grant spending over the 10-year budget window and, in particular, starts to rein in the growth of Medicaid, which accounts for 56 percent of total grant spending to State and local governments. The Budget provides $751 billion in outlays for aid to State and local governments in 2020, an increase of less than one percent from spending in 2019. Among its proposals to slow the growth of federal aid to state and local governments and improve federal grant performance, the Administration recommended that Medicaid be converted to a block grant or be subject to a per capita spending cap indexed to the Consumer Price Index "to support States as they transition to more sustainable health care programs and encourage them to pursue innovative ideas to that aim to curb costs moving forward." states be provided "maximum flexibility over their Medicaid programs" to place the program "on a sound fiscal path." funding be eliminated for "lower priority grant programs," such as the Sea Grant, Coastal Zone Management Grants, and the Pacific Coastal Salmon Recovery Fund. funding be eliminated for Community Development Block Grants and the Economic Development Administration. In addition, the Trump Administration noted that its President's Management Agenda, released in March 2018, included a cross-agency priority goal of achieving results-oriented accountability for federal grants funding. The Administration's goal is to ensure that federal grants to state and local governments are "delivered to intended recipients as efficiently as possible" by standardizing the grants management process and data, building shared IT infrastructure, managing risk, and achieving program goals and objectives. The Administration also included proposals "to require able-bodied adults participating in the Supplemental Nutrition Assistance Program (SNAP) enter and re-enter the job market and work toward self-sufficiency." <11. Congressional Issues> As the data in Table 2 , Table 3 , and Table 4 attest, outlays for federal grants to state and local governments, in both nominal and constant dollars, and the number of federal grants to state and local governments have continued to increase since the mid-1980s. Given its increased size and cost, providing effective congressional oversight of federal grants to state and local governments can be a daunting task. Given the decentralized nature of the congressional committee system, Congress is well positioned to provide effective oversight of individual federal grants to state and local governments. However, it could be argued that the decentralized nature of the congressional committee system is not optimally conducive to providing effective oversight of the interactive effects of multiple federal grants to state and local governments, or of the potential interactive effects of federal grants to state and local governments and federal tax policy. In the past, the independent, bipartisan ACIR, which operated from 1959 to 1996, provided Congress and others a series of authoritative reports on the status and operation of intergovernmental grants, both as individual programs and as a collective system. GAO has published several reports over the years on federal grants that have helped to fill the informational and analytic void left by ACIR's demise. However, it could be argued that Congress may wish to examine whether a reconstituted ACIR, perhaps one that focuses on the structure and operation of the intergovernmental system as a whole, might prove useful as an additional source of information and analysis as it conducts oversight of the federal grants to state and local governments. For example, such an organization could provide an accepted methodology for counting federal grants to state and local governments, and provide Congress periodic assessments of the intergovernmental grant system's overall performance. <12. Concluding Remarks> It could be argued that the recent upward trend in outlays for federal grants to state and local governments is about to end because there is a general consensus that anticipated growth in federal discretionary spending, which includes outlays for federal grants to state and local governments, may be targeted for reductions as part of an effort to address the federal deficit and debt. However, Congress's historical tendency to use federal grants to state and local governments as a means to create jobs and promote national economic growth suggests that the upward trend in federal grant outlays and federal grant numbers that has been experienced over the past several decades may continue, although at a slower pace. President Trump's FY2020 budget request estimates that total outlays for federal grants to state and local governments will increase from $696.5 billion in FY2018 to an anticipated $749.5 billion in FY2019 and $750.7 billion in FY2020. In retrospect, with the exception of the early 1980s, federal grant funding, the number of federal grants, and the issuance of federal mandates have increased under both Democratic and Republican Congresses and Presidents. Historically, there have been notable differences between the two parties' approaches toward federalism. Although both parties have generally opposed unfunded federal mandates, the Republican Party has done so more aggressively, as evidenced by its 1994 Contract With America, sponsorship of UMRA, and recent legislative efforts to broaden UMRA's coverage to include, when requested by the chair or ranking Member of a committee, the prospective costs of legislation that would change conditions of federal financial assistance. The Republican Party has also advocated the devolution of certain federal grant-in-aid programs to state and local governments while the Democratic Party has generally opposed devolution. The Republican Party has also been more aggressive in its support of the decentralization of grants-in-aid decisionmaking to state and local governments through the consolidation of categorical grants into block grants, for revenue sharing, and administrative relief from various grant conditions. But, overall, the historical record suggests that for most Members of both political parties, regardless of their personal ideological preferences, federalism principles are often subordinated to other policy goals, such as reducing the federal budget deficit, promoting social values or environmental protection, and guaranteeing equal treatment and opportunity for the disadvantaged. As long at this continues to be the case, and the public continues to express support for specific government programs even if they generally oppose "big" government as a whole there is little evidence to suggest that the general historical trends of increasing numbers of federal grants to state and local governments, increasing outlays for those grants, an emphasis on categorical grants, and continued enactment of federal mandates, both funded and unfunded, are likely to change.

The federal government is expected to provide state and local governments about $750 billion in federal grants in FY2019, funding a wide range of public policies, such as health care, transportation, income security, education, job training, social services, community development, and environmental protection. Federal grants account for about one-third of total state government funding, and more than half of state government funding for health care and public assistance. Congressional interest in federal grants to state and local governments has always been high given the central role Congress has in determining the scope and nature of the federal grant-in-aid system, the amount of funding involved, and disagreements over the appropriate role of the federal government in domestic policy generally and in its relationship with state and local governments. Federalism scholars agree that congressional decisions concerning the scope and nature of the federal grants-in-aid system are influenced by both internal and external factors. Internal factors include congressional party leadership and congressional procedures; the decentralized nature of the committee system; the backgrounds, personalities, and ideological preferences of individual Members; and the customs and traditions (norms) that govern congressional behavior. Major external factors include input provided by voter constituencies, organized interest groups, the President, and executive branch officials. Although not directly involved in the legislative process, the Supreme Court, through its rulings on federalism issues, also influences congressional decisions concerning the federal grants-in-aid system. Overarching all of these factors is the evolving nature of cultural norms and expectations concerning government's role in American society. Over time, the American public has become increasingly accepting of government activism in domestic affairs generally, and of federal government intervention in particular. Federalism scholars attribute this increased acceptance of, and sometimes demand for, government action as a reaction to the industrialization and urbanization of American society; technological innovations in communications, which have raised awareness of societal problems; and exponential growth in economic interdependencies brought about by an increasingly global economy. This report provides a historical synopsis of the evolving nature of the federal grants-in-aid system, focusing on the role Congress has played in defining the system's scope and nature. It begins with an overview of the contemporary federal grants-in-aid system and then examines its evolution over time, focusing on the internal and external factors that have influenced congressional decisions concerning the system's development. It concludes with an assessment of the scope and nature of the contemporary federal grants-in-aid system and raises several issues for congressional consideration, including possible ways to augment congressional capacity to provide effective oversight of this system.

crs_R46142

crs_R46142_0

Under long-standing Supreme Court precedent, Congress has "plenary power" to regulate immigration. This power, according to the Court, is the most complete that Congress possesses. It allows Congress to make laws concerning non-U.S. nationals (aliens) that would be unconstitutional if applied to citizens. And while the immigration power has proven less than absolute when directed at aliens already physically present within the United States, the Supreme Court has interpreted the power to apply with most force to the admission and exclusion of nonresident aliens. The Court has upheld or shown approval of laws excluding aliens on the basis of ethnicity, gender and legitimacy, and political belief. It has also upheld an executive exclusion policy that was premised on a broad statutory delegation of authority, even though some evidence considered by the Court tended to show that religious hostility may have prompted the policy. Outside of the immigration context, in contrast, laws and policies that discriminate on such bases are almost always struck down as unconstitutional. To date, the only judicially recognized limit on Congress's power to exclude aliens concerns lawful permanent residents (LPRs): they, unlike nonresident aliens, generally cannot be denied entry without a fair hearing as to their admissibility. The plenary power doctrine has roots in the Chinese Exclusion Case of 1889, which upheld a federal statute that provided for the exclusion of Chinese laborers. Some jurists and commentators have criticized the Chinese Exclusion Case for indulging antiquated notions of race. More generally, many legal scholars contend that the plenary power doctrine lacks a coherent rationale and that it is an anachronism that predates modern individual rights jurisprudence. Yet the Supreme Court continues to employ the doctrine. Some commentators have argued that the Court is in the process of narrowing the parameters of the doctrine's applicability, but they find support for this argument mainly in cases outside the exclusion context. In the exclusion context, the Court's 2018 decision in Trump v. Hawaii reaffirms the exceptional scope of the plenary power doctrine. Congress's plenary power to regulate the entry of aliens rests at least in part on implied constitutional authority. The Constitution itself does not mention immigration. It does not expressly confer upon any of the three branches of government the power to control the flow of foreign nationals into the United States or to regulate their presence once here. To be sure, parts of the Constitution address related subjects. The Supreme Court has sometimes relied upon Congress's enumerated powers over naturalization and foreign commerce, and to a lesser extent upon the Executive's implied Article II foreign affairs power, as sources of federal immigration power. Significantly, however, the Court has also consistently attributed the immigration power to the federal government's inherent sovereign authority to control its borders and its relations with foreign nations. It is this inherent sovereign power, according to the Court, that gives Congress essentially unfettered authority to restrict the entry of nonresident aliens. The Court has determined that the executive branch, by extension, possesses unusually broad authority to enforce laws pertaining to alien entry, and to do so under a level of judicial review much more limited than that which would apply outside of the exclusion context. Recent events have generated congressional interest in the constitutional division of responsibilities between Congress and the Executive in establishing and enforcing policies for the exclusion of aliens. Through three iterative executive actions in 2017, commonly known as the "Travel Ban," the President provided for the exclusion of broad categories of nationals of specified countries, most of which were predominantly Muslim. These executive actions relied primarily upon a delegation of authority in the Immigration and Nationality Act (INA) allowing the President, by way of proclamation, to exclude "any aliens" or "any class of aliens" whose entry he determines would be "detrimental to the interests of the United States." In June 2018, the Supreme Court upheld the third iteration of the Travel Ban as likely lawful, rejecting claims that it was motivated by unconstitutional religious discrimination and that it exceeded the President's authority under the INA. Since that decision, some Members of Congress have proposed curtailing executive authority to craft exclusion policy or subjecting executive exclusion decisions and policies to more stringent judicial review. This report provides an overview of the legislative and executive powers to exclude aliens. First, the report discusses a gatekeeping legal principle that frames those powers: nonresident aliens outside the United States cannot challenge their exclusion from the country in federal court because Congress has not expressly authorized such challenges. But aliens at the threshold of entry have more access to judicial review of exclusion decisions, compared to aliens abroad, because of statutory provisions and other considerations. Next, the report analyzes the extent to which the constitutional and statutory rights of U.S. citizens limit the exclusion power. Specifically, the report examines a line of Supreme Court precedent, starting with Kleindienst v. Mandel and ending with Trump v. Hawaii , that makes a highly curtailed form of judicial review available to U.S. citizens who claim that the exclusion of one or more aliens abroad violates the U.S. citizens' constitutional rights. The report concludes by analyzing the implications of these cases for the scope of the congressional power to legislate for the exclusion of aliens and, separately, for the scope of the executive power to take action to exclude aliens. <1. Knauff and the General Rule Against Judicial Review of Exclusion Decisions> As discussed later, Supreme Court case law on the exclusion of aliens has come to focus upon whether the rights of U.S. citizens limit the government's power to exclude. The case law arrived at this issue, however, only after the Supreme Court developed an underlying principle: nonresident aliens outside the United States do not have constitutional rights with respect to entry. Further, any statutory provisions that govern the admission of nonresident aliens do not permit judicial review unless Congress "expressly authorize[s]" such review, something that federal courts generally conclude Congress has not done. Put differently, Congress's plenary power over immigration includes not merely the power to set rules as to which aliens may enter the country and under what conditions, but also the power to have such rules "enforced exclusively through executive officers, without judicial intervention" unless Congress provides otherwise. Because Congress has not provided otherwise, judicial review of decisions to exclude aliens abroad is generally unavailable. The Supreme Court developed these general principles against judicial review of exclusion decisions in a series of cases between the late 19th and mid-20th centuries about aliens denied admission after arriving by sea. In one illustrative early case, the 1895 decision Lem Moon Sing v. United States , a Chinese national contended that immigration officers improperly denied him admission under the Chinese exclusion laws. Those laws barred the entry of Chinese laborers, but the Chinese national described himself as a merchant and argued that the laws therefore did not apply to him. As a consequence of his exclusion, he was detained by the steamship company. The Supreme Court recognized that the professed merchant could challenge the legality of his detention through a petition for habeas corpus. This procedural right ultimately proved hollow, however, because the Court held that it could not review the immigration officials' determination that the petitioner fell within the scope of the provision excluding Chinese laborers. The Court explained that Congress had precluded such review by providing in statute that the decisions of immigration officers to deny admission to aliens under the Chinese exclusion acts "shall be final, unless reversed on appeal to the secretary of the treasury." In other words, the statute allowed only the Secretary of the Treasury to review exclusion decisions under the acts. Accordingly, the Court limited its consideration of the habeas petition to the narrow question of whether the immigration officers who excluded the professed merchant had authority to make exclusion and admission decisions under the statutes (in other words, whether the officers had jurisdiction). Determining that the immigration officers did have such statutory authority, the Court rejected the habeas petition without reviewing the petitioner's contention that he was in fact a merchant, not a laborer. To review that contention, the Court reasoned, would "defeat the manifest purpose of congress in committing to subordinate immigration officers . . . exclusive authority to determine whether a particular alien seeking admission into this country belongs to the class entitled by some law or treaty to come into the country." The Court saw no constitutional problem in Congress's assignment of final authority over exclusion decisions to executive officials. The Court considered it a settled proposition that, because aliens lack constitutional rights with respect to entry, exclusion decisions "could be constitutionally committed for final determination to subordinate immigration or other executive officers . . . thereby excluding judicial interference so long as such officers acted within the authority conferred upon them by congress." Two major Supreme Court decisions from the 1950s appeared to transform the principle from Lem Moon Sing and earlier cases that Congress may bar judicial review of exclusion decisions affirmatively into a presumption that judicial review of exclusion decisions is barred unless Congress expressly provides otherwise. First, in the 1950 case United States ex rel. Knauff v. Shaughnessy , the Court declared itself powerless to review an executive branch decision to exclude the German bride of a U.S. World War II veteran, even though executive officials failed to explain the exclusion beyond stating that the woman's entry would have been "prejudicial." The Court reiterated that aliens do not have constitutional rights with respect to entry and reasoned that, as a consequence, "[w]hatever the procedure authorized by Congress is, it is due process as far as an alien denied entry is concerned." In what would become an oft-cited sentence, the Court also announced the presumption against judicial review of exclusion decisions: "it is not within the province of any court, unless expressly authorized by law , to review the determination of the political branch of the Government to exclude a given alien." Next, in the 1953 case Shaughnessy v. Mezei , the Court refused to question the Executive's undisclosed reasons for denying entry to an essentially stateless alien returning to the United States after a prior period of residence, even though the exclusion relegated the stateless alien to potentially indefinite detention on Ellis Island. The Mezei Court cited Knauff for the proposition that federal courts may not review exclusion decisions "unless expressly authorized by law," and the Court held that the Attorney General's decision to exclude Mezei and detain him as a consequence of that exclusion was "final and conclusive." The issue of detention complicated the Knauff and Mezei cases. Because the aliens in both cases suffered detention as a result of their exclusion, they filed petitions for habeas corpus challenging the legality of their detention. And in both cases, in accord with Lem Moon Sing and other early precedents, and notwithstanding the Court's declaration in Knauff and Mezei that judicial review of the exclusion decisions was unavailable, the Court conducted a limited inquiry into whether the governing statutes empowered the Attorney General to exclude the aliens without a hearing. As explained further below, in the immigration context, the Supreme Court does not construe a general bar on judicial review to preclude habeas corpus review, although the proper scope of habeas review in cases concerning the exclusion of arriving aliens remains unclear. In any event, even though the Knauff and Mezei Courts conducted a limited habeas inquiry into the Attorney General's statutory authority to exclude aliens without a hearing, federal courts often cite the cases (and especially Knauff ) for the proposition that courts may not review exclusion decisions unless Congress expressly provides otherwise. Many scholars criticize Knauff and Mezei as incorrectly decided. The aspect of Mezei that upholds as constitutional the indefinite detention of an arriving alien, in particular, is controversial and has been limited by some lower federal courts to apply only in cases that implicate national security. The Supreme Court, however, has cited Knauff and earlier exclusion cases for the proposition that excluded nonresident aliens do not have grounds to challenge their exclusion in federal court. Under current law, this proposition forms the basis for the doctrine of consular nonreviewability, which bars judicial review in almost all circumstances of the denial of visas to aliens abroad. The general principle against judicial review of exclusion decisions applies with less force to executive decisions to exclude aliens arriving in the United States, even though the rule arose from cases about such aliens. The general principles that govern reviewability of both of these two categories of exclusion decisions (1) visa denials and other exclusion decisions concerning aliens located abroad; and (2) decisions to deny entry to aliens arriving at U.S. borders or ports of entry are discussed below. <1.1. Nonresident Aliens Located Abroad: Consular Nonreviewability> The doctrine of consular nonreviewability precludes judicial review of challenges brought by nonresident aliens located abroad against visa denials and also possibly against other actions by executive branch officials to deny them admission. Under the doctrine, the millions of nonresident aliens denied visas each year at U.S. consulates abroad cannot themselves challenge their visa denials in federal court on statutory or constitutional grounds. The doctrine may also bar U.S. citizens, LPRs, and U.S. entities from challenging the exclusion of a nonresident alien abroad on statutory grounds (as opposed to constitutional grounds), although the Supreme Court has not decided this issue. The general unavailability of judicial review of visa denials under the doctrine means that U.S. consular officers (the officials who adjudicate visas abroad) have considerable power to make final decisions about visa applications. Table 1 provides an overview of the types of claims to which the doctrine of consular nonreviewability applies. <1.1.1. Legal Basis for Consular Nonreviewability> Much controversy surrounds the doctrine of consular nonreviewability. Some scholars argue that it lacks a compelling foundation in law. No statute speaks expressly to the issue of whether visa decisions should be subject to judicial review. Even so, lower federal courts recognize the doctrine with apparent uniformity (although some have recognized exceptions to it, as discussed in the next subsection). As authority for the doctrine, courts often cite Knauff and the other Supreme Court cases referenced above concerning the denial of admission to aliens arriving by sea. In particular, the consular nonreviewability cases cite these Supreme Court precedents for the proposition that Congress's plenary immigration power includes the power to have statutes governing the admission of aliens "enforced exclusively through executive officers, without judicial intervention" and that "it is not within the province of any court, unless expressly authorized by law, to review the determination of the political branch of the Government to exclude a given alien." Thus, the reasoning that supports lower court applications of the doctrine appears to be that Congress has not expressly authorized judicial review of visa denials. Because the doctrine has its basis in Knauff and the presumption against judicial review of exclusion decisions, it does not apply to the decisions of domestic immigration authorities to deny immigration benefits, unless perhaps those decisions underlie eventual visa denials or otherwise work to exclude aliens located abroad. Some federal courts have sought to reconcile the doctrine of consular nonreviewability with the provisions governing judicial review of final agency action set forth in the Administrative Procedure Act (APA). The APA establishes a "strong presumption" that the actions of federal agencies including the Department of State are subject to judicial review. Yet, according to these courts, Congress enacted the APA against the backdrop of already-existing consular nonreviewability jurisprudence and without expressly overruling that jurisprudence by providing for review of consular decisions. On this basis, these courts have concluded that the doctrine of consular nonreviewability constitutes a preexisting limitation on judicial review that the APA preserves through its stipulation, in 5 U.S.C. 702(1), that nothing in the statute "affects other limitations on judicial review." In other words, the APA preserves consular nonreviewability as an exception to the general rule that judicial review is available for agency action. Although the doctrine of consular nonreviewability is well established, it remains true that no statute expressly bars judicial review of visa denials abroad. For this reason, courts generally hold that the doctrine "supplies a rule of decision, not a constraint on the subject matter jurisdiction of the federal courts." The legislative history of the original Immigration and Nationality Act of 1952 indicates that Congress considered and rejected the idea of creating within the Department of State a system of administrative appeals for visa denials, and the current version of the INA bars the Secretary of State from overturning visa decisions. But Congress has not legislated affirmatively to shield visa decisions from judicial review. The doctrine of consular nonreviewability is therefore premised upon the absence of any specific statutory authorization for the review of visa denials, not upon an explicit statutory prohibition on such review. <1.1.2. Exceptions to Consular Nonreviewability> Supreme Court case law qualifies the doctrine of consular nonreviewability in one important respect discussed at length later in this report: if a U.S. citizen challenges the exclusion of a nonresident alien abroad on the ground that the exclusion violates the citizen's constitutional rights, then, under the rule of Kleindienst v. Mandel and later cases, courts "engage[] in a circumscribed judicial inquiry" of the constitutional claim. Mandel recognized that U.S. citizens may have constitutional rights that bear upon the entry of nonresident aliens, even though nonresident aliens themselves do not have such rights. As such, the case law of multiple federal circuit courts of appeals establishes that "a U.S. citizen raising a constitutional challenge to the denial of a visa is entitled to a limited judicial inquiry regarding the reason for the decision." This is the only exception to consular nonreviewability that federal courts have recognized uniformly. As explained later in the section on the Mandel line of cases, it allows challengers only exceedingly slim prospects of obtaining relief from a visa denial. Lower federal courts have split over whether U.S. citizens may also challenge visa denials on statutory grounds. Some lower federal courts have recognized other exceptions to consular nonreviewability's bar on judicial review of decisions to exclude aliens abroad. For instance, at least one federal circuit court decision extends the Mandel principle to allow a limited level of judicial review of a constitutional challenge brought directly by an excluded nonresident alien (rather than a U.S. citizen) against the denial of a visa. This extension, however, seems at odds with Mandel itself, which concluded that a nonresident alien who was denied the statutory waivers needed to secure a visa "had no constitutional right of entry," and that limited judicial review was therefore available only because of constitutional claims brought by U.S. citizens against the alien's exclusion. Other federal appellate court decisions make clear that review of visa denials under Mandel is available only for claims brought by U.S. citizens. In another non-uniformly recognized exception, a line of decisions by the U.S. Court of Appeals for the Ninth Circuit allows nonresident aliens to challenge a consular officer's failure to act upon a visa application (as opposed to the denial of an application). The supporting rationale is that the Mandamus Act supplies a basis for judicial review where an official fails to take a legally required action, such as the adjudication of a visa application, even if the APA does not. This exception to the rule of consular nonreviewability is not as well established as the exception allowing for limited review of constitutional claims brought against visa denials by U.S. citizens. Federal district courts outside the Ninth Circuit have split over whether to recognize the exception. However, as discussed in the next section, in cases not specifically concerning the adjudication of visas, other courts have recognized that the Mandamus Act creates an exception to the presumption against judicial review of decisions to exclude aliens abroad. Other federal district court opinions may suggest further exceptions to consular nonreviewability that have yet to gain uniform recognition, such as an exception allowing visa applicants to challenge the validity of generally applicable statutes, regulations, or policies that govern their applications. Nonetheless, the review available under Mandel for constitutional challenges brought by U.S. citizens remains the only exception to consular nonreviewability grounded in Supreme Court case law and universally recognized by lower federal courts. <1.1.3. Nonresident Aliens Abroad Who Seek Entry to Remedy Prior Violations of Constitutional or Statutory Rights> Other cases concerning aliens abroad that implicate the presumption against judicial review of exclusion decisions and the doctrine of consular nonreviewability address the following question: may a federal court order the executive branch to grant entry to a nonresident alien located abroad in order to remedy violations of constitutional or statutory rights that the alien suffered while in the United States or while detained by the United States? The Seventh and Ninth Circuits have both answered in the affirmative. The D.C. Circuit, however, has held that Knauff bars courts from ordering the executive branch to grant entry to an alien unless a statutory provision authorizes courts to do so. The Ninth Circuit held that a federal district court has authority to order the executive branch to parole aliens whom it removed in violation of due process back into the country to attend fair removal proceedings. "Without a provision requiring the government to admit individual [aliens] into the United States so that they may attend the hearings to which they are entitled," the court reasoned, the determination that their removal proceedings violated due process "would be virtually meaningless." In other words, the only way to remedy the constitutional violation was to order the government to grant the aliens reentry. In a recent district court case that relied on the Ninth Circuit decision, the district court reasoned that ordering the government to grant reentry to aliens who were removed in violation of law did not contravene the political branches' broad authority over exclusion decisions because the remedy formed part of the review that Congress authorized courts to conduct of removal orders under the INA. The Seventh Circuit reached a broader holding in a different context. The case, Samirah v. Holder , concerned an alien who had overstayed his nonimmigrant visa but who had applied for LPR status (through a process called "adjustment of status"). When his mother fell ill in Jordan, the alien received a grant of advance parole from the Department of Homeland Security (DHS) so that he could visit her without abandoning his application for adjustment and with some assurance that he would be able to return to the United States to pursue the application. But while the alien was abroad, DHS revoked his advance parole and did not allow him to board a connecting flight back to the United States. Reviewing the alien's application for a writ of mandamus ordering executive branch officials to grant him reentry, the Seventh Circuit reasoned that DHS had used the advance parole as "a trap a device for luring a nonlawful resident out of the United States so that he can be permanently excluded from this country." The circuit court held that DHS's parole regulation unambiguously granted the plaintiff a right to reenter the country to continue pursuing his pending application for adjustment of status and that the court could enforce that right through mandamus. Further, the circuit court reasoned that the Supreme Court's holding in Knauff that "it is not within the province of any court, unless expressly authorized by law , to review the determination of the political branch of the Government to exclude a given alien" does not apply in instances where a statute or regulation grants an excluded alien a right to physical presence in the United States. Put differently, where a nonresident alien abroad "has a right, conferred by a regulation the validity of which is conceded all around, to be in this country," Knauff and the doctrine of consular nonreviewability do not bar a court from ordering executive branch officials to grant the alien entry. The Court did not clarify, however, whether the alien's right to be in the United States under the parole regulation also constituted an "express[] authoriz[ation]" of judicial review , within the meaning of Knauff , of the alien's exclusion. The Supreme Court, for its part, has held at least once that the potential existence of a right to entry does not give rise to judicial review of an alien's exclusion. A D.C. Circuit decision stands in tension with the Seventh and Ninth Circuit cases. In Kiyemba v. Obama , the D.C. Circuit held that it did not possess authority to order executive branch officials to grant entry into the United States to seventeen Chinese nationals detained without sufficient evidence as enemy combatants in Guantanamo Bay. The aliens feared that they would face persecution in China and requested entry and release into the United States, at least until authorities could locate an appropriate third country to accept them, but executive branch officials denied their request and continued to hold the aliens at Guantanamo Bay while pursuing resettlement options through diplomacy. Although the illegality of the aliens' detention was undisputed, the D.C. Circuit held that it could not order the government to release the aliens into the United States. The circuit court cited Knauff , Mezei , and other exclusion cases for the principle that the political branches have "exclusive power . . . to decide which aliens may, and which aliens may not, enter the United States," and reasoned that this principle barred it from granting the requested relief. The "critical question" under Knauff , the circuit court reasoned, was whether any law "expressly authorized" courts "to set aside the decision of the Executive Branch and to order the[] aliens brought to the United States." The Court concluded that the aliens did not have due process rights and that no other "statute or treaty" authorized it to override the executive branch's decision not to grant the aliens entry to the United States. As such, the rule that "in the United States, who can come in and on what terms is the exclusive province of the political branches" foreclosed the aliens' claims for relief. In conclusion, the Seventh and Ninth Circuit cases suggest that the doctrine of consular nonreviewability does not bar federal courts from ordering executive branch officials to grant entry to nonresident aliens abroad for the purpose of remedying constitutional, statutory, or regulatory violations that the aliens suffered in the United States. However, the cases may not fully explain how such judicial authority to order a nonresident alien's entry comports with Knauff and the principles underlying the doctrine of consular nonreviewability. The D.C. Circuit opinion, in contrast, appears to stand for the proposition that Knauff allows federal courts no authority to order the entry of a nonresident alien located outside the United States, unless a statute expressly authorizes such relief. <1.2. Aliens Excluded at the Border or Port of Entry> Under current law, the general rule against challenges to denials of entry appears less relevant in the context of arriving aliens at the threshold of entry, notwithstanding the rule's provenance in Knauff and other cases about such aliens. Unlike in the visa context, it is not rare for federal courts to review and even strike down executive exclusion decisions and policies concerning aliens arriving at the border. At least three interrelated considerations contribute to the diminished relevance of the rule against challenges to exclusion decisions in arriving alien cases. <1.2.1. Detention and Other Consequences of Exclusion> First, decisions to exclude arriving aliens, unlike decisions to exclude aliens abroad, typically result in detention. Although nonresident aliens do not have constitutional rights with respect to entry , they may enjoy some protection from burdensome enforcement measures, such as prolonged detention, that sometimes flow from denial of entry. Recall, for example, the 1953 Mezei case mentioned above, where the Supreme Court denied relief to a stateless alien whose exclusion left him detained on Ellis Island without prospects for release. Unlike cases about aliens denied visas abroad, Mezei raised not only the question of whether the alien had grounds to challenge his exclusion from the United States, but also whether the government could keep him in detention on Ellis Island as a consequence of the exclusion decision. The majority answered this second question in the affirmative, reasoning that Mezei's lack of constitutional rights with respect to entry, and Congress's decision not to provide him with any judicially enforceable statutory rights to entry, foreclosed his challenge to the detention that resulted from his exclusion. In dissent, Justice Jackson made a famous retort: Because the respondent has no right of entry, does it follow that he has no rights at all? Does the power to exclude mean that exclusion may be continued or effectuated by any means which happen to seem appropriate to the authorities? It would effectuate [an alien's] exclusion to eject him bodily into the sea or set him adrift in a rowboat. In more recent cases, the Supreme Court has hesitated to rely on Mezei for the proposition that the federal government has the constitutional power to subject arriving aliens to prolonged detention in order to carry out their exclusion. Some lower courts have gone further and held that arriving aliens have due process rights that offer some protection against unreasonably prolonged detention, reasoning that Mezei applies only in cases that implicate specific national security concerns. The Supreme Court has yet to resolve the issue. As such, the extent to which aliens arriving at the border enjoy constitutional protections against prolonged detention or other enforcement measures connected to the denial of entry is a disputed issue. And while the law remains clear on the point that arriving nonresident aliens do not have constitutional rights with respect to entry itself, the proposition that they may have constitutional rights against detention or other enforcement measures that implicate fundamental rights often leads to judicial review of issues arising from their exclusion. <1.2.2. Habeas Corpus Review> Second, also because of the detention issue, arriving alien cases may trigger some level of habeas corpus review. Knauff and Mezei establish that no judicial review is available for exclusion decisions unless a statute expressly authorizes such review. But at the same time, the cases confirm an arguably countervailing proposition: that arriving aliens who suffer detention as a consequence of exclusion may challenge their exclusion in habeas corpus proceedings. Thus, in Knauff , the Court disavowed judicial review but still considered and rejected the excluded alien's argument that the applicable statutes required the Attorney General to conduct a hearing on her admissibility and that an executive branch regulation providing to the contrary was "unreasonable." Similarly, in Mezei , the Court's habeas review included an assessment that the exclusion of the stateless alien in that case without a hearing conformed to the procedural requirements of the immigration statutes. As the Court has noted elsewhere, "[i]n the immigration context, 'judicial review' and 'habeas corpus' have historically distinct meanings." The Court has held in the deportation context that the preclusion of judicial review does not bar habeas corpus proceedings. Knauff , Mezei , and earlier exclusion cases suggest that the same principle applies in the exclusion context: the cases declare that judicial review is unavailable for challenges to exclusion decisions, but they nonetheless engage in some review of executive jurisdiction and procedure under the rubric of habeas corpus. The scope of federal court review in habeas corpus proceedings of a decision to exclude an alien appears extremely limited, although its exact contours remain unclear (as does the question whether such proceedings are constitutionally required). The habeas review that the Court conducted in Knauff and Mezei did not reach the merits of the exclusion decisions. In Knauff , the Court declined to review the Attorney General's determination that the German war bride's entry would be "prejudicial." Similarly, in Mezei , the Court held that it could not review the Attorney General's undisclosed reasons for excluding the stateless alien. As such, one might read Knauff and Mezei to mean that courts reviewing exclusion decisions in habeas proceedings (1) may review pure questions of law, such as whether immigration officials had jurisdiction to enforce the relevant exclusion statutes and whether the statute authorized them to forgo a hearing, but (2) may not review the basis for the officials' determination that the statutes require the aliens' exclusion. Other cases complicate this picture, however. In at least one early habeas case that the Supreme Court has not overruled, the Court reviewed and reversed the determination of immigration officers that a group of arriving aliens was subject to exclusion under the immigration statutes. One federal circuit court has interpreted Supreme Court case law to suggest that "the Suspension Clause requires review of legal and mixed questions of law and fact related to removal orders, including expedited removal orders." The proper reach of a habeas court's review of the exclusion of an arriving alien thus remains unsettled, although the Supreme Court is scheduled to consider this issue in 2020. Regardless, the availability of any level of habeas review in arriving alien cases means that, in practice, the general rule against judicial review of exclusion decisions applies with less force in this context than in the context of visa denials or other decisions to exclude aliens located abroad , where the lack of detention makes habeas unavailable. <1.2.3. INA Framework for Judicial Review of Removal Orders> Third and finally, Congress has established a limited framework in the INA for the review of orders of removal against arriving nonresident aliens. The INA sets forth two primary procedures by which DHS officials may remove aliens arriving in the United States. These procedures are expedited removal, a streamlined process that contemplates removal without a hearing before an immigration judge, and formal removal, a more traditional proceeding in which an immigration judge determines whether to order the alien's removal. The INA specifies the limited circumstances in which an alien ordered removed under these procedures may obtain judicial review. The INA also expressly bars or limits judicial review of a range of executive branch actions and determinations connected to the removal process. This INA scheme of limitations on judicial review purports to bar review of expedited removal orders in most circumstances, but it may not bar review of some executive branch exclusion policies that bear upon the expedited removal process (such as, for example, executive policies that restrict asylum eligibility for some aliens arriving at the border who are subject to expedited removal procedures). These INA provisions concerning the reviewability of removal orders appear to have replaced the Knauff presumption that judicial review of exclusion decisions is unavailable "unless expressly authorized by law" as the touchstone for whether executive decisions or policies for the exclusion of arriving nonresident aliens are subject to judicial review. When the INA expressly authorizes judicial review of orders or policies for the removal of arriving aliens, federal courts engage in such review. More broadly, however, federal courts have also shown a willingness to review statutory challenges to exclusion decisions or policies concerning aliens at the threshold of entry so long as the INA does not expressly bar such review (even if it does not expressly authorize review). This situation typically arises in cases where arriving aliens or their advocates challenge an executive branch exclusion policy under the APA. How judicial review in such exclusion cases where the INA neither expressly authorizes nor bars review comports with the Knauff presumption remains largely unexplained in the case law. Yet the Supreme Court has on at least one occasion allowed for judicial review of inadmissibility determinations of arriving aliens on the ground that Congress had not expressly barred such review: in the 1956 case Brownwell v. We Shung , the Court held that arriving aliens could challenge inadmissibility determinations through declaratory judgment actions because the relevant statute a prior version of the INA that Congress later amended in disapproval of the Supreme Court decision did not bar such actions. This decision appeared to disregard the presumption against judicial review of exclusion determinations established in Knauff and earlier exclusion cases, although the We Shung Court did not address this point. The underlying implication of We Shung , and of the more recent lower court decisions reviewing statutory challenges to executive branch policies concerning the exclusion of arriving aliens, may be that the INA's judicial review framework for orders of removal occupies the territory that the Knauff presumption against judicial review once occupied and therefore replaces the Knauff presumption as the law governing the availability of judicial review in arriving alien exclusion cases. To recap: the current case law generally provides that statutory challenges to the exclusion of arriving aliens are reviewable unless a statute expressly bars such judicial review. However, the case law does not thoroughly reconcile this approach with the Knauff presumption that there should be no review of an exclusion determination unless the review is expressly authorized in statute. <1.3. Conclusion Concerning General Rule Against Judicial Review of Exclusion Decisions> The line of Supreme Court exclusion jurisprudence culminating in Knauff and Mezei establishes that courts may not review challenges to the exclusion of nonresident aliens unless Congress expressly provides for such review. In the context of aliens located abroad, this jurisprudence has developed into the rule of consular nonreviewability, which bars judicial review in most circumstances of visa refusals and other decisions to exclude nonresident aliens abroad. In the context of arriving aliens, however, the Knauff presumption against judicial review of exclusion decisions appears to have been mostly overshadowed by constitutional issues concerning enforcement measures related to the denial of entry, the potential availability of some level of habeas review, and the framework of INA provisions governing judicial review of removal orders. <2. Claims by U.S. Citizens Against an Alien's Exclusion> Even as applied to aliens abroad, the rule against nonresident alien challenges to denials of entry has a major limitation: the rule only clearly forecloses challenges brought by nonresident aliens themselves. Thus, if a U.S. citizen claims that the exclusion of an alien violated the U.S. citizen's constitutional rights, the rule against alien challenges does not apply with its full force. Cases that invoke this limitation account for the entirety of the Supreme Court's modern exclusion jurisprudence. The Court has not considered a nonresident alien's own challenge to a denial of entry in decades. The question about the extent to which U.S. citizens can challenge an alien's exclusion, on the other hand, has occupied the Court in four important cases since 1972: Kleindienst v. Mandel , Fiallo v. Bell , the splintered Kerry v. Din , and Trump v. Hawaii . Under the rule that these cases establish, the government need satisfy only a "highly constrained" judicial inquiry into whether the exclusion "had a justification independent of unconstitutional grounds" in order to prevail against an American citizen's claim that the exclusion violated his or her constitutional rights. This is an extremely limited level of judicial review under which the government has always prevailed before the Supreme Court. <2.1. Mandel and the Narrow Review of Exclusion Decisions> In 1972, the Court confronted a case in which a group of American professors claimed that the exclusion of a Belgian intellectual, Ernest Mandel, violated the American professors' and not Mandel's First Amendment rights. The professors had invited Mandel to speak at their universities. A provision of the INA rendered him ineligible for a visa because of his communist political beliefs. A separate provision authorized the Attorney General to waive Mandel's ineligibility upon a recommendation from the Department of State, but the Attorney General declined to do so. The case produced a standard of review for claims that the exclusion of an alien violates an American citizen's constitutional rights: [P]lenary congressional power to make policies and rules for exclusion of aliens has long been firmly established . . . . We hold that when the Executive exercises [a delegation of this power] negatively on the basis of a facially legitimate and bona fide reason , the courts will neither look behind the exercise of that discretion, nor test it by balancing its justification against the First Amendment interests of those who seek personal communication with the applicant. Applying this "facially legitimate and bona fide" test, the Court upheld Mandel's exclusion on the basis of the government's explanation that it denied the waiver because Mandel had abused visas in the past. The American professors and two dissenting Justices pointed to indications of pretext and argued that Mandel had actually been excluded because of his communist ideas. Nonetheless, the majority refused to "look behind" the government's justification to determine whether any evidence supported it. In other words, the Court accepted at face value the government's explanation for why it denied Mandel permission to enter. The "facially legitimate and bona fide" standard resolved what the Court saw as the major dilemma that the dispute over Mandel's visa posed for the bedrock principles of its immigration jurisprudence. Unlike Mandel himself and the unadmitted aliens from prior exclusion cases, the American professors stated a compelling First Amendment claim based on their "right to receive information" from the Belgian intellectual. But for the Court to grant relief on that claim, or even to grant full consideration of the claim, would have undermined Congress's plenary power to exclude aliens by interjecting the courts into the exclusion process. After all, many other exclusions of aliens for communist ideology could also have implicated the rights of U.S. citizens who sought to "meet and speak with" the excluded aliens. The "facially legitimate" standard protected the plenary power against dilution by limiting the reach of the American professors' claim. Under the standard, the professors were not entitled to balance their First Amendment rights against the government's exclusion power; they were entitled only to a constitutionally valid statement as to why the government exercised the exclusion power. Significantly, the Court left open the question whether the American professors' rights entitled them to even that much. Although the government proffered a "facially legitimate and bona fide" justification for Mandel's exclusion, the Court declined to say whether the government would have prevailed even if it had offered "no justification whatsoever." <2.2. Subsequent Applications of Mandel: Fiallo, Din, and Trump v. Hawaii> The Court has followed Mandel in three subsequent exclusion cases. The first of these cases, Fiallo v. Bell , concerned the constitutionality of a statute; the second, Kerry v. Din , concerned the Executive's application of a statute in an individual visa case; and the third, Trump v. Hawaii , concerned the Executive's invocation of statutory authority to exclude a broad class of aliens by presidential proclamation. All three cases reinforce the notion of the government's plenary power to exclude aliens even in the face of constitutional challenges brought by U.S. citizens. The second and third cases, however, indicate that a different standard of review than Mandel 's "facially legitimate and bona fide" test may apply when challengers present extrinsic evidence of an unconstitutional justification for an executive exclusion decision or policy. The Supreme Court has assumed without definitively holding that, in such cases, reviewing courts may consider the extrinsic evidence to determine whether the exclusion decision or policy "can reasonably be understood to result from a justification independent of unconstitutional grounds." <2.2.1. Fiallo v. Bell> In Fiallo v. Bell , the Court upheld a provision of the INA that classified people by gender and legitimacy. The statute granted special immigration preferences to the children and parents of U.S. citizens and LPRs, unless the parent-child relationship at issue was that of a father and his illegitimate child. Two U.S. citizens and two LPRs claimed that the restriction violated their equal protection rights by disqualifying their children or fathers from the preferences. Despite the "double-barreled discrimination" on the face of the statute, the Court upheld it as a valid exercise of Congress's "exceptionally broad power to determine which classes of aliens may lawfully enter the country." Although it relied on Mandel , the Fiallo Court did not identify a concrete "facially legitimate or bona fide" justification for the statute. Instead, the Court surmised that a desire to combat visa fraud or to emphasize close family ties may have motivated Congress to impose the gender and legitimacy restrictions. Similar to the analysis in Mandel , the Fiallo Court justified its limited review of the facially discriminatory statute as a way to prevent the assertion of U.S. citizen rights from undermining the sovereign prerogative to exclude aliens. <2.2.2. Kerry v. Din> In Kerry v. Din , the Court considered a U.S. citizen's claim that the Department of State violated her due process rights by denying her husband's visa application without sufficient explanation. The Department indicated that it denied the visa under a terrorism-related ineligibility but did not disclose the factual basis of its decision. The Court rejected the claim by a vote of 5 to 4 and without a majority opinion. Justice Scalia, writing for a plurality of three Justices, did not reach the Mandel analysis because he concluded that Din did not have a protected liberty interest under the Due Process Clause in her husband's ability to immigrate. But Justice Kennedy, in a concurring opinion for himself and Justice Alito, which some lower courts view as the controlling opinion in the case, assumed without deciding that the visa denial implicated due process rights but rejected the claim under the "facially legitimate and bona fide reason" test. Justice Kennedy's concurring opinion made two significant statements about how Mandel works in application. First, the government may satisfy the "facially legitimate and bona fide reason" standard by citing the statutory provision under which it has excluded the alien. Such a citation fulfills the "facially legitimate" prong by grounding the exclusion decision in legislative criteria enacted under Congress's "plenary power" to restrict the entry of aliens, and the citation also, by itself, suffices to "indicate[] [that the government] relied upon a bona fide factual basis" for the exclusion. Thus, because the government stated that it denied Din's husband's visa application under the terrorism-related ineligibility, it provided an adequate justification under Mandel even though it did not disclose the factual findings that triggered the ineligibility. Pointing to the statute suffices. Second, however, Justice Kennedy indicated that his interpretation of the "bona fide" prong might be susceptible to a caveat in some cases: Absent an affirmative showing of bad faith on the part of the consular officer who denied Berashk [Din's husband] a visa which Din has not plausibly alleged with sufficient particularity Mandel instructs us not to "look behind" the Government's exclusion of Berashk for additional factual details beyond what its express reliance on [the terrorism-related ineligibility] encompassed. In other words, under Justice Kennedy's reading of the Mandel standard, courts will assume that the government has a valid basis for excluding an alien under a given statute unless an affirmative showing suggests otherwise. In Din , the facts did not suggest bad faith, because Din's own complaint revealed a connection between the statutory ineligibility and her husband's case. Justice Kennedy therefore had no occasion to apply the caveat, and the opinion did not clarify what kind of "affirmative showing" would trigger it. Nonetheless, Justice Kennedy's concept of a bad faith exception to Mandel 's rule against judicial scrutiny of the government's underlying factual basis for an exclusion decision became a prominent issue in the Supreme Court's most recent exclusion case, Trump v. Hawaii . <2.2.3. Trump v. Hawaii> Most recently, in Trump v. Hawaii , the Court rejected a challenge brought by U.S. citizens, the state of Hawaii, and other U.S.-based plaintiffs against a presidential proclamation that provided for the indefinite exclusion of broad categories of nonresident aliens from seven countries, subject to some waivers and exemptions. Five of the seven countries covered by the proclamation were Muslim-majority countries. The proclamation, like two earlier executive orders that imposed entry restrictions of a similar nature, became known colloquially as the "Travel Ban" or "Muslim Ban." As statutory authority for the proclamation, the President relied primarily upon INA 212(f). That statute grants the President power "to suspend the entry of all aliens or any class of aliens" whose entry he "finds . . . would be detrimental to the interests of the United States." In the proclamation, the President concluded that the entry of the specified categories of nationals from the seven countries would have been "detrimental" to the United States because, based on the results of a multiagency review, the countries did not adequately facilitate the vetting of their nationals for security threats or because conditions in the countries posed particular risks to national security. Thus, the stated purpose of the proclamation was to protect national security by excluding aliens who could not be properly vetted due to the practices of their governments or the conditions in their countries. The challengers contended, however, that the actual purpose of the proclamation was to exclude Muslims from the United States. They based this argument primarily upon extrinsic evidence that is, evidence outside of the four corners of the proclamation including statements that the President had made as a candidate calling for a "total and complete shutdown of Muslims entering the United States." The challengers argued that the proclamation was illegal on statutory and constitutional grounds. With respect to statute, the challengers contended that INA 212(f) conferred upon the President only a "residual power to temporarily halt the entry of a discrete group of aliens engaged in harmful conduct" and therefore did not authorize the proclamation's indefinite exclusion of nationals of seven countries. The challengers also made other statutory arguments, including that the proclamation did not make sufficient findings that the entry of the excluded aliens would be "detrimental to the interests of the United States," as the language of 212(f) requires. With respect to the constitutional ground, the challengers argued that the proclamation violated the Establishment Clause because, based on the extrinsic evidence, the President issued the proclamation for the actual purpose of excluding Muslims from the United States. As such, according to plaintiffs, the proclamation ran afoul of the "clearest command" of the Establishment Clause: "that one religious denomination cannot be officially preferred over another." A five-Justice majority of the Supreme Court rejected all of these challenges in an opinion by Chief Justice Roberts that generally reaffirmed the unique breadth of the political branches' power to admit or exclude aliens. On the statutory claims, the Court declined to decide whether the doctrine of consular nonreviewability barred judicial review of the U.S. plaintiffs' arguments that the proclamation violated 212(f) and other provisions of the INA. The Court instead held that the proclamation did not violate the INA because 212(f) "exudes deference to the President" and grants him "'ample power' to impose entry restrictions in addition to those elsewhere enumerated in the INA," even restrictions as broad as those in the proclamation. The Court also reasoned that the "deference traditionally accorded the President" in national security and immigration matters means that courts must not conduct a "searching inquiry" into the basis of the President's determination under 212(f) that the entry of certain aliens would be "detrimental to the interests of the United States." The Court suggested that such a presidential determination might not be subject to judicial review at all calling the premise for such review "questionable" but ultimately held that, "even assuming some form of review [was] appropriate," the findings in the proclamation about the results of the multiagency review of vetting practices satisfied 212(f)'s requirements. In short, although the Court reviewed the statutory claims against the proclamation, it rejected those claims by holding that Congress has delegated extraordinary power to the President to exclude aliens and that the President's decisions to employ this power warrant deference. On the constitutional issue, the Court reiterated the holdings in Mandel and Fiallo that matters concerning the admission or exclusion of aliens are "'largely immune from judicial control'" and are subject only to "highly constrained" judicial inquiry when exclusion "allegedly burdens the constitutional rights of a U.S. citizen." Interestingly, however, the Court did not decide whether the limitations on the scope of this inquiry barred consideration of extrinsic evidence of the proclamation's purpose. Much of the litigation in the lower courts had turned on this issue. A majority of judges on the U.S. Court of Appeals for the Fourth Circuit, citing Justice Kennedy's concurrence in Din , had relied on the campaign statements and other extrinsic evidence of anti-Muslim animus to hold that the proclamation likely violated the First Amendment. Dissenting Fourth Circuit judges had reasoned that Mandel and the other exclusion cases prohibited consideration of the extrinsic evidence. The Supreme Court, instead of resolving this disagreement, assumed without deciding that consideration of the extrinsic evidence was appropriate in connection with a rational basis inquiry: A conventional application of . . . [the] facially legitimate and bona fide [test] would put an end to our review. But the Government has suggested that it may be appropriate here for the inquiry to extend beyond the facial neutrality of the order. For our purposes today, we assume that we may look behind the face of the Proclamation to the extent of applying rational basis review. That standard of review considers whether the entry policy is plausibly related to the Government's stated objective to protect the country and improve vetting processes. As a result, we may consider plaintiffs' extrinsic evidence, but will uphold the policy so long as it can reasonably be understood to result from a justification independent of unconstitutional grounds. In other words, the Court concluded that, even if plaintiffs' evidence of anti-Muslim animus warranted expansion of the scope of judicial review beyond the four corners of the proclamation itself, the appropriate inquiry remained extremely limited: whether the proclamation was rationally related to the national security concerns it articulated. And that rational basis inquiry, the Court explained, is one that the government "hardly ever" loses unless the laws at issue lack any purpose other than a "'bare . . . desire to harm a politically unpopular group.'" Applying this forgiving standard, the Court held that the proclamation satisfied it mainly because agency findings about deficient information-sharing by the governments of the seven covered countries established a "legitimate grounding in national security concerns, quite apart from any religious hostility." In the principal dissent, Justice Sotomayor argued that the majority failed to provide "explanation or precedential support" for limiting its analysis to rational basis review after deciding to go beyond the "facially legitimate and bona fide reason" inquiry. In Justice Sotomayor's view, the Court's Establishment Clause jurisprudence required the Court to strike down the proclamation because a "reasonable observer" familiar with the evidence would have concluded that the proclamation sought to exclude Muslims. She also reasoned that, even if rational basis review were the correct standard, the proclamation failed to satisfy it because the President's statements were "overwhelming . . . evidence of anti-Muslim animus" that made it impossible to conclude that the proclamation had a legitimate basis in national security concerns. Finally, Justice Sotomayor criticized the majority for, in her view, tolerating invidious religious discrimination "in the name of a superficial claim of national security." She compared the majority decision to Korematsu v. United States , a case that upheld as constitutional the compulsory internment of all persons of Japanese ancestry in the United States (including U.S. citizens) in concentration camps during World War II. (The majority responded that unlike the exclusion order in Korematsu the proclamation did not engage in express, invidious discrimination against U.S. citizens and that, as such, " Korematsu has nothing to do with this case." The majority also took the occasion to overrule Korematsu which had long been considered bad law but which the Supreme Court had never expressly overruled calling it "gravely wrong the day it was decided." ) In conclusion, Trump v. Hawaii leaves some questions unresolved about how the Mandel test works in practice, but Trump v. Hawaii leaves no uncertainty on one point: Mandel and its progeny permit courts to conduct only a vanishingly limited review of executive decisions to exclude aliens abroad. The Court did not decide whether U.S. citizens may challenge exclusion decisions on statutory grounds or whether, and in what circumstances, courts may consider extrinsic evidence of the government's purpose for an exclusion decision or policy. Yet the majority opinion reaffirms that the standard of review that applies to constitutional claims brought by U.S. citizens against the exclusion of aliens abroad is a "highly constrained" one that favors the government heavily, even when extrinsic evidence suggests that the Executive may have acted for an unconstitutional purpose. <3. Implications of Supreme Court Jurisprudence for the Scope of Congressional Power> The Mandel line of cases embraces the broad view of congressional power over the admission and exclusion of aliens that the Supreme Court established in Knauff and earlier precedent, although the cases do leave some uncertainty about the outer edges of the congressional power. Mandel and Din appeared to take the absoluteness of Congress's exclusion power as a given. In Din , Justice Kennedy grounded his conclusion that a visa denial withstands constitutional attack so long as the government ties the exclusion to a statutory provision on the premise that Congress can impose whatever limitations it sees fit on alien entry. In other words, because Congress's limitations are valid per se , executive enforcement of those limitations is also valid. Mandel makes the same point, albeit mainly through omission. Recall that the case concerned application of an INA provision that rendered the Belgian academic ineligible for a visa because he held communist political beliefs. The Court acknowledged that the statute triggered First Amendment concerns by limiting, based on political belief, U.S. citizens' audience with foreign nationals. But the Court did not assess whether the statute violated the First Amendment. Rather, the Court accepted without significant analysis that Congress had the power to impose such an idea-based entry limitation. As a result, the Mandel decision considered only the First Amendment implications of the Attorney General's refusal to waive Mandel's communism-based ineligibility, not the statutory premise of the ineligibility. The untested assumption underlying Mandel and Din that Congress's immigration power encompasses the power to exclude based on any criteria whatsoever, including political belief raises a fundamental question about the nature of the plenary power. Often, the Supreme Court has described the power as one that triggers judicial deference , meaning that courts may conduct only a limited inquiry when considering the constitutionality of an exercise of the immigration power. But the plenary power doctrine, as some scholars have noted, can be understood another way, one that perhaps makes more sense of Mandel : the "plenary" refers to the scope of the power itself, in substance, and not to its immunity from judicial review. The congressional power to admit or exclude aliens is so complete, this theory goes, as to override the constitutional limitations that typically constrain legislative action. For example, the power overrides the First Amendment principles that would invalidate legislation that expressly provides for unfavorable treatment based on political belief in almost any other context. Aspects of Fiallo , however, arguably do not support this concept of a substantively limitless congressional power to regulate alien entry. Unlike Mandel and Din , which examined the Executive's application and implementation of authority delegated by statute, Fiallo squarely considered the constitutionality of a statute itself. And while Fiallo 's outcome (upholding an immigration law that discriminated by gender and legitimacy) aligns with the concept of an unbridled legislative power, the Court's reasoning wavered between statements suggesting that the legislative power might have limits and statements describing the power as absolute. The lack of clarity in the opinion seemed to stem from the awkwardness of applying Mandel which fashioned a rule for review of executive action (the "facially legitimate and bona fide" test) in a case reviewing legislative action. Ultimately, the Fiallo Court cited the Mandel test as an analogue but did not actually apply the test. Rather, the Court upheld the statute at issue under something that looked like a version of rational basis review, one in which a hypothetical justification suffices to sustain the statute. While extremely deferential, this version of rational basis review implies an underlying constitutional limitation against legislative unreasonableness, at least in theory. In other words, an even-handed reading of Fiallo suggests that statutes regulating the admission of aliens must at least be reasonable. Some scholars have argued that Fiallo was incorrectly decided and that stricter constitutional scrutiny should apply to admission and exclusion laws that classify aliens by factors such as race, religion, and gender. To date, this argument does not find support in Supreme Court precedent, particularly not after the Court relied on Fiallo in Trump v. Hawaii to describe the breadth of the political branches' exclusion power. To be sure, the Supreme Court has made clear that Congress cannot deny certain rights to aliens subject to criminal or deportation proceedings within the United States, and that the federal government cannot deny some procedural protections to LPRs returning from brief trips from abroad. But the Court has never suggested that laws regulating the admission of non-LPR aliens trigger anything more than the deferential rational basis review that it applied to the gender-based immigration preferences statute at issue in Fiallo . In other words, the Court has never called Fiallo into question. In one recent case, Sessions v. Morales-Santana , the Supreme Court applied heightened constitutional scrutiny to strike down a derivative citizenship statute that, much like the statute in Fiallo , used gender classifications. However, the Morales-Santana Court distinguished Fiallo and the plenary power doctrine by noting that the statute before it concerned citizenship, not immigration. Accordingly, Morales-Santana does not appear to portend imminent reconsideration of Fiallo . The term after Morales-Santana , the Court applied rational basis review in Trump v. Hawaii to an executive exclusion policy that was based on a statutory delegation of authority, suggesting that nothing more than rational basis review could apply to an exclusion statute itself. To summarize, dicta in two of the exclusion cases that decided challenges to executive action, Mandel and Din , give the impression of a substantively absolute congressional power to control the entry of aliens. But courts have generally interpreted Fiallo , which concerned a direct challenge to a law regulating alien admission and exclusion, to mean that such laws must at least survive a review for reasonableness. To date, the Supreme Court has not heeded calls by some scholars and litigants for more exacting review of laws regulating alien entry. <4. Implications of Supreme Court Jurisprudence for the Scope of Executive Power> Mandel , Din , and Trump v. Hawaii trace the contours of the Executive's exclusion power. As described above, Mandel 's "facially legitimate and bona fide reason" test governs claims that an exclusion decision or policy violates a U.S. citizen's constitutional rights. The Executive satisfies the test by identifying the statutory basis for the exclusion. Where the U.S. citizen challenger proffers extrinsic evidence that the Executive acted with an unconstitutional purpose, it might be proper for a reviewing court to consider that evidence, but only as part of a rational basis inquiry under which the exclusion decision or policy must be upheld if "it can reasonably be understood to result from a justification independent of unconstitutional grounds." However, the cases do not resolve definitively at least three issues about the executive power. These issues, discussed below, are (1) whether the Executive possesses inherent exclusion power, as opposed to solely statutory-based power; (2) the extent to which U.S. persons or entities may challenge an alien's exclusion on statutory grounds; and (3) the extent to which the Constitution limits the Executive's application of broad delegations of congressional power to make exclusion determinations. <4.1. Source of Executive Power> The Supreme Court's exclusion cases generally indicate that the authority to exclude aliens reaches the Executive through congressional delegation. The cases generally assign the constitutional power to regulate immigration to Congress and imply that an executive exclusion decision or policy must have a basis in statute. Mandel , Din , and Trump v. Hawaii illustrate this implied point: even though all three cases considered the constitutionality of executive action, the Court focused its analysis in each case on a statutory source of authority for the executive action. For instance, in Trump v. Hawaii , the Court analyzed whether the "Travel Ban" order fit within the President's authority under INA 212(f) to "suspend the entry of all aliens or any class of aliens." Trump v. Hawaii and the Court's other exclusion cases proceed on the assumption that executive action to exclude aliens requires statutory authorization. An opposing view held by at least one current Supreme Court Justice posits that the Executive has " inherent authority to exclude aliens from the country." Under this view, Congress does not have authority to constrain executive exclusion decisions. This view arguably finds some support in Supreme Court immigration jurisprudence. Many of the cases, for example, do not distinguish between Congress and the Executive when discussing the constitutional power to regulate immigration, suggesting that the two branches could share the power. Furthermore, at least one pre- Mandel Supreme Court decision states expressly that the Executive possesses inherent authority to exclude aliens. The case makes this statement, however, only to rebuff a challenge to the constitutionality of congressional delegations of immigration authority to executive agencies. In other words, the case states that the Executive has inherent exclusion authority only to explain why Congress may delegate exclusion authority to the Executive, not to establish that the Executive may exclude aliens absent statutory authority. The case goes on to acknowledge that, notwithstanding any inherent executive authority, in immigration matters the Executive typically acts upon congressional direction. The text of the Constitution itself does not resolve whether the Executive has a constitutional power to exclude aliens that is independent of statutory authorization. Because the federal government's immigration power rests at least in part upon an "inherent power as a sovereign" not enumerated in the Constitution, courts cannot determine who owns the power by reading Article I or Article II. Neither does Supreme Court precedent resolve the issue definitively. In one 1915 case, Gegiow v. Uhl , the Court held that an executive exclusion decision violated the governing statute. That holding implies that legislative restrictions on such decisions are constitutionally valid. But that brief decision did not discuss the concept of inherent executive authority over immigration, and more recent exclusion cases have not decided the issue because they have resolved statutory challenges by holding that the executive action at issue complied with the relevant statutes. On balance, the weight of authority favors the view that the power to exclude aliens belongs primarily to Congress, at least in the first instance. The idea that the Executive could exclude aliens in contravention of a statute or, to a lesser extent, without statutory authorization would challenge separation of powers principles and does not find support even in the one Supreme Court opinion that expressly endorses the concept of an inherent executive immigration power. The idea of an extra-statutory executive exclusion power would also undermine basic features of the Court's exclusion jurisprudence, such as the long-standing rule that a court reviewing the exclusion of an arriving alien in habeas corpus proceedings must ascertain whether immigration officers had statutory authorization to make the exclusion determination. The point remains, however, that the Court has not established clearly that the Executive may not exclude aliens in contravention of a statute or without statutory authorization. This lack of definitive precedent on the issue may result from Congress's extremely broad delegation of exclusion authority to the Executive, most notably in INA 212(f), and from the limited judicial review available for executive enforcement of exclusion statutes. Finally, a specific aside about the field of diplomacy: because the Reception Clause of the Constitution grants the President the exclusive power to "receive Ambassadors and other public Ministers," it seems more than plausible that a President could override a statute at least when making decisions about the admission or exclusion of foreign diplomats. <4.2. Statutory Challenges to Executive Decisions to Exclude Aliens> Because executive exclusion power appears to derive primarily from statute, executive exclusion decisions or policies are susceptible in theory to attack on the ground that they violate the governing statutes. In Trump v. Hawaii , for instance, the Supreme Court analyzed and rejected arguments that the "Travel Ban" exclusion policy violated provisions of the INA. But the Court declined to resolve a threshold question about such challenges: whether they are barred by the doctrine of consular nonreviewability, which, as discussed above, forms part of the general rule against judicial review of exclusion decisions. Specifically, consular nonreviewability prohibits judicial review of a visa denial unless the denial burdens the constitutional rights of a U.S. citizen, in which case the deferential standard of review under the Mandel line of cases applies to the constitutional claim. The Mandel Court, in recognizing for the first time that U.S. citizens could challenge exclusion decisions despite the bar against such suits when brought by aliens, spoke narrowly of constitutional claims by U.S. citizens. Trump v. Hawaii reasoned that the statutory claims at issue there failed on the merits even if they were subject to judicial review, and the Court therefore declined to answer whether the Mandel exception also encompasses statutory claims brought by U.S. citizens against the exclusion of aliens abroad. At least two federal circuit courts have held that the doctrine of consular nonreviewability bars U.S. citizen challenges to visa denials on statutory grounds, at least when the citizen does not also state constitutional claims. These courts reasoned that permitting review of purely statutory claims would "convert[] consular nonreviewability into consular reviewability" and "eclipse the Mandel exception" by subjecting statutory claims to a more exacting level of review under the APA than constitutional claims receive under the "highly constrained" review that applies under the Mandel line of cases. On the other hand, in two other cases involving a combination of statutory and constitutional claims brought by U.S. citizens against visa denials, courts in the First Circuit and D.C. Circuit reviewed the statutory claims and rejected or called into question the visa denials on statutory grounds. One of these decisions concluded that the statutory claims were reviewable because, among other rationales, the canon of constitutional avoidance required the court to construe the relevant statutes before considering whether the Executive's application of the statutes violated the Constitution. In both cases, the courts analyzed the statutory claims without deferring to the government's determination that the INA required the denial of the visa applications at issue. As a result, the cases scrutinized the government's justifications for excluding aliens much more closely than the Supreme Court analyzed the constitutional claims in Trump v. Hawaii , Mandel , and Din . It was the Ninth Circuit's disagreement with this framework endorsed by the First and D.C. Circuits that statutory challenges to visa denials should draw stricter review than constitutional challenges that led it, among other reasons, to hold in a pure statutory case that consular nonreviewability bars statutory claims. The Supreme Court has on at least two occasions rejected statutory challenges brought by U.S. citizens or organizations against the exclusion of aliens abroad without deciding whether such challenges are subject to judicial review. As already mentioned, in Trump v. Hawaii , the Court acknowledged but did not decide the reviewability question in a case that involved a combination of statutory and constitutional claims brought by U.S. citizens and other U.S. parties. In the 1993 case Sale v. Haitian Centers Council , the Court considered and ultimately rejected statutory challenges to the U.S. Coast Guard's interdiction and forced return of Haitian migrants trying to reach the United States by sea. Specifically, the Court analyzed and rejected the argument that the interdictions violated an INA provision requiring immigration authorities to determine whether aliens would suffer persecution in a particular country before returning them to that country. The Sale Court did not address the consular nonreviewability issue, even though the government argued it, but instead seemed to assume without discussion that the statutory challenges to the interdictions and forced returns were reviewable. The only clear holding about consular nonreviewability that arises from Hawaii and Sale is that the doctrine does not deprive federal courts of subject matter jurisdiction over statutory challenges brought by U.S. citizens against the exclusion of aliens abroad, even though the doctrine might supply a rule of decision requiring courts to reject such statutory challenges without reviewing their merits. In summary, federal appellate courts have held that the doctrine of consular nonreviewability bars exclusively statutory challenges brought by U.S. citizens against the executive branch decisions to exclude aliens abroad, but not where the citizens also press constitutional challenges. The Supreme Court has not resolved the issue, but the Court reviewed statutory challenges that were combined with constitutional challenges in Trump v. Hawaii and reviewed exclusively statutory challenges in Sale . <4.2.1. Exclusions Based on Broad Delegations of Congressional Power> Justice Kennedy concluded in Din that the plenary nature of Congress's power to exclude aliens means that an executive exclusion decision for a statutory reason is facially legitimate and bona fide. But what about where Congress transfers its exclusion power to the Executive with few limiting criteria? What constitutional restrictions does the Executive face in that scenario? Trump v. Hawaii indicates that the Executive, at least in theory, must comply with constitutional guarantees when exercising power delegated from Congress to create exclusion policies. Even though the Court in that case engaged in only a "highly constrained" level of judicial review, it stated that the purpose of the review was to determine whether the challenged exclusion policy could "reasonably be understood to result from a justification independent of unconstitutional grounds." Presumably, if the Court had concluded that the "Travel Ban" proclamation was "'inexplicable by anything other than [anti-Muslim] animus,'" it would have struck down the proclamation for violating the Establishment Clause. Although the proposition that constitutional guarantees restrict executive exercises of exclusion authority may seem unremarkable, the Court actually avoided deciding this issue in Mandel . The relevant statute in that case gave the Attorney General broad discretion to waive the communism-based ground for exclusion. The parties and the Court assumed that Congress had the authority to exclude communists based on their political ideas. The executive branch argued that it, too, could exercise congressionally delegated exclusion authority to deny entry based on political belief or for "any reason or no reason." The Mandel Court, in adopting the "facially legitimate and bona fide" standard, avoided addressing this contention. The Court reasoned that it did not have to decide whether the government could deny an inadmissibility waiver for "any reason or no reason" because the government had in fact supplied a reason for denying Mandel's waiver his alleged prior visa abuse "and that reason was facially legitimate and bona fide." Thus, Mandel left open the possibility that the First Amendment could limit the executive branch's, but not Congress's, power to exclude based on political belief, but the Court did not decide the issue. After Trump v. Hawaii , however, it seems relatively clear that executive exclusion policies must find support in justifications that are "independent of unconstitutional grounds," even though courts will apply only a "narrow standard of review" to assess those justifications. In other words, constitutional guarantees might not restrict Congress's exercise of the exclusion power, but they apparently do restrict the Executive's exercise of exclusion power delegated to it by Congress. <5. Conclusion> The Supreme Court has consistently reaffirmed that legislative and executive decisions to exclude aliens abroad are "'largely immune from judicial control.'" The doctrine of consular nonreviewability bars judicial review of decisions to exclude aliens abroad in most circumstances. And even where such decisions burden the constitutional rights of U.S. citizens, the Mandel line of cases stands for the proposition that federal courts must grant the decisions a level of deference so substantial that it mostly assures government victory over any challenges. Notably, however, Supreme Court precedent mainly describes the deference due to executive exclusion decisions as an issue within Congress's control. The doctrine of consular nonreviewability and the Mandel line of cases take their cue from legislative inaction: because Congress has not said that courts may review executive decisions to exclude aliens abroad, courts mostly do not conduct such review or (where constitutional claims of U.S. citizens are at stake) conduct only an extremely limited form of review. Ultimately, the cases indicate that Congress has authority to expand review through affirmative legislation.

Supreme Court precedent establishes that inherent principles of sovereignty give Congress "plenary power" to regulate immigration. The core of this power—the part that has proven most impervious to judicial review—is the authority to determine which non-U.S. nationals (aliens) may enter the United States and under what conditions. The Court has also established that the executive branch, when enforcing the laws concerning alien entry, has broad authority to do so mostly free from judicial oversight. Two principles frame the scope of the political branches' power to exclude aliens. First, nonresident aliens abroad generally cannot challenge exclusion decisions because they do not have constitutional rights with respect to entry and cannot obtain judicial review of the statutory basis for their exclusion unless Congress provides otherwise. Second, even when the exclusion of a nonresident alien burdens the constitutional rights of a U.S. citizen, the government need only satisfy a "highly constrained" judicial inquiry to prevail against the citizen's constitutional challenge. The Supreme Court developed the first principle—that nonresident aliens generally cannot challenge exclusion decisions—in a line of late 19th to mid-20th century exclusion cases. These cases culminated in the 1950 decision United States ex rel. Knauff v. Shaughnessy , in which the Court declared that "it is not within the province of any court, unless expressly authorized by law, to review the determination of the political branch of the Government to exclude a given alien." This rule forms the basis of the doctrine of consular nonreviewability, which in almost all circumstances bars nonresident aliens abroad from challenging visa denials by U.S. consular officers. But the rule set forth in Knauff applies with less force to decisions to exclude aliens arriving at the border. Aliens at the cusp of entry into the United States may be detained by immigration authorities pending their removal. Their cases can trigger habeas corpus proceedings for that reason and may also implicate complex statutory frameworks on judicial review. The second principle, concerning exclusion decisions that burden the rights of U.S. citizens, has been the primary subject of the Supreme Court's modern exclusion jurisprudence. In four cases since 1972— Kleindienst v. Mandel , Fiallo v. Bell , the splintered Kerry v. Din , and Trump v. Hawaii —the Court has recognized that U.S. citizens who claim that the exclusion of aliens violated the citizens' constitutional rights may obtain judicial review of the exclusion decisions. Yet the standard of review that the Court applies to such claims is so deferential to the government as to all but foreclose U.S. citizens' constitutional challenges. In the most recent case, Trump v. Hawaii , the Court applied a "highly constrained" level of review to uphold a broad executive exclusion policy notwithstanding some evidence that the purpose of the policy was to exclude Muslims. The Mandel line of cases reaffirms the unique scope of Congress's power to legislate for the exclusion of aliens. Exclusion statutes draw minimal judicial scrutiny even when they classify people by disfavored criteria, such as gender or legitimacy. With respect to the executive power, the cases reaffirm generally that, in the absence of statutory provisions to the contrary, courts play almost no role in overseeing the application of admission and exclusion laws to nonresident aliens abroad. However, the cases leave some questions about executive exclusion power unresolved, including whether the Executive has inherent, constitutional power to exclude aliens and whether U.S. citizens may bring statutory challenges against executive decisions to exclude aliens abroad.

crs_R46196

crs_R46196_0

<1. How Does Solar Energy Work?1> The energy in sunlight can be converted into electricity in either of two ways: by using solar photovoltaic cells or by concentrating solar energy to produce heat for electricity generation. Solar energy can also be used to heat water for direct use, but this report focuses only on electricity generation applications. <1.1. Solar Photovoltaic (PV)> Sunlight can interact with certain materials to directly produce electricity in a process known as the photovoltaic (PV) effect. Silicon (more specifically, crystalline-silicon, or c-Si) is the most commonly used material today, but other materials (e.g., cadmium telluride) also can be used. Research is ongoing into alternative materials and designs that might be more efficient or less expensive than c-Si. To construct a PV cell to generate electricity, PV material is manufactured into ingots, which are then cut into wafers ( Figure 1 ). Wafers are typically 15 centimeters (cm) wide along each side and around one-hundredth of a centimeter thick, although exact dimensions may vary by manufacturing process. Wafers are processed into cells, which are then assembled into modules, also called panels. A module typically consists of 60 to 72 cells mounted on a plastic backing within a frame. Modules are typically installed in groups, known as arrays, with the number of modules in the array depending upon the available space and the desired generation capacity of the project. A PV system includes modules and a variety of structural and electronic components, known as balance of system (BOS) equipment, to tie the system together. Structural BOS equipment includes brackets, on which the modules are mounted. For ground-mounted systems, these brackets can be either fixed or able to rotate during the day to face the sun. Mounting systems that can rotate are known as tracking systems. Modules mounted on tracking systems tend to generate more electricity than modules on fixed-mount systems, all else being equal, because the tracking systems can optimize the amount of sunlight hitting the module over the course of a day. One key piece of BOS equipment is an inverter, an electronic device that converts the electricity generated by PV modules into a form that is usable in the U.S. electric system. Other electronic BOS equipment includes charge controllers, circuit breakers, meters, and switch gear. Some PV systems also include integrated energy storage systems such as batteries. PV systems can be divided into three categories, based primarily on capacity. Utility- scale systems (i.e., solar farms) may range in capacity from a few megawatts (MW) to a few hundred MW. They are typically owned and operated like other central power plants. Utility-scale projects are typically connected to the electricity transmission system, the network of high-voltage lines that move electricity over long distances. Commercial-scale systems typically range in capacity from a few kilowatts (kW; 1,000 kW = 1 MW) to a few hundred kW. They may be installed on the ground or on rooftops, and are typically owned or hosted by commercial, industrial, or institutional entities. Some may be connected to the transmission system, and some may be connected to the electricity distribution system, the network of low-voltage lines that deliver electricity directly to most consumers. Residential -scale systems typically have generation capacity of a few kW. Most residential-scale projects are installed on rooftops and connected to the distribution system. Another way to categorize PV systems is by ownership model. Systems connected to the transmission system (typically utility-scale) are generally owned by utilities or independent power producers, as is the case for other central power plants. Smaller systems may use other ownership models, depending on what applicable state laws allow. Customer-owned systems are owned directly by the electricity consumer benefiting from the system. The consumer might buy the system outright or finance it in the same way as for other property improvements (e.g., loan). Third-party ownership (i.e., solar leasing) is an ownership model in which an electric consumer, such as a homeowner, allows a company to build a solar system on the consumer's property. The company owns and maintains the solar system while the consumer uses the electricity produced by the system. The consumer pays back the cost of the system to the company through either lease payments or a power purchase agreement. Community solar (i.e., solar gardens) is an ownership model in which multiple electricity consumers may purchase or lease shares of a solar system through a subscription. Subscribers can benefit from the project by receiving electricity, financial payments, or both. Community solar systems are usually not installed on a subscriber's property, and the systems may be owned by a utility or another type of entity. <1.2. Concentrating Solar Power> Concentrating solar power (CSP) technologies collect and concentrate energy from sunlight to heat certain fluids (liquids or gases). CSP plants use these heated fluids to produce electricity, either by creating steam to drive a steam turbine or by directly running a generator. CSP plants can be designed with thermal energy storage systems. At least one CSP plant with storage operating in the United States is capable of generating electricity 24 hours a day. <2. How Much Electricity Comes From Solar Energy?11> Electricity generation from solar energy has grown in recent years, as shown in Figure 2 . Solar energy overall (PV and CSP combined) accounted for 0.7% of total U.S. electricity generation in 2014 and 2.2% of the total in 2018, according to data from the U.S. Energy Information Administration (EIA). Most generation (96% in 2018) from solar energy comes from PV systems. Large-scale systems, defined by EIA as those greater than 1 MW, accounted for 61% of overall generation from solar energy in 2014, the first year for which EIA reported generation data for different size categories. By 2018, the share from large-scale systems had increased to 68%. <3. How Much Does a Solar PV System Cost?13> Costs for solar PV systems vary by size, as shown in Figure 3 . The figure shows an estimate of average U.S. solar PV system costs per unit of capacity, as of the first quarter of 2018 (Q1 2018), based on an analysis by the Department of Energy's National Renewable Energy Laboratory (NREL). Costs for any individual project could differ based on project-specific circumstances. Two general findings from NREL's analysis are supported by numerous other studies, namely that larger projects tend to be cheaper on a per-unit basis, and that costs for projects of all sizes have declined in recent years. Utility-scale systems have the lowest unit costs, ranging from an average of $1.06 per watt of direct current (hereinafter, W) to $1.13/W in 2018, depending on whether projects were mounted on fixed brackets or tracking systems, respectively. Commercial-scale systems cost $1.83/W on average in Q1 2018, and residential-scale systems cost $2.70/W on average. The total system cost differences shown in Figure 3 are driven primarily by higher "soft costs." These costs include, for example, costs associated with permitting, interconnecting with the grid, and installer overhead costs. The soft costs are much higher for smaller-scale systems, per watt, than for utility-scale systems. PV system costs have declined, as shown by data from the NREL analysis shown in Figure 4 . NREL reported costs from 2010 to Q1 2018. NREL credits cost declines over this time period to cost declines in all system components (i.e., modules, inverters, BOS equipment, labor, and other soft costs). PV module costs increased between 2017 and 2018 as a result of tariffs discussed in the section " How Are U.S. Tariffs Affecting Domestic Solar Manufacturing? ," offsetting cost declines in other system components, according to the NREL report. <4. How Does Solar Energy Impact Electricity Costs for Consumers?16> Generalizing the cost impacts to consumers for solar systems is challenging because costs for these systems vary across the United States. Additionally, solar system costs are declining in both absolute terms (as discussed in the previous section) and relative to other sources of electric power. In parts of the country, new solar systems are sometimes among the least cost-options for generating electricity. This was not generally the case a few years ago. Policies aimed at promoting solar energy make an assessment of costs more complex. For example, tax incentives, as discussed in the section " What Federal Tax Incentives Support Solar Energy Development? ," can reduce the ownership costs for businesses or individuals that purchase solar energy systems. Some of those costs are then transferred to taxpayers. The following discussion focuses on electricity costs only from a consumer's point of view. Consumers' electricity costs can be measured in two ways. The first way is the electricity rate, typically expressed in cents per kilowatt-hour (cents/kWh). The second way is the electricity bill, typically the total costs for electricity that consumers pay each month expressed in dollars. In most cases, an electricity bill reflects the costs to produce electricity (typically, the applicable electricity rate times the amount of electricity consumed), the costs to deliver electricity to the consumer, and any other fees as determined by state or local regulators (e.g., contributions to funds that provide bill relief to low-income households). Electricity rates can go down while bills go up, and vice versa. Multiple factors can determine how solar energy might affect what consumers pay for electricity. Many of these factors vary based on local circumstances. They can also change over time as the profile of electricity sources changes. <4.1. Comparing Electricity Costs> One way to compare electricity costs is by estimating the lifetime costs of energy systems. Lifetime costs include the initial construction and installation cost plus operation and maintenance (O&M) costs, fuel costs, and other costs. Electricity rates are strongly influenced by total lifetime costs for all the electricity generators serving a given area. Lifetime costs for solar energy have historically been higher than for many other sources, but that is changing in many parts of the United States. For example, one commonly used measure of lifetime costs is the levelized cost of electricity (LCOE), usually expressed in dollars per megawatt-hour of generation ($/MWh) and averaged over the lifetime of a project. LCOE estimates attempt "apples-to-apples" comparisons among technologies because the estimates account for how much electricity a given power plant is expected to produce over its lifetime. According to widely cited estimates from one consulting firm, 2019 LCOE for new utility-scale solar systems ranged from $32/MWh to $42/MWh. By comparison, LCOE for new wind generation was $28/MWh-$54/MWh and for natural gas combined cycle generation was $44/MWh-$68/MWh. Another factor in consumers' bills is the extent to which electricity from solar energy displaces electricity generation from existing sources. If existing power plants are called upon to produce less electricity than planned when they were first built due to the availability of power from less expensive sources, the owners still need to pay the construction cost of their unneeded capacity. Such costs are known as stranded costs. Depending on each state's regulatory framework, stranded costs might be borne by power plant owners or be passed through to consumers in electric bills. To the extent that solar systems require new transmission lines to deliver electricity to consumers, the cost of building those lines may result in higher electricity bills. Utility-scale solar, which is frequently located in rural areas distant from consumers, may have higher associated cost impacts on bills than, for example, residential-scale solar, depending upon project details. On the other hand, installation of solar systems can sometimes avoid upgrades to transmission systems, resulting in potentially lower costs for consumers. In other cases, though, solar systems necessitate upgrades to local distribution systems, which might increase costs for customers. In states with carbon pricing policies in place, increased solar energy deployment could reduce the bill impacts associated with the carbon price. Generating solar energy has approximately zero marginal cost. Marginal costs reflect the variable costs of producing incremental amounts of electricity from an existing source. Marginal costs are typically dominated by fuel costs, which are not relevant for solar energy. When solar energy is present in an area, fewer fuel-consuming electricity sources are required, which tends to drive down marginal costs for the regional electricity system overall. This effect may diminish as the number of solar electricity generators increases in an area, because nearby solar PV systems tend to maximize their electricity production at the same time (usually midday). If all of the midday electricity demand were to be met by solar PV, there would no incremental cost benefit to adding more solar PV systems to the region. The rate and bill impacts discussed above would apply to all electricity consumers within a region in which solar energy development is taking place. Consumers that install rooftop solar systems or participate in community solar projects ("solar customers") could have different bill impacts. Most states allow solar customers to be financially compensated for the electricity generated by the projects they host. The most common type of policy for this compensation is net metering, though some states have established net metering alternatives. Depending on a consumer's electricity demand and the size of the solar energy project, solar consumers participating in net metering or related policies could reduce their electricity bills to zero. <5. Is Solar Energy Reliable?22> One potential reliability concern for solar energy is due to its variable nature, dependent on the availability of sunlight. For example, solar PV systems cannot produce electricity at night, and their output can vary during the day depending on local weather conditions (e.g., cloudiness). The physical requirements of the electricity system are such that the supply and demand of electricity must equal each other at all times. Currently, to ensure reliability, other sources of electricity generation are used when solar energy is not available. Expanding other types of electricity system infrastructure, such as transmission lines or energy storage assets, could also address this limitation. Alternatively, policies and regulatory frameworks that incent greater electricity consumption during daytime hours and less at night (i.e., load shifting) could reduce the reliability impact of solar energy's variability. Another potential reliability concern for solar energy arises from the mismatch between the hours of the day when generation from solar energy peaks (typically midday) and when electricity demand peaks (typically several hours later). To maintain reliability, some sources of electricity have to quickly increase their output to account for the simultaneous drop-off in output from solar generators and increase in demand. As more solar systems are installed, the need for other sources that can quickly change output levels typically increases. This situation is often referred to as the "duck curve" because the shape of the plot showing the difference between demand and output from solar generators resembles a duck. Not all electricity generators are capable of quickly changing their output, and their deployment may not match the levels of deployment of solar generators. Load shifting, operational changes to non-solar sources, and deployment of more flexible resources (e.g., energy storage) are all possible ways to address the duck curve. Some analysis suggests that electric vehicle deployment might also act as a form of load shifting and address the duck curve, at least if vehicle charging occurs when output from solar sources is high. A third potential reliability concern comes from the fact that solar PV produces direct current (DC) electricity. Conventional generators produce alternating current (AC) electricity, and the grid is optimized for AC. An inverter is an electrical device that converts DC to AC; grid-connected solar PV systems require an inverter. For this reason, solar is sometimes referred to as an "inverter-based resource." Generators that produce AC also inherently contribute to grid reliability by providing what are known as "essential reliability services" or "ancillary services." Most of these services arise from the way generators physically respond to changes in the balance of electricity supply and demand over fractions of seconds. Inverter-based resources do not inherently provide these services, although inverters can be designed (and are being deployed) to provide some of these services. The electric power industry and its federal and state regulators have been studying ways to protect system reliability from the unique nature of inverter-based resources since at least 2008. Additionally, Congress has funded a variety of research programs related to electric reliability. No widespread reliability issues due to solar appear to have occurred to date, though some local reliability issues have been reported. <6. What Federal Tax Incentives Support Solar Energy Development?30> Various provisions in the Internal Revenue Code (IRC) support investment in solar energy equipment. These provisions reduce the after-tax cost of investing in solar property, thereby encouraging taxpayers to invest in more solar property than they would have absent tax incentives. Tax incentives for solar energy property were first enacted in 1978. Several incentives for solar are currently part of the tax code. Historically, the value of tax incentives for solar has fluctuated, although the current tax credit rates were established in 2005. Under current law, solar tax incentives are scheduled to phase down in the coming years from their 2019 rates. <6.1. Tax Incentives for Businesses> Investments in certain renewable energy property, including solar, qualify for an investment tax credit (ITC). The amount of the credit is determined as a percentage of the taxpayer's basis in eligible property (generally, the basis is the cost of acquiring or constructing eligible property). The credit rate for solar was 30% through 2019, 26% in 2020 and 22% in 2021. Solar energy has a permanent 10% ITC that is to go into effect in 2022. The expiration dates for the ITC are commence construction deadlines. For example, solar property that was under construction by the end of 2019 may qualify for the 30% tax credit, even if the property is not placed in service (or ready for use) until a later date. Special provisions in the tax code allow solar energy property to be depreciated over a shorter period of time than would normally be the case. Specifically, solar energy property is classified as five-year property in the Modified Accelerated Cost Recovery System (MACRS). The depreciable basis (the amount that is recovered through depreciation deductions over time) of solar energy property is reduced by 50% of any ITC claimed. Thus, if a 30% ITC was claimed on a $1 million investment in solar energy property, $850,000 would be depreciated under the schedule for five-year MACRS property. Accelerating depreciation reduces the after-tax cost of investing in solar energy property. Temporarily, through 2022, certain investments in solar energy property are eligible for 100% bonus depreciation. This eligibility means that for these investments, the expense can be deducted immediately (i.e., expensed). Bonus depreciation is scheduled to phase down after 2022. It is scheduled to decrease to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026, before being 0% in 2027. Bonus depreciation may be claimed for new as well as used property. Regulated public utilities cannot claim bonus depreciation. Tax-exempt organizations, such as electric cooperatives, also cannot claim bonus depreciation, and typically are limited in their ability to benefit from tax incentives more broadly. <6.2. Tax Incentives for Individuals> Individuals purchasing solar energy property may qualify for the residential energy-efficient property credit. Through 2019, the tax credit for individuals is 30% of the cost of solar electric property installed on the taxpayer's residence. The tax credit rate is scheduled to be 26% in 2020 and 22% in 2021, with the credit expiring after 2021. The tax credit is nonrefundable, meaning that the amount of the credit a taxpayer can claim in the tax year is limited to the taxpayer's income tax liability. However, unused tax credits can be carried forward to the following tax year. <7. How Much Do Solar Tax Incentives Cost?> Tax expenditure estimates are one source of information on the "cost" of solar tax incentives. Tax expenditures are, by definition, the amount of forgone revenue associated with special provisions in the tax code, such as tax credits and accelerated cost recovery. For FY2019, the Joint Committee on Taxation (JCT) estimates that the amount of forgone revenue associated with the business ITC for solar was $3.4 billion. The amount of forgone revenue associated with the residential energy-efficient property credit for FY2019 was an estimated $2.0 billion. This figure, however, includes all eligible technologies. While most of this was due to solar energy property, JCT does not estimate the forgone revenue associated with solar separate from other eligible technologies. The revenue loss for five-year MACRS for all eligible energy property (primarily wind and solar, but other technologies are eligible) is estimated at less than $50 million in FY2018. Because bonus depreciation is not a solar- or even energy-specific provision, a tax expenditure estimate for bonus depreciation for solar is not available. Internal Revenue Service (IRS) data also provide information on individual claims of tax credits for solar electric property. In 2017, individuals filed 381,242 tax returns that claimed the residential energy-efficient property credit for solar electric property. The total cost of solar electric property for which tax credits were claimed was $5.5 billion, generating approximately $1.6 billion in individual income tax credits. <8. What State Policies Support Solar Energy Development?46> Per the Federal Power Act, states have jurisdiction over most aspects of electricity generation and distribution. Consequently, many policies that affect the development solar energy are implemented by states. This section discusses one common state policy, a renewable portfolio standard. Other state policies designed to accelerate the deployment of solar energy include net metering (mentioned in the section " How Does Solar Energy Impact Electricity Costs for Consumers? "), state tax credits, and allowing third-party ownership (i.e., solar leasing). Renewable portfolio standards (or, more broadly, electricity portfolio standards), as typically implemented, set requirements on utilities to procure a minimum share of their electricity sales from specified renewable sources such as solar. Many factors influence solar energy development, but renewable portfolio standards are widely credited as being a key factor historically, as they have provided a policy-driven source of demand for renewable electricity generation. Twenty-nine states, three U.S. territories, and the District of Columbia are implementing mandatory electricity portfolio standards, and an additional eight states and one territory have voluntary standards. Of these, nine jurisdictions have targets of 100% clean energy. Jurisdictions differ in their definitions of eligible clean energy sources, but solar is eligible in all cases. Nineteen of these policies include specific requirements or extra incentives for solar. <9. How Are U.S. Tariffs Affecting Domestic Solar Manufacturing?52> The United States has applied tariffs on imports of solar energy equipment since 2012. The different types of equipment comprising a solar PV system are discussed in the section " How Does Solar Energy Work? " The Obama Administration imposed double- and triple-digit antidumping and countervailing duty tariffs on U.S. imports of solar cells and modules from China in 2012 and 2015 and on imports from Taiwan in 2015. The Trump Administration imposed a tariff, which started at 30% in 2018 and declines by 5% yearly until reaching 15% in 2021, on photovoltaic solar cells and modules from most countries. The tariff includes some exemptions, such as an annual 2.5 gigawatt (GW) tariff-free quota for solar cells as long as the final module assembly takes place in the United States. Several dozen developing countries are excluded from the tariff as long as their import levels stay small, and certain technologies, such as thin-film solar PV products or smaller crystalline silicon PV cells, are not subject to the tariff. This tariff is scheduled to expire in February 2022, but it may be extended, at the President's discretion, for up to four additional years. It is assessed on top of the previously existing tariffs on Chinese and Taiwanese producers, leading to tariff rates as high as 239% on some PV products made in China. In 2018, the Trump Administration placed a 25% duty on steel and a 10% duty on aluminum imported from most countries. These duties affect BOS equipment, such as PV brackets, module frames, cabling, power electronics housing, batteries, and wiring, and are projected to add 2% - 5% to PV system costs. Additional tariffs on a long list of Chinese products, including inverters and other solar equipment, were imposed at a 10% rate in September 2018. The rate was raised to 25% in May 2019. The tariff effects have not been felt evenly across the solar industry's manufacturing segments (i.e., polysilicon production, ingot and wafer production, solar cell production, and module assembly). To date the tariffs have not encouraged expansion of U.S. manufacturing in the more technologically advanced segment of the PV manufacturing supply chain, namely the production of crystalline-silicon solar cells. However, U.S. production of solar modules, into which cells are assembled, rose in 2018, and a few companies, including one Chinese manufacturer, have opened solar module assembly plants in the United States. The increased domestic production of modules draws on imported parts and components, reflecting the industry's global supply chain. U.S. solar tariffs have negatively affected the one segment of the PV supply chain in which the United States traditionally has been the most competitive, the production of polysilicon, the key raw material used in the manufacture of the vast majority of solar cells. China retaliated against the Obama Administration tariffs by imposing double-digit tariffs on polysilicon shipped from the United States to China, which had been a significant export market for U.S. producers. These tariffs have had an adverse effect on U.S. production of polysilicon, which shrank 40% between 2015 and 2018. The U.S. share of global polysilicon production is also down, falling to 11% of the global total in 2017 from 29% in 2010. The production of wafers made from polysilicon, which in turn are cut to make individual cells, has largely been discontinued in the United States, with China accounting for more than 80% of global wafer production in 2017. Solar cell production has significant economies of scale, so manufacturers generally centralize production in large plants. As shown in Figure 5 , annual domestic U.S. PV cell production shrank to 124 megawatts (MW) in 2018, the lowest level since 2010. Domestic manufacturers of PV modules import nearly all of their solar cells, which represent a substantial portion of the cost and value of a finished module (27% in Q4 2018, according to Wood Mackenzie, an energy consultancy). China accounted for more than two-thirds of the world's solar cell production in 2017. Despite the various trade actions in 2018, solar cell prices in the United States declined from 20 cents per watt at the beginning of that year to 10 cents per watt at year-end 2018, which represented a 50% decrease in cost. Meanwhile, figures from the United States International Trade Commission (ITC) show U.S. imports of solar cells more than doubled by value from 2016 to 2018. This trend continued despite the additional tariffs on solar cells and modules that took effect in 2018, with U.S. imports of solar cells rising 32% during the first seven months of 2019 compared to the same period in 2018. One possible reason for the rise in cell imports is that the Trump Administration's solar tariff allows up to 2.5 GW of unassembled solar cells to be imported into the United States duty-free each year the tariff is in effect. These can then be assembled into solar modules in the United States. From February 2018 to the end of 2018, about a quarter, or 650 MW, of the duty-free tariff rate quota was filled. The low fill rate during the first year may be because there was not enough module assembly capacity in the United States to use those cells, and because some PV cells were stockpiled prior to the imposition of the tariff. If the 2.5 GW quota is reached in any year, foreign-made cells will be subject to U.S. tariffs for the balance of that year. The uncertainty surrounding the tariffs limits the incentive to expand solar cell production in the United States. For example, the Trump Administration's solar tariff is initially set to last four years, with the tariff rate declining by five percentage points in each year the tariff is in effect. The other tariffs may be discontinued at the President's discretion. A new cell factory would need a large capital investment and about two years to construct. The possibility that some or all of the tariffs will be eliminated in the near future may discourage creation of new manufacturing capacity. At present, Panasonic is the only major domestic producer of crystalline-silicon solar cells, and several producers of solar cells have closed U.S. plants since 2012. Unlike cell production, domestic module assembly is growing. A count by the Solar Foundation, a trade group, indicates that approximately 20 factories assembled PV modules in the United States in 2018. Annual U.S. PV module production increased to 1.4 GW in 2018, up from 970 MW in 2017, but down from a record high of 1.7 GW in 2016, the year the federal investment tax credit had been set to expire (see Figure 5 ). It typically takes about six months to construct a new solar-module assembly facility and begin operation at scale. PV Magazine , an industry publication, reported that 3.9 GW of new module manufacturing capacity was under construction or had recently come online as of late 2018. Hanwha Q Cells, a South Korean company, and Jinko Solar, a Chinese company (the largest module producer in the world), have opened new module-assembly facilities in the United States. A Canadian company, Heliene, reopened a shuttered solar module facility in Minnesota. NREL reports that several additional solar companies expect to add another 4 GW of U.S. module assembly capacity. In 2017, China accounted for more than 70% of total global module production. One challenge for domestic producers is that U.S. module facilities are smaller than the most efficient plants in Asia, meaning they generally lack the economies of scale that are central in driving down unit costs. The two companies SolarWorld and Suniva that petitioned the Trump Administration to put tariffs on imported cells and modules have both ceased production. Because U.S. tariffs are much higher on imports from China and Taiwan than on products of other countries, the tariffs have encouraged manufacturers of cells and modules to serve the U.S. market from other Asian countries. PV module shipments into the United States from Malaysia, South Korea, Vietnam, Mexico, and Thailand have largely replaced module imports from China, which shrank to less than 1% of total U.S. imports by 2018. These five countries accounted for nearly 85% of $2.8 billion in PV modules imported into the United States in 2018. Inverters made in China now face a 25% U.S. tariff. To avoid the U.S. tariff, two large suppliers of inverters to the U.S. market are reportedly planning to shift production from China to other locations. According to the Solar Energy Industries Association (SEIA), U.S. inverter production is declining, primarily due to the closure of two major U.S. facilities at the end of 2016. Backsheets and junction boxes are other examples of solar energy components needed for solar panel assembly, and they are also among the products that face a 25% tariff if they are imported from China. Module prices globally have declined steeply over the past decade. While prices in the U.S. market have fallen as well, despite the tariffs on imported cells and modules, they remained 61% higher, on average, than the global average selling price in 2018, according to NREL. One factor contributing to this price differential is the preference of U.S. purchasers for Tier 1 solar modules, which may be 10% to 30% more expensive and may be more reliable than Tier 2 and Tier 3 solar modules, although they may not necessarily be the best-performing modules on the market. Projects using Tier 1 modules may be easier to finance than those using modules not classified as Tier 1. <10. What U.S. Jobs Are Supported by the Solar Industry?86> The federal government does not collect data on employment in the solar energy industry. According to a report by the Solar Foundation, the industry provided 242,300 full-time equivalent jobs in 2018 ( Figure 6 ). Of these positions, 85% involved work other than manufacturing, such as installation of solar systems and project management, wholesale trade and distribution, and operations and maintenance. Most employment in the solar energy industry 64% in 2018 involves two solar sectors, the installation of solar systems and project development, whether on rooftops of individual homes or larger projects. Although the federal government does not track employment specific to the solar energy industry, the Bureau of Labor Statistics (BLS) publishes occupational data for solar PV installers. These data indicate that employment in PV installation may be significantly lower than the figures reported by SEIA for the combined solar installation and project development segment of the industry. BLS predicts the overall employee occupational count for solar PV installers of 9,700 workers in 2018 will rise by 63% to 15,800 jobs in 2028. BLS predicts that solar installation will be the fastest-growing occupation in the nation over the next decade. BLS reports the median pay for a PV installer in 2018 was $42,680 per year, or $20.52 per hour, about 13% above the national median for all workers. At the end of 2018, the number of solar jobs as reported by the Solar Foundation was approximately 7% lower than in 2016, with installation jobs accounting for most of the decline. The annual number of PV systems installed in the United States shrank 14% to about 327,000 in 2018 from approximately 380,000 in 2016. Direct employment in U.S. solar manufacturing was about 34,000 workers in November 2018, according to the Solar Foundation, accounting for about 14% of total employment related to the solar energy sector. The number of reported jobs dropped by 4,400 from November 2016. One reason for the decline may be that the tariffs raised the cost of foreign inputs that are assembled into solar systems in U.S. factories, making those factories' products more expensive. Due to automation, a significant increase in employment in U.S. solar manufacturing is considered to be unlikely. One market research firm says module manufacturing accounted for about 1,200 U.S. jobs in 2018, but is projected to fall to just over a 1,000 workers by 2024. A review of publicly available information by CRS suggests that there are fewer than 2,000 workers involved in domestic polysilicon production. There is also limited employment related to the assembly of solar factory production equipment for wafers, cells, and modules in the United States because this equipment is made mainly in Europe and China. <11. What Land Requirements Does Solar Energy Have?92> Land is required for the extraction, production, and consumption of energy and for the generation, transmission, and distribution of electricity. There is not a generally accepted standard metric or methodology for a comparison of land use impacts across energy technologies. Different studies evaluate land use in different ways and may or may not account for upstream and downstream process steps associated with electricity generation (e.g., extraction of fuels or resources used for electricity generation), for the intensity of the impact of the activity on the occupied land, or for the time-to-recovery. Other factors that may not be incorporated into comparisons include location-dependent factors, such as solar incidence, or co-location of different activities with the energy generation, such as solar panels on rooftops. Estimates of power density for different energy sources vary by methodology and technology type studied. Some estimates consider the area of the power plant only, while others include land areas used for fuel production, electricity transmission, waste disposal, or other factors. Estimates can change with time as technology innovation leads to increased energy efficiency; such is the case for solar energy, with newer and more efficient technologies leading to increased power density. When considering total land area occupied, renewable energy sources generally require more land to produce the same amount of electricity than nonrenewable sources. One metric used in the energy sector that accounts for land use is power density, which can be expressed as a unit of power per unit of area (e.g., watts per square meter). A review of 54 studies which examined the power density of electric power production in the United States found that solar energy has a lower power density than natural gas, nuclear, oil, and coal, but solar energy has a higher power density than wind, hydro, biomass, and most geothermal. The review accounted for energy conversion efficiencies, capacity factors, and infrastructure area, including infrastructure associated with energy production (e.g., mines). The review did not control for time, reporting that the earliest study included in the analysis was from 1974; however, the review concluded that, of the nine energy types evaluated, only solar had a statistically significant relationship between power density and time. Published values for power density for solar systems range from 1.5 to 19.6 W e /m 2 . Generally, solar thermal and utility-scale photovoltaic (PV) were found to require more land area to produce the same amount of electricity than residential PV and concentrated solar. While the technology for residential PV and utility-scale PV is similar, sloped rooftops may allow more sunlight to reach otherwise flat panels for residential systems, and the spacing of panels at utility-scale facilities (regardless of tilt) to provide for maintenance and to avoid shading may lead to lower power densities. Another review found that both location-dependent parameters and technology-dependent parameters affect the variability of land use energy intensity of solar electricity generation. In addition to power density, other factors may be relevant when evaluating energy sources and land use. Two examples are land use and land cover change, which account for the previous state of the land before an energy project was developed. In the case of solar, some solar energy systems may change land use and land cover to a smaller degree than others. For example, rooftop solar PV systems do not change how the underlying land is used or covered. Another factor is co-location of activities where land can be occupied but not used exclusively by its occupier. For example, farming and grazing can occur on land around wind turbines and underneath solar panels (this dual-use solar is referred to as "agrivoltaics"). Time-to-recovery is another factor to consider. Some technologies may impact land such that the land can recover to its previous state after use in a matter of months or a few years; other technologies may impact the land in such a way that it may take decades or centuries for the land to recover to its previous state. According to the Department of Energy, "further work is critically needed to determine appropriate land-use metrics for meaningful cross-comparisons." <12. What Are Potential Impacts of Solar Energy Development on Agriculture?103> Agricultural land has become increasingly desirable for siting utility-scale solar PV systems (i.e., solar farms) for electrical generation. One concern that some raise about solar farm development is that siting solar arrays on agricultural lands can also displace agricultural production. With solar generation capacity in the United States increasing from less than 1 GW in 2010 to 50 GW in 2018, demand for large tracts of reliably sunlit, cleared, unobstructed acreage is also growing. California, North Carolina, Texas, and Florida had the largest U.S. cumulative solar capacity in the third quarter of 2019, with California the largest. While some individual farm operations develop PV arrays through their own investments in solar technologies as an income supplement or as an on-site energy source for their farming operations, private solar development companies have increasingly turned to long-term leasing arrangements with farmers to site PV arrays. Farmers benefit from the lease and solar developers get access to the scarce commodity of land. Prime agricultural lands often represent very large tracts of land in potentially suitable locations. As important as large tracts of acreage may be, other variables determine whether a satisfactory lease is negotiated. The quality of the terrain, local weather factors, proximity to grid connections, local transmission capacity, proximity to main roads, conservation and environmental impact issues, local/regional land use regulations, and flood risks all contribute to the suitability of particular agricultural acreage for a solar development company. In potential lease arrangements, farmers are often interested in whether or not the PV array will curtail, if not completely end, their ability to continue farming. Typically, contractors constructing solar farms will strip the topsoil and then mount the PV modules on concrete footings. Not only does this remove the land from agricultural production during the period of the lease, it can become prohibitively expensive to restore the land to production after a lease terminates. The concern that the agricultural land can be permanently lost to production even after a lease ends is a factor when considering whether to maximize energy capacity on land at the expense of agricultural production. Suitable land where solar generation can be maximized will tend to be highly compensated relative to the potential of the agricultural operation. For example, while marginally productive acreage may be tilled, its yield potential is often quite low, and the environmental costs can be high (e.g., erodible soils). This type of acreage may be suitable for maximization of solar generation without significant threat to overall agricultural production. Under other lease arrangements, solar energy development might occur without detriment to farming. While the land is attractive for siting solar PV arrays, it is also valuable as productive farmland. In these arrangements, vegetation growth may be possible under and around the solar system. The University of Massachusetts Crop Research and Education Center is exploring agrivoltaics, where modules are raised high enough off the ground and spaced in a way that crops can still grow around and beneath them, but also permit an economically viable solar development. Fear of a decline in agricultural production may be an important factor in some opposition to solar development, particularly where the value of the land for solar exceeds the current value for agriculture. Research examining the impact on agricultural yields of solar development could prove important to informing future investment in solar generation. State and federal grants to support development of dual-use agrivoltaic systems, such as the Solar Massachusetts Renewable Target (SMART), could help offset these systems' additional costs. Because U.S. agricultural land often enjoys favorable property tax treatment, different states/regions may establish regulations governing the use of agricultural lands for nonagricultural purposes. Local and regional planning commissions can constrain solar development, and may require various permits and clearances that could challenge the longer-term economic feasibility of the solar development, regardless of the suitability of the land for solar deployment. Successfully co-locating agricultural production with solar development could reduce some of the land use planning constraints or outright prohibitions that may come with productive agricultural lands proposed for solar development.

Use of solar energy for electricity generation is growing in the United States and globally. In the United States, solar energy overall accounted for 2.2% of total electricity generation in 2018, up from 0.7% in 2014. This report addresses a dozen frequently asked questions that may be of interest to lawmakers as the growing use of solar energy potentially affects a variety of areas of congressional interest. The first set of questions looks at different technologies that use solar energy to generate electricity and their costs and prevalence over time. Costs for all components of solar photovoltaic (PV) systems, including cells, modules, inverters, and other related equipment, have generally declined in recent years. Assessing solar energy costs for consumers is challenging because there are many local factors to consider. Another question considers whether using solar energy is a reliable form of electricity generation given its variable nature. The second set of questions discusses federal and state policies aimed at promoting deployment of solar energy in the United States. At the federal level, tax incentives reduce the after-tax cost of investing in solar property, thereby encouraging taxpayers to invest in more solar property than they would have absent tax incentives. Federal tax incentives include an investment tax credit for businesses, eligibility for accelerated depreciation for businesses, and a residential energy efficient property tax credit for individuals. At the state level, renewable portfolio standards (or, more broadly, electricity portfolio standards) require electric utilities to procure a specified amount of electricity from designated, eligible sources. Twenty-nine states, three U.S. territories, and the District of Columbia are implementing electricity portfolio standards. All of these policies include solar energy as an eligible source. Utility-scale solar systems typically benefit from electricity portfolio standards, while commercial- and residential-scale systems typically benefit from a different state policy called net metering. Net metering allows individual electricity consumers to receive payment for the electricity produced by systems installed on their property (or, in some cases, systems not installed on their property but with which consumers have a contractual arrangement). Another set of questions considers the U.S. manufacturing base for solar products and U.S. tariffs, which have been applied over the years on imports of solar equipment. The results on the nation's solar manufacturing industry have been mixed. Different parts of the solar PV supply chain have responded differently to the tariffs. For some components, such as the assembly of solar modules, domestic production has increased since the imposition of tariffs. By one count, about 20 factories assembled PV modules in the United States in 2018. For other components, such as solar cell production, tariffs have not had this effect. At present, there is one major domestic producer of crystalline-silicon solar cells; several producers of solar cells have closed U.S. plants since 2012. A related question discusses the number of U.S. jobs supported by the domestic solar industry, which employed more than 240,000 full-time equivalent workers in 2018. Of these positions, 64% involved two solar sectors, the installation of solar systems and project development. The final questions address some potential environmental considerations associated with the use of solar energy, such as land use. Standard metrics for measuring land use impacts for different energy technologies do not exist. When considering total land area occupied, solar typically requires more land to produce the same amount of electricity than many other sources. Other aspects of land requirements affect comparisons among energy sources, including technology developments over time, land cover change, and time-to-recovery. Po ssible effects on agricultural production are also discussed. Some farmers view solar energy favorably as an income supplement, but others raise concerns about long-term damage to soil health and agricultural productivity. Some researchers are investigating options for dual-use solar PV systems known as agrivoltaics, in which the same land could be used for simultaneous crop production and electricity generation.

crs_R46326

crs_R46326_0

<1. Introduction> On March 13, 2020, President Donald J. Trump declared an emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act; 42 U.S.C. 5191(b)) in response to coronavirus disease 2019 (COVID-19). The President's emergency declaration authorized assistance for COVID-19 response efforts for all U.S. states, territories, tribes, and the District of Columbia in accordance with Stafford Act Section 502. The emergency declaration authorized the Federal Emergency Management Agency's (FEMA's) Public Assistance (PA) program, which provides direct and financial assistance for emergency protective measures. The President's March 13, 2020 emergency declaration letter to the Acting Secretary of the Department of Homeland Security, the Secretary of the Department of Treasury, the Secretary of the Department of Health and Human Services, and the Administrator of the Federal Emergency Management Agency, stated that the President "believe[s] that the disaster is of such severity and magnitude nationwide that requests for a declaration of a major disaster ... may be appropriate." As of March 20, 2020, the President began approving major disaster declaration requests under the Stafford Act. As of April 22, 2020, the President had approved major disaster declaration requests for all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. This report provides answers to frequently asked questions (FAQs) regarding: Stafford Act declarations, including legal authorities, limitations on assistance, and other information related to the declaration request process; types of assistance available to state, territorial, and tribal governments, private nonprofit organizations, private entities, and individuals and households pursuant to the Stafford Act emergency and major disaster declarations for COVID-19; the Disaster Relief Fund (DRF), the source of funding for the Stafford Act emergency and major disaster declarations; and additional references. The scope of this report is limited to assistance authorized under the Stafford Act. There are, however, other types of assistance extrinsic to the Stafford Act that are activated by a Stafford declaration. This report does not address these other forms of assistance. <2. Stafford Act Declarations> The Stafford Act authorizes the President to issue two types of declarations that could provide federal assistance to states and localities in response to a public health incident, such as an infectious disease outbreak: (1) an "emergency declaration" (authorized under Stafford Act Section 501), or (2) a "major disaster declaration" (authorized under Stafford Act Section 401). The following questions relate to the Stafford Act declarations for COVID-19. <2.1. The President declared an emergency for COVID-19. Do states, territories, and tribes still need to request a COVID-19 emergency declaration?> The President's emergency declaration authorized assistance for COVID-19 response efforts for all U.S. states, territories, tribes, and the District of Columbia; specifically, it authorized FEMA Public Assistance (PA) emergency protective measures. Thus, states, territories, and tribes do not need to request separate emergency declarations in addition to the President's emergency declaration. If, however, a state, territory, or tribe needs supplementary federal assistance, the governor or chief executive may request that the declaration be amended to include additional areas or types of assistance. FEMA can approve a request for additional areas or forms of assistance after a presidential emergency declaration. The assistance provided pursuant to an emergency declaration is limited (see Table 1 , which lists the forms of assistance available pursuant to each type of declaration). If a state, territory, or tribe needs assistance that is only available pursuant to a major disaster declaration, they may submit a major disaster declaration request to the President (through FEMA). Although the President can declare an emergency unilaterally in certain circumstances, a major disaster declaration would need to be requested by state, territory, or tribal governments (see " Why didn't the President declare a national major disaster for COVID-19? "). <2.2. Does the President have the authority to unilaterally declare an emergency under the Stafford Act?> Section 501(b) of the Stafford Act allows the President to unilaterally declare an emergency for certain emergencies involving federal primary responsibility. The President's nationwide emergency declaration for COVID-19 was made under Stafford Act Section 501(b) on the grounds that the entire country is now facing a significant public health emergency ... [and] [o]nly the Federal Government can provide the necessary coordination to address a pandemic of this national size and scope.... It is the preeminent responsibility of the Federal Government to take action to stem a nationwide pandemic that has its origins abroad, which implicates its authority to regulate matters related to interstate matters and foreign commerce and to conduct the foreign relations of the United States. This is the first time a President has unilaterally declared a Stafford Act emergency for a public health incident specifically, an infectious disease outbreak. Unilateral presidential declarations, however, have been made for incidents on a limited scale. <2.3. Is there a cap on the amount of funding FEMA can spend under an emergency declaration?> Although Stafford Act Section 503 sets a statutory "cap" of $5 million on spending for a single emergency, there is an exception. The $5 million limit may be exceeded when the President determines that: (A) continued emergency assistance is immediately required; (B) there is a continuing and immediate risk to lives, property, public health or safety; and (C) necessary assistance will not otherwise be provided on a timely basis. If the $5 million "cap" is exceeded, the President must report to Congress on the "nature and extent of emergency assistance requirements and shall propose additional legislation if necessary." Although the President's emergency declaration for COVID-19 covers the entire nation, each disaster-affected state and the District of Columbia, as well as some tribal governments, received a distinct emergency declaration (i.e., 57 separate emergency declarations). Therefore, it appears that each distinct emergency declaration may count as a "single emergency" for purposes of Stafford Act Section 503 and that the $5 million "cap" is not the nationwide limit on the amount of emergency assistance that FEMA can provide (see Appendix B for an example of a time when different states, territories, and tribes received presidential emergency declarations under the Stafford Act for the same incident). Major disaster declarations do not have a statutory or regulatory spending cap. As of April 22, 2020, all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands have received major disaster declarations for COVID-19. For more information on the funding available for the emergencies and major disasters declared for COVID-19, see the " Funding for Stafford Act Declarations " section. <2.4. Is the COVID-19 emergency assistance time limited?> The federal assistance provided must respond to the effects of the incident warranting an emergency or major disaster declaration "which took place during the incident period or was in anticipation of that incident." The emergency and major disaster declarations for COVID-19 currently list the incident period as "January 20, 2020 and continuing." In previous ongoing disasters, the "continuing" incident period has changed to a set date marking the end of the emergency or major disaster. In the case of COVID-19, the incident period may vary for each state, territorial, and tribal government as the threat of COVID-19 abates. According to federal regulations, FEMA determines the incident period in the FEMA-State Agreement. In May 2016, the agency released a fact sheet on responding to an infectious disease event, which states, "[i]n the event of an emergency declaration, FEMA would determine the incident period in coordination with HHS." The governor of each declared state or territory, or the chief executive for each declared Indian tribal government, must execute a FEMA-State Agreement in order to receive assistance pursuant to their COVID-19 emergency declaration. It is also possible to extend the incident period. Extensions of the incident period, and program extensions and end dates may be announced via news releases on FEMA's website. <2.5. Why didn't the President declare a national major disaster for COVID-19?> Stafford Act Section 401 states "[a]ll requests for a declaration by the President that a major disaster exists shall be made by the Governor of the affected State" or "[t]he Chief Executive of an affected Indian tribal government may submit a request for a declaration by the President that a major disaster exists.... " Although the President is not authorized by the Stafford Act to unilaterally declare a major disaster on behalf of a state, territory, or tribe, the President stated in his emergency declaration letter to the Acting Secretary of the Department of Homeland Security, the Secretary of the Department of Treasury, the Secretary of the Department of Health and Human Services, and the Administrator of the Federal Emergency Management Agency that he "believe[s] that the disaster is of such severity and magnitude nationwide that requests for a declaration of a major disaster ... may be appropriate." As of March 20, 2020, the President began approving major disaster declaration requests under the Stafford Act. As of April 22, 2020, all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands have received major disaster declarations for COVID-19. <2.6. Have states, territories, and tribes ever received a major disaster declaration for an outbreak of an infectious disease, such as COVID-19?> The President started approving major disaster declaration requests for COVID-19 as of March 20, 2020. These declarations are the first major disaster declarations issued under the Stafford Act for an infectious disease outbreak. <2.7. Does it take a long time to approve a request for a major disaster declaration?> The State of New York was the first state to receive a major disaster declaration for COVID-19. According to FEMA's "Daily Operations Briefing for Wednesday, March 18, 2020," New York requested a major disaster declaration on March 17, 2020. The President authorized New York's request on March 20, 2020. Other state requests for a major disaster for COVID-19 have also been processed within days of their submission. FEMA lists the approved presidential major disaster declarations for COVID-19 on the agency's "COVID-19 Disaster Declarations" and "Disasters" webpages. As of April 22, 2020, all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands have received major disaster declarations for COVID-19. <3. Types of Stafford Act Assistance> Different types of federal assistance are available pursuant to each type of declaration, with emergency declarations providing more limited forms of assistance than major disaster declarations. Federal assistance made available pursuant to Stafford Act declarations is intended to supplement local efforts to respond to and recover from emergencies and major disasters. Federal assistance may support state, territorial, tribal, and local governments, certain nonprofit organizations, and individuals and households. Table 1 lists the forms of assistance available pursuant to each type of declaration. The following questions relate to the federal response efforts for COVID-19, including assistance available to state, territorial, tribal, and local governments, private nonprofit organizations, private entities, and individuals and households. <3.1. What is Emergency Declaration Assistance?> Emergency declarations authorize some forms of Public Assistance (PA) and Individual Assistance (IA) but the assistance is generally more limited than assistance that is made available under a major disaster declaration. Table 1 lists the forms of assistance available pursuant to an emergency declaration. Emergency declarations often authorize certain forms of PA, which supplement the ability of a state, territory, or tribe to respond to an incident. Emergency declarations may authorize PA "emergency work" undertaken "to save lives, protect property and public health and safety, and lessen or avert the threat of a catastrophe, including precautionary evacuations," per Section 502 of the Stafford Act. FEMA's two categories of PA "emergency work" are debris removal (Category A) and emergency protective measures (Category B). Stafford Act emergency declarations for public health incidents have previously authorized emergency protective measures undertaken to reduce an immediate threat to life, public health, or safety, including emergency shelter and medicine, hazard communication, and provision and distribution of necessities. Individual Assistance, which helps individuals and households respond to post-disaster needs, can also be made available through an emergency declaration. One form of IA the Individuals and Households Program (IHP) (authorized under Stafford Act Section 408) may be authorized pursuant to an emergency declaration. <3.1.1. What assistance is available for states, territories, and tribes under the emergency declaration for COVID-19?> The emergency declarations issued for COVID-19 on March 13, 2020 authorized Public Assistance (PA) in accordance with Section 502 of the Stafford Act. Under this declaration, FEMA may reimburse states, tribes, and territories for costs incurred while performing emergency protective measures. Specifically, the COVID-19 emergency declarations authorized PA Category B Emergency Protective Measures. States, territories, or tribes will be the PA grant Recipients and administer PA awards. State, territorial, and tribal governments that have received emergency or major disaster declarations may apply to FEMA for funds as PA grant Recipients. Local governments and certain nonprofit entities may apply for funds through the PA grant Recipient. Eligible applicants are to be reimbursed for 75% of eligible costs incurred while performing emergency protective measures. FEMA cannot provide financial assistance for activities that are covered by insurance, or any other source, including activities eligible for financial assistance from the Department of Health and Human Services (HHS). For example, PA applicants cannot receive reimbursement for COVID-19 public health surveillance work or other activities already funded by the HHS Public Health Emergency Preparedness Cooperation Agreement Program. Emergency protective measures encompass a wide range of activities. According to a FEMA news release on the COVID-19 emergency declaration , reimbursable activities may include "activation of State Emergency Operations Centers, National Guard costs, law enforcement and other measures necessary to protect public health and safety." On March 19, 2020, FEMA released a non-exclusive list of eligible emergency protective measures that was later supplemented with a non-exclusive list of eligible emergency medical care. <3.1.2. What assistance is available for private nonprofit organizations and businesses under the emergency declaration for COVID-19?> Under the Stafford Act, eligible private nonprofit organizations may receive reimbursement for costs incurred while performing eligible emergency protective measures through the PA program. For-profit entities are not eligible applicants for PA. President Trump's emergency declaration for COVID-19 authorized FEMA to reimburse state, territorial, tribal, and local government entities and certain nonprofit organizations (PNPs) for eligible costs incurred while performing emergency protective measures. Under the Stafford Act, certain PNPs may be eligible for PA if they provide "critical services" or non-critical, "essential" services available to the general public. PNPs providing critical services include educational, utility, irrigation, emergency, medical, rehabilitational, and temporary or permanent custodial care facilities. PNPs providing non-critical but essential services include, but are not limited to, community centers, libraries, homeless shelters, food banks, broadcasting facilities, houses of worship, senior citizen centers, rehabilitation facilities, and shelter workshops. Religiously affiliated PNPs must meet the same eligibility criteria as other PNPs. For-profit entities are not eligible to apply for reimbursement through the PA program. For-profit entities, however, may be eligible for COVID-19 assistance through the Small Business Administration (SBA). Eligible PA applicants and PA grant Recipients may also contract for-profit entities to perform emergency work. For example, FEMA specified that eligible governments "may contract with medical providers, including private for-profit hospitals, to carry out any eligible activity described in the Eligible Emergency Medical Care Activities ." FEMA may then reimburse PA grant Recipients for the federal share of eligible costs incurred during the execution of the work. PA grant Recipients may then reimburse PA Applicants for eligible associated costs. <3.1.3. What assistance is available for individuals under the emergency declaration for COVID-19?> Individual Assistance (IA) was not authorized by the President's initial emergency declaration for COVID-19. However, IA Crisis Counseling has been authorized for 10 states pursuant to their major disaster declarations for COVID-19 (for more information, see " What assistance is available to individuals under a major disaster declaration? "). Table A-1 includes a list of the categories of FEMA assistance including Crisis Counseling authorized pursuant to the major disaster declarations for COVID-19, organized by state and territory. <3.1.4. What types of assistance for medical care will FEMA reimburse under the Stafford Act declarations for COVID-19?> As of March 30, 2020, Stafford Act declarations for COVID-19 authorized FEMA to reimburse only state, territorial, tribal, and local governments and eligible nonprofits for the cost of uninsured emergency medical care. No assistance for individuals' medical costs has been authorized. All major disaster and emergency declarations issued under the Stafford Act as of March 30, 2020, authorized PA Category B Emergency Protective Measures, through which FEMA may reimburse eligible state, territorial, tribal, and local governmental entities and eligible private nonprofit entities for the cost of uninsured emergency medical care directly related to COVID-19. Per Stafford Act Section 312, FEMA may not duplicate assistance provided by other entities, including the Department of Health and Human Services (HHS) or private medical insurers. FEMA may only reimburse medical care that is required as a result of COVID-19, and that eliminates or lessens immediate threats to life, public health, or safety. Typically, emergency medical care costs are eligible for up to 30 days from the date of an emergency or major disaster declaration. In the case of COVID-19, eligible emergency medical care costs are "eligible for the duration of the Public Health Emergency, as determined by HHS." However, the cost of long-term medical treatment is not eligible for reimbursement through PA, including the costs of medical care for COVID-19 patients admitted to a medical facility on an inpatient basis. Also not eligible are the costs of treatment for COVID-19 patients beyond the duration of the Public Health Emergency, and administrative costs associated with the treatment of COVID-19 patients. The HHS Secretary has invoked several public health emergency authorities for the COVID-19 response. Although FEMA's list of authorized medical care does not specify which public health emergency authority is meant in referring to the duration of eligibility, it probably refers to the declaration authority pursuant to Section 319 of the Public Health Service Act. The "Section 319" authority allows the HHS Secretary to carry out a specified set of actions to address public health emergencies, such as expediting or waiving certain administrative requirements that would otherwise apply to federal activities or federally administered grants. The declaration of a Public Health Emergency for COVID-19 was made on January 31, 2020. It is in effect for 90 days, and is expected by many to be renewed and remain in effect for the duration of the response. Table 3 includes the types of emergency medical care necessary to saves lives or protect public health and safety that are listed by FEMA as eligible for PA for COVID-19, as of March 31, 2020. FEMA may determine that other activities undertaken to reduce the threats to life, public health, or safety by COVID-19 are eligible emergency protective measures. To determine eligibility, FEMA's Regional Administrators may require that local, state, or federal officials certify that the work performed was necessary to cope with such threats. <3.1.5. What measures must states, tribes, and territories take before FEMA may provide assistance for COVID-19 within their jurisdictions?> According to FEMA, all U.S. states, territories, and the District of Columbia, as well as tribes that have received independent emergency declarations for COVID-19, must execute a FEMA-State/Tribal/Territory Agreement (hereinafter FEMA-State Agreement), as appropriate, and execute an applicable emergency plan in order to receive FEMA assistance. FEMA-State Agreements state the understandings, terms, and commitments under which FEMA disaster assistance is to be provided. FEMA-State Agreements describe the emergency or disaster (incident), the incident period, the type and extent of assistance to be made available, the federal and nonfederal cost share, and other terms and conditions of the declaration and provision of assistance. The state, territory, or tribe with an emergency or major disaster declaration becomes the PA grant Recipient and administers PA awards within its jurisdiction. FEMA also requires an Application for Federal Assistance and an update of a Public Assistance Plan before it will provide assistance through the PA program. Recipients may register accounts for all PA Applicants on the PA Grants portal, a FEMA maintained database. Eligible PA Applicants within the jurisdiction may then apply for PA, and awarded projects are tracked in the PA grants database. <3.1.6. Can states/tribes request to receive certain kinds of emergency protective measures?> FEMA has published guidance "on the types of emergency protective measures that may be eligible under FEMA's Public Assistance Program in accordance with the COVID-19 Emergency Declaration in order to ensure that resource constraints do not inhibit efforts to respond to this unprecedented disaster." The list of eligible emergency protective measures is not exhaustive. Moreover, FEMA stated that In accordance with section 502 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the "Stafford Act"), eligible emergency protective measures taken to respond to the COVID-19 emergency at the direction or guidance of public health officials may be reimbursed under Category B of FEMA's Public Assistance program. FEMA will not duplicate assistance provided by the U.S. Department of Health and Human Services (HHS), to include the Centers for Disease Control and Prevention (CDC), or other federal agencies. FEMA and PA grant Recipients (i.e., the state, territory, or tribe that administers the PA award) both review applications for Public Assistance to determine whether costs, work, and applicants are eligible to receive PA. FEMA may approve or decline requests for assistance (see Table 2 for a list of eligible emergency protective measures for COVID-19). FEMA regulations provide procedures by which an eligible PA Applicant, Subrecipient, or Recipient "may appeal any determination previously made related to an application for or the provision of Federal assistance." <3.1.7. May applicants receive PA for management and disposal of medical waste and human remains?> PA for disposal of medical waste and interment of human remains is included in eligible work authorized for all jurisdictions under PA Category B Emergency Protective Measures. <3.1.8. How long does it take to receive emergency assistance?> In the case of COVID-19, FEMA introduced streamlined procedures in an effort to expedite the delivery of PA emergency assistance. According to FEMA, "[f]unding is immediately available should state, tribal, territorial or local officials request expedited assistance." On March 21, 2020, FEMA reported that the agency had obligated over $100 million in 24 hours for awards authorized under the March 13, 2020 emergency declarations for COVID-19 authorized under the Stafford Act. Generally, the time elapsed during delivery of PA emergency assistance will vary by state, incident, applicant, and project. A number of different factors involved in the PA application and reimbursement process affect the delivery of PA. Relevant factors include, but are not limited to, the scope of the project and the time required for the performance of eligible work. FEMA may obligate and disburse funds for small projects (those up to $131,100 in FY2020) upon the approval of a project worksheet, the form FEMA uses to document the details of the Applicant's work and costs claimed. For large projects (those equal to or greater than $131,100 in FY2020), FEMA may obligate funds to the PA grant Recipient upon the approval of a project worksheet. Applicants may request reimbursement for work completed from the PA grant Recipient. <3.1.9. Can declarations be amended to provide additional types of assistance?> After the President declares an emergency or major disaster, the governor or chief executive may request that the declaration be amended to include additional types of assistance. FEMA can approve such a request. It is not uncommon to authorize additional types of assistance subsequent to a presidential declaration. If FEMA denies a requested amendment, the governor or chief executive may appeal the decision in writing. The request and its justification must be submitted to the Assistant Administrator for the Disaster Assistance Directorate through the appropriate FEMA Regional Administrator for the FEMA region in which the state, territory, or tribe is located. The appeal is a "one-time request for reconsideration" FEMA's determination on the appeal is final. <3.1.10. Can the federal cost share be adjusted?> The President has the authority to adjust the federal share of Public Assistance programs. The federal cost share may be increased at FEMA's recommendation when requested by a state, territory, or tribe. The federal share is set at 75% for eligible emergency protective measures performed by states pursuant to the Stafford Act declarations for COVID-19 (authorized under Stafford Act Section 502 for the emergency declarations, and Section 403 for the major disaster declarations). A state may also receive a loan or advance to cover the nonfederal share (i.e., the portion of the costs not borne by the federal government) in certain extraordinary situations. Specifically, Stafford Act Section 319 authorizes the President to either lend or advance the nonfederal share to an eligible Applicant or a state. This may be done when (1) the State is unable to assume its financial responsibility under such cost-sharing provisions (A) with respect to concurrent, multiple major disasters in a jurisdiction, or (B) after incurring extraordinary costs as a result of a particular disaster; and (2) the damages caused by such disasters or disaster are so overwhelming and severe that it is not possible for the applicant or the State to assume immediately their financial responsibility under this chapter. Any loan or advance must be repaid with interest. FEMA's regulations, as a condition for making such a loan, require that the state or eligible Applicant not be delinquent in payment of any debts to FEMA. If the governor's request for an advance is denied, the governor may appeal the decision in writing. As with other appeals of federal decisions regarding assistance provided pursuant to a disaster declaration, this is a one-time request for reconsideration. Congress has, on occasion, adjusted the federal share through legislation. For example, Section 4501 of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ) authorized 100% federal share for Public Assistance and Individual Assistance for specific states following Hurricanes Katrina, Wilma, Dennis, and Rita. <3.2. What is Major Disaster Assistance?> Different types of federal assistance are available pursuant to each type of declaration, with major disaster declarations providing more forms of assistance than emergency declarations. As of April 22, 2020, the President had approved major disaster declaration requests for all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands for COVID-19. The specific types of assistance that may be available under a major disaster declaration are listed in Table 1 . Additionally, Table 4 lists the categories of assistance and the Stafford Act section under which they are authorized. When the President makes a major disaster declaration under the Stafford Act, states, tribes, and local governments, as well as certain private nonprofit organizations, may receive reimbursement through Public Assistance (PA) for "emergency work" undertaken to save lives, protect property, public health, and safety, and lessen or avert the threat of a catastrophe, or for "permanent work" undertaken to repair, restore, reconstruct, or replace disaster-damaged public and eligible private nonprofit facilities. As noted previously, most assistance under the Stafford Act related to public health incidents has been delivered through PA Category B Emergency Protective Measures, including emergency shelter and medicine, hazard communication, and provision and distribution of necessities. Individual Assistance (IA) provides aid to affected individuals and households. If a major disaster is declared, the forms of IA that may be authorized include assistance for housing and for other needs assistance through the Individuals and Households Program; crisis counseling; disaster unemployment assistance; disaster legal services; and disaster case management services. Additionally, pursuant to a major disaster declaration the Hazard Mitigation Grant Program (HMGP) may be authorized. The HMGP funds mitigation and resiliency projects, typically across the entire state or territory. State, territorial, tribal, and local governments, as well as certain private nonprofit organizations, may apply for measures that reduce loss of life or property in future disasters or emergencies. As of April 22, 2020, FEMA reported that all requests for Hazard Mitigation Assistance through the Hazard Mitigation Grant Program (HMGP) for COVID-19 are under review. <3.2.1. What assistance is available for states, territories, and tribes under a major disaster declaration for COVID-19?> Major disaster declarations issued as of April 22, 2020 for COVID-19 have all authorized Public Assistance (PA) Category B Emergency Protective Measures. Major disaster declarations issued for some states also authorized Individual Assistance through the Crisis Counseling Program. Table A-1 includes a list of the categories of FEMA assistance authorized pursuant to the major disaster declarations for COVID-19, organized by state and territory. Major disaster declarations may authorize Hazard Mitigation Assistance through the Hazard Mitigation Grant Program (HMGP). As of April 22, 2020, FEMA reported that all requests for Hazard Mitigation Assistance through the Hazard Mitigation Grant Program (HMGP) for COVID-19 are under review. States, tribes, or territories may request that major disaster declarations be amended to include additional forms of assistance or increase the federal cost-share for PA above 75% (see " Can declarations be amended to provide additional types of assistance? " and " Can the federal cost share be adjusted? "). <3.2.2. What assistance is available for private nonprofit organizations and businesses under a major disaster declaration?> Certain private nonprofit organizations may be eligible for reimbursement for work performed for eligible emergency protective measures. Eligible PNPs may apply for PA as Applicants or may be contracted by other primary PA grant Recipients or Applicants to perform eligible work. Businesses are not eligible for assistance authorized under the Stafford Act. PNPs may be eligible for PA if they provide "critical services" or non-critical, "essential" services available to the general public. PNPs providing critical services include educational, utility, irrigation, emergency, medical, rehabilitational, and temporary or permanent custodial care facilities. PNPs providing non-critical but essential services include, but are not limited to, community centers, libraries, homeless shelters, food banks, broadcasting facilities, houses of worship, senior citizen centers, rehabilitation facilities, facilities that provide health and safety services of a governmental nature, and shelter workshops. Religiously affiliated PNPs are eligible but must meet the same eligibility criteria of other PNPs. For-profit entities are not eligible to apply directly for public assistance as authorized under the Stafford Act. However, eligible PA applicants and PA grant Recipients may contract with for-profit entities to perform emergency work. FEMA may then reimburse PA grant Recipients for the federal share of eligible costs incurred during the execution of the work, and PA grant Recipients may then reimburse PA Applicants for eligible associated costs. For-profit entities may also be eligible for SBA COVID-19 assistance. <3.2.3. What assistance is available to individuals under a major disaster declaration?> As of April 22, 2020, the FEMA Crisis Counseling Assistance and Training Program (CCP) is the only form of Individual Assistance that has been authorized for some states pursuant to their major disaster declarations for COVID-19. IA-CCP was not authorized for every state that received a major disaster declaration; nor were the territories of the Commonwealth of Puerto Rico, the U.S. Virgin Islands, American Samoa, the Commonwealth of the Northern Mariana Islands, or Guam authorized to receive IA-CCP. Table A-1 includes a list of the categories of FEMA assistance authorized pursuant to the major disaster declarations for COVID-19, organized by state and territory. The CCP provides financial assistance to state, territorial, tribal, and local government agencies through a grant or cooperative agreement, which allows them to either provide or contract for crisis counseling services. The crisis counseling services are intended to assist disaster survivors "to prevent or mitigate adverse psychological effects caused or aggravated by a major disaster." FEMA operates the CCP with the Substance Abuse and Mental Health Services Administration (SAMHSA) within the Department of Health and Human Services (HHS). An emergency declaration or a major disaster declaration may be amended to allow for additional types of IA to be authorized (see Table 1 for a list of IA programs). The governor may request that the declaration be amended to include additional types of assistance. FEMA can approve a request for additional forms of assistance after a presidential declaration. If a governor of an affected state requested types of IA be authorized in their major disaster declaration request, and those forms of IA were not authorized, the governor may appeal the decision in writing (if a request to amend a declaration to add types of IA is denied, that decision may also be appealed). Although the CCP is the only form of IA authorized to date, individual relief has been provided through other sources. For example, the supplemental appropriations acts for COVID-19 address some of the other unmet needs of individuals (e.g., Section 2102 of the CARES Act ( P.L. 116-136 ) provides pandemic unemployment assistance). <3.2.4. How do applicants receive funds through the Public Assistance program?> FEMA introduced procedures the agency says are designed to simplify the PA application process for COVID-19 response work. State, territories, and tribes that have received emergency declarations or major disaster declarations for COVID-19 are PA grant Recipients, which administer PA awards in their jurisdictions. Prior to receiving funding, PA grant Recipients must execute FEMA-State/Tribal/Territorial Agreements, submit federal grant applications, and update Recipient Public Assistance Administrative Plans (see " What measures must states, tribes, and territories take before FEMA may provide assistance for COVID-19 within their jurisdictions? "). Eligible applicants may apply for funding through the Recipient's PA award. FEMA generally refers to PA Applicants as any entity that is responsible for PA-eligible work. Applicants may be state, tribal, territorial, and local governments, as well as eligible private nonprofits. For example, the Texas Department of State Health Services applied for PA funds for COVID-19 response as a PA Applicant. Those funds were administered by the state of Texas as the PA grant Recipient. As the PA Recipient, the state of Texas also administered funds through its PA award for state and local PA Applicants including the Texas Division of Emergency Management, Harris County, and the Texas Military Department. To receive PA funds, Applicants may submit a request for grant funds, a project worksheet describing the details of the work and costs claimed, and supporting documentation though the PA Grants Portal. FEMA and the PA grant Recipient evaluate these documents for eligibility and reasonableness. Once a project worksheet is approved, Applicants may receive reimbursement for eligible costs incurred while executing eligible emergency protective measures. FEMA's fact sheet on PA Simplified Application procedures for COVID-19 notes that expedited assistance may be available in certain cases. When expedited assistance is approved for large projects (in FY2020, projects over $131,100), FEMA obligates 50% of the total expected costs as soon as the project worksheet is approved, and the PA Applicant may be reimbursed at that time. The remaining federal share may be reimbursed once the Applicant submits documentation of actual costs incurred while performing eligible work. FEMA has provided expedited PA for multiple COVID-19 response efforts. <3.2.5. How do applicants receive financial or direct assistance through the Individual Assistance program?> The FEMA Crisis Counseling Assistance and Training Program (CCP) is the only form of IA that has been authorized for some states, as of April 22, 2020 (see Table A-1 for the list of states that have been authorized for Crisis Counseling). FEMA operates the CCP with the Substance Abuse and Mental Health Services Administration (SAMHSA) within the Department of Health and Human Services (HHS). Local, state, territorial, or tribal governments may apply for a grant to administer the CCP, or may contract with local mental health service providers. The CCP supports crisis counseling services for disaster survivors, and disaster survivors receive the assistance for free. Generally, the CCP is designed to connect individuals with community resources. CCP services may be advertised to disaster survivors through media outlets, websites, community events, etc. If other forms of IA are authorized pursuant to a major disaster declaration for COVID-19, those assistance programs would include different application requirements and processes. For example, if the Individuals and Households Program (IHP) is authorized, applicants in a declared disaster area may register for FEMA IA and Small Business Administration (SBA) disaster loan assistance. Individuals and households can register for assistance online, by telephone, or in-person at a Disaster Recovery Center (DRC). Individuals and households generally have 60 days from the date of a declaration to apply for FEMA IHP assistance. <4. Funding for Stafford Act Declarations> The following questions relate to the funding sources for the federal assistance under the Stafford Act that may supplement state, tribal, and local response efforts for COVID-19. <4.1. Where does funding for Stafford Act assistance come from?> Many forms of assistance made available pursuant to a Stafford Act declaration are funded through the Disaster Relief Fund (DRF), which is the primary source of funding for the federal government's domestic general disaster relief programs. The DRF is managed by FEMA, but as a funding structure, it predates both FEMA and the Stafford Act, having first been funded in 1948. <4.2. Is there enough funding in the DRF for COVID-19?> As a result of prior-year appropriations to fund long-term recovery work from previous disasters, the DRF had about $42.6 billion in unobligated balances as of the beginning of March 2020. Division B of the CARES Act ( P.L. 116-136 ), included $45 billion more for the DRF. This put the balance of funding in the DRF at its highest level in history. DRF resources are available for past, current, and future incidents. However, the majority of its funding is specifically set aside for the costs of major disasters. $41.6 billion of what was in the DRF was specifically for the costs of major disasters, and roughly $600 million was potentially available for emergencies. Of the funding provided in the CARES Act for the DRF, $25 billion was for major disasters and $15 billion was for any Stafford Act costs, including both emergency declarations and major disasters. It is not clear what the total draw on the DRF will be, since the pandemic is an evolving situation, there are other federal programs providing resources, and there is no precedent for using the Stafford Act to respond to a public health crisis. <4.3. Is DRF funding set aside for COVID-19?> DRF appropriations are not provided for specific emergencies or disasters; there is no COVID-19 account within the DRF. The most recent iterations of the appropriations bill text for the DRF indicate the funds are provided for the "necessary expenses in carrying out the Robert T. Stafford Disaster Relief and Emergency Assistance Act," thus covering all past and future disaster and emergency declarations. Previous versions of the appropriations language going back to 1950 also referenced the legislation authorizing general disaster relief rather than targeting specific disasters. On a number of occasions, specific disasters have been mentioned in the appropriation, but funding was not specifically directed to one disaster over others. While many disaster supplemental appropriations bills are associated with a specific incident or incidents such as P.L. 113-2 , "the Sandy Supplemental" the language in such acts does not limit the use of the supplemental appropriations to specific incidents. It provides funding "for major disasters declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act." This is also the case with the funding provided in Division B of the CARES Act. The DRF supplemental appropriation itself includes no incident-specific direction, or reference to COVID-19. While one of the general provisions of the law states that the funds provided in the act "may only be used to prevent, prepare for, and respond to coronavirus," the last subsection of that general provision indicates that restriction does not apply to the title that included the DRF appropriation. <5. References> Additional sources of assistance may be available to support the nation's response to and recovery from the COVID-19 pandemic. CRS has developed products on various topics related to the COVID-19 pandemic, including global issues, public health, economic impacts on individuals, impacts on business and the U.S. economy, executive branch response, congressional response and legislation, and legal analysis. The CRS COVID-19 resources are available at https://www.crs.gov/resources/coronavirus-disease-2019 . Some select products CRS has developed related to the COVID-19 pandemic and Stafford Act assistance programs are included below. For more information on the President's declarations under the Stafford Act for COVID-19, see CRS Insight IN11264, Presidential Declarations of Emergency for COVID-19: NEA and Stafford Act , by L. Elaine Halchin and Elizabeth M. Webster; CRS Insight IN11251, The Stafford Act Emergency Declaration for COVID-19 , by Erica A. Lee, Bruce R. Lindsay, and Elizabeth M. Webster; and CRS Insight IN11229, Stafford Act Assistance for Public Health Incidents , by Bruce R. Lindsay and Erica A. Lee. Stafford Act major disaster declarations for COVID-19 will automatically authorize Small Business Administration (SBA) Economic Injury Disaster Loans (EIDL) for businesses in declared counties and contiguous counties. For more information, see CRS Report R46284, COVID-19 Relief Assistance to Small Businesses: Issues and Policy Options , by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry For additional information about relief and assistance resources for small businesses, see CRS Insight IN11301, Small Businesses and COVID-19: Relief and Assistance Resources , by Maria Kreiser. For additional information about the actions taken by the U.S. federal government to quell the introduction and spread of COVID-19 in the United States, see CRS Report R46219, Overview of U.S. Domestic Response to Coronavirus Disease 2019 (COVID-19) , coordinated by Sarah A. Lister and Kavya Sekar. Appendix A. COVID-19 Approved Major Disaster Declarations and Authorized Assistance The following information is current as of April 22, 2020. Public Assistance Category B Emergency Protective Measures has been authorized for all states and territories. Ten states have been authorized to receive Individual Assistance Crisis Counseling Assistance and Training Program (CCP) (referred to in Table A-1 as "Crisis Counseling"). Appendix B. Example of Emergency Declarations for the Same Incident Stafford Act emergencies have been declared for different states, territories, and tribes for the same incident. For example, the states of Florida, Georgia, South Carolina, and North Carolina, the U.S. Virgin Islands, and the Florida Seminole Tribe of Florida all received emergency declarations for Hurricane Dorian in 2019. The incident period and declaration date for the emergency declarations varied by state, territory, and tribe. This information is captured in Table B-1 .

On March 13, 2020, President Donald J. Trump declared an emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act; 42 U.S.C. §§5121 et seq.) in response to coronavirus disease 2019 (COVID-19). The declaration authorized assistance to all U.S. states, territories, tribes, and the District of Columbia. Specifically, the Stafford Act emergency declaration authorized one form of Federal Emergency Management Agency (FEMA) assistance: Public Assistance emergency protective measures (as authorized under Stafford Act Section 502). Subsequently, the President approved major disaster declaration requests under the Stafford Act for all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands (authorized under Stafford Act Section 401). This report provides answers to frequently asked questions (FAQs) regarding the Stafford Act disaster declarations made for COVID-19, federally available assistance, and sources of funding. The subjects to be covered include: Stafford Act declarations, including legal authorities, limitations on assistance, and other information related to the declaration request process; types of assistance available to state, territorial, and tribal governments, private nonprofit organizations, private entities, and individuals and households pursuant to the Stafford Act emergency and major disaster declarations for COVID-19; the Disaster Relief Fund (DRF), the source used to fund FEMA assistance provided pursuant to Stafford Act emergency and major disaster declarations; and additional references. This report also includes the following appendices: Appendix A includes Table A-1 , which lists the categories of FEMA assistance authorized pursuant to the major disaster declarations for COVID-19, organized by state and territory. Appendix B provides an example of different states, territories, and tribes that have received presidential emergency declarations under the Stafford Act for the same incident. The scope of this report is limited to assistance authorized under the Stafford Act. There are, however, other types of assistance extrinsic to the Stafford Act that are activated by a Stafford declaration. This report does not address these other forms of assistance. The report is not a comprehensive review of all potential forms of federal assistance made available for COVID-19 response and recovery. It does not provide information on the assistance made available pursuant to the President's declaration of emergency under the National Emergencies Act (NEA; 50 U.S.C. §§1601 et seq.) or the declaration by the Secretary of Health and Human Services (HHS) of a Public Health Emergency under Section 319 of the Public Health Service Act (PHSA; 42 U.S.C. §247d). Information included in this report is current as of April 22, 2020.

crs_R45986

crs_R45986_0

<1. Introduction> Per- and polyfluoroalkyl substances (PFAS) are a large, diverse group of fluorinated compounds that have been used in numerous commercial, industrial, and U.S. military applications. Among other uses, PFAS have been used in fire-fighting foams and in the processing and manufacture of many commercial products (e.g., nonstick cookware, stain- and water-resistant fabrics). PFAS are persistent in the environment, and studies of several PFAS suggest that exposures above certain levels may lead to adverse health effects. Detections of PFAS contamination in drinking water and the environment, have increased in recent years with the availability of new analytical methods and increased monitoring. PFAS primarily perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS) have been detected in soil, surface water, groundwater, and public water supplies in numerous locations. These detections have been associated primarily with releases from manufacturing and processing facilities, and from U.S. military installations and other facilities that use firefighting foams (e.g., civilian airports and fire departments). These detections have prompted calls for increased federal action and authority to prevent and mitigate exposures to PFAS. Federal actions to address potential health and environmental risks of exposure to PFAS have been taken primarily under the authorities of the following federal statutes: Toxic Substances Control Act (TSCA); Safe Drinking Water Act (SDWA); and Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and related U.S. Department of Defense (DOD) response authorities. The U.S. Environmental Protection Agency (EPA) has used the authorities of these three statutes to take most of its actions to address potential risks of PFAS. DOD and other federal agencies have also used CERCLA authorities to respond to releases of various PFAS at federal facilities. Some federal actions have involved the private sector in complying with reporting and other requirements. Other actions have involved voluntary measures taken by some companies. Although the federal government has taken a range of actions to address PFAS exposure, policymakers and stakeholders have urged federal agencies to act more quickly and broadly. For instance, some are calling for EPA to issue enforceable drinking water standards for some or all PFAS. Others want EPA to designate all PFAS as hazardous substances (and thus establish liability for responsible parties to pay response costs). Multiple bills introduced in the 116 th Congress would require EPA or other agencies to take various actions under existing law or would create new authorities. Some of these bills are incorporated into the House-passed and Senate-passed versions of the National Defense Authorization Act for FY2020 ( H.R. 2500 and S. 1790 ). For example, among other PFAS provisions, H.R. 2500 would establish liability for PFAS response costs through designation of PFAS as hazardous substances under CERCLA and also indirectly through listing PFAS as toxic pollutants under the Clean Water Act, whereas S. 1790 would expand DOD statutory responsibilities for response actions to include releases of any other pollutant or contaminant without establishing enforceable liability under CERCLA for such chemicals. S. 1790 also would direct EPA to issue drinking water standards for PFAS and to take various actions for other purposes. Bills related to the topics covered in this report are noted where relevant in the discussions, and these and other related bills are identified in this report in Table 2 . This report focuses on federal authorities under which EPA and other agencies have taken actions to address potential risks of PFAS. It does not discuss other laws under which EPA or other agencies may take additional actions, or actions under state laws. The report begins with a brief discussion of the chemical properties, uses, and varying risks of PFAS, followed by discussions of federal actions, relevant legislation enacted in the 115 th Congress, and relevant legislation in the 116 th Congress. <2. Properties and Uses of PFAS> PFAS are a large group of synthesized chemical compounds that do not occur naturally. Chemical manufacturers have produced various types of PFAS for a range of commercial, industrial, and U.S. military applications since the 1940s. EPA identifies over 1,200 PFAS manufactured in the United States over time. The specific types and quantities of PFAS produced and used have varied over time and continue to change. PFAS are not a single chemical or a single compound, but refer to a group of compounds that share similar chemical structures. Any compound that has the chemical structure of at least one carbon atom attached to two or more fluorine atoms, or a chain of at least two carbon atoms attached to two or more fluorine atoms, may be considered a PFAS. Individual PFAS vary in terms of the numbers of fluorinated carbon atoms. The extent to which a chain of carbon atoms is fluorinated would determine whether a chemical may be considered a perfluoroalkyl substance or a polyfluoroalkyl substance. Given the possible variations in the length of the carbon chain, number of fluorinated carbon atoms, and other atoms attached to the chain, PFAS potentially could include thousands of chemical compounds if every possible combination were created. Industry and government sources indicate that manufacturers have focused on producing PFAS with longer fluorinated carbon chains, primarily because they reduce the surface tension of liquids and resist heat. Some longer chain PFAS have been used in chemical manufacturing processes to produce fluoropolymers designed for multiple consumer uses, including non-stick and heat-resistant coatings for cookware and food packaging, and treatment of clothing, leather, and other materials for soil, stain, and water resistance. In some cases, PFAS may be used only as a processing aid to create a fluoropolymer-based product, and in other cases, PFAS may be a constituent in the resulting product. Fluoropolymer-based products may therefore contain varying amounts of PFAS depending on the manufacturing process. Fluoropolymers containing specific types of PFAS may also break down into other PFAS depending on the conditions. Some PFAS have also been used as an ingredient in a variety of products, including fire suppressants in Aqueous Film Forming Foam (AFFF) used by U.S. military installations, other federal agencies, civilian airports, and local fire departments as Class B agents to extinguish petroleum-based liquid fuel fires; and suppressants of oxidizing mist in industrial metal plating operations. Such products generally contain relatively small concentrations of PFAS that require further dilution of the product for its intended use. For example, AFFF products that contain PFAS are designed to be diluted with water in their application to form an aqueous film that restricts oxygen to extinguish petroleum-based liquid fuel fires. Perfluorooctane sulfonate (PFOS), perfluorooctanoic acid (PFOA), and certain other related perfluoroalkyl substances accounted for most of the historical production of PFAS prior to their phase-out, discussed below in "Regulation of PFAS in Commerce under TSCA." Manufacturers have transitioned away from these longer chain PFAS because of their potential toxicity and environmental persistence. Policymakers and stakeholders have continued to raise questions about the relative toxicity and persistence of shorter chain or less fluorinated PFAS in comparison to longer chain PFAS. Some policymakers and stakeholders have also expressed concern about the continued use and disposal of existing stocks of longer chain PFAS and products containing these chemicals, including the disposal of AFFF stocks by the federal government, civilian airport operators, and local fire departments, as they move to alternative firefighting foams. <3. Challenges in Assessing Potential Risks> Similar to other commercial chemicals, releases of PFAS may occur in multiple ways that could result in exposures. PFAS may be released from chemical manufacturing or processing operations; intended uses (such as the application of AFFF as a fire extinguishing agent); disposal of products or wastes containing these chemicals; or accidental spills or other unexpected incidents. Occupational exposures may occur among workers in facilities that manufacture or process PFAS, among workers that use products containing these chemicals (such as firefighters that use AFFF), or among workers involved in disposal. Exposures among the general public would depend on whether a release may move through the environment in a manner that an individual could come into contact with these chemicals. Exposures may also occur among individuals who use a product containing these chemicals. As with any chemical, potential risks to human health and the environment would depend on the properties of the specific PFAS, the conditions under which exposure may occur, and the characteristics of the exposed individual. How PFAS interact in the environment and in humans or animals would vary depending on the structure, toxicity, persistence, and other properties of the individual chemical. The breakdown rate of a particular chemical once released would determine how long it persists before reacting with other chemicals in the environment or in a human or animal that would produce new chemicals with different properties. Although some have characterized PFAS as "forever chemicals," persistence varies among longer chain versus shorter chain PFAS, and among more fluorinated versus less fluorinated PFAS. Toxicity and potential health effects may also vary. Whereas persistence would affect how long the properties of the chemical remain intact, the potential risks associated with exposure would depend on the toxicity of the specific chemical, the exposure pathway and other exposure factors. Given this variability, evaluating the potential risks of all PFAS as a singular category presents scientific (and regulatory) challenges. Similarly, regulating all PFAS as a singular category would present challenges in developing a singular risk-based standard (i.e., a singular concentration level). Because of the diversity of the potential universe of these chemicals, designating all PFAS as a singular category for regulatory or reporting purposes would also present challenges in implementation to identify which chemicals would be subject to applicable requirements. Studies of the potential human health and environmental effects of PFAS have focused on PFOA, PFOS, and certain other longer chain perfluoroalkyls because of their more predominant manufacture and use. Fewer studies have examined shorter chain perfluoroalkyls or polyfluoroalkyls. Although scientific understanding of the potential risks of these chemicals has been evolving, uncertainties remain about health effects that may be associated with exposures to various PFAS. Much of the attention among policymakers, stakeholders, and the general public has focused on drinking water sources. Studies of these chemicals have mostly focused on drinking water or contaminated food sources. Less is known about risks that may be associated with other exposure pathways, such as dermal contact or inhalation. The Agency for Toxic Substances and Disease Registry (ATSDR) and EPA have developed guidelines for assessing chemical exposure risks under various agency programs. The National Research Council of the National Academy of Sciences has also established risk assessment guidelines and has examined some of the challenges, such as uncertainty stemming from data quantity and quality. Each of these guidelines outlines factors to evaluate potential risks that may be associated with exposure to a specific chemical, including toxicity and other properties of the chemical; frequency, concentration, and duration of exposure (i.e., the dose); pathway of exposure (e.g., inhalation, ingestion, or skin contact); interaction with other chemicals that may be present in the environment; and age, overall health, and genetic and behavioral characteristics of the exposed individual. <4. Federal Actions to Address Potential Risks of PFAS> Federal actions to address potential risks from PFAS have primarily been taken under the authorities of TSCA, SDWA, and CERCLA. Most of these actions have focused on PFOS and PFOA, because of predominant past uses, prevalence in the environment stemming from these uses, and the greater availability of scientific research on potential health effects than for other PFAS. Congress has also authorized specific federal actions in separate legislation. See the section on " Relevant Legislation Enacted in the 115th Congress " for a list of these laws. EPA has taken actions under TSCA over the past few decades to gather and assess existing information on the risks of PFOS, PFOA, and certain other PFAS. Based on the findings, TSCA authorizes EPA to require manufacturers to submit more information if needed to further evaluate potential risks, and the agency has done so. EPA has also required, or worked with, manufacturers to develop new information when existing information on a substance is insufficient to evaluate the risks. If EPA determines that the risks would meet the statutory threshold of "unreasonable" under TSCA, TSCA authorizes EPA to establish various regulatory controls if no other statute addresses the risks. EPA has not rendered a finding of unreasonable risk for any PFAS to date. Following a series of voluntary industry phase-outs in the United States for the manufacture of PFOS, PFOA, and other related substances, EPA used TSCA authority to promulgate multiple significant new use rules (SNURs) that require manufacturers to notify the agency prior to reintroducing these substances into commerce. TSCA also requires manufacturers to notify EPA of the intent to produce any new PFAS. When information on potential risks is insufficient, EPA has issued orders that restrict the manufacture, processing, distribution, use, disposal or any combination of these activities pending the development of new information on risks. EPA has used information on PFAS gathered under TSCA to inform its actions under SDWA and CERCLA. For over a decade, EPA has been evaluating PFOA and PFOS under SDWA to determine whether an enforceable Maximum Contaminant Level (MCL) for drinking water provided by public water systems may be warranted. EPA has also included four other PFAS among emerging contaminants being evaluated for potential regulation under SDWA. In 2009, EPA issued provisional health advisories for short-term exposures to PFOA and PFOS in drinking water. In 2016, EPA issued additional health advisories for exposures to these chemicals in drinking water over an individual's lifetime. These health advisories are not enforceable standards for public water systems. However, SDWA grants EPA "emergency powers" to issue enforceable orders to abate an imminent and substantial endangerment to health from a contaminant in drinking water whether or not the contaminant is regulated under the act. EPA has issued such orders at certain sites where releases of PFOA or PFOS have threatened drinking water sources. EPA and other federal agencies have also responded to releases of PFAS under CERCLA. DOD administers the vast majority of federal facilities where PFAS has been detected. DOD has been responding to releases of PFOA and PFOS from the use of AFFF at active and decommissioned U.S. military installations under the Defense Environmental Restoration Program. DOD has been phasing out the use of AFFF that contains PFOA or PFOS to reduce the risks of future releases. EPA has responded to releases of PFOA and PFOS under the Superfund program at some sites located on non-federal lands, in coordination with the states in which these sites are located. Sites addressed under the Superfund program have varied in terms of manufacturing or uses of PFAS. In February 2019, EPA issued a PFAS Action Plan that established an administrative framework for multiple planned actions under TSCA, SDWA, CERCLA, and other related authorities, including determining whether to establish an MCL for PFOA and PFOS; proposing SDWA monitoring for additional PFAS under the fifth Unregulated Contaminant Monitoring Rule (UCMR5); proposing the designation of PFOA and PFOS as hazardous substances under CERCLA (or other related laws that trigger such designation); developing "groundwater cleanup recommendations" to guide decisions at Superfund sites and federal facilities under CERCLA (proposed in April 2019); proposing additional SNURs under TSCA for potential new uses; taking enforcement actions "as appropriate" under available authorities; and developing toxicity values and other risk assessment tools to inform decisions under multiple statutes. The status of federal actions to address potential risks of PFAS under TSCA, SDWA, CERCLA, and other related authorities are discussed in greater detail below. <4.1. Health Effects Studies> EPA and other federal agencies have been evaluating potential human health effects that may be associated with exposures to various PFAS. These agencies have revised some of their findings over time to reflect the developing scientific literature. EPA has gathered information about certain PFAS from manufacturers and others to evaluate whether regulation is warranted under TSCA. EPA has also been evaluating whether regulation is warranted under SDWA, and whether response actions are warranted under CERCLA at sites where certain PFAS have been released into the environment. EPA has reported that studies of exposures to PFOA and PFOS in laboratory animals have identified reproductive and developmental, liver and kidney, and immunological effects, and that exposures to both chemicals have caused tumors in laboratory animals. EPA has also referenced human epidemiology studies observing increased cholesterol levels among exposed populations, with more limited findings related to infant birth weights, effects on the immune system, cancer (for PFOA), and thyroid hormone disruption (for PFOS). Although some studies have identified potential cancer risks, EPA has not classified any PFAS as a likely or known human carcinogen. Other federal agencies have also been evaluating the risks of certain PFAS. The Centers for Disease Control and Prevention (CDC) has collected blood serum levels and other biomonitoring data from individuals selected for a long-term study of the prevalence of exposures to a range of chemicals, including several PFAS. The ATSDR, National Institute of Environmental Health Sciences (NIEHS), and the interagency National Toxicology Program (NTP), have also been researching potential health effects that may be associated with exposures to certain PFAS. Although the roles of these agencies are not regulatory, data and findings of these studies may be used to inform regulatory decisions of other federal or state agencies. The following sections discuss the CDC biomonitoring program, ATSDR studies of the toxicological properties of certain PFAS, ATSDR site-specific studies, and related joint CDC/ATSDR studies. EPA's actions to evaluate PFAS are discussed in "Regulation of PFAS in Commerce under TSCA," "Regulation of PFAS and Other Actions under SDWA," and "Environmental Remediation." <4.1.1. CDC Biomonitoring> For two decades, CDC has collected biomonitoring data for multiple environmental chemicals from a group of randomly-selected individuals intended to be representative of the general U.S. population. These data have included blood serum levels for PFOA and PFOS and 14 other PFAS. This effort is part of the National Health and Nutrition Examination Survey (NHANES). The biomonitoring data that CDC has collected generally indicate that blood serum levels for the selected group of perfluoroalkyl substances among participating individuals declined between 1999 and 2016 (the most recent year for which biomonitoring data are available for these specific chemicals). Declining blood serum levels for a particular chemical generally indicate reduced exposures. CDC tracks the biomonitoring data by age group, gender, and race/ethnicity, but not occupation. CDC cautions that "finding measureable amounts of PFAS in [blood] serum does not imply that the levels of PFAS cause an adverse health effect." The likelihood that a specific amount of PFAS in blood serum may be associated with an adverse health effect requires further study. The actual levels of PFAS in blood serum among the broader U.S. population is also uncertain, as the sample size is relatively small. <4.1.2. ATSDR Draft Toxicological Profile> Section 104(i) of CERCLA authorizes ATSDR to prepare toxicological profiles for hazardous substances, pollutants, or contaminants found at contaminated sites that warrant federal attention. Over the last decade, ATSDR has issued three draft Toxicological Profiles for perfluoroalkyls (i.e., perfluoroalkyl substances) to identify potential health effects that may be associated with exposures to certain chemicals within this group of compounds. ATSDR typically issues drafts for public comment prior to finalizing a Toxicological Profile for an individual chemical or a group of chemicals. ATSDR has produced multiple drafts for perfluoroalkyls without issuing a final version so far, reflecting continuing developments in the scientific literature. ATSDR issued its first draft Toxicological Profile for perfluoroalkyls in May 2009, its second draft in August 2015, and its third draft in June 2018. For its third draft, ATSDR determined that sufficient scientific information was available to evaluate 14 perfluoroalkyls, including PFOA and PFOS. ATSDR observed that scientific studies of this group of perfluoroalkyls have focused mostly on risks associated with ingestion, and less on inhalation or skin contact (i.e., dermal exposure). ATSDR determined that scientific information was sufficient to establish provisional ingestion Minimal Risk Levels (MRLs) for four of these 14 perfluoroalkyls: PFOA, PFOS, perfluorohexane sulfonic acid (PFHxS), and perfluorononanoic acid (PFNA). ATSDR proposed the following values for these MRLs in milligrams per kilograms per day (mg/kg/day) to quantify an intermediate exposure level (i.e., daily exposure from 15 to 364 days) for each chemical that accounts for variance in bodyweight among exposed individuals. PFOA (3 x 10 -6 mg/kg/day or 0.000003 mg/kg/day) PFOS (2 x 10 -6 mg/kg/day or 0.000002 mg/kg/day) PFHxS (2 x 10 - 5 mg/kg/day or 0.00002 mg/kg/day) PFNA (3 x 10 -6 mg/kg/day or 0.000003 mg/kg/day) These values are smaller than in previous draft Toxicological Profiles and are among the smallest MRLs for the body of chemicals that ATSDR has evaluated. Smaller values generally indicate greater toxicity in comparison to chemicals with larger values, given the same exposure. Although the proposed MRLs for the PFAS referenced above are relatively small, the values are based on conservative assumptions and incorporate uncertainty factors. The value of an MRL alone therefore does not necessarily indicate conclusiveness of the level of risk. MRLs are estimates of daily human exposure to a chemical that is not expected to present an appreciable risk of adverse non-cancer health effects over a specified route (i.e., pathway) and duration of exposure. MRLs are intended to serve only as screening levels to identify sites that warrant further evaluation to determine whether actions may be needed to mitigate risks. Some stakeholders have characterized the proposed MRLs as recommended standards for regulation or site remediation. However, ATSDR emphasized in its June 2018 draft that "MRLs are not intended to define clean-up or action levels." Although some perfluoroalkyls have been detected in ambient air at certain locations, ATSDR noted in its June 2018 draft that scientific information on exposure through inhalation is relatively limited. ATSDR concluded that the data were insufficient to establish provisional MRLs for inhalation exposures for any of these 14 perfluoroalkyls. In its June 2018 draft, ATSDR also noted that findings from epidemiological studies that examined potential associations between serum PFAS levels and the occurrence of adverse health effects were not consistent across studies. ATSDR examined a range of epidemiological studies, including those in which reported serum PFAS levels were hundreds or thousands of times that of the general population. Because the findings of epidemiological studies were inconsistent, ATSDR relied on animal studies to calculate provisional MRLs. <4.1.3. ATSDR Site-Specific Studies> Under Section 104(i) of CERCLA, ATSDR has also conducted or funded multiple site-specific studies to examine potential health effects where certain PFAS were released into the environment. State health departments performed some of these studies through cooperative agreements with ATSDR. These studies have focused on sites where PFOS, PFOA, and various other PFAS were manufactured, used, or disposed. ATSDR reports that the agency or a state health department has conducted site-specific studies for more than 20 sites across the United States. Some of these sites are federal facilities, such as U.S. military installations, whereas other sites are privately owned. <4.1.4. Joint CDC and ATSDR Studies> In addition to ATSDR site-specific studies under CERCLA, Congress has authorized CDC and ATSDR to conduct joint scientific studies to better understand the potential risks associated with exposure to PFAS. Subject to annual appropriations, Section 316 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ), as amended, authorizes CDC and ATSDR to conduct a joint study in consultation with DOD on the "human health implications" from potential exposure in "drinking water, ground water, and any other sources of water and relevant exposure pathways." Using appropriations made available to CDC and ATSDR for the joint study, the agencies have worked to develop procedures and methods for studying potential health risks at sites with PFAS contamination. In April 2019, ATSDR announced that it would fund epidemiological studies at multiple sites. Section 316 also authorizes CDC and ATSDR to conduct exposure assessments at no fewer than eight current or former U.S. military installations where PFAS contamination has been discovered in drinking water, groundwater, or any other sources of water, and relevant exposure pathways. In February 2019, CDC and ATSDR announced the selection of eight military installations for such exposure assessments. <4.2. Regulation of PFAS in Commerce under TSCA> EPA's PFAS Action Plan includes over 1,200 PFAS out of approximately 85,000 chemicals in the inventory. EPA added some of these PFAS to the inventory soon after the original enactment of TSCA in 1976, and added others over time as manufacturers notified the agency of the intent to introduce these PFAS into commerce. EPA reports that over 600 of these PFAS were produced in the United States between 2006 and 2016. Using the information gathering authorities of TSCA, EPA has obtained information on the risks of various PFAS to assess if such risks may be unreasonable to warrant regulation under the statute. In 2000, the sole manufacturer of PFOS and related perfluoroalkyl sulfonate chemicals (3M) reported to EPA that information it had obtained on the potential risks of these chemicals justified a voluntary phase-out of their production. The phase-out occurred over several years. In 2006, EPA reached an agreement with a group of manufacturers that produced PFOA and related perfluoroalkyl carboxylate chemicals for the voluntary phase-out of these chemicals over a ten-year period. Subsequent to each phase-out, EPA promulgated "significant new use rules" (SNURs) under Section 5(a)(2) of TSCA to require any manufacturer to notify the agency before reintroducing these chemicals into commerce for historical uses. Promulgating SNURs for phased-out uses of existing chemicals is not uncommon. EPA also promulgated SNURs to require notification of entirely new uses of existing PFAS. SNURs give EPA the opportunity to evaluate risks associated with planned uses before they occur. Under Section 5(a)(1), EPA has also continued to evaluate the risks of new chemicals, including new PFAS, as manufacturers have notified the agency of their intent to produce new chemicals. For some premanufacture notices, EPA has determined that the submitted information is not sufficient to assess whether risks associated with a new PFAS may be unreasonable. In such instances, EPA has issued orders under Section 5(e) to require the manufacturer to produce new information on the chemical. EPA has also used Section 5(e) orders to place restrictions on a new PFAS until the manufacturer submits the requested information to EPA. Section 6 of TSCA authorizes EPA to establish regulatory controls on any stage of the lifecycle of a chemical (i.e., manufacture, processing, distribution, use, and disposal) only if such controls would be necessary to mitigate "unreasonable risk of injury to health or the environment." To date, EPA has not rendered such finding of unreasonable risk for any PFAS to warrant regulatory controls under Section 6. <4.2.1. Voluntary Industry Phase-Out> Chemical manufacturers may choose to phase-out the production of a chemical as a business decision. Following negotiations with EPA, 3M the sole manufacturer of PFOS and related perfluoroalkyl sulfonate chemicals announced a voluntary phase-out of these chemicals in 2000 based on risk information that it had gathered. Pursuant to Section 8(e) of TSCA, the manufacturer had submitted this information to EPA after it determined that the information met the statutory criteria for reporting. In 2006, EPA initiated the PFOA Stewardship Program with eight major manufacturers to reduce the extent to which PFOA and related perfluoroalkyl carboxylate chemicals enters the environment by 95% below 2010 levels and to completely phase-out the manufacture of these chemicals by 2015. In 2017, EPA announced that all eight manufacturers had met their phaseout goals. <4.2.2. Information Gathering> To evaluate chemicals for potential regulation, other provisions of Section 8 also authorize EPA to gather existing information from manufacturers, processors, and distributors. For example, EPA has used Section 8(a) to gather information on manufacturing volumes of PFAS above particular thresholds at chemical manufacturing facilities. Under Section 8(d), EPA has required that chemical manufacturers, processors, and distributors submit lists of health and safety studies related to PFAS to the agency. If EPA finds that existing information is insufficient to evaluate risks, Section 4 of TSCA authorizes EPA to require manufacturers or processors to test a chemical and submit the findings to the agency. In 2005, EPA determined that existing information on fluoropolymers and other fluorinated compounds that contain PFOA and related chemicals was insufficient to assess potential environmental effects. To obtain new information, EPA entered into Section 4 consent orders with two industry organizations requiring them to test various PFAS-containing resins, dispersions, paper, and textiles for environmental effects. In 2015, EPA concluded that the testing data were sufficient at that time to determine that these uses were unlikely to present unreasonable risks. EPA has promulgated multiple SNURs under Section 5(a)(2) to require notification of various PFAS for significant new uses. EPA promulgated a SNUR in 1987 for any use of hexafluoropropylene oxide other than as an intermediate in the manufacture of fluorinated chemicals in an enclosed process. Between 2002 and 2007, EPA promulgated SNURs that generally designated all uses of PFOS and 270 related perfluoroalkyl sulfonate chemicals as "significant new uses," except certain specialized existing uses. In 2013, EPA promulgated a SNUR that designated uses of PFOA and related perfluoroalkyl carboyxlate chemicals in carpets or carpet treatments as significant new uses requiring notification. In 2015, EPA proposed a SNUR that would designate all uses of PFOA and related perfluoroalkyl carboyxlate chemicals as "significant new uses." EPA's PFAS Action Plan states that it "plans to follow up on the 2015 SNUR." Section 5(a)(1) authorizes the primary information gathering mechanism for new chemicals that have never been manufactured in commerce. Prior to producing a new chemical, a manufacturer must submit a premanufacture notice to EPA. In 1984, EPA determined under Section 5(h)(4) that most polymers entering into commerce do not present unreasonable risks and exempted them from premanufacture notification. This exemption is commonly referred to as the "polymer exemption." In 2010, EPA determined that polymers containing perfluoroalkyl constituents may present unreasonable risk and promulgated a new rule requiring notification prior to their manufacture. This regulatory change became effective in 2012 and is intended to allow EPA to determine whether regulation of such polymers may be warranted. If EPA were to determine that information provided in a premanufacture notice is insufficient to assess risks, Section 5(e) authorizes EPA to issue an order that requires the manufacturer to develop new information on the new chemical. EPA has issued Section 5(e) orders for specific PFAS. For example, EPA issued a Section 5(e) consent order in 2009 for hexafluoropropylene oxide dimer acid and its ammonium salt (i.e., the GenX chemicals). According to its manufacturer, the GenX chemicals are used to make fluoropolymers without the use of PFOA. <4.2.3. Risk Assessment> EPA has assessed the risks of PFOS, PFOA, and other PFAS on multiple occasions using information that the agency has collected under TSCA. In 2000, EPA's assessment of PFOS consisted of summarizing various animal studies and did not involve a formal determination on whether the risks were considered unreasonable. In 2002, EPA issued a draft assessment for PFOA using a similar approach it took for PFOS. As EPA has gathered more information, the agency has compared the findings of newer studies with those of existing studies to determine if the agency's understanding of the risks of PFAS warranted revision. For instance, EPA submitted an updated draft assessment for PFOA in 2005 to its Science Advisory Board for review. These assessments have informed the agency's subsequent consideration of whether regulation of certain PFAS may be warranted under TSCA. <4.2.4. Regulatory Action> In 2009, EPA announced its intention to consider initiating a Section 6 rulemaking under TSCA to manage risks of long-chain PFAS. EPA noted its intent to develop more detailed assessments to support a finding of unreasonable risk. If EPA were to make such a finding, Section 6 authorizes EPA to promulgate a rule to mitigate the unreasonable risk. In promulgating the rule, EPA may select among several regulatory options, including a prohibition or restriction on the manufacture, processing, distribution of the chemical or a limitation on the amount in which the chemical may be manufactured, processed, or distributed for all or particular uses; a requirement to label the chemical with clear and adequate warnings and instructions with respect to its use, distribution, or disposal; a requirement to track the processes used to manufacture or process the chemical or conduct tests that are reasonable and necessary to assure compliance with the rule; a prohibition or restriction on commercial use or disposal of a chemical; or a requirement for manufacturers and processors of the chemical to notify distributors, those in possession of, or exposed to, the chemical, and the public of the agency's unreasonable risk finding, and to replace or repurchase the chemical if requested. If EPA were to find an "unreasonable risk," Section 9 requires EPA to determine whether other federal authorities may be available to mitigate the risk before establishing regulatory controls. Since its announcement in 2009 to consider a Section 6 rulemaking, EPA has not made an unreasonable risk finding for any PFAS. Additionally, none of the 10 chemicals that EPA prioritized in 2016 for risk evaluation under Section 6 are PFAS. Although EPA has not restricted existing PFAS through Section 6 rulemaking, the agency has issued Section 5(e) orders to restrict the manufacture, processing, distribution, use, and disposal of new PFAS reported to the agency under Section 5(a)(1). These restrictions remain effective until the manufacturer submits the new information requested by EPA. As an example, the Section 5(e) consent order for the two GenX chemicals noted above requires the manufacturer to "recover and capture (destroy) or recycle [both chemicals] at an overall efficiency of 99% from all effluent process streams and the air emissions (point source and fugitive)." <4.2.5. Enforcement> Although EPA has not established Section 6 regulatory controls on any PFAS, the agency has used its enforcement authorities under TSCA to assess fines and penalties for violations of other statutory requirements. Section 15 of TSCA prohibits certain acts such as failure or refusal to comply with any requirement, rule, order, or consent agreement under Title I, or any requirement, rule, or order under Title II; use of a chemical for commercial purposes that violates any requirements established under Sections 5, 6, or 7; failure or refusal to establish or maintain records, submit reports, notices or other information, or permit access to or copying records, as required by TSCA; and failure or refusal to permit entry or inspection under Section 11. Section 16 authorizes civil and criminal penalties for taking actions that are prohibited under Section 15. In 2005, EPA announced a settlement with DuPont for reporting violations under Section 8(e) of TSCA and the Resource Conservation and Recovery Act (RCRA) that involve PFOA. According to EPA, the settlement required DuPont to pay $10.25 million in civil penalties and perform Supplemental Environmental Projects valued at $6.25 million. EPA has continued to take enforcement actions for other violations related to PFAS. For example, EPA sent a Notice of Violation to Chemours in February 2019 for alleged violations of Sections 5 and 8 of TSCA involving GenX chemicals. <4.3. Regulation of PFAS and Other Actions under SDWA> SDWA authorizes EPA to promulgate national primary drinking water regulations for contaminants in water provided by public water systems. These regulations generally include an enforceable standard (MCL) and associated monitoring, treatment, and reporting requirements. For substances that are not regulated under SDWA, EPA is authorized to issue health advisories that identify non-enforceable levels of contaminants in drinking water that are expected to be protective of sensitive populations. For both regulated and unregulated contaminants, SDWA emergency powers authorize EPA to take actions to abate an imminent and substantial endangerment to public health. To date, EPA has not promulgated drinking water regulations for any PFAS but plans to propose preliminary regulatory decisions for PFOA and PFOS in 2019. In 2016, the agency issued non-enforceable Lifetime Health Advisories for PFOS and PFOA. EPA also has used SDWA emergency powers to respond to releases of PFOA and PFOS detected in public water systems at several sites. The following sections further discuss these SDWA authorities and related actions. <4.3.1. Health Advisories> SDWA authorizes EPA to issue health advisories for contaminants that are not regulated under the act. Health advisories include non-enforceable concentrations for contaminants in drinking water and often include values for different exposure durations (e.g., one day, a lifetime). These non-regulatory levels are intended to help water suppliers and others address contaminants for which EPA has not promulgated drinking water standards. Advisories provide technical guidance on identifying, measuring, and treating such contaminants. In May 2016, EPA established the Lifetime Health Advisory levels for PFOA and PFOS at 70 parts per trillion (ppt), separately or combined. In calculating the health advisory level, EPA applied a relative source contribution of 20% (i.e., an assumption that 20% of PFOS and/or PFOA exposure is attributable to drinking water and 80% is from diet, dust, air or other sources). These levels are intended to protect the most sensitive subpopulations (i.e., nursing infants), with a margin of protection, over a lifetime of daily exposure. Previously in January 2009, EPA issued provisional health advisory levels of 400 ppt for PFOA and 200 ppt for PFOS to address short-term exposures to these substances from drinking water. <4.3.2. National Primary Drinking Water Regulations> For more than a decade, EPA has been assessing whether to promulgate national primary drinking water regulations for PFOA and PFOS. SDWA specifies a multistep process for evaluating contaminants to determine whether a national regulation is warranted. The evaluation process includes identifying contaminants of potential concern, assessing health risks, collecting occurrence data (and developing reliable analytical methods necessary to do so), and making determinations as to whether or not regulatory action is needed for a contaminant. <4.3.3. Identifying Emerging Contaminants That May Warrant Regulation> Every five years, EPA is required to publish a contaminant candidate list (CCL) that identifies contaminants that are known or anticipated to occur in public water systems and that may require regulation under the act. In 2009, EPA placed PFOA and PFOS on the third such list (CCL 3) for evaluation. In 2016, EPA published the fourth list, CCL 4, which carried over PFOA and PFOS. EPA carried forward these contaminants to continue evaluating health effects, gathering national occurrence data, and developing analytical methods. <4.3.4. Monitoring for Emerging Contaminants in Public Water Systems> SDWA Section 1445 requires EPA to promulgate, every five years, an unregulated contaminant monitoring rule (UCMR) that requires public water systems to test for no more than 30 such contaminants. A representative sample of systems serving 10,000 or fewer people is required to conduct monitoring. In 2012, EPA issued the third UCMR (UCMR 3), under which 4,864 public water systems tested their drinking water for 6 PFAS including PFOA and PFOS between January 2013 and December 2015. Overall, 63 of the 4,864 (1.3%) water systems reported at least 1 sample with PFOA and/or PFOS (separately or combined) concentrations exceeding EPA's health advisory level of 70 ppt. EPA estimates that these 63 water systems serve approximately 5.5 million individuals. According to EPA's PFAS Action Plan , the agency intends to propose monitoring requirements for other PFAS in the next UCMR in 2020. As of August 2019, EPA had developed an analytical method to detect 18 PFAS in drinking water supplies. The plan states that the agency would use the monitoring data gathered through UCMR 5 to evaluate the national occurrence of additional PFAS. The agency has been developing analytical methods for monitoring additional PFAS. <4.3.5. Regulatory Determinations> SDWA requires EPA, every five years, to make a regulatory determination (RD) a determination of whether or not to promulgate a drinking water regulation for at least five contaminants on the CCL. To determine that a national drinking water regulation is warranted for a contaminant, EPA must find that a contaminant may have an adverse health effect; it is known to occur or there is a substantial likelihood that it will occur in public water systems with a frequency and at levels of public health concern; and in the sole judgment of the EPA Administrator, regulation of the contaminant presents a meaningful opportunity for health risk reduction for persons served by public water systems. To meet the statutory criteria for making an RD, EPA requires a peer-reviewed risk assessment; a widely available analytical method for monitoring; and nationally representative occurrence data. During the third RD round in 2014, when EPA published preliminary RDs for contaminants on CCL 3 (which included PFOA and PFOS), UCMR 3 monitoring was underway and national occurrence data for PFOA and PFOS were not available. EPA would not have been able to include any PFAS for the third RD without such data. In 2016, EPA included PFOA and PFOS on the agency's list of unregulated contaminants that met EPA data availability requirements to make RDs. The fourth round of RDs is scheduled for 2021. SDWA does not prevent EPA from making determinations outside of that five-year cycle. According to the Spring 2019 Unified Regulatory Agenda , EPA will propose preliminary RDs for PFOA and PFOS by the end of 2019 and make final determinations by the end of 2020. Several bills in the 116 th Congress would direct EPA to promulgate national primary drinking water regulations and establish an MCL for individual or total PFAS, including Senate-passed S. 1790 , National Defense Authorization Act for FY2020; S. 1507 ; S. 1473 ; H.R. 2377 , H.R. 4033 , and S. 2466 . <4.3.6. Standard Setting> Once the EPA Administrator makes a determination to regulate a contaminant, SDWA requires EPA to propose a rule within 24 months and promulgate a "national primary drinking water regulation" within 18 months after the proposal. When proposing a regulation, EPA must also propose a non-enforceable maximum contaminant level goal (MCLG), at which no known or anticipated adverse health effects are expected to occur and which allows an adequate margin of safety. An MCLG is based solely on health effects data and does not reflect cost or technical feasibility considerations. EPA derives an MCLG based on an estimate of the amount of a contaminant that a person can be exposed to on a daily basis that is not anticipated to cause adverse health effects over a lifetime. This level is further reduced to be protective of sensitive populations. Drinking water regulations generally include an MCL an enforceable limit for a contaminant in public water supplies. SDWA requires EPA to set the MCL as close to the MCLG as feasible. When assessing feasibility, the law directs EPA to consider the best available (and field-demonstrated) treatment technologies, taking cost into consideration. Regulations also include monitoring, treatment, and reporting requirements. EPA has promulgated regulations that cover several similar contaminants and typically establishes an individual MCL for each contaminant covered by the regulation. Regulations generally take effect three years after promulgation. EPA may allow up to two additional years if the Administrator determines that more time is needed for public water systems to make capital improvements. States have the same authority for individual water systems. The law directs EPA to review and if necessary revise each regulation every six years. A revision may maintain or provide greater health protection, but it may not reduce protection. Several bills in the 116 th Congress would direct EPA to promulgate national primary drinking water regulations and establish an MCL for individual or total PFAS, including Senate-passed S. 1790 , National Defense Authorization Act for FY2020; S. 1507 ; S. 1473 ; H.R. 2377 , and H.R. 4033 . Among other amendments to SDWA, S. 1790 , Title LXVII, Subtitle B and S. 1507 reported, would also establish a standard-setting process specifically for PFAS. <4.3.7. Emergency Powers Orders> SDWA Section 1431 grants EPA "emergency powers" to issue orders to abate an imminent and substantial endangerment to public health from "a contaminant that is present in or is likely to enter a public water system or an underground source of drinking water," and if the appropriate state and local authorities have not acted to protect public health. This authority is available to address both regulated and unregulated contaminants. The EPA Administrator "may take such actions as he may deem necessary" to protect the health of persons who may be affected. Actions may include requiring persons who caused or contributed to the endangerment to provide alternative water supplies, or to treat contamination. When using this authority, EPA generally coordinates closely with states. EPA reports that it has used its emergency powers under Section 1431 to require responses to PFOA and/or PFOS contamination of drinking water supplies in four cases, three of which involved DOD sites. Required actions included treating drinking water, offering connection to a public water system, or providing bottled water where PFOA or PFOS concentrations were above 70 ppt. SDWA Section 1431 emergency orders can require a person to perform an action to abate an imminent and substantial danger to public health. However, such orders do not establish liability in a manner comparable in scope to CERCLA, nor do such orders create or otherwise trigger liability under CERCLA. For additional discussion of drinking water issues related to PFAS, see CRS Report R45793, PFAS and Drinking Water: Selected EPA and Congressional Actions , by Elena H. Humphreys and Mary Tiemann. <4.4. Environmental Remediation> As with other chemicals, the federal role under CERCLA in remediating environmental contamination from releases of PFAS has focused on releases from federal facilities, and releases at sites on non-federal lands designated for priority federal attention under the Superfund program in coordination with the states in which the sites are located. The vast majority of PFAS known to be released from federal facilities has occurred from the use of AFFF at U.S. military installations, some of which have involved National Guard facilities. DOD has been responding to these releases under the Defense Environmental Restoration Program, pursuant to CERCLA and to SDWA emergency powers orders at the three U.S. military installations referenced above. The National Aeronautics and Space Administration (NASA) has also responded to releases of PFOA and PFOS from the use of AFFF detected at the Wallops Flight Facility in Virginia. As for other chemicals, the states have generally played a more prominent role under state law in responding to releases of PFAS at sites on non-federal lands that are not designated under the Superfund program. Authorities of CERCLA, and actions related to PFAS under the EPA Superfund program and DOD Defense Environmental Restoration Program, are discussed below. <4.4.1. CERCLA Response Authority> Section 104 of CERCLA authorizes the President to respond to releases of hazardous substances into the environment, and releases of other pollutants or contaminants that may present an imminent and substantial danger to public health or welfare. Response actions may include "removal" actions to address more immediate hazards and stabilize site conditions, and more extensive "remedial" actions intended to provide a more permanent solution. This Presidential response authority is delegated by executive order to EPA under the Superfund program for releases at sites on non-federal lands, and to other departments and agencies that administer federal facilities from which a release occurs. EPA is also responsible for designating sites on the National Priorities List (NPL) and for overseeing response actions at federal facilities performed by departments and agencies that administer those facilities. The federal response framework involves coordination with the states in which the sites are located, and state cost-shares for the use of Superfund appropriations to pay for remedial actions at sites on non-federal lands. Section 104(c) of CERCLA generally requires states to match 10% of the construction costs of remedial actions, and 100% of the costs of operation and maintenance once a remedial action is in place and operating as intended, with the exception of the treatment of groundwater or surface water for which the federal government may pay 100% of the costs for the first 10 years. More limited "removal" actions are not subject to state cost-shares and may be fully federally funded. Response actions for releases from federal facilities are not subject to state cost-shares. The availability of federal funding at Superfund sites or federal facilities is subject to annual appropriations. Section 111 of CERCLA generally restricts the use of Superfund appropriations at federal facilities funded with separate appropriations. <4.4.2. CERCLA Liability> Section 107 of CERCLA establishes liability for response costs, natural resource damages, and the costs of ATSDR public health studies at release sites. Categories of parties who may be held liable for these costs generally include current and former site owners and operators; persons who arranged for the treatment or disposal of a hazardous substance; persons who arranged for the transport of a hazardous substance for treatment or disposal; and persons who transported a hazardous substance for treatment or disposal and selected the receiving site. However, the statute exempts various categories of parties, including persons who acquired a site with preexisting contamination in certain circumstances and did not cause or contribute to the contamination; persons who contributed very small quantities or only household wastes to a site; persons who released a hazardous substance in accordance with a federal permit issued under certain other laws (including state permits issued with delegated federal authorities) referred to as "federally permitted releases;" and certain other categories of parties. Section 107 authorizes actions to recover response costs for which a party is liable. Section 106 also authorizes enforcement orders to require a liable party to perform a response action under federal oversight to avoid the need for federal and state funds upfront. Section 122 authorizes an additional mechanism under which liable parties may enter into negotiated settlements with the federal government to perform or pay for response actions. CERCLA Section 106 orders are similar in principle to SDWA Section 1431 emergency powers orders in terms of requiring a person to perform a specific action to mitigate potential risks. However, SDWA does not establish broader liability comparable to CERCLA and does not include cost-recovery or settlement authorities. CERCLA also is not limited to drinking water exposures and may address additional pathways through which exposures to contamination may occur. The scope of liability under CERCLA is more limited than response authority under the statute. Liability only applies to releases of designated hazardous substances, and not to other pollutants or contaminants. EPA has not designated any PFAS as hazardous substances to date. CERCLA authorizes federal actions to respond to releases of PFAS as pollutants or contaminants, but does not establish liability for such releases to compel the party that caused or contributed to a release to pay for or perform response actions. The scope of liability under CERCLA for hazardous substances does not include product liability, or liability for personal injury or property damages, both of which vary under state tort law. The Federal Tort Claims Act (FTCA) authorizes tort claims against the United States government for personal injury, death, or property damages that may be caused by negligent or wrongful federal acts or omissions, but authorizes a defense for discretionary functions of federal departments and agencies in carrying out their respective missions. <4.4.3. CERCLA Hazardous Substances> EPA's PFAS Action Plan indicated that the agency is developing a rule to designate PFOA and PFOS as hazardous substances under Section 102 of CERCLA or other related laws that trigger a hazardous substance designation. Section 101(14) of CERCLA defines the term "hazardous substance" to include chemicals designated for regulation or enforcement under the following federal statutes: hazardous substances designated under Section 311(b)(2)(A) of the Clean Water Act; toxic pollutants designated under Section 307(a) of the Clean Water Act; characteristic or listed hazardous wastes under Section 3001 of the Solid Waste Disposal Act (commonly referred to as the Resource Conservation and Recovery Act or RCRA); hazardous air pollutants designated under Section 112 of the Clean Air Act; and any imminently hazardous chemical substance or mixture for which EPA has taken a civil action in the appropriate U.S. District Court of jurisdiction under Section 7 of TSCA. Contaminants for which EPA has promulgated an MCL under SDWA are not included in this definition. The designation of an MCL for any PFAS would therefore not trigger a hazardous substance designation under CERCLA. EPA's authority to designate hazardous substances is not restricted to chemicals designated under the laws referenced in Section 101(14) of CERCLA. Section 102(a) also authorizes EPA to promulgate regulations designating other chemicals as a hazardous substance if the chemical may present substantial danger to the public health or welfare or the environment when released into the environment. If PFAS were designated as hazardous substances, releases into the environment would be subject to liability and release reporting requirements under CERCLA to the same extent as other hazardous substances. Section 120 of CERCLA generally applies liability and other requirements of the statute to federal facilities to the same extent as other entities. Multiple bills introduced in the 116 th Congress would require EPA to designate PFAS as hazardous substances under CERCLA, whereas some bills requiring differing designations under other statutes would have the effect of a CERCLA hazardous substance designation. H.R. 535 and S. 638 would require EPA to designate "all" PFAS as hazardous substances under Section 102(a) of CERCLA within one year of the date of enactment. Section 330O of House-passed H.R. 2500 includes similar language. Section 330A of House-passed H.R. 2500 , H.R. 3616 , and H.R. 2605 would also have the effect of a CERCLA hazardous substance designation for PFAS. Section 330A of House-passed H.R. 2500 and H.R. 3616 would require EPA to list PFAS as toxic pollutants under Section 307(a)(1) of the Clean Water Act within 30 days of enactment, and would exempt PFAS from the listing criteria of that provision. H.R. 2605 would require EPA to list "all" PFAS as hazardous air pollutants under Section 112(b) of the Clean Air Act within 180 days of enactment. As noted above, Section 101(14) of CERCLA defines hazardous substances to include such pollutants designated under the Clean Water Act and Clean Air Act, and certain other statutes. The lists of hazardous substances, toxic pollutants, and hazardous air pollutants are codified in federal regulation. Revisions to these lists have been subject to federal rulemaking procedures. If PFAS were designated as hazardous substances, some potentially responsible parties (PRPs) may include the federal government at U.S. military installations and other federal facilities, civilian airport owners and operators, and local fire departments that released PFAS from the use of AFFF. Owners and operators of landfills could be PRPs if PFAS-containing products and wastes migrated into the environment. Chemical manufacturers and processors that release PFAS at sites they own or operate could also be PRPs. CERCLA does not more broadly establish product liability for companies that manufacture or process PFAS. Although CERCLA authorizes some exemptions from liability, these exemptions focus primarily on situations in which the site owner did not cause or contribute to the contamination or the party contributed very small quantities of waste or only household wastes to a site. Fertilizer applications of biosolids (i.e., treated sewage sludge) that may contain PFAS would generally not be subject to CERCLA because of the statutory exclusion of the "normal application of fertilizer." Although PFAS are presently not subject to liability under CERCLA, states may establish liability for releases of these chemicals under their own laws. Section 120(a)(4) of CERCLA waives federal sovereign immunity to allow the application of state remediation laws to federal facilities that are not on the NPL. State laws establishing liability for PFAS may be applied to such facilities. Although federal sovereign immunity is not waived at federal facilities on the NPL, Section 121 of CERCLA requires the state in which a site is located to be provided the opportunity for involvement in the selection of remedial actions regardless of whether the site is on the NPL. This provision allows states to oversee remedial actions at federal facilities on the NPL, but not to enforce state law at such facilities. <4.4.4. Superfund Program> Absent a hazardous substance designation, EPA has responded to releases of PFAS under the Superfund program using CERCLA response authorities for pollutants and contaminants at certain sites on non-federal lands, in coordination with the states in which the sites are located. Sites where EPA has been involved under the Superfund program have typically been contaminated not only from PFAS but also releases of designated hazardous substances. For example, EPA added the Saint-Gobain Performance Plastics site in Hoosick Falls, NY to the NPL in August 2017 based on potential risks associated with multiple hazardous substances detected at that site in addition to PFOA. Without a hazardous substance designation, EPA's PFAS Action Plan indicated that the agency would continue to consider its use of CERCLA response authorities for pollutants and contaminants to respond to PFAS contamination, or the use of SDWA Section 1431 emergency powers or RCRA Section 7003 enforcement authorities applicable to solid or hazardous wastes. PFAS could be considered a solid waste under RCRA if released in a manner that constituted discarding, pursuant to the definition of "solid waste" in RCRA Section 1004(27). Hazardous waste is a subset of solid waste as defined in Section 1004(5) of RCRA. All solid wastes are therefore not necessarily hazardous wastes. EPA has not listed any PFAS as hazardous waste to date. The constituents for characterizing the toxicity of hazardous waste under RCRA also do not include any PFAS. On April 25, 2019, EPA proposed interim groundwater cleanup recommendations for PFOA and PFOS at Superfund sites, U.S. military installations, and other federal facilities. The public comment period closed on June 10, 2019. These recommendations would establish screening levels to identify sites for evaluation, and a preliminary remediation goal (PRG) as a starting point to inform site-specific remediation decisions under CERCLA. EPA proposed a concentration of 40 ppt in groundwater as a screening level, and a concentration of 70 ppt as a PRG for groundwater that is a current or potential source of drinking water at sites where no state, tribal, or other applicable, relevant, and appropriate requirement exists. The proposed 70 ppt PRG is the same concentration as the EPA Lifetime Health Advisory for PFOA or PFOS in drinking water. If EPA were to promulgate an MCL under SDWA, the concentration may be applied as a standard for remedial actions under Section 121 of CERCLA to protect current or potential sources of drinking water. EPA indicated that its proposed groundwater cleanup recommendations may also be used to evaluate risks at RCRA corrective action sites. However, as noted above, EPA has not listed any PFAS as hazardous waste under RCRA to date. <4.4.5. Defense Environmental Restoration Program> DOD has responded to releases of various PFAS from the use of AFFF at current and former U.S. military installations under the Defense Environmental Restoration Program in conjunction with its delegated CERCLA response authorities. DOD response actions taken under this program are subject to the requirements of CERCLA. These program authorities apply to releases at facilities or sites that are or were owned by, leased to, or otherwise possessed by the federal government, and under the jurisdiction of DOD at the time of the release. DOD is required to respond to releases of hazardous substances at such facilities or sites. DOD may also respond to releases of other pollutant or contaminants, but is not required to do so consistent with CERCLA liability applying only to hazardous substances. Section 319(b) of Senate-passed S. 1790 would amend these program authorities to require DOD to respond to releases of either hazardous substances, pollutants, or contaminants at DOD facilities or sites, but without enforceable liability under CERCLA. Regardless of such statutory obligation, funding for DOD response actions would remain subject to annual appropriations. Releases caused by a state National Guard unit operating at a facility or site that DOD owns, leases, or possesses may be eligible for DOD response actions, but the contractual agreement with the state may relieve federal responsibility for actions of a state National Guard unit. National Guard facilities that are state-owned and state-operated have generally been ineligible for funding under the Defense Environmental Restoration Program, consistent with the statutory criteria of eligibility restricted to DOD facilities or sites. House-passed H.R. 2500 and Senate-passed S. 1790 both include provisions that would address the eligibility of DOD funding to respond to releases of PFAS at National Guard facilities. DOD actions to respond to PFAS contamination at eligible sites have ranged from providing bottled water or other alternative water supplies to treating contaminated water sources. The availability of funding for response actions under the Defense Environmental Restoration Program is subject to annual appropriations to multiple accounts. Each account funds a different inventory of sites, including Defense Environmental Restoration accounts of the U.S. Air Force, U.S. Army, U.S. Navy, and Defense-wide sites. A fifth Defense Environmental Restoration account funds Formerly Used Defense Sites (FUDS) decommissioned prior to 1986. The Defense Base Closure account funds sites closed under consolidated Base Realignment and Closure (BRAC) rounds in 1988, 1991, 1993, 1995, and 2005. The Explanatory Statement accompanying the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) "encouraged" DOD to establish procedures for prompt and cost-effective remediation of contamination from perfluorinated chemicals (PFCs, i.e., PFAS) released as a result of the use of AFFF at current and former U.S. military installations. The Explanatory Statement also directed DOD to submit a report to Congress assessing the number of current and former installations where AFFF was or is used, and the impact of contamination in drinking water on surrounding communities. The Explanatory Statement further directed DOD to develop plans for "prompt" community notification of such contamination and procedures for "timely" remediation. DOD issued this report in October 2017 identifying an initial inventory of release sites and stating Addressing elevated levels of PFOS and PFOA from DoD activities is a priority for DoD. The DoD Components have taken action to ensure safe drinking water for people living and working on their military installations and in the surrounding communities. Following the CERCLA process, DoD is addressing its cleanup responsibility and promptly notifying affected communities. DoD is also taking steps to remove and replace AFFF containing PFOS in the supply chain, and is committed to finding a fluorine-free alternative that safeguards its troops and military assets, meets critical mission requirements, and protects human health and the environment. In March 2018, DOD issued a presentation on the status of its efforts to respond to releases of PFOA and PFOS. The House Committee on Armed Services directed DOD to provide a status update, in its report accompanying the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ). DOD identified 401 U.S. military installations with known or suspected releases of PFOA or PFOS from the use of AFFF. DOD detected PFOA or PFOS in groundwater wells above the EPA Lifetime Health Advisory of 70 ppt at 90 of these installations. DOD identified planned actions at these installations under the CERCLA site response process, subject to annual appropriations and prioritization of funding among eligible sites. DOD has been remediating contamination from hazardous substances and unexploded ordnance under the Defense Environmental Restoration Program for years at many of these same installations. Detections of PFOA or PFOS in groundwater are a more recent development that adds to existing challenges. <4.5. Disposal> Some stakeholders have expressed concern about the potential for environmental contamination from the disposal of PFAS. As with many other types of wastes, incineration and landfilling have been the two principal methods of disposal available for wastes containing PFAS. Incineration offers the potential to reduce the toxicity and volume of wastes, but generates air emissions and combustion residuals that necessitate disposal. Determining what temperatures are necessary to break down PFAS and ensuring that potential combustion byproducts are acceptable also have been issues for incineration. Wastewater discharges or sludge from industrial facilities and sewage treatment plants may contain PFAS depending on the constituency of the waste source. As industry transitions to shorter chain PFAS, some policymakers and stakeholders have also expressed concern about the disposal of existing stocks of longer chain PFAS and products containing these chemicals. For example, DOD, other federal agencies, civilian airport operators, and local fire departments face disposal needs for existing stocks of AFFF as they transition to alternatives. Waste streams generated from the treatment of PFAS in drinking water, or the remediation of PFAS contamination, also necessitate disposal. The disposal of PFAS wastes is regulated under multiple federal and state laws. EPA has not promulgated contaminant-specific standards for the disposal of PFAS to date. The disposal of PFAS wastes has been regulated similarly to other types of wastes for which contaminant-specific standards are not established. Although not presently listed as hazardous wastes, the disposal of PFAS wastes in landfills would generally be subject to RCRA Subtitle D solid waste criteria considering the breadth of the definition of "solid waste" in applying to garbage, refuse, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility, and other discarded material. Incineration facilities are also subject to RCRA for the disposal of combustion residuals, and to hazardous air pollutants standards under the Clean Air Act (CAA). Whereas these CAA standards are not specific to PFAS, some of them apply to related chemicals that may be created during combustion, such as hydrogen fluoride. Although EPA has not established effluent limitations or pretreatment standards for PFAS in wastewater, the Clean Water Act generally requires permits for the discharge of any pollutant into U.S. waters. Section 330D of House-passed H.R. 2500 would require DOD to ensure that PFAS is eliminated and not emitted into the air when using incineration to dispose of AFFF or other materials containing these chemicals. This House provision would also require DOD to ensure that applicable CAA requirements are met, the selected incineration facility has not violated the CAA within the past 12 months, and AFFF or other PFAS materials designated for disposal are stored in accordance with RCRA Subtitle C hazardous waste requirements. As a practical matter, DOD would be required to select incinerators designed for hazardous wastes that operate at temperatures sufficient to destroy carbon and fluorine bonds in PFAS. However, Section 330D would not designate PFAS as hazardous waste. The PFAS Waste Incineration Ban Act of 2019 ( H.R. 2591 ) would require EPA to promulgate regulations no later than six months after enactment that would prohibit the use of incineration to dispose of AFFF containing PFAS. H.R. 2591 would also require EPA to promulgate regulations no later than one year after enactment to identify other categories of PFAS wastes for which incineration would be prohibited if necessary to protect human health and the environment, and to review and revise these waste categories at least every four years. If incineration were prohibited, landfilling could increase if other disposal methods do not become more widely available. For wastewater discharges, Section 330A of House-passed H.R. 2500 would require EPA to list PFAS as toxic pollutants under the Clean Water Act within 30 days of enactment, and to establish effluent limitations and pretreatment standards for PFAS no later than January 1, 2022. <4.6. Transition to Fluorine-Free Class B Firefighting Foams> DOD has revised its Military Specification for AFFF as a step in its transition away from the use of Class B firefighting foams containing PFOA and PFOS. Military Specifications provide instructions to U.S. military departments and agencies that establish standards and parameters for specific products that DOD has determined are suitable for procurement to meet U.S. military needs for DOD to carry out its mission. DOD Military Specifications are internal guidelines developed for U.S. military procurement, and are not binding and enforceable regulations. DOD initially issued its Military Specification on AFFF (MIL-F-24385) in 1969, specifying the use of "fluorocarbon surfactants" based on their effectiveness in extinguishing petroleum-based liquid fuel fires. DOD subsequently revised MIL-F-24385 for various purposes in the 1970s, 1980s, and 1990s, and on September 7, 2017, under MIL-PRF-24385F to address the amount of PFOA and PFOS and other criteria. DOD guidelines generally require reviews of Military Specifications at least once every five years. The next scheduled review of MIL-PRF-24385F is September 6, 2022. DOD issued a similar version of this Military Specification for the Naval Sea Systems Command on May 7, 2019. Both versions specify AFFF containing fluorocarbon surfactants for use as Class B fire extinguishing agents, but restrict the content of PFOA or PFOS to 800 parts per billion (ppb) or micrograms per liter. Neither version limits the content of other PFAS. Previous versions stated that AFFF must contain "fluorocarbon surfactants" but did not restrict the concentration of any PFAS. Section 6.6 of both the September 2017 version and the May 2019 version include the following DOD policy statement on the long-term objective to transition to the use of fluorine-free AFFF: The DoD's goal is to acquire and use a non-fluorinated AFFF formulation or equivalent firefighting agent to meet the performance requirements for DoD critical firefighting needs. The DoD is funding research to this end, but a viable solution may not be found for several years. In the short term, the DoD intends to acquire and use AFFF with the lowest demonstrable concentrations of two particular PFAS; specifically PFOS and PFOA. The DoD intends to be open and transparent with Congress, the Environmental Protection Agency (EPA), state regulators, and the public at large regarding DoD efforts to address these matters. AFFF manufacturers and vendors are encouraged to determine the levels of PFOS, PFOA, and other PFAS in their products and work to drive these levels toward zero while still meeting all other military specification requirements. DOD has funded the research and development of fluorine-free AFFF under its Strategic Environmental Research and Development Program (SERDP) and Environmental Security Technology Certification Program (ESTCP). In June 2018, DOD issued a report examining the status of alternatives to AFFF that contain PFOA and PFOS, and the plans of DOD for the phase-out and disposal of its existing stocks of AFFF that contain these chemicals. The report also discussed projects funded under SERDP and ESTCP. Section 1059 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ) required DOD to issue this report to the House and Senate Committees on Armed Services. House-passed H.R. 2500 includes multiple provisions related to phasing out the use of AFFF for land-based application at U.S. military installations and replacement with fluorine-free foams. Senate-passed S. 1790 also includes a phase-out provision for land-based application at U.S. military installations. The Federal Aviation Administration (FAA) has been using the DOD Military Specification for AFFF as criteria for civilian airport operators to demonstrate compliance with certification requirements for Class B fire extinguishing agents. Section 332 of the FAA Reauthorization Act of 2018 ( P.L. 115-254 ) directed FAA to stop recommending the use of fluorinated AFFF for civilian airport certification, no later than three years from the date of enactment (October 5, 2018). On January 17, 2019, FAA updated its guidelines to reference the September 2017 version of the DOD Military Specification for AFFF that restricted the maximum content of PFOA or PFOS. The FAA noted that it is researching potential alternatives for fluorine-free AFFF to comply with P.L. 115-254 , but observed Currently, fluorine-free foams on the market do not match the performance of their fluorinated counterparts, and they require more agent to extinguish fires quickly. Fluorine-free foams are not able to provide the same level of fire suppression, flexibility, and scope of usage as MIL-PRF-24385 AFFF firefighting foam. The statutory deadline under P.L. 115-254 for FAA to allow the use of fluorine-free firefighting foams for civilian airport certification is October 5, 2021. <4.7. PFAS in Dairy Milk, Foods, and Food Contact Applications> Federal efforts to address potential health risks of PFAS have also focused on the potential for these chemicals to be present in foods, which may occur through interactions with environmental contamination or food contact applications. The U.S. Food and Drug Administration (FDA) has been evaluating potential exposures to PFAS in dairy milk, dairy products, other foods, and food contact applications, using its authorities under the Federal Food, Drug, and Cosmetic Act (FFDCA). The FDA has not established regulatory standards for specific concentrations of PFAS in milk or other foods to date. Federal safety standards for milk have generally been established in the Pasteurized Milk Ordinance. The FDA has examined multiple ways in which PFAS may become present in foods: PFAS may be present in dairy milk and dairy products from livestock that consume contaminated water. PFAS similarly may be present in meat from livestock that consume contaminated water. PFAS may be present in food crops if grown in contaminated soils or irrigated with contaminated water sources. PFAS may be present in fish and shellfish from contaminated water bodies. Food contact applications (e.g., cookware, food packaging, and processing) that contain PFAS are another potential source of contamination in foods. These situations are not unique to PFAS. They may present potential pathways of human exposure to any contaminant present in the environment that may interact with foods or that may be present in food contact applications. The uptake of PFAS or other chemicals in food would depend on the properties of the specific chemical, the conditions in which interaction with food occurs, and potentially other factors. As with drinking water, potential risks from PFAS or other contaminants in food would depend on the toxicity of the specific chemical, the conditions of exposure, and the characteristics of the exposed individual. The FDA has been assessing PFAS in foods from specific sites where PFAS contamination has been detected, certain foods with an increased likelihood of PFAS contamination not associated with specific sites, and foods more generally. The FDA has also regulated the uses of PFAS in food contact applications, and has been reviewing these regulations as more information becomes available. The FDA has generally found no or relatively low concentrations of PFAS in the foods that it has sampled. The FDA concluded that the sampled foods with detectable concentrations of PFAS were low enough not to present a human health concern. Of dairy milk sampled, FDA found elevated levels of certain PFAS in milk produced from livestock that consumed water from a contaminated well at a dairy farm in New Mexico. The FDA reports that the contaminated milk was discarded and did not enter the food supply. The U.S. Department of Agriculture (USDA) provided financial assistance to this affected New Mexico dairy farm through the Dairy Indemnity Payment Program (DIPP) for removing the contaminated milk from the commercial market. The USDA Agricultural Research Service (ARS) has also been examining blood and tissue samples from the contaminated livestock. ARS reports that the USDA Food Safety and Inspection Service notified state animal health officials that cattle from the New Mexico dairy farm should not be shipped to a federally inspected establishment and are not eligible to be processed for human food. The FDA reports that it conducts a safety assessment when discovering PFAS in foods "using the best available current science to evaluate whether the levels present a possible human health concern" considering the quantity of food consumed and the toxicity of the contaminants. The FDA has used EPA's reference dose (RfD) of 0.00002 mg/kg/day for ingestion of PFOA and PFOS as a toxicity value for its food safety assessments. The EPA lifetime health advisories of 70 ppt for PFOA and PFOS in drinking water are derived from this RfD, but are not intended for addressing other exposure scenarios. EPA did not recommend 70 ppt as an acceptable concentration of PFOA or PFOS individually or combined in milk or other foods. EPA stated in November 2016 that these health advisories "only apply to exposure scenarios involving drinking water" and "are not appropriate for use in identifying risk levels for ingestion of food sources, including: fish, meat produced from livestock that consumes contaminated water, or crops irrigated with contaminated water." In a November 2016 agency memorandum, EPA also clarified these health advisories in relation to food: In the development of the health advisories, EPA took into consideration sources of exposure to PFOA and PFOS other than drinking water, including: air, food, dust, and consumer products. Thus, to be protective of exposure, the calculation of the health advisory accounts for the relative exposure to PFOA and PFOS from a variety of sources, including food. Calculation of specific risk levels for foods would require development of entirely different exposure assumptions and is not a part of the HA [health advisory] derivation methodology. Multiple bills in the 116 th Congress would address agricultural uses of water contaminated with PFAS, including provisions in the FY2020 NDAA bills. Section 323 of House-passed H.R. 2500 and Section 1073 of Senate-passed S. 1790 would authorize the use of DOD Operation and Maintenance accounts to fund alternative water sources or treat water contaminated with PFOA or PFOS at sites where U.S. military activities caused contamination of a water source used to produce agricultural products for human consumption. These provisions in both bills would authorize such DOD actions in these situations where PFOA or PFOS is detected in a water source at a concentration that exceeds EPA's May 2016 lifetime health advisories for PFOA or PFOS, or is equal to or exceeds any future FDA regulatory standard for PFOA or PFOS in raw agricultural commodities and milk associated with a contaminated water source. Section 323 of House-passed H.R. 2500 also would authorize alternative water sources or treatment of contaminated water in situations where PFOA of PFOS in raw agricultural commodities and milk exceeds a promulgated enforceable state standard, whereas Section 1073 of Senate-passed S. 1790 does not include such state standards. Section 4 of H.R. 1567 and Section 4 of S. 675 similarly would authorize DOD to provide alternative water sources or treat agricultural water sources contaminated with PFOA or PFOS, but do not include exceedances of state standards for raw agricultural commodities or milk as a threshold for DOD action. Use of the EPA lifetime health advisories for PFOA or PFOS in drinking water as a threshold for taking actions to address contamination of agricultural water sources may also be an issue from a scientific standpoint, as discussed above. Other legislation would address PFAS in food contact applications. H.R. 2566 would require EPA to revise the "Safer Choice Standard" to provide for a Safer Choice label for pots, pans, and cooking utensils that do not contain PFAS. H.R. 2827 would amend Section 409(h) of FFDCA to deem any PFAS used as a food contact substance as unsafe, beginning on January 1, 2022. Section 330B of House-passed H.R. 2500 would prohibit the DOD Defense Logistics Agency, beginning October 1, 2020, from procuring meals ready-to-eat (MREs) for U.S. military use that are assembled or packaged with any food contact substances that contain PFAS. <5. Relevant Legislation Enacted in the 115th Congress> In the 115 th Congress, multiple bills of broader purposes containing provisions related to PFAS were enacted. Some of these provisions were included in annual defense authorization legislation to authorize the CDC, ATSDR, and DOD to conduct additional health effects studies, and require DOD to submit reports to Congress related to the use of AFFF containing PFAS. Other provisions related to PFAS were included in Federal Aviation Administration (FAA) reauthorization legislation to allow the use of fluorine-free firefighting foams for civilian airport certification, and in a "farm bill" to authorize technical assistance for rural water systems. Table 1 on the following page identifies each of these laws, the specific provisions related to PFAS, the date of enactment, and a summary of the purpose of each relevant provision. Various appropriations acts have also allocated funding for DOD response actions at current and former U.S. military installations, joint CDC/ATSDR health effects studies, and certain other federal actions not identified in the table below. Multiple bills introduced in the 116 th Congress would also require EPA to take actions related to PFAS under various existing laws or would create new authorities, but none of these bills have been enacted to date. <6. Relevant Legislation in the 116th Congress> More than 40 bills have been introduced in the 116 th Congress to address PFAS through a broad range of actions and federal agencies, but none of these bills have been enacted to date. Among these bills, the House- and Senate-passed NDAA bills ( S. 1790 and H.R. 2500 ) contain numerous PFAS provisions specific to DOD. For example, some provisions involve the use, phase out, and disposal of AFFF, while others address DOD remediation of PFAS-contaminated drinking water, groundwater, and surface water. Multiple bills would require EPA to take actions related to PFAS under various existing laws or would create new authorities. The apparent intent of many of these bills is to reduce exposures to PFAS in drinking water and prevent or remediate the contamination of environmental media from releases of these substances. Table 2 identifies each of these bills and their status, the specific provisions related to PFAS, and a summary of the purpose of each relevant provision.

Per- and polyfluoroalkyl substances (PFAS) are a group of fluorinated compounds that have been used for various purposes, including numerous commercial, industrial, and U.S. military applications. Some common uses include food packaging, nonstick coatings, and stain-resistance fabrics, and as an ingredient in fire suppressants in Aqueous Film Forming Foam (AFFF) used at U.S. military installations, at civilian airports, and by state and local fire departments, and elsewhere. PFAS persist in the environment and in humans, and studies on several PFAS indicate that exposures above certain levels are associated with various adverse health effects. Some PFAS—primarily perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS)—have been detected in soil, surface water, groundwater, and drinking water in numerous locations. These detections—associated with releases from federal and industrial facilities, civilian airports, and fire department facilities—have prompted calls for increased federal action and authority to prevent and mitigate releases of and exposures to PFAS. Federal actions to address potential risks from PFAS have focused mostly on PFOS and PFOA because of past uses, prevalence in the environment, and availability of health effects research. These actions have been taken primarily under the authorities of the Toxic Substances Control Act (TSCA); the Safe Drinking Water Act (SDWA); and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and related Department of Defense (DOD) response authorities. The U.S. Environmental Protection Agency (EPA) has used various authorities to address PFAS in commerce, public water supplies, and in the environment. Under TSCA, EPA has taken actions over recent decades to gather and assess existing information on the risks of PFOS, PFOA, and certain other PFAS. The agency has required manufacturers to develop new information to evaluate risks of various PFAS and has issued orders restricting the manufacture, processing, distribution, use, and/or disposal pending the development of new risk information. In addition, EPA worked with U.S. manufacturers as they voluntarily phased out production of PFOS, PFOA, and related substances. Under SDWA, EPA is evaluating PFOA and PFOS to determine whether national drinking water regulations are warranted. EPA plans to propose preliminary determinations in 2019. Among other actions, EPA has issued nonenforceable health advisory levels for PFOA and PFOS, intended to be protective over a lifetime of daily exposure, and has used SDWA emergency powers to issue enforcement orders to require responses to drinking water contamination by PFAS. DOD and other federal agencies have used CERCLA authorities to respond to releases of various PFAS at federal facilities, although such responses are not statutorily required. DOD administers the vast majority of federal facilities where PFAS has been detected. DOD has been responding to releases of PFOA and PFOS from the use of AFFF at active and decommissioned U.S. military installations under the Defense Environmental Restoration Program. DOD has been phasing out the use of AFFF that contains PFOA or PFOS to reduce the risks of future releases. Several federal agencies, including EPA and the Agency for Toxic Substances and Disease Registry, have been evaluating potential health effects that may be associated with exposures to various PFAS. The U.S. Food and Drug Administration and the U.S. Department of Agriculture are addressing risks of PFAS in dairy milk, other foods, and food contact applications. Various stakeholders have urged federal agencies to act more quickly and broadly to address potential PFAS risks and to provide assistance to address contamination. In the 116 th Congress, more than 40 bills, including House- and Senate-passed National Defense Authorization Act (NDAA) bills for FY2020 ( H.R. 2500 and S. 1790 ), would address PFAS through various federal agencies and authorities (see Table 2 ). Among other PFAS provisions, H.R. 2500 would establish liability for PFAS response costs though designation of PFAS as hazardous substances, both under CERCLA and through the Clean Water Act, while S. 1790 would expand DOD response requirements to include releases of any pollutant or contaminant. Unlike H.R. 2500 , S. 1790 would amend SDWA to direct EPA to issue drinking water standards for PFAS and for other purposes. Both bills would address PFAS under other statutes and new authorities. Several bills, including H.R. 2500 and S. 1790 , would variously authorize funds to be appropriated to assist communities in addressing contaminated water supplies.

crs_R46180

crs_R46180_0

<1. Introduction> This report analyzes the effects of historic wet conditions during the 2019 growing season on major U.S. field crops, primarily corn and soybeans. These effects include record acres prevented from being planted, widespread delays in planting and harvesting of the corn and soybean crops, large crop insurance indemnity payments due to prevented plantings and weather-related yield losses, and additional ad hoc payments announced for producers experiencing both trade damage and losses from prevented planting. This report focuses on corn and soybeans the two largest commercial crops grown in the United States in terms of number of producers, cultivated area, volume produced, and value of production. Together, they account for 54% of land planted to major field crops since 2010. They are critical inputs for several sectors, including the livestock, biofuels, food processing, and export sectors. As a result, any delay or reduction from expected output for either of these crops can have important implications for market prices and the broader U.S. farm economy. The U.S. Department of Agriculture (USDA) forecasted an increased role of federal support for farm incomes in 2019 including $22.4 billion in direct support payments and $10.3 billion in federal crop insurance indemnity payments. Together, the forecast of USDA farm support plus crop insurance indemnities of $32.7 billion represents a 35.3% share of U.S. net farm income $92.5 billion. Since 2010, the federal crop insurance program has emerged as the largest component of the farm safety net in terms of taxpayer outlays, averaging $7.8 billion annually in premium subsidies. While USDA implements the federal crop insurance program, Congress is responsible for authorizing and funding it. The federal crop insurance program is permanently authorized by the Federal Crop Insurance Act of 1980 ( P.L. 96-365 ), as amended (7 U.S.C. 1501 et seq. ) and receives mandatory funding. Each of the past three farm bills P.L. 10-246 (2008), P.L. 113-79 (2014), and P.L. 115-334 (2018) has included a separate title to modify crop insurance program provisions. <2. Wet Spring Affects Corn and Soybean Planting> U.S. agricultural production got off to a late start in 2019 due to prolonged cool, wet springtime conditions throughout the major growing regions, particularly in states across the northern plains and eastern Corn Belt. Saturated soils prevented many farmers from planting their intended crops (see text box below). Such acres are referred to as "prevent plant" (PPL) acres. In addition to the unplanted acres, sizeable portions of the U.S. corn and soybean crops were planted later than usual, especially in Illinois, Michigan, Missouri, Ohio, Wisconsin, and North and South Dakota. Traditionally, 96% of the U.S. corn crop is planted by June 2, but in 2019 by that date 67% of the crop had been planted ( Figure 1 ). Similarly, the U.S. soybean crop was planted with substantial delays. By June 16, 77% of the U.S. soybean crop was planted, whereas an average of 93% of the crop has been planted by that date during the previous five years ( Figure 2 ). <2.1. Planting Delays Complicate Producer Choices> Widespread planting delays for corn and soybeans pushed both crops' growing cycle into hotter, drier periods of the summer than usual. In addition, maximizing yield potential will likely depend on beneficial weather extending into the fall to achieve full crop maturity. This would potentially make crop growth vulnerable to an early freeze in the fall that would terminate further yield growth. Also, planting delays increase the complexity of producer decisionmaking. When the planting occurs after a crop insurance policy's "final planting date" (FPD), the "late planting period" clause in the policy comes into play, and insurance coverage starts to decline with each successive day of delay ( Figure 3 ). Insured acres planted on or before the FPD receive the full yield or revenue coverage that was purchased. However, if the crop is planted after the FPD, insurance coverage is reduced by 1% per day throughout the late-planting period (which begins the day after the FPD and extends for 25 days for both corn and soybeans). During the late-planting period, producers must decide whether to opt for a PPL indemnity payment or try to plant the crop under reduced insurance coverage with a heightened risk of reduced yields. Despite the risks associated with this choice, large portions of both the corn and soybean crops were planted after the FPD ( Figure 1 and Figure 2 ). The choice of planting versus not planting was complicated in 2019 by Secretary of Agriculture Perdue's announcement on May 23 that only producers with planted acres would be eligible for "trade damage" assistance payments in 2019 under the Market Facilitation Program (MFP). The Secretary's announcement, which came in the middle of the planting period, could have encouraged greater planting than would have otherwise occurred as farmers sought to ensure eligibility for the 2019 MFP payment. During 2018, U.S. soybean and corn producers had received MFP payments based on their farms' harvested output, including $1.65 per bushel for soybean and $0.01 per bushel for corn. For 2019, the Secretary of Agriculture was offering higher payment rates of $2.05 per bushel for soybeans and $0.14 for corn. However, the MFP payment formula would use planted acres not harvested production and combine the commodity-specific payment rates of major program crops (referred to as "non-specialty crops") at the county level (weighted by historical county planted acres and yields) to derive a single county-level MFP payment rate. The potential for 2019 MFP payments could have provided sufficient incentive for some producers to plant their corn and soybean crops under conditions they would not have otherwise (e.g., to plant their crops in wet fields where potential yield-reducing problems associated with seed germination and soil compaction are increased). If such planting did occur, it likely prevented even larger PPL acres from being reported. Additionally, overarching uncertainty remained in 2019 associated with the then-ongoing trade dispute between the United States and China. The dispute had reduced U.S. agricultural exports in 2018 and dampened prospects for both commodity prices and export volumes in 2019. These factors further complicated producers' evaluations of market payoffs under different planting and crop insurance choices. <2.2. Record PPL Acres in 2019> The two principal sources for data on PPL acres within USDA the Farm Service Agency (FSA) and the Risk Management Agency (RMA) provide similar but not identical estimates of PPL ( Figure 4 ). FSA oversees the implementation of USDA's farm revenue-support and disaster assistance programs. All producers that participate in these farm programs are required to report their acreage and yields to FSA in an annual acreage report that details crop production activity by specific field. RMA oversees the implementation of USDA's crop insurance programs. All participating producers provide detailed information on insured crops and land to RMA. Farmers report the same number of acres to RMA and FSA. However, not all farms participate in USDA farm programs or buy federal crop insurance. As a result, differences in reported acres planted, harvested, and prevented from being planted occur between the two sources. As of November 1, 2019, U.S. farmers reported to FSA that, of the cropland that they intended to plant this past spring, they were unable to plant 19.6 million acres due primarily to prolonged wet conditions that prevented field work. In contrast, RMA reported a record 18.8 million of PPL acres. The previous record for total PPL acres was set in 2011, when RMA reported 10.2 million acres and FSA reported 9.6 million of PPL. <2.2.1. PPL Comparison by Crop: Corn and Soybeans Dominate> In 2019, FSA reported 19.6 million PPL acres, including 11.4 million acres of corn and 4.5 million acres of soybeans both crops established new records for PPL acres by substantial margins. The previous record PPL for corn was 2.8 million acres in 2013, and for soybeans it was 2.1 million acres in 2015. By way of comparison, in 2019 RMA's PPL acres included slightly more soybean (5.3 versus 4.5 million) and wheat (2.4 versus 2.2 million) acres and less corn (9.5 versus 11.4 million) acres. For both datasets (FSA and RMA), corn, soybeans, and wheat accounted for over 90% of PPL acres (92.3% for FSA, 91.5% for RMA). RMA reported 2019 PPL indemnity payments of over $4.2 billion, with $2.6 billion (60.6%) for corn PPL acres and $1.1 billion (25%) for soybean PPL acres ( Table 1 ). The 2019 average national PPL payment rate for all crops was $224.04 per acre. Payment rates vary by crop and ranged from a low of $50 per acre for millet to a high of $1,432 per acre for dark air cured tobacco. Some economists have suggested that the large discrepancy in corn PPL acres between the two data sources (1.9 million acres) could be the result of acres originally intended to be planted to soybeans being claimed as corn PPL acres to obtain the higher PPL indemnity for corn available under federal crop insurance. In their analysis of historical PPL indemnity rates, the PPL payment rate was almost always higher for corn than soybeans. In 2019, corn's average PPL payment rate of $270.13 per acre was about $70 per acre (34.7%) higher than soybean's average PPL payment rate ( Table 1 ). Thus, producers had an incentive to claim PPL for corn to the maximum extent possible, whether corn or soybeans was the intended crop. A breakout of PPL acres by state and by major commodity is available in the Appendix to this report ( Table A-1 ). <2.2.2. PPL Comparison by State: South Dakota Stands Out> The unusually wet spring conditions that produced the record PPL acres in 2019 were heavily concentrated in Corn Belt states but were also reported in significant amounts in Arkansas, Texas, Mississippi, Louisiana, North Carolina, Tennessee, New York, and Oklahoma ( Table 2 ). However, the 3.9 million acres of PPL reported in South Dakota (primarily the eastern portion of the state) were more than double second-place Ohio, where 1.4 million PPL acres were reported. South Dakota's PPL acres accounted for over 20% of the national total in 2019, while its PPL indemnity payments of over $925 million accounted for 21.9% of national PPL indemnity payments. <2.3. PPL Acres Eligible for Multiple Payments> Farmers who were unable to plant a crop during the spring of 2019 due to natural causes were eventually eligible for multiple payments under federal farm programs. First, federal crop insurance provides PPL coverage under a standard policy that covers pre-planting cost and potential revenue loss. Second, the FY2019 supplemental authorized disaster assistance payments for PPL (referred to as "top up") in addition to crop insurance indemnities. Third, the Administration's 2019 MFP payments were based on planted acres. However, payments were also included for eligible cover crops planted on PPL acres. <2.3.1. Crop Insurance PPL Indemnity Payments> If producers are prevented from planting an insured crop because of an insured peril (described below), then the PPL provisions of a standard crop insurance policy compensate the affected producers for pre-planting costs incurred in preparation for planting their insured crops. Crop insurance PPL coverage is available for any farm-based COMBO policy. COMBO policies include individual yield or revenue insurance policies: Revenue protection (RP) insures a producer-selected coverage level of the farm's historical yield times the higher of the projected price or the harvest price. RP with the harvest price exclusion insures a producer-selected coverage level of the farm's historical yield times the projected price. Yield protection insures for a producer-selected coverage level of the farm's historical yield. Area-based revenue and yield policies such as Area Risk Protection and Area Yield Protection that rely on county yields and revenues to trigger indemnity payments are not eligible for PPL indemnities. <2.3.1.1. Calculating the PPL Indemnity> As described in the section " Planting Delays Complicate Producer Choices ," policyholders who are prevented from planting acres until after the FPD may choose not to plant the crop and instead receive a PPL indemnity, calculated as a percentage of the original insurance guarantee (e.g., 55% for corn and 60% for soybean). For example, suppose that a corn producer with an insurable yield of 200 bushels per acre has purchased RP at an 80% coverage level with an RMA projected price of $4.00 per bushel. For this policy: The RP coverage guarantee is 200 x $4.00 x 80% = $640 per acre; The PPL indemnity is 55% x $640 = $352 per acre. Alternately, consider a hypothetical soybean producer with an average production history yield of 50 bushels per acre, an RMA projected price of $9.54 per bushel, and an RP policy with an 80% coverage level. For this policy: The RP coverage guarantee is 50 x $9.54 x 80% = $381.60 per acre; The PPL indemnity is 60% x $381.60 = $228.96 per acre. <2.3.2. FY2019 Supplemental Top Up Payments for PPL Losses> On June 3, 2019, Congress passed a FY2019 supplemental appropriations bill ( P.L. 116-20 ) that, among other assistance, authorized $3 billion in additional funds for disasters that impacted farmers and ranchers. The disaster funding is administered through multiple USDA programs and provides financial assistance to producers with production losses on both insured and non-insured crops. All of the agriculture funds are designated as emergency spending. The supplemental funding covers several types of agricultural losses from 2018 and 2019, including losses for crops prevented from being planted in 2019. In particular, producers who claimed PPL losses in 2019 are eligible for a top up of 10%-15% of their PPL indemnity. The PPL top up is 15% for producers with standard RP policies that include the harvest price option as a default and 10% for producers who opted out of the harvest price option and selected the RP with harvest price exclusion policy. For 2019, 91% of corn and soybean insured acres were covered by RP with harvest price option. Under the corn and soybean examples introduced earlier, the supplemental top up would be calculated as: For a corn RP policy: 15% x $352 = $52.80 per acre; For a soybean RP policy: 15% x $$228.96 = $34.34 per acre. <2.3.2.1. Requirements Associated with the Top Up Payments> The FY2019 supplemental program limits payments to up to 90% of losses, including payments from crop insurance and the non-insured disaster assistance program (NAP) but excluding MFP payments. For producers who did not purchase crop insurance or NAP in advance of the natural disasters, payments are limited to 70% of losses. In addition, all recipients of any FY2019 supplemental disaster payments (including the PPL top up) are required to purchase crop insurance or NAP for the next two crop years. <2.3.3. MFP Payments for PPL Cover Crops> Under USDA's 2019 MFP program, eligibility for payments which range from $15 to $150 per acre is restricted to planted acres, thus excluding any PPL acres. However, on June 10, 2019, Secretary Perdue announced that USDA was exploring "legal flexibilities" to provide a minimal per acre MFP payment to farmers who opted for a PPL indemnity but also planted an MFP-eligible cover crop (such as barley, oats, or rye) with the potential to be harvested and for subsequent use of those cover crops for forage. On July 29, 2019, USDA announced a 2019 MFP payment rate of $15 per acre for PPL losses claimed on non-specialty crop acres followed by a USDA-approved cover crop. <2.3.4. Combined PPL Payments from Multiple Programs> In summary, a producer can combine payments from multiple programs without having planted the intended cash crop. While it is not likely to cover all losses incurred, the combination can result in a higher payment in 2019 than was possible in previous years. Based on the above example, a corn farmer with a standard RP policy and an 80% coverage level could receive combined PPL payments of $419.80 per acre, including the PPL indemnity ($352), the supplemental top up payment ($52.80), and the MFP payment for an eligible cover crop planted on PPL acres ($15). By comparison, the original RP policy with 80% coverage would have guaranteed a maximum revenue of $640 per acre had the insured crop been planted. On such an RP policy, a yield loss of nearly 66% would be necessary to generate an indemnity payment that would match the federal payout under the suite of multiple programs available to PPL acres in 2019. Similarly, the hypothetical soybean producer with a standard RP policy and an 80% coverage level could receive combined PPL payments of $278.30 per acre, including the PPL indemnity ($228.96), the supplemental top up payment ($34.34), and the MFP payment for an eligible cover crop planted on PPL acres ($15). However, the second and third payment programs the top up and the extended MFP payment on eligible cover crops were not known until later in the growing season (June 3 for the top up and July 29 for the extended MFP payment) after most late planting versus PPL decisions had been made. Some preliminary research suggests that some farmers that might have been better off choosing PPL with top up and extended MFP on cover crops but instead elected to plant corn or soybeans. This choice may have been driven in part by then-relatively high futures market prices and the prospect of qualifying for the 2019 MFP payment, which required planting an eligible crop as announced by Secretary Perdue on May 23. <3. Late Harvest Suggests Additional Crop Losses> In addition to the PPL acres, large portions of the corn and soybean crops were planted two to four weeks later than usual ( Figure 1 and Figure 2 ). Such late planting meant that initial crop development would be behind normal across much of the major growing regions and that eventual yields would depend on beneficial weather extending late into the fall to achieve full crop maturity. The late planting also rendered crop growth vulnerable to an early freeze in the fall. Widespread wet conditions continued into the fall, especially in the northern plains and western Corn Belt. North Dakota recorded the wettest September on record in 2019, while Iowa recorded the wettest October. Ultimately, much of the corn crop was harvested under wet conditions with high moisture content that required drying. An early cold spell in the Upper Midwest had already heightened the demand for propane that, in addition to serving as the primary energy source for drying corn, is used to heat hog barns and for other farm operations. This resulted in limited supplies and higher prices for propane. Many farmers chose to leave their corn in the field until more beneficial market conditions emerged. As of December 16, 2019 the date of USDA's final weekly Crop Progress report for 2019 an estimated 8% (or 7.2 million acres) of the U.S. corn crop had yet to be harvested, adding further to the uncertainty of yields and harvested acreage for the 2019 corn crop ( Table 3 ). <4. Implications for Congress> Saturated soil conditions heading into the winter months suggest a continuation of wet conditions into the 2020 planting season and the potential for a repeat of planting difficulties in the months ahead. These unusual conditions have come in the midst of a continued trade dispute between the United States and China that has dampened demand for U.S. agricultural products from one of the United States' principal foreign markets and has compelled the Administration to undertake large ad hoc "trade aid" payments to producers of selected commodities. The record PPL acreage has resulted in record crop insurance PPL indemnity payments under the PPL provisions of standard federal crop insurance policies in 2019. Should wet conditions persist into 2020 and create a situation where farmers are again confronted with delayed or prevented planting, some producers may also bump up against a limit on the continued use of PPL. Under RMA rules, PPL can be taken only for crops planted on an insured unit in one of the four preceding crop years. Thus, four consecutive years of PPL would result in ineligibility for the affected cropland. Furthermore, while crop insurance indemnities can help to offset some of the financial loss associated with prevented planting or poor harvests, they are not designed to cover all of the associated losses. Another concern for producers is the timing and clarity (or lack thereof) with respect to USDA announcements about new payment programs that are linked to producer production choices. In general, to avoid adversely influencing producer behavior a precept of most farm policies such announcements should be made either well in advance of the spring planting period or well after production decisions have been made. A final looming concern for market watchers and policymakers is the increased role of USDA payments to support farm incomes in 2019. USDA forecasts $22.4 billion in direct support payments to the U.S. agricultural sector in 2019, including $14.3 billion in direct payments made under trade aid programs as well as over $8 billion in payments from other farm programs. In addition, USDA forecasts $10.3 billion in federal crop insurance indemnity payments. Together, forecasts of USDA farm support plus crop insurance indemnities combine for $32.7 billion in payments that represent a 35.3% share of USDA's November forecast of 2019 net farm income of $92.5 billion. Without this federal support, net farm income would be lower, primarily due to continued weak prices for most major crops. Should these conditions persist into 2020, they would signal the potential for continued dependence on federal programs to sustain farm incomes in 2020. <4.1. Appendix. Supplementary Table>

U.S. agricultural production got off to a late start in 2019 due to prolonged cool, wet springtime conditions throughout the major growing regions, particularly in states across the northern plains and eastern Corn Belt. Saturated soils prevented many farmers from planting their intended crops—such acres are referred to as "prevent plant (PPL)" acres. As of November 1, 2019, the U.S. Department of Agriculture (USDA) reported that farmers were unable to plant a record 19.6 million acres in 2019—including 11.4 million acres of corn and 4.5 million acres of soybeans. The previous record for total PPL acres was set in 2011, when USDA reported 10.2 million acres of PPL. USDA's Risk Management Agency (RMA) reported on November 15, 2019, that 2019 PPL indemnity payments were over $4.2 billion, with $2.6 billion (60.6%) for corn PPL acres and $1.1 billion (25%) for soybean PPL acres. The 2019 average national PPL payment rate for all crops was $224.04 per acre. Payment rates varied by crop and ranged from a low of $50 per acre for millet to a high of $1,432 per acre for dark air cured tobacco. The unusually wet spring conditions that produced the record PPL acres in 2019 were heavily concentrated in Corn Belt states but were also reported in significant numbers in Arkansas, Texas, Mississippi, Louisiana, North Carolina, Tennessee, New York, and Oklahoma. However, South Dakota's 3.9 million acres of PPL were more than double second-place Ohio's 1.4 million of PPL acres. South Dakota's PPL acres accounted for over 20% of the national total in 2019, while its PPL indemnity payments of over $925 million accounted for 21.9% of national PPL indemnity payments. During the previous 19-year period from 2000 to 2018, national PPL averaged 4.1 million acres annually with average indemnities of $680 million per year. Of these national totals, South Dakota accounted for an average of 10% of PPL acres (406 million acres) and 11.2% of PPL indemnities ($76.4 million). Farmers that were unable to plant a crop during the spring of 2019 due to natural causes were potentially eligible for multiple payments under federal farm programs. First, federal crop insurance provides PPL coverage under a standard policy that covers pre-planting cost and potential revenue loss. Second, the FY2019 supplemental authorized disaster assistance payments for PPL (referred to as "top up") in addition to crop insurance indemnities. Third, the Administration's 2019 MFP payments, although based on planted acres, also included payments for eligible cover crops planted on PPL acres. In addition to the unplanted acres, a sizeable portion of the U.S. corn and soybean crops was planted later than usual. Such late planting meant that initial crop development would be behind normal across much of the major growing regions and that eventual yields would depend on beneficial weather extending late into the fall to achieve full crop maturity. Widespread wet conditions continued into the fall, especially in the northern plains and western Corn Belt. Ultimately, much of the corn crop was harvested under wet conditions with high moisture content that required drying. Due to the high costs of propane for drying, many farmers chose to leave their corn in the field until more beneficial market conditions emerged. As of December 16, 2019, USDA estimated that 8% (or 7.2 million acres) of the U.S. corn crop had yet to be harvested, adding further to the uncertainty of yields and harvested acreage for the 2019 corn crop. Saturated soil conditions heading into the winter months suggests a continuation of wet conditions into the 2020 planting season and the potential for a repeat of planting difficulties in the year ahead. Should wet conditions persist in 2020 and create a situation where farmers are again confronted with delayed or prevented planting, many producers may also bump up against a limit on the continued use of crop insurance PPL. Another looming concern for market watchers and policymakers is that, should wet conditions persist in 2020, they could signal the potential for continued dependence on federal programs to sustain farm incomes in 2020.

crs_R46003

crs_R46003_0

<1. Introduction> A majority of the population of the United States has private health insurance coverage (i.e., coverage not available through a public program, such as Medicare or Medicaid). In 2017, about 55% of the U.S. population had private group coverage (e.g., a health plan offered by an employer) and 13.5% had private individual coverage (e.g., a health plan offered through a health insurance exchange). In general, health plans sold in the private health insurance market must comply with state and federal health insurance requirements. The federal requirements relate to how coverage is offered and issued, the benefits it must cover, and how it is priced, among other issues. An example of a federal health insurance requirement is the prohibition of preexisting condition exclusions. Although federal health insurance requirements generally apply to health plans sold in the private health insurance market, not all private health coverage arrangements comply with such requirements. This includes exempted health coverage arrangements and nonco mpliant health coverage arrangements , as termed for purposes of this report. This report identifies and describes arrangements within these two categories. The report is intended to help congressional policymakers better understand the scope of these health coverage arrangements that are available to individuals in the United States private health insurance markets and to provide information about the limitations of the application of federal health insurance requirements. <1.1. Background> The private health insurance market has different segments. Understanding these different segments is relevant to the application of state and federal health insurance requirements. The individual health insurance market segment is where individuals and families buying insurance on their own (i.e., not through a plan sponsor) may purchase health plans. In the group health insurance market, a plan sponsor, typically an employer, offers coverage to a group (e.g., the employer's employees). The group market is divided into small- and large-group market segments. It is also categorized according to how the plan is insured. Group plans that are purchased by employers and other plan sponsors from state-licensed health insurance issuers and are offered to employees or other groups are referred to as fully insured plans. Employers or other plan sponsors that offer self - insur e d plans set aside funds to pay for health benefits directly, and they bear the risk of covering medical expenses generated by the individuals covered under the self-insured plan. States are the primary regulators of the business of health insurance, as codified by the 1945 McCarran-Ferguson Act, and each state requires health insurance issuers to be licensed to sell plans in the state. Each state has a unique set of requirements that apply to state-licensed issuers and the plans they offer; these requirements are broad in scope and address a variety of issues, and often the requirements apply differently to the various market segments. In general, state oversight of health plans applies only to plans offered by state-licensed issuers. Because self-insured plans are financed directly by a plan sponsor, as opposed to a state-licensed insurer, such plans generally are not subject to state law. The federal government also regulates state-licensed issuers and the plans they offer, as well as self-insured plans and their sponsors . Federal requirements can, but do not necessarily, apply uniformly to health plans offered in the aforementioned market segments individual, small-group, and large-group markets and to self-insured plans. For example, the requirement that plans cover preexisting health conditions applies uniformly; health plans offered in the individual, small-group, and large-group markets and self-insured plans must comply with the prohibition on excluding benefits based on health conditions for any individual. The requirement to cover a core package of 10 "essential health benefits" does not apply uniformly; it applies only to health plans offered in the individual and small-group markets. Federal health insurance requirements are codified in three statutes Title XXVII of the Public Health Service Act (PHSA), Part 7 of the Employee Retirement Income Security Act of 1974 (ERISA), and Chapter 100 of the Internal Revenue Code (IRC). In general, federal standards establish a minimum level of requirements ( federal floor ) and states may impose additional requirements on issuers and the health plans they offer, provided the state requirements neither conflict with federal law nor prevent the implementation of federal health insurance requirements. Enforcement of the federal health insurance requirements generally involves both the federal and the state governments. States are the primary enforcers of private health insurance requirements, but the federal government assumes this responsibility if it is determined that a state has failed to "substantially enforce" the federal provisions, including if a state indicates that it lacks authority to enforce or is otherwise not taking enforcement actions. <1.2. Applicability of Federal Health Insurance Requirements to Selected Health Coverage Arrangements> Some health coverage arrangements that consumers may purchase to help them pay for health care services do not comply with some or all of the federal health insurance requirements codified in Title XXVII of the PHSA, Part 7 of ERISA, and Chapter 100 of the IRC. This report focuses on such arrangements ( Table 1 ). The health coverage arrangements listed in Table 1 can be divided into two categories: 1. Exempted Health Coverage A rrangements : Those that meet a federal definition of health insurance but that are exempt from compliance with some or all applicable federal health insurance requirements. 2. Noncompliant Health Coverage A rrangements : Those that the federal government has not explicitly exempted from compliance with federal health insurance requirements and that do not necessarily comply with those requirements. The arrangements listed in Table 1 are summarized in the remainder of this report. Each summary includes a brief description of the arrangement, its status with respect to complying with federal health insurance requirements, and the history of its status. The summaries also include information about whether and how the arrangements are subject to state regulatory authority. Where available, estimates of enrollment in an arrangement are provided. <2. Exempted Health Coverage Arrangements> The arrangements discussed in this section have the following in common: they meet a federal definition of health insurance (i.e., they meet the federal definition of health insurance coverage or group health plan), but they are exempt from compliance with some or all applicable federal health insurance requirements. For most of the arrangements discussed in this section, the exemption is explicit in federal statute, regulations, or guidance (see Table 1 ). <2.1. Group Health Plans Covering Fewer Than Two Current Employees> Both fully insured and self-insured group health plans covering fewer than two current employees are exempt from all federal health insurance requirements. This includes retiree-only plans , provided they cover fewer than two current employees. If retiree benefits are offered through the same plan offered to current employees (and there are two or more current employees enrolled in such plan), then the retiree benefits are not exempt from federal health insurance requirements. The exemption was established in the Health Insurance Portability and Accountability Act (HIPAA; P.L. 104-191 ). HIPAA set forth parallel exemptions from federal health insurance requirements for group plans covering fewer than two current employees in Title XXVII of the PHSA, Part 7 of ERISA, and Chapter 100 of the IRC. After the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) amended, reorganized, and renumbered Title XXVII of the PHSA, the exemption that had been in the PHSA ceased to exist. However, in the preamble to an interim final rule implementing ACA provisions related to grandfathered plans (see " Grandfathered Plans " in this report), the Department of Health and Human Services (HHS) stated that it would not enforce HIPAA or ACA requirements with respect to group health plans covering fewer than two current employees, including retiree-only plans. HHS encouraged states not to enforce the requirements, either, and said the federal government would not cite states for failing to enforce in this situation. Given an Administration's authority to promulgate regulations and issue administrative guidance relating to federal health insurance standards, it is possible that an Administration may reconsider its position on enforcement, but no Administration has done so to date. States may impose their own requirements on group health plans covering fewer than two current employees (including retiree-only plans), provided the plans are fully insured. States do not have the authority to regulate self-insured plans. CRS did not find estimates of enrollment in group health plans covering fewer than two current employees. <2.2. Excepted Benefits> In general, health plans in their provision of excepted benefits are exempt from all federal health insurance requirements. A diverse collection of insurance benefits can be considered excepted benefits, including auto liability insurance, limited-scope dental and vision benefits, benefits for long-term care, specific disease coverage, and supplemental Medicare plans (i.e., Medigap plans). Per federal statute, there are four categories of excepted benefits. One category is exempt from complying with all federal health insurance requirements in all circumstances; the other three categories are exempt from complying with all of the requirements only when specified conditions are met. (See Table 2 for details.) The exemption for excepted benefits and the conditions for exemption were established under HIPAA. HIPAA set forth parallel exemptions and conditions in Title XXVII of the PHSA, Part 7 of ERISA, and Chapter 100 of the IRC. Enactment of the ACA modified the PHSA exemption in such a way that some federal requirements would apply to excepted benefits under the PHSA. However, given that the ERISA and IRC exemptions for excepted benefits remained unchanged, HHS stated it would not enforce HIPAA or ACA requirements on excepted benefits and encouraged states not to enforce the requirements, either. States may impose requirements on excepted benefits, provided the benefits are not self-insured. CRS did not find estimates of enrollment in the various types of excepted benefit plans. <2.3. Short-Term, Limited-Duration Insurance> Short-term, limited-duration insurance (STLDI) is defined as health insurance coverage provided pursuant to a contract with a health insurance issuer that meets the following standards: the contract for the coverage must have a specified expiration date that is less than 12 months after the original effective date of the contract and cannot last longer than 36 months, taking into account renewals or extensions, and the contract and application materials must display a notice as specified in federal regulations indicating that the coverage does not have to comply with federal requirements. Additionally, the 36-month maximum duration is severable from the rest of the definition, meaning the definition would be operative even if the 36-month maximum duration were challenged in court and found invalid or unenforceable. The federal definition of STLDI has changed twice since it was established. STLDI was first defined in regulations issued in 1997. The term was redefined in regulations issued in 2016, and again in regulations issued in 2018. (See Table 3 for details.) Although the definition of STLDI has changed, the applicability of federal health insurance requirements to STLDI has remained the same. STLDI historically has not and currently does not have to comply with federal health insurance requirements. Although STLDI is health insurance coverage generally sold in the individual market, it is excluded from the federal definition of individual health insurance coverage. Per the preamble to the final rule on STLDI, this exclusion from the definition of individual health insurance coverage provides the basis of STLDI's exemption from federal health insurance requirements. State regulation of STLDI varies. Some states impose restrictions on STLDI that are more prohibitive than what is allowed under the federal definition. For example, 22 states (including the District of Columbia [DC]) impose expiration dates shorter than the 12 months allowed under federal law. States may opt to place additional restrictions on STLDI that are not addressed under federal law. For example, 34 states (including DC) require that individuals enrolled in STLDI have access to external appeals processes and 3 states restrict how issuers can vary rates for STLDI (e.g., Minnesota prohibits gender rating for STLDI policies). States also may ban the sale of STLDI in the state, as four states have done. The most recent change to the definition of STLDI has been in effect for less than a year, and enrollment data for the new policies are not yet available. For a discussion of projected estimates of enrollment in STLDI under the latest definition, see the final rule on STLDI. <2.4. Student Health Insurance Coverage> Student health insurance coverage is a type of individual health insurance coverage that may be provided only to students enrolled in an institution of higher education and their dependents. The coverage has to meet the following conditions: it cannot be available to anyone other than a student in an institution of higher education and a student's dependent(s), it cannot condition eligibility for the coverage on any health status-related factor of a student or a student's dependent(s), and it must meet requirements imposed under state law. As a type of individual health insurance coverage, fully insured student health insurance coverage would be required to comply with federal health insurance requirements that apply to individual coverage. However, regulations provide that it is exempt from complying with specified requirements that otherwise apply to individual health insurance coverage. (See Table 4 for details.) Student health insurance coverage was defined and its exemption status was established through the rulemaking process in response to ACA Section 1560(c), which states, "Nothing in this title (or an amendment made by this title) shall be construed to prohibit an institution of higher education (as such term is defined for purposes of the Higher Education Act of 1965) from offering a student health insurance plan, to the extent that such requirement is otherwise permitted under applicable Federal, State, or local law." In the preamble to the proposed rule on student health insurance coverage, HHS noted that it proposed to exempt student health insurance coverage from guaranteed issue and renewal, minimum actuarial value requirements, and the single risk pool requirement because it believed that having to comply with the requirements "would effectively prohibit institutions of higher education from being able to offer these [student health insurance coverage] plans" and doing so would not be in keeping with ACA Section 1560(c). These regulatory exemptions went into effect for student health insurance coverage beginning on or after July 1, 2012. The exemption from rate review requirements was established later and went into effect for student health insurance plans beginning on or after July 1, 2018. HHS acknowledges that it does not have the authority to regulate self-insured student health plans, which means the federal health insurance requirements and the exemptions listed in Table 4 apply only to fully insured student plans. States, however, can regulate fully insured and self-insured student health plans. According to data from the National Association of Insurance Commissioners, in 2017, there were about 1.1 million student health insurance policies written and nearly 1.3 million covered lives. <2.5. Self-Insured, Nonfederal Governmental Plans> A nonfederal governmental plan is a governmental group health plan that is not sponsored by the federal government. Examples of entities that may sponsor nonfederal governmental plans are states, counties, school districts, and municipalities. Like private employers, sponsors of nonfederal governmental plans can choose to offer self-insured or fully insured plans. If a sponsor of a nonfederal governmental plan offers a self-insured plan, the sponsor may elect to exempt the plan from the specified federal requirements listed in Table 5 . The sponsor may choose to exempt the plan from some or all of the listed requirements. For example, a sponsor may elect to exempt its plan only from complying with the mental health parity requirement. The exemption for self-insured, nonfederal governmental plans was established in the PHSA under HIPAA as an exemption from seven federal requirements. Because of how the ACA amended and reorganized the PHSA, the exemption was modified and, as of September 2010, self-insured, nonfederal governmental plans may opt out of only the four requirements listed in Table 5 . Because these plans are self-insured group health plans, states do not have the authority to regulate these plans. According to an analysis of data published by the Center for Consumer Information & Insurance Oversight, as of June 21, 2019, at least 174 nonfederal governmental entities across 35 states have elected to exempt at least one self-insured plan they offer from one or more of the four requirements. Nearly all of the 174 entities offer at least one plan that is exempt from the mental health parity requirement; significantly fewer entities offer plans that are exempt from each of the other three requirements. About 11% of the 174 entities offer at least one plan that is exempt from all four requirements. CRS did not find estimates of enrollment in self-insured, nonfederal governmental plans. <2.6. Grandfathered Plans> The ACA provided that group health plans and health insurance coverage in which at least one individual was enrolled as of enactment of the ACA (March 23, 2010) could be grandfathered . For as long as a plan maintains its grandfathered status, the plan is exempt from specified federal health insurance requirements established under the ACA. Since grandfathered plans existed as of March 23, 2010, they must comply with applicable federal health insurance requirements that were established prior to enactment of the ACA, as long as the prior requirements do not conflict with the ACA's grandfathered rules. For example, both grandfathered and non-grandfathered plans offered in the individual market must comply with federal health insurance requirements that applied to the individual market prior to enactment of the ACA. However, a grandfathered plan is required to comply with only some ACA requirements that apply to the individual market, whereas a non-grandfathered plan must comply with all such requirements. Table A-1 in the Appendix identifies which federal health insurance requirements apply to grandfathered plans. A plan can lose its grandfathered status. To maintain grandfathered status, a plan must continue to meet specified conditions and avoid making specified changes regarding employer contributions (where applicable), access to coverage, benefits, and cost sharing (e.g., changes in coinsurance requirements). A health plan offered in any market segment individual, small group, large group, or self-insured could be grandfathered. There is no time limitation on grandfathered status; as long as a plan avoids making the specified changes, it can remain a grandfathered plan. Once a plan has lost its grandfathered status, it cannot regain that status. Grandfathered plans generally are not available to new enrollees. Only individuals who have been continually covered and any new dependents can be covered under grandfathered plans in the individual market, and only individuals who have been continually covered, new dependents, and new employees can be covered under self-insured grandfathered plans and grandfathered plans offered in the group market. As of the date of this report, no repository for enrollment data for grandfathered plans was found, but the federal government has commented on enrollment. In October 2018, the Departments of HHS, Labor, and the Treasury commented that "only a small number of individuals are currently enrolled in grandfathered individual health insurance coverage" and "the number of individuals with grandfathered individual health insurance coverage has declined each year since ... [the ACA] was enacted, and the already small number of individuals who have retained grandfathered coverage will continue to decline each year." In February 2019, the Departments issued a request for information on grandfathered group health plans and grandfathered group health insurance coverage. In the request, they noted the following: "It is the Departments' understanding that the number of group health plans and group health insurance policies that are considered to be grandfathered has declined each year since the enactment of ... [the ACA], but many employers continue to maintain group health plans and coverage that have retained grandfathered status." Data from the Kaiser Family Foundation's annual surveys on employer-sponsored health benefits underscore the decline among grandfathered group plans. According to the surveys, the percentage of employers that offer at least one grandfathered plan declined from 72% in 2011 to 22% in 2019. The percentage of covered workers covered under a grandfathered plan declined from 56% in 2011 to 13% in 2019. States may regulate grandfathered plans in the same way they regulate non-grandfathered plans they may impose requirements on issuers of grandfathered plans and the plans themselves, provided the state requirements neither conflict with federal law nor prevent the implementation of federal health insurance requirements. States do not have the authority to regulate self-insured grandfathered plans. <2.7. Transitional Plans> The ACA included many new federal requirements that applied to health insurance coverage and the entities that offer such coverage. Some of the requirements were effective shortly after the ACA was enacted, but most became effective for plan years beginning on or after January 1, 2014. Many of the 2014 requirements applied to plans offered in the individual and small-group markets. In the fall of 2013, issuers offering non-grandfathered individual and small-group plans began notifying their enrollees that their coverage would soon be canceled because the plans did not comply with the 2014 ACA requirements. If the individuals and employers enrolled wanted to continue to be covered in the individual or small-group market, they would have to find plans (offered by their current issuer or a different issuer) that complied with the 2014 ACA requirements. In response to the announced plan terminations, CMS issued guidance in November 2013 that established what are often referred to as transitional plans (or grandmothered plans). In the guidance, CMS stated it would not find individual and small-group market plans out of compliance with specified 2014 ACA requirements if the plans did not satisfy such requirements, provided the plans were renewed for plan years starting between January 1, 2014, and October 1, 2014. Pursuant to the guidance, state insurance commissioners could choose whether to enforce compliance with the specified 2014 ACA requirements in their individual and small-group markets. If state insurance commissioners chose not to enforce compliance in one or both of the markets, then issuers selling plans in the market(s) could choose to (but would not be required to) renew coverage for enrollees who otherwise would receive cancellation notices. Table A-1 in the Appendix identifies the ACA requirements with which transitional plans do and do not have to comply. Transitional plans must comply with federal health insurance requirements that went into effect prior to enactment of the ACA and all ACA requirements that went into effect prior to 2014. Initially, the transitional plan guidance applied to plans that were renewed for plan years starting between January 1, 2014, and October 1, 2014. The transitional plan guidance has been extended multiple times (most recently on March 25, 2019); currently, states may allow issuers that have continually renewed transitional plans since 2014 to continue to cover individuals under transitional plans through 2020. In states that allow transitional plans, issuers can choose to continue their transitional plans or not. Discontinued transitional plans cannot be revived. Transitional plans generally are not available to new enrollees. Only individuals who have been continually covered and any new dependents can be covered under transitional plans in the individual market, and only individuals who have been continually covered, new dependents, and new employees can be covered under transitional plans in the small-group market. Most states opted to allow transitional plans in both their individual and small-group markets when the policy was first established. Some states have changed their policies since then. In 2019, transitional plans are available in both the individual and small-group markets in 32 states; most of these states have indicated they will allow transitional plans to continue in their markets through 2020 under the recent federal extension. In four states, transitional plans are allowed in both markets, but issuers have stopped offering transitional plans in each state's individual market. Fifteen states (including DC) either never allowed or no longer allow transitional plans in the state. As of the date of this report, no repository of enrollment data for transitional plans could be found. Given that transitional plans, for the most part, may only be renewed by those currently involved and may not be sold to new consumers, enrollment in transitional plans likely has declined since the plans were established. <3. Noncompliant Health Coverage Arrangements> The two health coverage arrangements discussed in this section have the following in common: the federal government has not explicitly exempted them from compliance with federal health insurance requirements, and they do not necessarily comply with those requirements. The arrangements summarized in this section are just two examples that share the aforementioned characteristics. There may be other health coverage arrangements that share the same characteristics, but it is difficult to make a comprehensive list of such arrangements, given that one of their defining characteristics is that the federal government does not appear to have discussed their status with respect to the application of the federal health insurance requirements. <3.1. Health Care Sharing Ministries> A health care sharing ministry (HCSM) is a faith-based organization that shares resources for medical needs among its members. The idea of pooling financial resources for medical needs among a religious community has a long history in the United States. The idea originated with the Amish and Mennonites over a century ago, and other religious groups began offering HCSMs in the 1990s. In general, members of an HCSM are expected to follow a set of religious or ethical beliefs and regularly contribute a payment (e.g., monthly) to cover the medical expenses of other members. The contributions are distributed, either through the HCSM or via a member-to-member match, to members who need funds for health care costs. Members are often responsible for a portion of their health care costs prior to receiving funds from the HCSM, and most HCSMs exclude coverage of specified illnesses, care, or treatments. HCSMs maintain that they are not providing insurance and do not guarantee payment for members' health care costs. However, the federal government does not appear to have defined HCSMs for regulatory or exemption purposes. HCSMs do not necessarily currently comply, and have not historically complied, with federal health insurance requirements. States may choose whether and how to regulate HCSMs operating in their state. As of August 2018, 30 states had opted to explicitly exempt HCSMs from state insurance law (i.e., the HCSM does not have to comply with the state's body of insurance laws), provided the HCSM meets specified requirements. State HCSM requirements vary; examples of requirements include providing to consumers written disclaimers stating the HCSM is not an insurance company and having an annual audit. In the remaining 21 states (including DC), HCSMs have not been explicitly exempted from state insurance law; however, the lack of an explicit exemption does not necessarily mean that such states regulate HCSMs. Regardless of whether a state has exempted an HCSM from its body of insurance laws, a state's role in regulating HCSMs is complex and varied. In states that exempt HCSMs from their insurance laws, state regulators are responsible for ensuring that HCSMs meet the requirements necessary to maintain their exemption and for taking action if they do not. In states that do not exempt HCSMs from their insurance laws, state regulators "can investigate and, if sufficient evidence exists, regulate these plans as unauthorized insurers." In all states, regulators may have roles to play in "investigating fraud, referring cases to the Attorney General's office, and assisting consumers who may have been harmed [by an HCSM]." The Alliance of Health Care Sharing Ministries reports that there are 104 HCSMs in 29 states, and 7 of the 104 are open to new members. As of the date of this report, the alliance estimates enrollment in HCSMs at just under 970,000. <3.2. Farm Bureau Coverage> The American Farm Bureau Federation is a national organization established in 1919 to advocate for the financial and political interests of farmers, ranchers, and others associated with agriculture. There are local farm bureau offices in all 50 states and in Puerto Rico (but not in DC). Membership in a local farm bureau is open to anyone who pays the membership fee, but typically membership is tiered, with members associated with agriculture having a status different from other members (e.g., agriculture-associated members may have voting rights in the organization, whereas other members may not). Each state farm bureau provides member benefits. The benefits include discounts on a variety of products and services, such as hotel stays, farm equipment, and membership in air ambulance networks. Additionally, many state farm bureaus assist their members with obtaining insurance, including health insurance. The assistance with health insurance takes different forms. Many state farm bureaus have agents available to assist their members with finding and enrolling in a health plan; some state farm bureaus sponsor coverage that is available to their members; and at least one state farm bureau is divided in two parts, with one part being an insurance company that serves the farm bureau's members. As of the date of this report, three states Iowa, Kansas, and Tennessee have enacted laws that allow the farm bureaus in each state to offer a different type of health coverage arrangement. Each state allows the state's farm bureau to sponsor health benefits coverage that is not defined by the state as insurance and is not subject to the state's insurance laws, provided the coverage and the farm bureau comply with specified requirements. (See Table 6 for details.) Iowa and Kansas passed their laws recently in 2018 and 2019, respectively and Tennessee passed its law in 1993. The farm bureaus in Iowa and Tennessee currently offer such coverage; the Kansas Farm Bureau's coverage became available for purchase beginning October 1, 2019, with coverage starting as early as January 1, 2020. As explained above, the arrangements sponsored by farm bureaus in Iowa, Kansas, and Tennessee are not considered insurance in their respective states and do not have to comply with state requirements that apply to insurance. Additionally, farm bureau coverage in these three states does not necessarily comply with any federal health insurance requirements. However, the federal government does not appear to have defined such coverage for regulatory or exemption purposes. In 2017, about 23,000 individuals had Tennessee Farm Bureau coverage. Estimates for the Iowa Farm Bureau were not found. Kansas Farm Bureau estimates that 11,000-42,000 residents of Kansas will be covered by its health benefits coverage. <3.2.1. Appendix. Applicability of Selected Federal Health Insurance Requirements to Grandfathered and Transitional Plans> Table A-1 shows the applicability of selected federal health insurance requirements to grandfathered and transitional plans. Both types of plans are described in detail in this report; as a reminder, any type of plan could be grandfathered, but only fully insured small-group plans and individual-market plans could become transitional plans. The check marks in the table indicate that the grandfathered or transitional plan must comply with the requirement. The term N.A. indicates that the requirement does not apply to the specified market segment, regardless of whether the plan is a grandfathered or transitional plan. The use of Exempt in the table indicates that the grandfathered or transitional plan is exempt from complying with the requirement. For example, the ACA's rate review requirement applies only to fully insured small-group plans and individual market plans. Grandfathered plans do not have to comply with the requirement, which is why the table indicates that grandfathered fully insured small-group plans and grandfathered individual plans are "Exempt" from the requirement. Transitional plans do have to comply with the requirement, which is why the table has check marks for these plans. The rate review requirement does not apply to fully insured large-group plans or self-insured plans; as such, the table indicates that the requirement is not applicable (N.A.) to grandfathered versions of these plans.

Federal health insurance requirements generally apply to health plans sold in the private health insurance market in the United States (i.e., individual coverage, small- and large-group coverage, and self-insured plans). However, not all private health coverage arrangements comply with these requirements. This includes exempted health coverage arrangements and noncompliant health coverage arrangements , as termed for purposes of this report. This report identifies and describes arrangements in these two categories. It is intended to help congressional policymakers better understand the scope of such arrangements available to individuals in the United States and to provide information about the limits of the application of federal health insurance requirements. The arrangements described in this report can be divided into two categories: Exempted Health Coverage Arrangements : Those that meet a federal definition of health insurance but are exempt from compliance with some or all applicable federal health insurance requirements. Such arrangements include the following: G roup health plans covering fewer than two current employees , including retiree-only plans , are exempt from all federal health insurance requirements. Health plans in their provision of excepted benefits (e.g., auto liability insurance, limited-scope dental and vision benefits, and specific disease coverage) are exempt from all federal health insurance requirements. S hort-term, limited-duration insurance (i.e., coverage generally sold in the individual market that must have a specified expiration date that is less than 12 months after the original effective date of the contract and that cannot be renewed or extended for longer than 36 months) is exempt from complying with all federal health insurance requirements. S tudent health insurance coverage (i.e., individual health insurance coverage that meets specified conditions and that may be provided only to students enrolled in an institution of higher education and their dependents) is exempt from complying with some federal health insurance requirements if such coverage is fully insured and is exempt from all federal health insurance requirements if the student health plan is self-insured. S elf-insured, nonfederal governmental plans (e.g., group health plans sponsored by states, counties, school districts, and municipalities) may elect to exempt the plan from some federal requirements. G randfathered plans (i.e., group health plans or health insurance coverage in which at least one individual was enrolled as of enactment of the Patient Protection and Affordable Care Act [ACA; P.L. 111-148 , as amended] and which have continued to meet specified conditions) are exempt from some federal requirements. T ransitional plans (i.e., individual and small-group market plans that meet certain requirements and are in states that have continuously opted to exempt them, per federal guidance) are exempt from some federal requirements. Noncompliant Health Coverage Arrangements : Those that the federal government has not explicitly exempted from compliance with federal health insurance requirements and that do not necessarily comply with those requirements. Such arrangements include the following: H ealth care sharing ministries (i.e., faith-based organizations that share resources for medical needs among their members) do not currently and have not historically complied with federal health insurance requirements. Certain types of f arm bureau coverage (i.e., health coverage offered by a farm bureau in the three states with a law that specifies that such coverage is not considered insurance and is not subject to the state's insurance laws) do not comply with federal health insurance requirements. The report includes a brief description of each arrangement, its status with respect to complying with federal health insurance requirements, and the history of its status. The report also includes information about whether and how the arrangements are subject to state regulatory authority. Where available, estimates of enrollment in an arrangement are provided.

crs_R46049

crs_R46049_0

<1. Introduction> Space weather refers to the dynamic conditions in Earth's outer space environment. This includes conditions on the Sun, in the solar wind, and in Earth's upper atmosphere. Space weather phenomena include solar flares or periodic intense bursts of radiation from the sun caused by the sudden release of magnetic energy, coronal mass ejections composed of clouds of solar plasma and electromagnetic radiation, ejected into space from the sun, high-speed solar wind streams emitted from low density regions of the sun, and solar energetic particles or highly-charged particles formed at the front of solar flares and coronal mass ejections. Hazardous space weather events are rare, but may cause geomagnetic disturbances (GMDs) that affect broad areas of the globe. Such events may pose hazards to space-borne and ground-based CI systems and assets that are vulnerable to geomagnetically induced current, electromagnetic interference, or radiation exposure (see Figure 1 ). Several notable events illustrate space weather hazards, and how their potential impact has broadened over time with technological advances. The 1859 "Carrington event," named for the British solar astronomer who first observed it, caused auroras as far south as Central America and disrupted telegraph communications. In 1972, a GMD knocked out long-distance telephone service in Illinois. In 1989, another GMD caused a nine-hour blackout in Quebec, and melted some power transformers in New Jersey. In 2005, X-rays from a solar storm disrupted GPS signals for a short time. This report provides an overview of federal government policy developed under the existing legislative framework, and describes the specific roles and responsibilities of select federal departments and agencies responsible for the study and mitigation of space weather hazards. <2. Federal Interagency Activities> Over the past several decades, the federal government's interest in space weather and its effects has grown. Congress has required individual federal agencies to conduct certain space weather-related activities related to agency missions. However, federal interagency work began in earnest with the establishment of the interagency National Space Weather Program (NSWP) in 1995 by the Department of Commerce's Office of the Federal Coordinator for Meteorology. The program was directed by the NSWP Council that included representatives from interested federal agencies. The NWSP Council coordinated federal space weather strategy development between 1995 and 2015 in partnership with federal agencies, industry, and the academic community. In 2010, Congress directed the White House Office of Science and Technology Policy (OSTP) to improve national preparedness for space weather events and to coordinate federal space weather activities of the NSWP Council. This marked the beginning of a period during which the White House assumed leadership of federal space weather policy. OSTP's National Science and Technology Council established the Space Weather Operations, Research and Mitigation (SWORM) Working Group in 2014 to lead federal strategy and policy development. The NSWP Council was deactivated the following year, when SWORM published a national space weather preparedness strategy, titled the "National Space Weather Strategy" (the 2015 Plan). In 2016, President Obama signed Executive Order (E.O.) 13744, "Coordinating Efforts to Prepare the Nation for Space Weather Events" directing federal space weather preparedness activities to be carried out "in conjunction" with those activities already identified in the 2015 Plan. The SWORM Working Group released an updated national space weather strategy in 2019, titled "The National Space Weather Strategy and Action Plan" (the 2019 Plan). The same year, President Trump signed E.O. 13865, "Coordinating National Resilience to Electromagnetic Pulses," directing the federal government to "foster sustainable, efficient, and cost-effective approaches" to improve national resilience to the effects of electromagnetic pulses. Taken together, the 2019 Plan and E.O. 13865 prioritize investment in CI resilience initiatives over scientific research and forecasting, and represent a shift in policy from that of the previous Administration set forth in the 2015 Plan and E.O 13744. The 2019 Plan focuses on three objectives related to protection of assets, space weather forecasting, and planning for space weather events, and identifies the agencies and departments with responsibilities under each objective ( Figure 2 ). E.O. 13865 directs relevant federal agencies to identify regulatory and cost-recovery mechanisms that the government may use to compel private-sector investments in resilience. This approach differs from most other federal infrastructure resilience initiatives, which generally rely upon voluntary industry adoption of resilience measures. E.O. 13865 applies both to space weather and manmade electromagnetic hazards (such as a nuclear attack) and refers to both types of hazard as electromagnetic pulse (EMP). This may create ambiguity in cases where a given provision could apply either to manmade or natural electromagnetic hazards. For example, E.O. 13865 directs the Secretary of Homeland Security to "incorporate events that include EMPs as a factor in preparedness scenarios and exercises," without specifying whether a space weather event or nuclear attack scenario should be exercised, or which should be prioritized. The fact that E.O. 13865 does not formally supersede E.O. 13744 (which refers solely to space weather) may create further ambiguity in cases where policies of the previous and current Administrations are not in direct alignment, or else reflect differing priorities. Federal agencies typically regard and refer to manmade EMP and naturally-occurring GMDs as related, but distinct phenomena. <3. Select Department and Agency Roles and Responsibilities> This section provides an overview of federal roles and responsibilities for space weather-related research and emergency preparedness. Federal agency roles and responsibilities fall into four major categories: early warning and forecasting; research and development (R&D); basic scientific research; risk assessment and mitigation, including modeling and information sharing; and response and recovery. Some agencies have roles and responsibilities in more than one category. This section only includes entities that relevant executive orders or strategies have designated as the federal lead for a specific objective or requirement. This does not include agencies whose role is confined to participation in working groups, harmonizing internal policies with national strategy or directives, contributing refinements to analytical products or models produced by other agencies, or ensuring their own continuity-of-operations in case of a space weather event. Each sub-section includes a summary of the department or agency mission and the relevant authorities under which it operates. If applicable, the agency-specific provisions of the two executive orders currently in force E.O. 13744 and E.O. 13865 are listed in a table, followed by information about implementing programs and activities. Provisions applicable only to manmade EMP threats, such as high-altitude nuclear detonations, are excluded. The 2019 Plan is referenced in cases where the executive orders do not provide specific or complete guidance to given federal entities. Departments and agencies are ordered alphabetically for ease of reference. <3.1. Department of Commerce18> In 1988, Congress authorized the Secretary of Commerce to "prepare and issue predictions of electromagnetic wave propagation conditions and warnings of disturbances in such conditions." The Secretary of Commerce delegated those responsibilities to the National Oceanic and Atmospheric Administration (NOAA). The Secretary of Commerce also directed NOAA to fulfill the department's space weather responsibilities in 2016 under E.O. 13744 and in 2019 under E.O. 13865 ( Table 1 ). Both executive orders direct the Secretary to improve services and partner with relevant stakeholders. The 2016 order refers to the hazard of concern as space weather, while the 2019 order refers to it as natural EMPs. NOAA's space weather work falls primarily under two line offices: National Weather Service (NWS) and National Environmental Satellite, Data, and Information Service (NESDIS). NWS operates and maintains observing systems to support forecasting of space weather including the National Solar Observatory Global Oscillation Network Group, a series of ground-based observatories. NWS also operates the Space Weather Prediction Center, which provides real-time monitoring and forecasting of solar events and disturbances and develops models to improve understanding and predict future events. NESDIS maintains NOAA's space weather data through the National Centers for Environmental Information. It also develops and manages several satellite programs which collect solar and space weather-related observations, including the Geostationary Operational Environmental Satellites (GOES) and the Space Weather Follow-on program. <3.2. Department of Defense (DOD)25> E.O. 13744 directed DOD to provide space weather forecasts and related products to support military operations of the United States and its partners ( Table 2 ). The FY2018 National Defense Authorization Act (NDAA; P.L. 115-91 ) codified the language in E.O. 13744. According to the FY2018 NDAA It is the sense of Congress that the [Secretary of Defense] should ensure the timely provision of operational space weather observations, analyses, forecasts, and other products to support the mission of the DOD including the provision of alerts and warnings for space weather phenomena that may affect weapons systems, military operations, or the defense of the United States. E.O. 13865 reiterates the E.O. 13744 requirement verbatim, except that it substitutes the phrase "naturally occurring EMPs" for "space weather phenomena." E.O. 13865 also directs DOD to take further steps related to EMP characterization, warning systems, effects, and protection of DOD systems and infrastructure and the United States from EMPs. <3.2.1. Air Force> The U.S. Air Force is the lead for all DOD and Intelligence Community (IC) space weather information. Air Force weather personnel provide space environmental information, products, and services required to support DOD operations as required. Air Force space weather operations and capabilities support all elements of the DOD and its decisionmakers. The Congressional Budget Office (CBO) estimates that the Department of Defense, primarily the Air Force, allocated $24 million to space weather activities in FY2019. The 557 th Weather Wing, located at Offutt Air Force Base, Nebraska, conducts most of DOD's space weather-related activities. It uses ground-based and space-based observing systems, including the Solar Electro-optical Observing Network (SEON), a network of ground-based observing sites providing 24-hour coverage of solar phenomena; ground-based ionosondes and other sensors providing data in the ionosphere; and space-based observations from the Defense Meteorological Satellite Program. <3.2.2. Army> The Army has two full-time meteorologists to coordinate space weather support within the Army and with other DOD and federal agencies. <3.2.3. Navy> The Naval Research Laboratory's (NRL's) Remote Sensing and Space Science Divisions and the Naval Center for Space Technology also contribute to the DOD's space weather activities. For example, the Wide-field Imager for Solar Probe Plus (WISPR), launched in August 2018, was designed and developed for NASA by NRL's Space Design Division. WISPR determines the fine-scale electron density and velocity structure of the solar corona and the source of shocks that produce solar energetic particles. <3.3. Department of Energy (DOE)32> DOE is responsible for monitoring and assessing the potential disruptions to energy infrastructure from space weather, and for coordinating electricity restoration under authorities granted to it by the White House and Congress. E.O. 13744 directs DOE to protect and restore the electric power grid in the event of a presidentially declared grid emergency associated with a geomagnetic disturbance. E.O. 13865 assigns additional roles and responsibilities to DOE specific to R&D and coordination with the private sector to better understand electromagnetic threats and hazards, and their possible effects on the electric power grid ( Table 3 ). Relevant programs and activities for energy infrastructure protection and threat mitigation are led by the DOE's Office of Cybersecurity, Energy Security, and Emergency Response (CESER) (under the Office of Electricity), and the Federal Energy Regulatory Commission (FERC), the North American Electric Reliability Corporation (NERC), and DOE's national laboratories. <3.3.1. Office of Cyber Security, Energy Security, and Emergency Response (CESER)> In February 2018, DOE announced the creation of CESER, a new office created from the Office of Electricity Delivery and Energy Reliability (OE). CESER has two main divisions: Infrastructure Security and Energy Response (ISER), and Cybersecurity for Energy Delivery Systems. ISER's mission is "to secure U.S. energy infrastructure against all hazards, reduce the impact of disruptive events, and respond to and facilitate recovery from energy disruptions, in collaboration with the private sector and state and local governments." The DOE has produced a number of reports on GMDs and EMPs. In compliance with the National Space Weather Action plan, ISER produced a 2019 report on geomagnetic disturbances and the impact on the electricity grid. This report was designed to provide a better understanding of GMD events in order to protect the U.S. electricity grid. Prior to the reorganization, DOE's OE collaborated with the Electric Power Research Institute (EPRI), a nonprofit organization that conducts research and develops projects focused on electricity. In 2016, the OE and EPRI together developed the Joint Electromagnetic Pulse Resilience Strategy , and subsequently the DOE Electromagnetic Pulse Resilience Action Plan in January 2017. E.O. 13865 refers to EMPs in two categories: human-made high-altitude (HEMP) and natural EMPs often referred to as GMDs by government agencies. These DOE-EPRI documents focus specifically on human-made nuclear threats and categorize GMDs separately from EMPs. However, the 2017 plan notes that "many of the actions proposed herein ... are also relevant to geomagnetic disturbances (GMD), which are similar in system interaction and effects to the E3 portion of the nuclear EMP waveform." <3.3.2. Federal Energy Regulatory Commission (FERC)> FERC is an independent government agency officially organized as part of DOE. The Energy Policy Act of 2005 (EPAct05; P.L. 109-58 ) authorized FERC to oversee the reliability of the bulk-power system. FERC's jurisdiction is limited to the wholesale power market and the transmission of electricity in interstate commerce. EPAct05 authorized the creation of an electric reliability organization (ERO) to establish and enforce reliability standards subject to FERC oversight. The ERO authors the standards for critical infrastructure protection. These standards, which FERC can approve or remand back, are mandatory and enforceable (with fines potentially over $1 million/day for noncompliance). In November 2018, FERC issued a final rule on reliability and transmission system performance standards for GMDs directing NERC to develop "corrective action plans" to mitigate GMD vulnerabilities, and to authorize time extensions to implement "corrective action plans" on a case-by-case basis. Additionally, the final rule accepts the ERO's submitted research plan on GMDs. <3.3.3. North American Electric Reliability Corporation (NERC)> In 2006 FERC certified NERC as the ERO for the United States. NERC works closely with the public and private electric utilities to develop and enforce FERC-approved standards. Part of NERC's role includes reducing risks and vulnerabilities to the bulk-power system. In April 2019, NERC created a task force in response to E.O. 13865 to examine potential vulnerabilities associated with EMPs and to develop possible areas for improvement, focusing on nuclear EMP threats. <3.3.4. National Laboratories> DOE oversees 17 national laboratories that advance science and technology research and development to support DOE's mission. The Los Alamos National Laboratory is currently working on a study of EMP and GMD physical characteristics and effects on critical infrastructure, to be carried out in four phases. <3.4. Department of Homeland Security (DHS)46> Under Presidential Policy Directive 21 (PPD-21), DHS is the lead U.S. agency for critical infrastructure protection and disaster preparedness. E.O. 13744 and E.O. 13865 assign several roles and responsibilities to DHS specific to space weather and EMPs ( Table 4 ). Both executive orders assign responsibility to DHS for early warning, response, and recovery functions related to space weather preparedness. However, E.O. 13865 also requires DHS to incorporate EMP scenarios into preparedness exercises, to conduct extensive R&D initiatives to better model EMP hazards and develop mitigation technologies, and to enhance critical infrastructure resilience against EMP hazards in coordination with other relevant federal agencies. Relevant programs and activities are managed by the Department's Science and Technology Directorate, as well as two DHS operational components: the Cybersecurity and Infrastructure Security Agency, and the Federal Emergency Management Agency. DHS utilizes an all-hazards risk management approach. Therefore, programs are generally not hazard-specific, but rather may be used to support space weather resilience activities as needed. <3.4.1. Science and Technology Directorate (S&T)> S&T conducts R&D projects in partnership with federal agencies and the national laboratories, providing tools and analyses to help utilities better predict localized effects of space weather and enhance grid resilience. For example, the Geomagnetic Field Calculator Tool, developed for this purpose by S&T in partnership with NASA, is in the online testing phase. <3.4.2. Cybersecurity and Infrastructure Security Agency (CISA)> CISA administers public-private partnership programs that provide training, technical assistance, and on-site risk assessments to relevant private-sector and federal partners. CISA, the Department of Energy, and interagency partners are producing technical guidance for electric utilities and other industry stakeholders on mitigation of electromagnetic hazards, which may include space weather. CISA provides long-term risk guidance and recommendations on EMP and other hazards to industry stakeholders through the National Risk Management Center. CISA provides real-time space weather advisories to private sector owner-operators of vulnerable infrastructure on an as-needed basis. <3.4.3. Federal Emergency Management Agency (FEMA)51> FEMA develops operations plans and annexes that coordinate use of national resources to address consequences of space weather events. Recent operational documents include the Federal Operating Concept for Impending Space Weather Events (Space Weather Concept of Operations (CONOP)) and the Power Outage Incident Annex and Nuclear/Radiological Incident Annex to the Response and Recovery Federal Interagency Operational Plans. FEMA also periodically incorporates space weather scenarios into all-hazard education, training, and exercise programs. In 2017, FEMA conducted operational and tabletop exercises with federal and state partners. In 2018, FEMA conducted a space weather exercise for senior federal officials. <3.5. Department of the Interior (DOI)53> The U.S. Geological Survey (USGS) is DOI's lead scientific agency and "provides research and integrated assessments of natural resources; supports the stewardship of public lands and waters; and delivers natural hazard science to protect public safety, health, and American economic prosperity." The Secretary of the Interior has delegated responsibilities from E.O. 13744 and E.O. 13865 to USGS ( Table 5 ). E.O. 13865 requires USGS to enhance understanding of the variations of the Earth's magnetic field associated with all EMPs, manmade and space weather-related, whereas E.O. 13744 specifies only those resulting from solar-terrestrial interactions. USGS conducts space weather-related activities through the Geomagnetism program under the Natural Hazards Mission Area. The Geomagnetism program collects data about the Earth's dynamic magnetic field at 11 observatories. USGS provides these data and resulting products to federal agencies, oil drilling services companies, geophysical surveying companies, the electric-power industry, and several international agencies, among others. For example, NOAA's Space Weather Prediction Center and the Air Force use USGS observatory data in geomagnetic warnings and forecasts. Congress appropriated $1.9 million to the Geomagnetism program in FY2019. <3.6. Department of State (DOS)56> DOS is the lead foreign affairs agency in the executive branch. Among DOS's responsibilities is negotiating and promoting international norms and practices with respect to outer space. DOS maintains that these efforts contribute to its broader objective of promoting American prosperity through advancing bilateral relationships and leveraging international institutions. E.O. 13744 requires the Secretary of State to lead implementation of U.S. diplomatic and public diplomacy efforts to enhance the international community's capacity to respond to space weather events. Similarly, E.O. 13865 directs the Secretary of State to lead U.S. engagement with allies and partners to enhance resilience to the effects of EMPs, which may include space weather (see Table 6 ). DOS's Bureau of Oceans and International Environmental and Scientific Affairs has traditionally been responsible for advancing U.S. diplomatic engagement on these matters. <3.6.1. Bureau of Oceans and International Environmental and Scientific Affairs (OES)> Congress established the Bureau of Oceans and International Environmental and Scientific Affairs in Section 9 of the Department of State Appropriations Authorization Act of 1973 ( P.L. 93-126 ). OES is responsible for building international partnerships in multilateral fora to strengthen both U.S. and international resilience to extreme events, including those pertaining to space weather. For example, OES's Office of Space and Advanced Technology leads U.S. delegations to the United Nations (U.N.) Committee on the Peaceful Uses of Outer Space (COPUOS). In 2017, OES participated in a workshop co-hosted by the United Nations and NASA on the International Space Weather Initiative (ISWI). The ISWI was first launched in 2009 to advance space weather science through deploying instruments to collect relevant space weather data, analyzing and interpreting the data obtained from those instruments, and communicating the results of that analysis to the public. The United States and 43 other U.N. member states that participated in this workshop found that strengthening the international framework for space weather services could be accomplished through several means. These included further improving ground and space-based space weather observation infrastructure, sharing best practices for space weather risk assessment and mitigation, increasing coordination on space weather forecasting services, and developing space weather mitigation plans for integration into broader contingency planning for disaster management. These action items are consistent with DOS's responsibilities to contribute to the realization of the 2019 Plan's three key objectives. Efforts by COPUOS to make progress in these and other focus areas are ongoing. <3.7. National Aeronautics and Space Administration (NASA)65> Under 51 U.S.C. 20301, NASA is responsible for scientific research on the "Sun-Earth connection through the development and operation of research satellites and other means." While E.O. 13865 does not address NASA, E.O. 13744 further directs NASA to (i) implement and support a national research program to understand the Sun and its interactions with Earth and the solar system to advance space weather modeling and prediction capabilities applicable to space weather forecasting; (ii) develop and operate space-weather-related research missions, instrument capabilities, and models; and (iii) support the transition of space weather models and technology from research to operations and from operations to research. The Heliophysics Division of NASA's Science Mission Directorate supports fundamental research on the sun, some of which is important for space weather prediction, but most of which is less directly applicable. Congress appropriated $720 million to the Heliophysics Division in FY2019. CBO estimates that NASA allocated $264 million to space weather activities in FY2019. The Heliophysics Division funds intramural and extramural research and operates a fleet of research spacecraft in Earth orbit and beyond to study the sun, the solar wind, and their interaction with Earth and the rest of the Solar System (see Figure 3 ). When a space weather event or disturbance is observed, NASA also provides research data and modeling results to NOAA for operational use by the Space Weather Prediction Center. In addition to its research activities, NASA has unique operational concerns regarding space weather. First, while multiple agencies and the private sector operate satellites in Earth orbit, above the protection provided by Earth's atmosphere, NASA also has spacecraft in orbits far beyond Earth for planetary exploration and other missions. Earth's magnetic field provides significant protection against space weather for Earth-orbiting satellites, but spacecraft outside Earth's magnetosphere do not benefit from this protection and so have additional requirements for radiation shielding and other countermeasures. Second, NASA is the only U.S. agency with human astronauts in space, so it has unique human safety concerns. Human safety concerns are particularly significant for planned future missions to the Moon and other destinations that are beyond Earth's protective magnetosphere. <3.8. National Science Foundation (NSF)69> Congress established the NSF to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." E.O. 13744 further directs NSF to "support fundamental research linked to societal needs for space weather information through investments and partnerships, as appropriate." NSF supports space weather research in two directorates: (1) the Geosciences Directorate, including through the Atmospheric and Geospace Sciences division (AGS) and the Office of Polar Programs (OPP), and (2) the Mathematical and Physical Sciences (MPS) Directorate, through the Astronomical Sciences division (AST). E.O. 13865 does not address NSF. NSF reports that FY2018 space weather funding totaled approximately $105 million, including about $45 million for AST. CBO estimates that NSF allocated $22 million to space weather activities in FY2019. NSF primarily provides grants to research institutions to conduct scientific studies, including universities and private entities that focus on fundamental research questions related to space weather and its impacts. The AGS division supports both basic sciences research and observational and cyber-infrastructure facilities including the National Center for Atmospheric Research's High Altitude Observatory to improve understanding of the dynamics of the sun, Earth's atmosphere, and near-space environment, and how the sun interacts with Earth's atmosphere. OPP support includes the Antarctic and Astrophysics Geospace program and the IceCube Neutrino Observatory (jointly funded with the MPS Division of Physics). In the ATS division the federal steward for ground-based astronomy in the United States observations focus mainly on the sun, and activities include management of the National Solar Observatory (NSO) Integrated Synoptic Program and the Daniel K. Inouye Solar Telescope (DKIST). According to NSF, DKIST will play an important role in enhancing the fundamental understanding of space weather and its drivers. In addition, NSF supports the development of numerical models of the space weather chain, including the sun, solar wind, and geospace. E.O. 13744 further directs NSF, in collaboration with other federal agencies, to identify mechanisms for advancing space weather observations, models, and predictions, and for sustaining and transitioning appropriate capabilities from research to operations and operations to research. As noted in the agency's March 2018 announcement regarding space weather operations to research proposals, NSF's primary role in space weather readiness efforts is support for basic research that advances fundamental understanding of space weather and related processes, including "the generation of solar storms, their propagation through the interplanetary medium, and their impact on the near-Earth space environment." <4. Federal Agency Spending on Space Weather Activities> A comprehensive account of total federal agency spending on space weather-related activities is not available. In a cost estimate for the Space Weather Research and Forecasting Act ( S. 881 in the 116 th Congress), CBO estimated that the federal agencies in the National Space Weather Program and the Space Weather Operations, Research, and Mitigation Working Group "allocated a combined total of nearly $350 million to activities related to space weather" in FY2019. CBO estimated that the National Aeronautics and Space Administration (NASA) allocated the majority ($264 million) of the $350 million total. Total federal agency allocations towards space weather activities may differ from year to year. For example, CBO estimated federal agencies that were a part of the National Space Weather Program "spent a total of $160 million" in FY2016 on activities related to space weather. <5. Legislation in the 116th Congress> The 116 th Congress continues to consider and pass legislation related to space weather research, forecasting, preparedness, response, and recovery. <5.1. The National Defense Authorization Act for Fiscal Year 2020 (P.L. 116-92)> Congress enacted S. 1790 in December 2019 as the National Defense Authorization Act for Fiscal Year 2020 (2020 NDAA). The 2020 NDAA amended Sections 320 and 707 of the Homeland Security Act of 2002 ( P.L. 107-296 ) to enact a series of homeland security-related provisions that parallel the E.O. 13865 framework for critical infrastructure resilience and emergency response. See Table 7 for a summary of the new requirements. The 2020 NDAA also repealed Section 1691 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ) , which authorized a "Commission to Assess the Threat to the United States from Electromagnetic Pulse Attacks and Similar Events." The Congressional EMP Commission was to conduct an EMP threat assessment and make policy recommendations to Congress. Senior commission members have publicly claimed a prominent role in developing E.O. 13865, which "seeks to implement core recommendations of the Congressional EMP Commission on an accelerated basis." House-passed versions of the 2020 NDAA cited the publication of E.O. 13865 when repealing Section 1691. Other provisions in the 2020 NDAA require the National Guard to clarify relevant "roles and missions, structure, capabilities, and training," and report to Congress no later than September 30, 2020, on its readiness to respond to electromagnetic pulse events affecting multiple states. <5.2. The Space Weather Research and Forecasting Act (S. 881) and Promoting Research and Observations of Space Weather to Improve the Forecasting of Tomorrow (PROSWIFT) Act (H.R. 5260)> These similar but not identical bills, introduced by Senator Gary Peters and Representative Ed Perlmutter respectively, set forth provisions designed to improve the ability of the United States to forecast space weather events and mitigate the effects of space weather. The bills provide statutory authority for an interagency working group (such as SWORM, which was established administratively by the NSTC in 2014). Other major provisions of the bills concern federal agency roles and responsibilities, the establishment of an advisory group, R&D, data sharing, and certain congressional reporting requirements. S. 881 also includes provisions related to the protection of critical infrastructure. The Senate Committee on Commerce, Science, and Transportation ordered S. 881 to be reported without amendment in April 2019. S. 881 was reported out of the committee and placed on the Senate Legislative Calendar in December 2019. H.R. 5260 was referred to several House committees for consideration in November 2019. Previous versions of these bills were introduced in the 114 th and 115 th Congresses.

Space weather refers to conditions on the sun, in the solar wind, and within the extreme reaches of Earth's upper atmosphere. In certain circumstances, space weather may pose hazards to space-borne and ground-based critical infrastructure systems and assets that are vulnerable to geomagnetically induced current, electromagnetic interference, or radiation exposure. Hazardous space weather events are rare, but may affect broad areas of the globe. Effects may include physical damage to satellites or orbital degradation, accelerated corrosion of gas pipelines, disruption of radio communications, damage to undersea cable systems or interference with data transmission, permanent damage to large power transformers essential to electric grid operations, and radiation hazards to astronauts in orbit. In 2010, Congress directed the White House Office of Science and Technology Policy (OSTP) to improve national preparedness for space weather events and to coordinate related federal space weather efforts ( P.L. 111-267 ). OSTP established the Space Weather Operations, Research, and Mitigation (SWORM) Working Group, which released several strategic and implementation plans, including the 2019 National Space Weather Strategy and Action Plan. The White House provided further guidance through two executive orders (E.O. 13744 and E.O. 13865) regarding space weather and electromagnetic pulses (EMPs), respectively. The National Oceanic and Atmospheric Administration and the National Weather Service are the primary civilian agencies responsible for space weather forecasting. The National Laboratories (administered by the Department of Energy), the National Aeronautics and Space Administration (NASA), and the National Science Foundation support forecasting activities with scientific research. Likewise, the U.S. Geological Survey provides data on the earth's variable magnetic field to inform understanding of the solar-terrestrial interface. The Department of Homeland Security disseminates warnings, forecasts, and long-term risk assessments to government and industry stakeholders as appropriate. The Department of Energy is responsible for coordinating recovery in case of damage or disruption to the electric grid. The Department of State is responsible for engagement with international partners to mitigate hazards of space weather. The Department of Defense supports military operations with its own space weather forecasting capabilities, sharing expertise and data with other federal agencies as appropriate. The Congressional Budget Office estimated that federal agencies participating in the SWORM Working Group "allocated a combined total of nearly $350 million to activities related to space weather" in FY2019. NASA allocated the majority ($264 million) of the $350 million total. Congress enacted S. 1790 in December 2019 as the National Defense Authorization Act for Fiscal Year 2020 (2020 NDAA). The 2020 NDAA amended Sections 320 and 707 of the Homeland Security Act of 2002 ( P.L. 107-296 ) to enact a series of homeland security-related provisions that parallel the E.O. 13865 framework for critical infrastructure resilience and emergency response. The 2020 NDAA also repealed Section 1691 of the National Defense Authorization Act for Fiscal Year 2018 ( P.L. 115-91 ), which authorized a "Commission to Assess the Threat to the United States from Electromagnetic Pulse Attacks and Similar Events." Other provisions in the 2020 NDAA require the National Guard to clarify relevant "roles and missions, structure, capabilities, and training," and report to Congress no later than September 30, 2020, on its readiness to respond to electromagnetic pulse events affecting multiple states. Separately, some Members of Congress have introduced the Space Weather Research and Forecasting Act ( S. 881 ), which would define certain federal agency roles and responsibilities, among other provisions.

crs_R45843

crs_R45843_0

Each term, the Supreme Court typically hears arguments in one or more cases concerning the rights and status of Indian tribes and their members. Prominent issues addressed by the Sup reme Court in recent terms have included (1) tribes' civil jurisdiction over nonmembers, (2) the scope of tribal sovereign immunity, and (3) termination of Indian parents' rights in adoption cases. The October 2018 term likewise featured several Indian law issues: the Court heard arguments in three significant cases, each of which implicated the complex relationships among tribal, state, and federal laws. In Washington State Department of Licensing v. Cougar Den , the Court upheld a Washington Supreme Court decision permitting a tribe to import fuel without paying state fuel taxes. The right to travel on public highways guaranteed by an 1855 treaty, the Court ruled, included the right to transport goods for sale on the reservation without paying additional taxes to do so. In Herrera v. Wyoming , the Court determined that neither Wyoming's admission into the Union nor the designation of the Bighorn National Forest abrogated an earlier treaty preserving tribal hunting rights. Thus, a tribe member's conviction for exercising those hunting rights in violation of Wyoming state law could not stand. Finally, in Carpenter v. Murphy , the Court reviewed whether Congress disestablished the Muscogee (Creek) reservation more than a century ago, with potential consequences for Oklahoma's ability to prosecute major crimes in the eastern half of the state. However, the eight Justices considering this case have not yet reached a decision, and the case is scheduled to be reargued in the October 2019 Supreme Court term. This report discusses each of these three cases in turn, focusing on analyses of the Supreme Court's interpretive rubric for treaties and relevant legislation, statements about the scope of legislative authority and discussions of legislative intent, and possibilities for future congressional action. <1. Washington State Department of Licensing v. Cougar Den> On March 19, 2019, the Supreme Court upheld a 2017 Washington Supreme Court decision defending a right-to-travel provision in an 1855 treaty (1855 Yakama Treaty) between the United States and the Yakama tribe against a state attempt to impose a motor fuels tax on a Yakama member. The treaty guaranteed the Yakamas the "right, in common with citizens of the United States, to travel upon all public highways." Cougar Den, Inc. (Cougar Den) a business owned by a Yakama member purchased and transported motor fuel into the state and resold it to on-reservation retailers. The Washington Supreme Court ruled that the treaty insulated Cougar Den from having to pay a Washington State motor fuels tax on that gasoline. The Supreme Court agreed, though in such a way that the limits of the right-to-travel provision in the 1855 Yakama Treaty may still not be perfectly clear. Nonetheless, this case could affect the interpretation of similar provisions in other treaties, and potentially impact state taxation of other activities both on- and off-reservation. <1.1. Legal Backdrop: State Taxing Authority over Tribal Activity> In general, states may tax off-reservation activities of Indian tribes unless an explicit federal law exempts those activities. In 1973, the Court decided Mescalero Apache Tribe v. Jones , holding that New Mexico could impose a gross receipts tax on a tribal ski resort operated on nonreservation land leased from the federal government. According to the Court in Mescalero , "[a]bsent express federal law to the contrary, Indians going beyond reservation boundaries have generally been held subject to nondiscriminatory state law otherwise applicable to all citizens of the State." Although Cougar Den involved a state tax imposed on off-reservation activity similar to the tax the Court upheld in Mescalero , the case arose against a backdrop of states having difficulty collecting taxes on tribal retailers selling goods to non-Indians on Indian reservations, even where courts had upheld the legality of those taxes. Collecting such taxes without tribal cooperation can be challenging because tribal sovereign immunity may defeat suits against a tribe absent tribal waiver or congressional consent. For example, in Moe v. Confederated Salish and Kootenai Tribes , the Supreme Court held that a state could impose record-keeping requirements on tribal retailers to facilitate collecting state taxes from on-reservation cigarette sales to non-Indians. However, in Washington v . Confederated Tribes of Colville Reservation , the Court later held that tribal sovereign immunity barred a state's enforcement action to compel a tribe to remit such taxes. And when Oklahoma later argued in Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of Oklahoma that "decisions such as Moe and Colville give . . . [states] a right [to levy a tax] without a remedy [to collect the tax]," the Court responded by suggesting that states could tax wholesalers, enter into agreements with tribes for collecting the taxes, or secure congressional legislation to require tribes to remit the taxes. <1.2. Factual Background: Washington's Motor Fuels Tax and the 1855 Yakama Treaty> A Washington statute imposes a motor fuels tax upon licensed importers who bring large quantities of fuel into the state by way of ground transportation. As of 2018, all 24 Indian tribes in Washington, other than the Yakamas, had negotiated fuel tax agreements under which they would pay the motor fuels tax to the state. The question before the Supreme Court in Cougar Den , then, was whether the 1855 Yakama Treaty forbade a similar tax from being imposed on fuel importation activities by Yakama members, on account of that treaty's protection of tribal members' right to travel off-reservation. Article III of the 1855 Yakama Treaty contains two clauses. The first clause states that "if necessary for the public convenience, roads may be run through the said reservation; and on the other hand, the right of way, with free access from the same to the nearest public highway, is secured to them." The second clause states that the Tribe also has "the right, in common with citizens of the United States, to travel upon all public highways." Some special canons of construction apply when courts interpret Indian treaties. According to the Supreme Court, courts must "give effect to the terms [of a treaty] as the Indians themselves would have understood them," considering "the larger context that frames the [t]reaty, including 'the history of the treaty, the negotiations, and the practical construction adopted by the parties.'" Partly because many such treaties (including the 1855 Yakama Treaty) were negotiated and drafted in a language other than the Indians' native language and often involved unequal bargaining power, the Supreme Court has stated that "any doubtful expressions in [treaties] should be resolved in the Indians' favor." However, courts must still take care not to extend treaty language beyond what it was intended to cover. <1.3. Case Background: The Washington Supreme Court's Decision> When considering whether the State of Washington could collect a motor fuels tax against Cougar Den, the Washington Supreme Court had to determine whether the right to travel conferred by the 1855 Yakama Treaty was implicated. Ultimately, a majority of that court held that it was: the State of Washington could not enforce its motor fuels tax against Yakama tribal members because that would infringe on the Tribe's treaty-protected right to travel. Specifically, the majority held that, "in this case, it was impossible for Cougar Den to import fuel without using the highway." Under the majority's view, the motor fuels tax constituted an impermissible burden or condition on tribal members' use of the highways to transport their goods, which violated the treaty. In reaching this decision, the majority relied heavily on a decision rendered by the U.S. Court of Appeals for the Ninth Circuit in United States v. Smiskin , which held that a Washington State law prohibiting the transportation and possession of unstamped cigarettes without prior notice to the state impermissibly restricted the right to travel protected by the 1855 Yakama Treaty. The Washington Supreme Court, reviewing the motor fuels tax, interpreted Ninth Circuit precedent to mean that the 1855 Yakama Treaty provision applied to "any trade, traveling, and importation that requires the use of public roads." By contrast, two dissenting state court justices read Ninth Circuit precedent narrowly. Because the fuel tax was directed against trade in a product, not the travel itself, the dissenting justices would have upheld the tax. <1.4. The U.S. Supreme Court's Decision> Washington appealed the Washington Supreme Court's decision to the U.S. Supreme Court, and the High Court granted review on June 25, 2018. In their arguments before the Court, the parties disagreed over the correct interpretation of the 1855 Yakama Treaty. Specifically, the parties disputed how the Yakama would have originally understood the right-to-travel provision. Citing another Ninth Circuit case, Cougar Den argued that the 1855 Yakama Treaty "guarantees the Yakama Nation and its members the ' right to transport goods to market without restriction .'" However, the Washington State taxing authority argued for a more literal and narrow interpretation of the treaty language, emphasizing that the right-to-travel provision contains no mention of taxes. In the state's view, because the fuel tax did not restrict tribe members' ability to travel on public highways, and because the 1855 Yakama Treaty "says nothing about a tax exemption at all," the Treaty did not preempt the tax's applicability to tribe members. The Supreme Court handed down its decision on March 19, 2019. By a 5-to-4 vote, the Court affirmed the Washington Supreme Court's decision, thereby prohibiting Washington from assessing its motor fuels tax against Cougar Den. However, there was no majority opinion; though five Justices voted to affirm, Justices Sotomayor and Kagan joined an opinion by Justice Breyer, while Justice Ginsburg joined a separate opinion by Justice Gorsuch. Justice Breyer's opinion noted that the treaty was not written in the tribe's native language, which Justice Breyer declared "put the Yakamas at a significant disadvantage." Justice Breyer contended that, based on precedent going back more than 100 years, courts interpreting an Indian treaty must "see that the terms of the treaty are carried out, so far as possible, in accordance with the meaning they were understood to have by the tribal representatives" at the time. Citing the historical record, Justice Breyer explained that the Yakamas would have understood the right to travel as including "the right to travel with goods for purposes of trade." Accordingly, because "to impose a tax upon traveling with certain goods burdens that travel," the motor fuels tax directly burdened Cougar Den's ability to travel with goods for purposes of trade, and thus impermissibly violated the 1855 Yakama Treaty. Justice Breyer also concluded that the tax at issue specifically burdened the type of travel the Yakamas had negotiated to protect: travel by public highway. (Washington's motor fuels tax was not assessed on distributors who imported fuel by pipeline or boat.) Justices Gorsuch, joined by Justice Ginsburg, took a somewhat shorter route to the same conclusion, noting "unchallenged factual findings" from an earlier federal district court case that the Yakamas "understood the right-to-travel provision to provide them 'with the right to travel on all public highways without being subject to any licensing and permitting fees related to the exercise of that right while engaged in the transportation of tribal goods.'" That factual finding, confirmed by a "wealth of historical evidence," in their view required a ruling for the Yakamas. While five Justices agreed that applying the fuel tax to Cougar Den would violate the 1855 Yakama Treaty, the Court's failure to render an opinion agreed upon by a majority of the Justices leaves some question as to how federal and state courts will construe and apply Cougar Den . To the extent that Justice Gorsuch's opinion rests on somewhat narrower grounds than Justice Breyer's, that may be deemed to be the controlling opinion of the Court. Because it relied on unchallenged evidence of the tribe's understanding of the right-to-travel provision, Justice Gorsuch's opinion leaves open the possibility that other, identical terms in other treaties could be interpreted differently, if there is different evidence about the relevant tribes' understanding. Chief Justice Roberts wrote an opinion on behalf of the four dissenting Justices, objecting that "the mere fact that a state law has an effect on the Yakamas while they are exercising a treaty right does not establish that the law impermissibly burdens the right itself." The Chief Justice's dissent went on to express concern that the plurality and concurring opinions could, for example, foreclose the applicability of "law[s] against possession of drugs or illegal firearms" by tribe members on public highways, because tribe members could invoke the treaty-protected right to travel when traveling with such items. The plurality responded to this concern by emphasizing that it did not "hold that the treaty deprives the State of the power to regulate to prevent danger to health or safety occasioned by a tribe member's exercise of treaty rights." <1.5. Implications and Considerations for Congress> The Court's decision in Cougar Den might prompt Congress to further consider the ability of states to enforce and collect valid state taxes from Indian tribes. Cougar Den involved a considerable amount of tax revenue; in December 2013, Washington assessed $3.6 million in taxes, penalties, and licensing fees against Cougar Den. And there are similar right-to-travel provisions in treaties with other tribes, including the Nez Perc Indians of Idaho and the Flathead, Kootenay, and Upper Pend d'Oreilles Indians of Montana. These similarly worded treaties could give rise to future challenges to state taxing authority over tribe members. Moreover, Congress could choose to act in the event legislators believe that Chief Justice Roberts's fears about health and safety laws are well-founded. Because of Congress's plenary authority over Indian matters, only Congress, not a state, could act to limit or eliminate a right granted by treaty. However, if Congress chooses to do so, its intention must be "clear and plain." Cougar Den also might prompt further reflection on the differences between state and federal tax exemptions for tribes. Relying on Supreme Court precedent upholding a tax exemption based on explicit language in the General Allotment Act, the Ninth Circuit, for example, has generally held that an exemption from a federal tax must be explicit. Accordingly, the Yakama tribe is currently not exempt from federal heavy vehicle and diesel fuel taxes or from the federal excise tax on manufactured tobacco products because the right-to-travel provision in the 1855 Yakama Treaty is not sufficiently explicit to exempt the tribe from federal taxes. Legislation could be drafted either to eliminate or to enshrine that different treatment. <2. Herrera v. Wyoming> In Herrera v. Wyoming , the Supreme Court resolved a disagreement about whether either Wyoming's admission into the Union or the later establishment of the Bighorn National Forest abrogated the Crow Tribe of Indians' treaty rights to hunt on "unoccupied lands of the United States." The Court concluded that neither event categorically affected those treaty rights. This decision was especially notable because the Supreme Court formally repudiated its 1896 ruling in Ward v. Race Horse , which had held that Wyoming's admission into the Union effectively abrogated a similar hunting-rights provision in a treaty between the United States and another Indian tribe. Race Horse had already appeared to be in considerable tension with the Court's decision over a century later in Minnesota v. Mille Lacs Band of Chippewa Indians , when the Court declared that "[t]reaty rights are not impliedly terminated upon statehood." However, it was not until Herrera that the tension was resolved; the Court stated that it was "formaliz[ing] what is evident in Mille Lacs itself. While Race Horse 'was not expressly overruled' in Mille Lacs , 'it must be regarded as retaining no vitality' after that decision." This rejection of Race Horse undermined other cases relying on it, causing a domino effect that ultimately led the Supreme Court to reverse the Wyoming state court decisions that had declined to recognize the Crow Tribe's treaty hunting rights. <2.1. Case Background: the Wyoming State Court Decisions> The Herrera case arose after the petitioner, a Crow Tribe member, tracked several elk beyond the Crow reservation's Montana borders into the Bighorn National Forest in Wyoming. Herrera and his hunting companions eventually killed three elk, and Herrera was criminally charged by Wyoming with violating its state hunting laws. Herrera moved to dismiss the charges, arguing that he was exercising subsistence hunting rights long protected by the 1868 Treaty of Fort Laramie (1868 Treaty) between the Crow Tribe and the United States. In exchange for ceding much of the territory that would eventually become Wyoming to the United States, the Crow Tribe received a guarantee of "the right to hunt on the unoccupied lands of the United States so long as game may be found thereon . . . ." According to Herrera, this treaty provision provided him with permission to hunt off-reservation in the Bighorn National Forest and prevented Wyoming from going forward with his prosecution under state law. Wyoming disagreed, contending that the hunting rights conferred to Crow Tribe members under the 1868 Treaty were abrogated following Wyoming's 1890 admittance into the Union or, alternatively, the 1897 establishment of the Bighorn National Forest. Rejecting Herrera's claim of treaty protection, the trial court determined it was bound by a 1995 United States Court of Appeals for the Tenth Circuit (Tenth Circuit) decision in Crow Tribe of Indians v. Repsis . That decision held that the 1868 Treaty's hunting-rights provisions had been abrogated for the same reasons as the similarly worded treaty provisions in Race Horse . Alternatively, the Tenth Circuit concluded that the establishment of the Bighorn National Forest in 1897 rendered those lands "occupied" and therefore no longer subject to the access rights given to Crow tribal members by the 1868 Treaty. According to the Wyoming court, principles of collateral estoppel prevented Herrera from "attempting to relitigate the validity of the off-reservation treaty hunting right that was previously held to be invalid" by the Tenth Circuit. After Herrera was convicted and denied appeal in a higher Wyoming state court, he sought review in the U.S. Supreme Court, which granted his request. <2.2. Legal Backdrop: Court Decisions Interpreting Statehood's Effects on Tribal Treaty Rights> A key issue in Herrera concerned the interplay of the Court's prior decisions considering statehood's effect on the continuing viability of treaties between the United States and Indian tribes located within a newly acceded state's territorial boundaries. In Race Horse , the Court had taken the view that Congress's legislative action in admitting a state to the Union abrogated earlier treaties conferring tribal rights to nonreservation lands within the new state's territory. This decision was partly premised on the equal footing doctrine the idea that newly admitted states must enjoy sovereignty equal to that of existing states. In Race Horse itself, the Court held that a hunting right in a Shoshone-Bannock treaty a provision with language identical to the 1868 Treaty violated the equal footing doctrine and had been abrogated by legislation admitting Wyoming to the Union. The Supreme Court reasoned that Wyoming's admission to the Union must have impliedly abrogated the treaty right, because "all the states" have the power "to regulate the killing of game within their borders," and the language of the Shoshone-Bannock treaty would impermissibly limit Wyoming's power to do so relative to other states. In other words, the "two facts" of the treaty's hunting rights and of Wyoming's statehood were "irreconcilable, in the sense that the two, under no reasonable hypothesis, [could] be construed as co-existing." The fact that Congress made no express statement abrogating the Shoshone-Bannock treaty rights did not change that reasoning. As a potentially alternative basis for its decision, the Court explained that because the treaty had been enacted while the land had territory status, it necessarily made only an "essentially perishable . . . temporary and precarious" promise, "intended to be of a limited duration." The equal footing doctrine's primacy in federal Indian law was short-lived, however. In United States v. Winans , less than a decade after Race Horse , the Court upheld tribal fishing rights granted to the Yakama tribe under the 1855 Yakama Treaty. The Court specifically concluded that those treaty rights were not displaced by the State of Washington's admission into the Union. According to the Winans Court, The extinguishment of the Indian title, opening the land for settlement, and preparing the way for future states, were appropriate to the objects for which the United States held the territory. And surely it was within the competency of the [nation] to secure to the Indians such a remnant of the great rights they possessed as "taking fish at all usual and accustomed places." Nor does it restrain the state unreasonably, if at all, in the regulation of the right. In short, just as Congress had the power to extinguish tribal title to the land, it had the power to reserve fishing rights to the tribes on nonreservation land and respecting that preservation of rights was a reasonable restraint on, rather a dramatic curtailment of, state sovereignty. But Race Horse 's holding was not explicitly overruled by Winans , and roughly a century later, Wyoming charged another Crow Tribe member with illegally hunting elk in the Bighorn National Forest (in a case called Crow Tribe of Indians v. Repsis , which predated Herrera's case, but involved similar factual circumstances). The Crow Tribe sought a declaratory judgment in federal court, hoping to resecure the 1868 Treaty hunting and fishing rights. The Tenth Circuit ruled against the tribe, concluding that because the relevant provision of the 1868 Treaty was virtually identical to the one abrogated by the Supreme Court in Race Horse , the Race Horse decision mandated that the treaty rights be considered abrogated by statehood. In so doing, the Tenth Circuit also emphasized Race Horse 's conclusion that the 1868 Treaty granted only "temporary and precarious" rights, such that Congress could not have intended them to be binding on a later-created state. A few years after Repsis , the Supreme Court decided Minnesota v. Mille Lacs Band of Chippewa Indians , which involved fishing rights under an 1837 tribal treaty in Minnesota. There, the Court declined to apply Race Horse and rejected its reasoning, at least in substantial part. The earlier decision's equal-footing holding rested on a "false premise," the Court said, and its language about "temporary and precarious" treaty rights was "too broad to be useful." Noting that courts "interpret Indian treaties to give effect to the terms as the Indians themselves would have understood them," the High Court explained that "Congress may abrogate Indian treaty rights, but it must clearly express its intent to do so." Since there was no "clear evidence" of Congress's intent to abrogate the tribal fishing rights at issue, those rights simply were not abrogated. In the view of the Court, "[t]reaty rights are not impliedly terminated upon statehood." Although highly critical of Race Horse , the Court majority in Mille Lacs did not expressly overrule the earlier decision (though Chief Justice Rehnquist, writing in dissent, accused the majority of overruling Race Horse " sub silentio ," via "a feat of jurisprudential legerdemain"). <2.3. The Herrera Decision: the Impact of Statehood> Thus, when Herrera came before the Supreme Court, the question of whether Race Horse would affect the outcome was a point of disagreement between the parties. Herrera argued that " Mille Lacs forecloses any suggestion that Wyoming's admission terminated the Tribe's treaty hunting rights." Wyoming disagreed, arguing that at least one aspect of Race Horse remained good law namely, its recognition that rights conferred to tribal members by treaty may be only of a "temporary and precarious nature," so that the "the proper inquiry is whether Congress intended . . . [those] rights to be perpetual or to expire upon the happening of a clearly contemplated event, such as statehood." According to Wyoming, Mille Lacs did not disturb and indeed, reaffirmed this aspect of Race Horse , which allowed for the conclusion that statehood terminates such temporary rights. Ultimately, the Supreme Court rejected Wyoming's arguments by a 5-4 vote. Writing for the Court majority, Justice Sotomayor joined by Justices Ginsburg, Breyer, Kagan, and Gorsuch acknowledged that Race Horse "relied on two lines of reasoning" namely the equal footing doctrine and the "temporary and precarious" nature of certain treaty rights. The Court determined that Mille Lacs had "undercut both pillars of Race Horse 's reasoning," and "methodically repudiated that decision's logic." "[T]he crucial inquiry for treaty termination analysis" established by Mille Lacs "is whether Congress has expressly abrogated an Indian treaty right or whether a termination point identified in the treaty itself has been satisfied." Unless the legislation granting statehood "demonstrates Congress's clear intent to abrogate a treaty" or statehood is mentioned in the treaty itself as a termination point, "[s]tatehood is irrelevant" to treaty termination analysis. Applying the Mille Lacs test to Herrera's case thus involved two questions: (1) Did the Wyoming Statehood Act "show that Congress intended to end the 1868 Treaty hunting right"? and (2) Was there any evidence "in the treaty itself that Congress intended the hunting right to expire at statehood"? The Supreme Court concluded that the answer to both questions was "No" there was "simply . . . no evidence" in either the Wyoming Statehood Act or in the treaty itself that Congress intended the Crow Tribe's hunting rights to end at statehood. <2.4. A Procedural Matter: Issue Preclusion> Herrera faced an additional procedural hurdle at the Supreme Court: the parties disagreed over whether he should even be legally allowed to raise his arguments in the first place. The Wyoming state courts had ruled that the Tenth Circuit's 1995 decision in Repsis barred Herrera from even being able to litigate the question of whether the Crow Tribe retained any off-reservation hunting rights under the 1868 Treaty. In short, they said that question had already been answered. Thus, much of the briefing at the Supreme Court focused on issue preclusion, a doctrine that prevents parties from resurrecting an issue already directly decided in a previous case. Both Herrera and the United States as amicus curiae argued that preclusion should not apply when there had been an intervening change in the law, like the Supreme Court's Mille Lacs decision. Wyoming, however, maintained that Mille Lacs had not overruled Race Horse in its entirety, and that at least one line of its reasoning survived: in Wyoming's view, issue preclusion should at least attach to the Tenth Circuit's finding in Repsis that the 1868 Treaty rights were only temporary . In other words, Wyoming argued that Herrera should not be permitted to relitigate the issue of whether Congress intended the 1868 Treaty's hunting rights to be "temporary" rights that expired after statehood because the Tenth Circuit had already definitively answered that question. For the same reasons that the Supreme Court disagreed that statehood had necessarily abrogated Herrera's treaty rights, it likewise rejected Wyoming's claim of issue preclusion. Mille Lacs constituted a "change in law" that justified "an exception to preclusion in this case." "At a minimum," the Court said, "a repudiated decision does not retain preclusive force." <2.5. The Herrera Decision: the Meaning of "Unoccupied Land"117> Having decided that the 1868 Treaty's hunting rights provision remained in effect even after Wyoming statehood, the Court then needed to decide whether the Bighorn National Forest should be considered "unoccupied" land under the terms of the treaty. The Tenth Circuit in Repsis had concluded that the establishment of the national forest in 1897 rendered the land "occupied" by the federal government because it was "no longer available for settlement," and the resources from the land could not be used "without federal permission." Wyoming similarly argued that "[c]reation of the Bighorn National Forest was an act of occupation, placing that land outside of the ambit of the Crow Treaty right"; in the state's view, because the national forest "is federal property, and the United States decides who may enter and what they may do," the national forest should constitute occupied land on which the 1868 Treaty would grant no special privileges. On the other hand, Herrera contended that the text and historical record of the 1868 Treaty demonstrate an understanding by the parties that "the term 'occupied' entailed actual, physical settlement of the land by non-Indian settlers." The United States, writing as amicus curiae, agreed. Herrera and the United States noted that, in other cases, the declaration of a national forest had led courts to declare the designated land "open and unclaimed." The Supreme Court reiterated that provisions of treaties with tribes must be interpreted as they would naturally have been understood by the tribes at the time those treaties were executed. In this case, the Supreme Court concluded "it is clear that the Crow Tribe would have understood the word 'unoccupied' to denote an area free of residence or settlement by non-Indians." That conclusion was based on analysis of the treaty's text, which used variations of the words "occupy" and "settle" at various points, and supported by both contemporaneous dictionary definitions and historical evidence from the time of the treaty negotiation and signing. Accordingly, "President Cleveland's proclamation creating Bighorn National Forest did not 'occupy' that area within the treaty's meaning. To the contrary, the President 'reserved' the lands 'from entry or settlement.'" <2.6. The Herrera Decision: Dissent and Limitations> The majority opinion in Herrera noted that its scope was limited in two distinct ways. First, the majority held only "that Bighorn National Forest is not categorically occupied, not that all areas within the forest are unoccupied." This leaves open the possibility that some parts of the Bighorn National Forest contain enough indicia of settlement to be considered "occupied," even though the rest of the forest is not which would preclude exercise of Crow tribal hunting rights in those areas. Second, the Supreme Court declined to consider arguments that Wyoming could regulate the exercise of hunting rights to promote conservation purposes. Because those arguments were not considered by the state appellate court, the Supreme Court did "not pass on the viability of those arguments" in its opinion. That may leave open another avenue by which Wyoming could limit the exercise of tribal hunting rights within its borders. A dissent written by Justice Alito was joined by the remaining three members of the Court. The four dissenting Justices would have determined that the Tenth Circuit's decision in Repsis ("holding that the hunting right conferred by [the 1868 Treaty] is no longer in force") was still binding, such that "no member of the Tribe will be able to assert the hunting right that the Court addresses." In other words, the dissent would have started with the parties' issue preclusion arguments, and would have determined that Herrera had no right to relitigate an issue that had already been settled by a court. More specifically, although the dissent expressed some doubt that Mille Lacs represented a sufficient change in the law to foreclose Repsis 's conclusion that Wyoming statehood abrogated the 1868 Treaty rights, it would not have reached that question. Instead, the dissent would have given preclusive effect to Repsis 's alternate legal conclusion, which it says existed independently of Race Horse namely, that the Repsis court decided the Bighorn National Forest was not "unoccupied" within the treaty's meaning. <2.7. Implications and Considerations for Congress> Congress's plenary authority to govern interactions with Indian tribes remains clear. Congress may at any time expressly disavow any provision of the 1868 Treaty, or may plainly reaffirm its commitment to any Indian treaty that remains in effect. To the latter end, Congress could, if it wished, clarify that the Bighorn National Forest (or other national forests) should be treated as unoccupied lands for the purposes of construing Indian treaty rights. By contrast, Congress could also choose to broadly abrogate hunting and fishing rights in national forests or other areas, but Herrera reaffirms that if Congress does so, it must clearly state that intention. <3. Carpenter v. Murphy> In Carpenter v. Murphy , the Supreme Court is reviewing a decision by the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit) concerning whether Oklahoma could legally charge and convict Patrick Murphy, a member of the Muscogee (Creek) Nation who was convicted of killing a fellow tribe member. The validity of Murphy's murder conviction may turn on whether his crime was committed within the boundaries of the Muscogee (Creek) reservation a reservation that Oklahoma says ceased to exist in the early 1900s. Although the Oklahoma state courts rejected Murphy's efforts to overturn his conviction, the Tenth Circuit concluded that the crime did occur on reservation land, and that Oklahoma thus lacked authority to prosecute Murphy. Although the Supreme Court heard oral arguments in Carpenter v. Murphy at the end of 2018, it ordered the case restored to the calendar and set for reargument in the October 2019 term. Whether the Court will ultimately agree with the Tenth Circuit's decision is uncertain, but if it does, the decision could have significant consequences beyond Murphy's case. The land where the crime occurred would then be "Indian country" under federal law, which Oklahoma says would significantly limit its criminal jurisdiction over offenses committed by Indians on such land. Such a decision could prompt additional litigation concerning the status of other tribal lands within Oklahoma. <3.1. The Major Crimes Act and "Indian Country"> The parties have asked the Supreme Court to decide whether the land that was historically designated as belonging to the Muscogee (Creek) Nation constitutes "Indian country," and if so, whether Oklahoma has any criminal jurisdiction over crimes like Murphy's. The federal government (and Congress in particular) has long been recognized as having plenary authority over Indian affairs, so states generally cannot exercise criminal jurisdiction over Indians in "Indian country" without federal permission. A federal statute defines "Indian country" to mean (1) all land within an Indian reservation, (2) all dependent Indian communities, and (3) all Indian allotments that still have Indian titles. An area qualifies as Indian country if it fits within any of these three categories, meaning a formal designation of Indian lands as a "reservation" is not required . Federal law establishes parameters for when states may prosecute certain crimes committed within Indian country. Most relevant to this case, the Major Crimes Act reserves federal jurisdiction over certain serious crimes, like murder and kidnapping, when committed by an Indian within Indian country. Federal jurisdiction under the Major Crimes Act generally forecloses overlapping state (though not tribal) jurisdiction, though legislative exceptions permit some states to exercise jurisdiction over such crimes. <3.2. The Tenth Circuit Decision> The Supreme Court has explained that Congress alone has the power to change or erase reservation boundaries. Once land is designated as a reservation, it generally stays that way until Congress eliminates ("disestablishes") or reduces ("diminishes") it. Appealing his state murder conviction to the Tenth Circuit, Murphy contended that the Muscogee (Creek) reservation had never been disestablished and therefore constituted "Indian country," precluding state jurisdiction over his offense. The Tenth Circuit agreed. In its decision, the Tenth Circuit briefly described the history of the Muscogee (Creek) reservation. In the 1820s, the federal government forcibly relocated the tribe's members (and members of several other tribes) to what is now present-day Oklahoma. As part of that relocation, the government signed a series of treaties with the Muscogee (Creek) Nation, ultimately giving the tribe a vast area of land roughly equivalent to present-day Oklahoma. That tract of land was later reduced. The final reduction occurred after the Civil War, when the Treaty of 1866 required the Muscogee (Creek) Nation to transfer the western half of its new lands back to the United States. Though the Muscogee (Creek) Nation later experienced many changes in its relationship with the federal government most notably related to tribal governance and a push for individual ownership of the land the boundaries of the Muscogee (Creek) land remained generally unchanged until at least the early 1900s. At that point, the "unique history" of Oklahoma began to transition toward statehood, effectively merging eastern Indian lands and western non-Indian lands into a single geographic entity. To determine whether Congress intended to disestablish the Muscogee (Creek) reservation land, the Tenth Circuit applied a three-step analysis employed in the Supreme Court's 1984 decision, Solem v. Bartlett . Under this framework, courts examine (1) the language of the governing federal statute; (2) the historical circumstances of the statute's enactment; and (3) subsequent events such as Congress's later treatment of an affected area. Importantly, the Solem framework instructs courts to resolve any uncertainty in favor of the tribes: if the evidence is not clear, courts "are bound by our traditional solicitude for the Indian tribes to rule that diminishment did not take place and that the old reservation boundaries survived . . . ." Using this framework, the Tenth Circuit agreed with Murphy that his criminal conduct occurred in Indian country, and Oklahoma therefore lacked jurisdiction over it. Although Oklahoma referenced eight separate federal acts that it viewed as collectively disestablishing the Muscogee (Creek) reservation, the Tenth Circuit ruled that none of those statutes clearly referred to disestablishment, and in some instances reflected Congress's continued recognition of the reservation's borders. Oklahoma's evidence that Congress intended to change its governance over the Muscogee (Creek) reservation failed to convince the Tenth Circuit that Congress also intended to erase the reservation boundaries. Similarly, the Tenth Circuit concluded that events subsequent to legislation cited by Oklahoma insufficiently supported the argument that Congress intended the Muscogee (Creek) reservation to be disestablished. In sum, the Tenth Circuit did not find that Congress clearly intended to disestablish the Muscogee (Creek) reservation, so it concluded that Oklahoma lacked jurisdiction to convict Murphy for a murder occurring on those lands. <3.3. Appeal to the Supreme Court> Oklahoma petitioned for certiorari review of the Tenth Circuit's decision, which the Supreme Court granted on May 21, 2018. In its brief to the Court, Oklahoma claimed that no one has treated the relevant land like a reservation since Oklahoma became a state in 1906. It also argued that because Congress broke certain promises in the treaties that had established the reservation, Congress must have intended to disestablish it. According to Oklahoma, it "is inconceivable that Congress created a new State by combining two territories while simultaneously dividing the jurisdiction of that new State straight down the middle by leaving the former Indian Territory as Indian country." In other words, in Oklahoma's characterization of the matter, Congress could not have intended the state to lack jurisdiction over major crimes in half its land mass. Finally, Oklahoma contended that the Solem framework should be inapplicable in the unique context of Oklahoma statehood. The federal government made similar arguments in a brief it filed in support of Oklahoma. However, the federal government additionally claimed that Congress had elsewhere granted Oklahoma broad criminal jurisdiction over Indian country, which it said should enable prosecution of cases like Murphy's regardless of whether his crime was committed in Indian country. More specifically, the United States argued that Congress had eliminated tribal jurisdiction and evinced an intent to have all crimes prosecuted by the same entity (whether committed by or against a tribal member or not) throughout the territory that became Oklahoma; in the United States' view, that intent should not be "implicitly" repealed by later statutes like the Major Crimes Act. <3.4. Supplemental Briefing Ordered by the Supreme Court> Following oral argument, the Supreme Court ordered both Oklahoma and Murphy to address whether or not Oklahoma would have criminal jurisdiction over cases like Murphy's if the crimes were found to have been committed in Indian country. It also asked the parties to address whether a reservation could ever not qualify as Indian country. These questions might be relevant if, for example, the Court sought additional information to clarify whether it would need to find that the Muscogee (Creek) reservation had been disestablished in order to conclude that Oklahoma could exercise jurisdiction over Murphy. In Murphy's supplemental brief, he began by stressing that Oklahoma had disavowed the argument that it could exercise criminal jurisdiction over him if the Muscogee (Creek) reservation endured. Murphy then argued that Congress has never given Oklahoma jurisdiction to prosecute crimes committed by Indians, and anticipating the assertion that several statutes could be read together to implicitly accomplish that result declared that "when Congress transfers jurisdiction to States, its statutes are bell-clear." None of the statutes mentioned by the United States in its briefing, Murphy argued, do anything like clearly grant criminal jurisdiction over tribes and tribal members to the State of Oklahoma. Oklahoma adopted the United States' view that it had jurisdiction to prosecute crimes regardless of the Muscogee (Creek) land's status, based on a series of laws passed by Congress between 1897 and 1907. However, the state asked the Court not to "leave open whether [Muscogee (Creek) and other historical territories] constitute Indian reservations today," arguing that such a decision "risks undermining the convictions of many federal prisoners" and "may also undermine federal and tribal authority currently exercised on restricted allotments and trust lands." Both Murphy and Oklahoma answered the Court's second question in the negative: they agreed, under current law a federally established reservation always constitutes "Indian country" under the governing statute. <3.5. Anticipating the U.S. Supreme Court's Decision> The Supreme Court heard oral arguments in this case on November 27, 2018. Justice Gorsuch was not present at oral arguments and is not slated to participate in deciding the case presumably because he participated in earlier discussions about this case while he was still a judge on the Tenth Circuit. A decision was expected by the end of the Supreme Court's 2018 term, but on June 27, 2019, the Court ordered this case restored to the calendar for reargument in the next term. If the Supreme Court reverses the Tenth Circuit and finds that the Muscogee (Creek) reservation was disestablished, Murphy's conviction and death sentence would be reinstated, and Oklahoma would presumably continue to prosecute cases like Murphy's. But if the Supreme Court agrees with Murphy and the Tenth Circuit that the Muscogee (Creek) reservation has not been disestablished, the decision's ramifications for federal, state, and tribal jurisdiction in the eastern half of Oklahoma might be significant, and could extend well beyond the Muscogee (Creek) reservation. In addition to the Muscogee (Creek) Nation, several other tribes were forcibly relocated to Oklahoma under similar circumstances and under the same or similar treaties. The parties in Murphy filed a joint appendix containing several historical maps depicting reservation boundaries in Oklahoma in the early 1900s. Oklahoma has argued that, if those statutes did not disestablish the Muscogee (Creek) reservation, similar arguments could be maintained with respect to other lands comprising most of eastern Oklahoma. If the Supreme Court agrees with the Tenth Circuit that Congress never disestablished reservations like the one in this case, Oklahoma argues that its ability to prosecute many crimes in the eastern part of the state would be significantly narrowed. According to Oklahoma and some amici, the Tenth Circuit's decision "would create the largest Indian reservation in America today . . . . That revolutionary result would shock the 1.8 million residents of eastern Oklahoma who have universally understood that they reside on land regulated by state government, not by tribes." If a significant part of Oklahoma is Indian country, then the burden would shift to the federal and tribal governments to prosecute many offenses involving Indian offenders or victims at least, absent other federal statutory authority allowing the state to prosecute. However, other amici have joined Murphy in arguing that the Tenth Circuit's decision should be upheld. Some, including the Muscogee (Creek) Nation, contend that recognition of the Muscogee (Creek) reservation's continued existence would leave intact most state and local functions on those lands. For example, the Muscogee (Creek) Nation argues that even on reservation land, state and local governments retain most civil jurisdiction, including taxing and zoning authority. The Supreme Court might also seek to avoid the question of whether the Muscogee (Creek) reservation still exists. For example, the Supreme Court could decide either to reassess the approach it endorsed in Solem , or as suggested by Tenth Circuit Chief Judge Tim Tymkovich conclude that the Solem framework is ill-suited to the unique circumstances surrounding Oklahoma's statehood. Alternatively, the Court could adopt the federal government's argument that Oklahoma had jurisdiction to prosecute Murphy because earlier statutes granted such jurisdiction, thereby rendering the Major Crimes Act inapplicable. <3.6. Implications and Considerations for Congress> Regardless of the Supreme Court's decision, the choice to disestablish a reservation still lies solely with Congress. If the Supreme Court agrees that the Muscogee (Creek) reservation still exists, a statute clearly disestablishing it would limit this case's applicability in the future. Congress could also pass a law expressly giving Oklahoma jurisdiction to prosecute major crimes in Indian country if the Supreme Court holds that no such law currently exists. If the Supreme Court disagrees with the Tenth Circuit and holds that the Muscogee (Creek) reservation no longer exists, Congress could depending on the exact grounds of the ruling countermand that decision by reestablishing or clarifying the continued existence of the Muscogee (Creek) reservation.

Each term, the Supreme Court typically hears arguments in one or more cases concerning the rights and status of Indian tribes and their members. Prominent issues addressed by the Supreme Court in recent terms have included (1) tribes' civil jurisdiction over nonmembers, (2) the scope of tribal sovereign immunity, and (3) termination of Indian parents' rights in adoption cases. The October 2018 term likewise featured several Indian law issues: the Court heard arguments in three significant cases, each of which implicated the complex relationships among tribal, state, and federal laws. In Washington State Department of Licensing v. Cougar Den , the Court upheld a Washington Supreme Court decision permitting a tribe to import fuel without paying state fuel taxes. The right to travel on public highways guaranteed by an 1855 treaty, the Court ruled, included the right to transport goods for sale on the reservation without paying additional taxes to do so. In Herrera v. Wyoming , the Court determined that neither Wyoming's admission into the Union nor the designation of the Bighorn National Forest abrogated an earlier treaty preserving tribal hunting rights. Thus, a tribe member's conviction for exercising those hunting rights in violation of Wyoming state law could not stand. Finally, in Carpenter v. Murphy , the Court reviewed whether Congress disestablished the Muscogee (Creek) reservation more than a century ago, with potential consequences for Oklahoma's ability to prosecute major crimes in the eastern half of the state. However, the eight Justices considering this case have not yet reached a decision, and the case is scheduled to be reargued in the October 2019 Supreme Court term.

crs_R45870

crs_R45870_0

<1. Background> Congress uses an annual appropriations process to fund the routine activities of most federal agencies. This process anticipates the enactment of 12 regular appropriations bills to fund these activities before the beginning of the fiscal year. When this process has not been completed before the start of the fiscal year, one or more continuing appropriations acts (commonly known as continuing resolutions or CRs) can be used to provide interim funding pending action on the regular appropriations. DOD has started the fiscal year under a CR for 13 of the past 18 years (FY2002-FY2019) and every year since FY2010 excluding FY2019. DOD has operated under a CR for an average of 119 days per year during the period FY2010-FY2019 compared to an average of 32 days per year during the period FY2002-FY2009 (see Figure 1 ). All told, since 2010, DOD has spent 1,186 days more than 39 months operating under a CR, compared to 259 days less than 9 months during the 8 years preceding 2010. To preserve congressional prerogatives to shape federal spending in the regular appropriations bills, the eventual enactment of which is expected, CRs typically contain limitations intended to allow execution of funds in a manner that provides for continuation of projects and activities with relatively few departures from the way funds were allocated in the previous fiscal year. However, DOD funding needs typically change from year to year across the agency's dozens of appropriations accounts for a variety of reasons, including emerging, increasing, or decreasing threats to national security. If accounts and activities within accounts are funded by a CR at a lower level than was requested in the pending Administration budget, then DOD cannot obligate funds at the anticipated rate. This can restrict planned personnel actions, maintenance and training activities, and a variety of contracted support actions. Delaying or deferring such actions can also cause a ripple effect, generating personnel shortages, equipment maintenance backlogs, oversubscribed training courses, and a surge in end-of-year contract spending. Given the frequency of CRs in recent years, many DOD program managers and senior leaders work well in advance of the outcome of annual decisions on appropriations to minimize contracting actions planned for the first quarter of the coming fiscal year. The Defense Acquisition University, DOD's education service for acquisition program management, advises students that, "[m]embers of the [Office of the Secretary of Defense], the Services and the acquisition community must consider late enactment to be the norm [emphasis in original] rather than the exception and, therefore, plan their acquisition strategy and obligation plans accordingly." In anticipation of such a delay in the availability of full funding for programs, DOD managers can build program schedules in which planned contracting actions are pushed to later in the fiscal year when it is more likely that a full appropriation will have been enacted. Additionally, managers can take steps to defer hiring actions, restrict travel policies, or cancel nonessential education and training events for personnel to keep their spending within the confines of a CR. On their face, CRs are disruptive to routine agency operations and many of the procedures used by agencies to deal with limitations imposed by a CR entail costs. However, even though these disruptions have been routine for more than a decade, there has been little systematic analysis of the extent to which theses disruptions have led to measurable and significantly adverse impacts on U.S. military preparedness over the long run. <1.1. Funding Available Under a CR> An interim continuing resolution typically provides that budget authority is available at a certain rate of operations or funding rate for the covered projects and activities and for a specified period of time. The funding rate for a project or activity is based on the total amount of budget authority that would be available annually at the referenced funding level and is prorated based on the fraction of a year for which the interim CR is in effect. In recent fiscal years, the referenced funding level has been the amount of budget authority that was available under specified appropriations acts from the previous fiscal year, or that amount modified by some formula. For example, the first CR for FY2018 ( H.R. 601 \ P.L. 115-56 ) provided, "... such amounts as may be necessary, at a rate of operations as provided in the applicable appropriations Acts for fiscal year 2017 ... minus 0.6791%" (Division D, Section 101). While recent CRs typically have provided that the funding rates for certain accounts are to be calculated with reference to the funding rates in the previous year, Congress could establish a CR funding rate on any basis (e.g., the President's pending budget request, the appropriations bill for the pending year as passed by the House or Senate, or the bill for the pending year as reported by a committee of either chamber). <1.1.1. Full Text Versus Formulaic CRs> CRs have sometimes provided budget authority for some or all covered activities by incorporating the text of one or more regular appropriations bills for the current fiscal year. When this form of funding is provided in a CR or other type of annual appropriations act, it is often referred to as full text appropriations . When full text appropriations are provided, those covered activities are not funded by a rate for operations, but by the amounts specified in the incorporated text. This full text approach is functionally equivalent to enacting regular appropriations for those activities, regardless of whether that text is enacted as part of a CR. The "Department of Defense and Full-Year Continuing Appropriations Act, FY2011" ( P.L. 112-10 ) is one recent example. For DOD, the text of a regular appropriations bill was included as Division A, thus funding those covered activities via full text appropriations. In contrast, Division B of the bill provided funding for the projects and activities that normally would have been funded in the remaining eleven FY2011 regular appropriations according to a formula based on the previous fiscal year's appropriations laws. If formulaic interim or full-year continuing appropriations were to be enacted for DOD, the funding levels for both base defense appropriations and Overseas Contingency Operations (OCO) spending could be determined in a variety of ways. A separate formula could be established for defense spending, or the defense and nondefense spending activities could be funded under the same formula. Likewise, the level of OCO spending under a CR could be established by the general formula that applies to covered activities (as discussed above), or by providing an alternative rate or amount for such spending. For example, the first CR for FY2013 ( P.L. 112-175 ) provided the following with regard to OCO funding: Whenever an amount designated for Overseas Contingency Operations/Global War on Terrorism pursuant to Section 251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 (in this section referred to as an "OCO/GWOT amount") in an Act described in paragraph (3) or (10) of subsection (a) that would be made available for a project or activity is different from the amount requested in the President's fiscal year 2013 budget request, the project or activity shall be continued at a rate for operations that would be permitted by ... the amount in the President's fiscal year 2013 budget request. <1.2. Additional Limitations that CRs May Impose> CRs may contain limitations that are generally written to allow execution of funds in a manner that provides for minimal continuation of projects and activities in order to preserve congressional prerogatives prior to the time a full appropriation is enacted. As an example, an interim CR may prohibit an agency from initiating or resuming any project or activity for which funds were not available in the previous fiscal year. Congress has, in practice, included a specific section (usually Section 102) in the CR to expressly prohibit DOD from starting production on a program that was not funded in prior years (i.e., a new start ), and from increasing production rates above levels provided in the prior year. Congress may also limit certain contractual actions such as multiyear procurement contracts. Figure 2. Air Force Appropriations for Combat Rescue Helicopter An interim CR that uses the same formula to specify a funding rate for different appropriations accounts may cause problems for programs funded by more than one account, if the ratio of funding between the accounts changes from one year to the next. For example, as the Air Force program to procure a new combat rescue helicopter transitions from development to production between FY2019 and FY2020, the amount requested for R&D dropped by about $200 million while the amount requested for procurement rose by a 12-percent larger amount. Although the total amount requested for the program in FY2020 is thus $25 million higher than the total appropriated in FY2019, a CR that continued the earlier year's funding for the program would problematic: The nearly $200 million in excess R&D money could not be used to offset the more than $200 million shortfall in procurement funding, absent specific legislative relief. This kind of mismatch at the account level between the request and the CR is sometimes referred to as an issue with the color of money . <1.3. Anomalies> Even though CRs typically provide funds at a particular rate, CRs may also include provisions that enumerate exceptions to the duration, amount, or purposes for which those funds may be used for certain appropriations accounts or activities. Such provisions are commonly referred to as anomalies . The purpose of anomalies is to insulate some operations from potential adverse effects of a CR while providing time for Congress and the President to agree on full-year appropriations and avoiding a government shutdown. A number of factors could influence the extent to which Congress decides to include such additional authority or flexibility for DOD under a CR. Consideration may be given to the degree to which funding allocations in full-year appropriations differ from what would be provided by the CR. Prior actions concerning flexibility delegated by Congress to DOD may also influence the future decisions of Congress for providing additional authority to DOD under a longer-term CR. In many cases, the degree of a CR's impact can be directly related to the length of time that DOD operates under a CR. While some mitigation measures (anomalies) might not be needed under a short-term CR, longer-term CRs may increase management challenges and risks for DOD. An anomaly might be included to stipulate a set rate of operations for a specific activity, or to extend an expiring authority for the period of the CR. For example, the second CR for FY2017 ( H.R. 2028 \ P.L. 114-254 ) granted three anomalies for DOD: Section 155 funded the Columbia Class Ballistic Missile Submarine Program ( Ohio Replacement) at a specific rate for operations of $773,138,000. Section 156 allowed funding to be made available for multi-year procurement contracts, including advance procurement, for the AH 64E Attack Helicopter and the UH 60M Black Hawk Helicopter. Section 157 provided funding for the Air Force's KC-46A Tanker, up to the rate for operations necessary to support the production rate specified in the President's FY2017 budget request (allowing procurement of 15 aircraft, rather the FY2016 rate of 12 aircraft). In anticipation of an FY2018 CR, DOD submitted a list of programs that would be affected under a CR to the Office of Management and Budget (OMB). This "consolidated anomalies list" included approximately 75 programs that would be delayed by a prohibition on new starts and nearly 40 programs that would be negatively affected by a limitation on production quantity increases. OMB may or may not forward such a list to Congress as a formal request for consideration. Arguably, to the extent that anomalies make a CR more tolerable to an agency, they may reduce the incentive for Congress to reach a budget agreement. According to Mark Cancian, a defense budget analyst at the Center for Strategic and International Studies, "a CR with too many anomalies starts looking like an appropriations bill and takes the pressure off." H.R. 601 ( P.L. 115-56 ), the initial FY2018 CR, did not include any anomalies to address the programmatic issues included on the DOD list. H.R. 601 was extended through March 23, 2018, by four measures. The fourth measure ( P.L. 115-123 ) included an anomaly to address concerns raised by the Air Force regarding the effects of the CR on certain FY2018 construction requirements. <1.4. How Agencies Implement a CR> After enactment of a CR, OMB provides detailed directions to executive agencies on the availability of funds and how to proceed with budget execution. OMB will typically issue a bulletin that includes an announcement of an automatic apportionment of funds that will be made available for obligation, as a percentage of the annualized amount provided by the CR. Funds usually are apportioned either in proportion to the time period of the fiscal year covered by the CR, or according to the historical, seasonal rate of obligations for the period of the year covered by the CR, whichever is lower. A 30-day CR might, therefore, provide 30 days' worth of funding, derived either from a certain annualized amount that is set by formula or from a historical spending pattern. In an interim CR, Congress also may provide authority for OMB to mitigate furloughs of federal employees by apportioning funds for personnel compensation and benefits at a higher rate for operations, albeit with some restrictions. In 2017 testimony before the Senate Subcommittee on Federal Spending Oversight and Emergency Management, Committee on Homeland Security and Governmental Affairs, a senior Government Accountability Office (GAO) analyst remarked that CRs can create budget uncertainty and disruptions, complicating agency operations and causing inefficiencies. Director of Strategic Issues Heather Krause asserted that "this presents challenges for federal agencies continuing to carry out their missions and plan for the future. Moreover, during a CR, agencies are often required to take the most limited funding actions." Krause testified that agency officials report taking a variety of actions to manage inefficiencies resulting from CRs, including shifting contract and grant cycles to later in the fiscal year to avoid repetitive work, and providing guidance on spending rather than allotting specific dollar amounts during CRs, to provide more flexibility and reduce the workload associated with changes in funding levels. When operating under a CR, agencies encounter consequences that can be difficult to quantify, including additional obligatory paperwork, need for additional short-term contracting actions, and other managerial complications as the affected agencies work to implement funding restrictions and other limitations that the CR imposes. For example, the government can normally save money by buying in bulk under annual appropriations lasting a full fiscal year or enter into new contracts (or extend their options on existing agreements) to lock in discounts and exploit the government's purchasing power. These advantages may be lost when operating under a CR. <2. Unique Implementation Challenges Faced by DOD> All federal agencies face management challenges under a CR, but DOD faces unique challenges in providing the military forces needed to deter war and defend the country. In a letter to the leaders of the armed services committees dated September 8, 2017, then-Secretary of Defense James Mattis asserted that "longer term CRs impact the readiness of our forces and their equipment at a time when security threats are extraordinarily high. The longer the CR, the greater the consequences for our force." DOD officials argue that the department depends heavily on stable but flexible funding patterns and new start activities to maintain a modernized force ready to meet future threats. Former Defense Secretary Ashton Carter posited that CRs put commanders in a "straitjacket" that limits their ability to adapt, or keep pace with complex national security challenges around the world while responding to rapidly evolving threats like the Islamic State. <2.1. Prohibitions on Certain Contracting Actions> As discussed, a CR typically includes a provision prohibiting DOD from initiating new programs or increasing production quantities beyond the prior year's rate. This can result in delayed development, production, testing, and fielding of DOD weapon systems. An inability to execute funding as planned can induce costly delays and repercussions in the complex schedules of weapons system development programs. Under a CR, DOD's ability to enter into planned long-term contracts is also typically restricted, thus forfeiting the program stability and efficiencies that can be gained by such contracts. Additionally, DOD has testified to Congress that CRs impact trust and confidence with suppliers, which may increase costs, time, and potential risk. <2.2. Misalignments in CR-Provided Funding> Because CRs constrain funding by appropriations account rather than by program, DOD may encounter significant issues with programs that draw funds from several accounts. Already mentioned, above, is the color of money issue that can arise when a weapons program transitions from development into production. In such cases, the program could have excess R&D funding (based on the prior year's appropriation) and a shortfall in procurement funds needed to ramp up production. A CR also can result in problems specific to the apportionment of funding in the Navy's shipbuilding account, known formally as the Shipbuilding and Conversion, Navy (SCN) appropriation account. SCN appropriations are specifically annotated at the line-item level in the DOD annual appropriations bill. As a consequence, under a CR, SCN funding is managed not at the appropriations account level, but at the line-item level. For the SCN account uniquely among DOD acquisition accounts this can lead to misalignments (i.e., excesses and shortfalls) in funding under a CR for SCN-funded programs, compared to the amounts those programs received in the prior year. The shortfalls in particular can lead to program execution challenges under an extended or full-year CR. <3. Assessing the Impact on DOD> Published reports on the effect of CRs on agency operations typically provide anecdotal assertions that such funding measures increase costs and reduce efficiencies. However, these accounts typically do not provide data that would permit a systematic analysis of CR effects. Nor do they address the impact of CR-caused near-term bureaucratic disruption on the combat capability and readiness of U.S. forces over the longer-term. One exception to this general rule discussed below is a 2019 study by the RAND Corporation of the effect of CRs on a limited number of DOD procurement programs. That analysis, "did not find strong evidence indicating that CRs are generally associated with delays in procurement awards or increased costs," although the authors of the study emphasized that, because of its limited scope, the study, "does not imply that the widely expressed concerns regarding CR effects are invalid." <3.1. The Navy's $4 Billion Price Tag> One widely publicized estimate of the cost of recent CRs stands apart in the level of detail available on how the figure was calculated. In a December 4, 2017, speech at a defense symposium, Secretary of the Navy Richard Spencer said that CRs had cost the Navy, "about $4 billion since 2011." CRS asked the Navy for the source of the $4 billion figure and for details on how it was calculated. In response, the Navy provided CRS with an information paper that stated the following in part: CRs have averaged 106 days per year in the last decade, or 29% of each year. This means over one quarter of every year is lost or has to be renegotiated for over 100,000 DON [Department of the Navy] contracts (conservative estimate) and billions of dollars. Contractors translate this CR uncertainty into the prices they charge the government. The cost factors at work here are: price uncertainty caused by the CR and reflected in higher rates charged to the government; government time to perform multiple incremental payments or renegotiate; and contractor time to renegotiate or perform unnecessary rework caused by the CR. These efforts are estimated at approximately 1/7 th of a man-year for all stakeholders or $26K [$26,000] per average contract. $26K x 100,000 contracts = $2.6B [$2.6 billion] per year. While the estimate for each contract would be different, it can readily be seen that this is a low but reasonable estimate. The Navy paper did not provide any justification for the assumptions underpinning that calculation. <3.2. RAND Procurement Study> The literature on CR effects includes one relatively rigorous effort to determine whether multi-month CRs are associated with delays and cost increases in DOD procurement programs. The study, conducted in 2017 by the RAND Corporation, was sponsored by the office of DOD's senior acquisition official (the then-Under Secretary of Defense for Acquisition, Technology, and Logistics). Summarizing its review of the literature on CR effects, the RAND team said Because of a lack of quantitative data, many of the [asserted] consequences would be very difficult to estimate quantitatively or to conclusively demonstrate. All of the research that we reviewed on the consequences of operating under a CR employed qualitative approaches that focused on case studies, assertions, and anecdotal information. To see whether CRs systematically are associated with cost increases and delays in DOD procurements, RAND examined 151 procurement awards for relatively high-profile programs during FY2013-FY2015. In each of those years, DOD operated under CRs for several months. Comparing procurement awards originally scheduled to occur while the agency was under a CR with those made after a regular appropriations bill had been enacted, the study found no statistically significant difference between the two groups in whether an award was delayed; if it was delayed, the length of the delay; or whether the unit cost increased compared with the projected cost. RAND also compared the 151 procurement awards made during FY2013-FY2015 years when there were prolonged CRs with 48 awards made during FY1999, when DOD operated under a CR for only the first 3 weeks of the fiscal year. A comparison of the awards made during the period of "long-CRs" (2013-15) with awards made during a period in which there was one relatively short CR (FY1999) showed no statistically significant difference in the percentage of awards that were delayed; for cases in which a delay occurred, longer delays in FY2013-FY2015 than in the earlier period; and larger unit-cost increases (relative to original projections) for cases during the FY1999 (i.e., the "short-CR" period). In sum, RAND concluded, "we did not find strong evidence that CRs are generally associated with delays in procurement awards or increased costs. On the other hand, given the limitations inherent in our statistical analysis, we cannot use its results to rule out the occurrence of these kinds of negative effects." <3.3. Issues for Congress> Inasmuch as CRs have become relatively routine, Congress may wish to mandate a broader and more systematic assessment of DOD's use of what the RAND study calls "levers of management discretion" to ameliorate their potential adverse impacts. In addition to cataloguing the techniques used and estimating their near-term costs, if any, Congress also may sponsor assessments of the impact of CRs over the longer term. After nearly a decade of managerial improvisation to cope with relatively long-term CRs' disruption of normal procedures, Congress may wish to look for evidence that the DOD has suffered adverse systemic impacts problems that go beyond marginal increases in cost or time to impair DOD's ability to protect the national security.

This report provides a basic overview of interim continuing resolutions (CRs) and highlights some specific issues pertaining to operations of the Department of Defense (DOD) under a CR. DOD has started the fiscal year under a CR for 13 of the past 18 years (FY2002-FY2019) and every year since FY2010 excluding FY2019. The amount of time DOD has operated under CR authorities during the fiscal year has tended to increase in the past 10 years and equates to a total of more than 39 months since 2010. As with regular appropriations bills, Congress can draft a CR to provide funding in many ways. Under current practice, a CR is an appropriation that provides either interim or full-year funding by referencing a set of established funding levels for the projects and activities that it funds (or covers ). Such funding may be provided for a period of days, weeks, or months and may be extended through further continuing appropriations until regular appropriations are enacted, or until the fiscal year ends. In recent fiscal years, the referenced funding level on which interim or full-year continuing appropriations has been based was the amount of budget authority that was available under specified appropriations acts from the previous fiscal year. CRs may also include provisions that enumerate exceptions to the duration, amount, or purposes for which those funds may be used for certain appropriations accounts or activities. Such provisions are commonly referred to as anomalies . The purpose of anomalies is to preserve Congress's constitutional prerogative to provide appropriations in the manner it sees fit, even in instances when only interim funding is provided. The lack of a full-year appropriation and the uncertainty associated with the temporary nature of a CR can create management challenges for federal agencies. DOD faces unique challenges operating under a CR while providing the military forces needed to deter war and defend the country. For example, an interim CR may prohibit an agency from initiating or resuming any project or activity for which funds were not available in the previous fiscal year (i.e., prohibit the use of procurement funds for "new starts," that is, programs for which only R&D funds were appropriated in the previous year). Such limitations in recent CRs have affected a large number of DOD programs. Before the beginning of FY2018, DOD identified approximately 75 weapons programs that would be delayed by the FY2018 CR's prohibition on new starts and nearly 40 programs that would be affected by a restriction on production quantity. In addition, Congress may include provisions in interim CRs that place limits on the expenditure of appropriations for programs that spend a relatively high proportion of their funds in the early months of a fiscal year. Also, if a CR provides funds at the rate of the prior year's appropriation, an agency may be provided additional (even unneeded) funds in one account, such as research and development, while leaving another account, such as procurement, underfunded. By its very nature, an interim CR limits an agency's ability to take advantage of efficiencies through bulk buys and multi-year contracts. It can foster inefficiencies by requiring short-term contracts that must be reissued once additional funding is provided, requiring additional or repetitive contracting actions. On the other hand, there is little evidence one way or the other as to whether the military effectiveness of U.S. forces has been fundamentally degraded by the limitations imposed by repeated CRs of months-long duration.

crs_R46282

crs_R46282_0

<1. Introduction> The Department of Veterans Affairs (VA) Caregiver Support Program was born from a new challenge facing veterans returning from recent conflicts. The conflicts in Afghanistan and Iraq (Operation Enduring Freedom, Operation Iraqi Freedom, and subsequent operations, hereinafter referred to as OEF/OIF ) led to a growing number of seriously disabled veterans, many of whom require extended care for the remainder of their lives. Some of those seriously injured while serving in these conflicts survived with injuries that would have been fatal in previous conflicts. In the Vietnam Era, five out of every eight seriously injured servicemembers survived. In OEF/OIF, seven out of eight seriously injured servicemembers survived. Seriously injured servicemembers returning from OEF/OIF conflicts often sustained polytraumatic injuries requiring medically complex care, intensive rehabilitation, and extended or long-term care. Such injuries can include physical injuries (e.g., traumatic brain injuries, amputations, serious burns, spinal cord injuries, and blindness), as well as mental health issues (e.g., posttraumatic stress disorder [PTSD], anxiety, and depression). These types of injuries often have lasting implications for the Department of Defense (DOD) and VA health care and disability systems. Researchers found that family members and close friends to veterans often shouldered much of the burden in the rehabilitation of returning veterans. Family members and friends relocated for extended periods of time while veterans received treatment in hospital settings. Moreover, family and friends often left jobs to act as caregivers for veterans. In recognition of this significant challenge to families, Congress enacted the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ), which required VA to establish specific supports for caregivers of veterans. The Veterans Health Administration (VHA), within VA, offers caregiver support through two programs established by the act: a Program of General Caregiver Support Services (general caregivers program) ; and a Program of Comprehensive Assistance for Family Caregivers ( family caregivers program ). The general caregivers program offers a basic level of support, such as education and training, to caregivers of veterans of all eras enrolled in VA health care. The family caregivers program offers comprehensive supports, such as health care benefits and a monthly stipend, to caregivers of veterans who were seriously injured in the line of duty on or after September 11, 2001. VA refers to these two programs collectively as the Caregiver Support Program. The Caregiver Support Program is distinct from other VA programs in that the beneficiary is a nonveteran with some relationship to a living veteran. VA services and benefits are typically provided only to veterans. (VA does provide some services and benefits to families of deceased veterans, with a few exceptions. ) Generally, caregiver services and benefits are available to caregivers only while the veteran receiving care is living. After many years of advocacy from veterans organizations, among others, the VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (VA MISSION Act; P.L. 115-182 , as amended) was enacted. It required VA to expand eligibility for supports under the family caregivers program to caregivers of veterans of all eras. Expansion is being implemented in two phases, as required by the VA MISSION Act. Veterans who were seriously injured in the line of duty before May 7, 1975, are to become eligible first. Two years later, veterans who served and were injured in the line of duty between May 7, 1975, and September 11, 2001, are to become eligible for the program. This expansion, which has yet to go into effect, is expected to generate a large increase in enrollment and may lead to changes to the underlying structure of the family caregivers program due to a large increase in the number of eligible individuals. Unlike the population currently eligible for the program, this newly eligible population is older and may have different disabling conditions that require personal care assistance, characteristics that may present a challenge to determining eligibility based on an injury in the line of duty. (See the text box "Proposed Rule Published on March 6, 2020" for information on a proposed rule to implement requirements under the VA MISSION Act.) <2. The Caregiver Support Program> Title I of the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ) includes programs and services to provide support to caregivers of veterans. Specifically, the act amends Title 38, Chapter 17, Subchapter II of the United States Code (U.S.C.) by establishing two programs to assist family caregivers. The first is a Program of Comprehensive Assistance for Family Caregivers, for caregivers of eligible veterans who incurred a serious injury in the line of duty while actively serving in the military on or after September 11, 2001 (referred to as the as the family caregivers program in this report). The second is a Program of General Caregiver Support Services, for caregivers of covered veterans of all eras enrolled in the VA health care system (referred to as the general caregivers program in this report). VA refers to the two programs together as the Caregiver Support Program. The Appendix provides a legislative history of the Caregiver Support Program. Title I of the act also amends Title 38 of the U.S.C. to provide the following services: (1) medical care to certain primary family caregivers; (2) counseling and mental health services to certain family caregivers and other caregivers; and (3) lodging and subsistence for attendants who travel with veterans for medical treatment, regardless of whether they require an attendant for such travel. The VA MISSION Act required VA to add additional services to the family caregivers program, to implement a new information technology (IT) system to support the family caregivers program, and to expand eligibility for the program to caregivers of veterans of all eras. <2.1. Caregiver Designations and Eligibility for Support> Title I of the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ) creates two caregiver designations: general caregiver and family caregiver. Within the family caregiver designation, the act established a primary designation. VA refers to individuals not designated primary as secondary family caregivers. Multiple individuals can be designated as a family caregiver for one veteran, hence the primary and secondary designations. Both primary and secondary family caregivers are provided supports through the family caregivers program. General caregivers are provided supports through the general caregivers program. Caregiver designation is conferred based on both the veteran's and the caregiver's eligibility for either of the two programs. Figure 1 shows these caregiver designations under the appropriate VA program. <2.2. Eligibility for the General Caregivers Program> The general caregivers program does not have a formal application process. Likewise, VA does not require a clinical evaluation to obtain benefits through the general caregivers program. A general caregiver may not be a primary or secondary family caregiver, as designated under the family caregivers program, and must provide personal care services to a veteran who is enrolled in the VA health care system and is either unable to perform an activity of daily living (ADL), or in need of supervision or protection based on symptoms or residuals of neurological or other impairment or injury (supervision or protection). The veteran's general caregiver is not required to reside with the veteran. To receive services under the general caregivers program, the veteran or the caregiver must contact a local VA medical center. The caregiver is identified in the veteran's medical record for the purpose of care coordination. VA health care providers are required to recognize the caregiver as a collaborative partner in the care of the veteran. <2.3. Eligibility for the Family Caregivers Program> The family caregivers program requires veterans and their caregivers to undergo an eligibility determination process before conferring caregiver designation under the program. Individuals who wish to be designated by VA as primary or secondary family caregivers must complete and sign a joint application with the veteran. Figure 2 describes the eligibility requirements that veterans and caregivers must meet before submitting an application, and the process used to determine eligibility after the application is submitted. <2.3.1. Veteran Eligibility Criteria> To qualify for the family caregivers program, an individual must first either (1) meet the statutory definition of a veteran , meaning an individual who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable, or (2) be a servicemember who has been issued a date of medical discharge from the military. Since the inception of the family caregivers program, the basis of veteran eligibility has been a serious injury incurred in the line of duty on or after September 11, 2001. As such, veterans eligible for this program are referred to as post-9/11 veterans. (See the " Issues for Congress " section for information on eligibility for pre-9/11 veterans.) In addition to this post-9/11 requirement, the veteran must have been in need of personal care services for a minimum of six continuous months due to either of the following clinical criteria: an inability to perform one or more activities of daily living (ADL), or a need for supervision or protection based on symptoms or residuals of neurological or other impairment or injury (supervision or protection). In addition to those criteria, the veteran's primary care team must determine clinically that it is in the best interest of the veteran to participate in the program. The veteran cannot receive personal care services simultaneously and regularly by another individual or entity who is not the family caregiver. The veteran must agree to receive care at home from the family caregiver and to receive ongoing care from a primary care team after VA designates a family caregiver. The following section describes the ADLs recognized by VA for the purpose of establishing eligibility for the family caregivers program. The section below that one describes the VA-recognized reasons why a veteran may need supervision or protection; these reasons are based on symptoms or residuals of neurological or other impairment or injury. <2.3.1.1. Eligibility Based on ADLs> VA considers the following seven ADLs when determining a veteran's eligibility for the family caregiver program: 1. Eating. The ability to feed oneself. Specifically, the process of eating, chewing, and swallowing. This does not include preparing food. 2. Grooming. The ability to safely tend to personal hygiene needs. 3. Bathing. The ability to wash the entire body safely. 4. Dressing and u ndressing. The ability to dress and/or undress the upper and lower body with or without dressing aids. 5. Toileting. The ability to maintain perineal hygiene and adjust clothing before and/or after using the toilet or bedpan; the ability to manage an ostomy, including cleaning the area around stoma but not managing equipment; or ability to manage urinary catheter or urinal. 6. Prosthetic a djustment. The ability to adjust special prosthetic or orthopedic appliances without assistance. The adjustment of appliances that any person (with or without a disability) would need assistance with should not be scored (e.g., supports, belts, lacing at back). 7. Mobility. The ability to transfer safely from bed to chair and/or chair to toilet, the ability to turn and position self in bed, the ability to walk safely on a variety of surfaces, and the ability to go upstairs. The inability to perform any one of these ADLs for a minimum of six continuous months is a qualifying factor for enrollment in the program. The VA also tracks a veteran's ability to perform instrumental activities of daily living (IADLs). However, IADLs are not considered in the eligibility determination process. <2.3.1.2. Eligibility Based on Supervision or Protection> VA recognizes seven reasons that a veteran may need supervision or protection under this clinical criterion: 1. Seizures . The veteran is unable to manage seizures independently. 2. Planning and o rganizing. The veteran has difficulty planning and organizing daily tasks, appointments, and medication regiments. 3. Safety. The veteran is unable to maintain safety with self and others. This may include a risk of falling or wandering. 4. Sleep. The veteran has difficulty regulating sleep without intervention. 5. Delusions/ h allucinations. The veteran is unable to maintain safe behavior in response to delusions (irrational beliefs) or hallucinations (serious disturbances in perception). 6. Impairment of r ecent m emory. The veteran has difficulty remembering recent events and learning new information. 7. Affective/ b ehavioral d ysregulation ( s elf- r egulation) . The veteran is unable to regulate behavior without exhibiting any of the following behaviors: aggressive or combative with self or others, verbally disruptive including yelling, threatening and excessive profanity, impaired decision making, inability to appropriately stop activities, and disruptive, infantile or socially inappropriate behavior. The need for supervision or protection based on any one of these reasons for a minimum of six continuous months is a qualifying factor for enrollment in the program. <2.3.2. Family Caregiver Eligibility Criteria> Under the family caregivers program, a caregiver must be at least 18 years of age, and be either a family member or a person who is living with the veteran or will live with the veteran upon approval. An individual is considered a family member if he or she is the eligible veteran's spouse, son, daughter, parent, step-family member, or extended family member. Although the family caregiver status includes the term family , the individual is not required to have any familial relationship with the veteran. Furthermore, to apply for the family caregivers program, an individual is not required to currently live with the veteran. The individual simply has to certify that he or she will live with the veteran upon approval as a family caregiver. <2.3.3. Applying for the Family Caregivers Program> If a veteran meets the eligibility criteria for the family caregivers program, he or she is encouraged to apply using VA form 10-10CG. The application can either be mailed to the VA Health Eligibility Center or submitted to the caregiver support coordinator at the veteran's local VA medical center. The application asks the veteran to identify up to three family caregivers one primary family caregiver and two secondary family caregivers. The qualification requirements are the same for the primary or secondary family caregivers. However, primary family caregivers are provided additional benefits, which are listed in Table 1 . After receiving the application, VA evaluates eligibility by identifying the veteran's potential qualifying injury and assessing whether it may render the veteran in need of personal care services. Before the approval and designation of family caregiver(s), the applicant undergoes an initial assessment, education, training, and an initial home care assessment. The entire VA approval process should be completed within 45 calendar days from the date of submission of an application. The 45-day deadline can be extended if a veteran is hospitalized during the application process or if the caregiver has not completed the required education and training. <2.3.3.1. Initial Assessment> A VA primary care team initially assesses each caregiver applicant to confirm that he or she is able to complete caregiver education and training. This initial assessment is completed at a VA medical center. The primary goals of this initial assessment are to assess whether the caregiver applicant can (1) communicate and understand details of the specific care needs related to the veteran and (2) follow a specific treatment plan for the veteran. During this initial assessment, the VA primary care team determines whether the veteran is eligible for the program. The team examines administrative eligibility (i.e., whether the veteran is enrolled in the VA health care system and has a documented serious injury that was incurred or aggravated in the line of duty on or after September 11, 2001) and clinical eligibility (i.e., the veterans need for personal care services). The veteran is assigned to a tier level during the clinical evaluation based on the number of hours of personal care services needed. (See the text box "Centralized Eligibility and Appeals Teams" for information on how VA is implementing centralized teams to change the eligibility determination process.) During the initial assessment, prospective caregivers are eligible for the Veterans Transportation Service (VTS) program. The VTS provides free transportation services to and from a VA medical center. <2.3.3.2. Education and Training> Following the initial assessment, VA administers a training program that consists of topics generally applicable to caregivers, as well as topics targeted to the needs of the specific veteran. The training program must cover 10 specific core competencies: medication management, vital signs and pain control, infection control, nutrition, functional activities, activities of daily living, communication and cognition skills, behavior management skills, skin care, and caregiver self-care. During this education and training process, prospective caregivers are eligible for either VTS or the VA beneficiary travel program, which reimburses travel expenses related to the veteran's medical appointments. The prospective caregiver can be reimbursed for expenses such as the cost of transport, lodging, and meals. In addition, during this period VA provides respite care for the veteran, if necessary. (For information on respite care, see the " Services and Benefits for General Caregivers " section.) <2.3.3.3. Initial Home Care Assessment> The final step before approval and designation is an initial home care assessment. In this step, a VA clinician or clinical team visits the veteran's home to assess whether the caregiver is competent to provide personal care services and to measure the veteran's well-being. The clinician or clinical team assesses the veteran's ability to complete ADLs and IADLs, identifies special care needs (e.g., use of a feeding tube), monitors vital signs, looks for signs of abuse or neglect, notes other potential health or safety risks, and screens both the veteran and the caregiver for depression. The clinician or clinical team is not responsible for developing a care plan or for management of the veteran's conditions. However, the clinician or clinical team is responsible for reporting any findings to the veteran's primary care team. The clinician or clinical team can also recommend referrals for follow-up care. VA requires that this assessment be completed within 10 days of certification that the caregiver completed the requisite education and training curriculum. If the veteran is hospitalized before the assessment is conducted, VA must conduct the assessment within 10 days from the date the veteran returns home. <2.3.3.4. Approval and Designation> If the veteran and his or her caregiver(s) are deemed eligible following the initial home care assessment, VA will approve the application and designate the primary and/or secondary family caregivers. Approval of one caregiver is not contingent on the approval of other caregivers listed on the application. For instance, if a veteran designates two caregivers, but only one of the two completed the required training, VA may still approve the individual who completed the training. VA informs veterans and caregivers deemed ineligible of their ability to appeal the decision. Appeals may be filed at either the local VA facility or at the VISN level. <2.3.4. Ongoing Monitoring and Revocation of Caregiver Status> Veterans and family caregivers are subject to ongoing monitoring while enrolled in the family caregivers program. VA requires ongoing assessments every 90 days. Assessments can be completed in-person, through video telehealth, or by phone, as well as with an annual in-home visit. The annual visit must be completed in the veteran's home. The purpose of ongoing monitoring is to monitor the veteran's overall health and well-being and adequacy of the personal care services provided by the family caregiver. Caregiver status can be revoked immediately if VA determines that the caregiver or the veteran no longer meet eligibility criteria, or if VA makes a clinical determination that having the family caregiver is no longer in the best interest of the veteran. If the family caregiver designation is revoked because the veteran's condition improves or as the result of the veteran's death or institutionalization the caregiver will continue to receive benefits for 90 days following the loss of the caregiver designation. The family caregiver or the veteran can request that the caregiver designation be revoked. If requested by the caregiver, benefits will terminate immediately upon the date that the caregiver requests revocation. If requested by the veteran, the caregiver will continue to receive benefits for 30 days. If the caregiver whose status is being revoked was a primary family caregiver and another primary family caregiver is designated within 30 days, the revoked caregiver's benefits will terminate the day before the new family caregiver is designated as such. <2.4. Services and Benefits Available to Caregivers> Table 1 lists the services and benefits available under the two caregiver support programs (i.e., the Program of General Caregiver Support Services and the Program of Comprehensive Assistance for Family Caregivers). The table also details which of the three categories of caregiver status (i.e., general caregiver, secondary family caregiver, or primary family caregiver) are eligible for the specific service or benefit. The general caregiver category, which confers the least services and benefits, is presented first; followed by the primary family caregiver category, which confers the most services and benefits. In developing Table 1 , CRS consulted Title 38 of the Code of Fe deral Regulations (38 C.F.R. 71.40 and 71.50), as well as publicly available VHA Directive 1152(1). A detailed description of each service and benefit appears below the table. <2.4.1. Services and Benefits for General Caregivers> As shown in Table 1 , the general caregivers are eligible for various services and benefits: limited to access to the VA caregiver support line; peer mentoring; education, training, and technical support; telehealth; counseling; and respite care. These services and benefits are detailed below. The caregiver support line is available to general and family caregivers, as well as to any individual who calls to learn more about offered services and eligibility. The support line serves as a resource referral center for individuals seeking caregiver information, provides referrals to local VA medical center caregiver support coordinators and other VA or community resources, and provides emotional support to callers. The caregiver support line also hosts monthly education calls for caregivers. An individual must be a caregiver of a veteran enrolled in VA health care, and participants must register for the call in advance. This optional benefit includes courses on managing difficult behavior, self-care, and other topics. The peer support mentoring program facilitates a mentor/mentee relationship between caregivers. Caregivers can join the program as both mentors and mentees. Mentors receive training and are considered volunteers by VA. This program generally asks mentees to commit to a minimum of six months of mentoring. However, VA also offers one-time connections for caregivers who cannot commit to long-term mentoring but who may need brief support. VA offers a variety of education, training , and t echnical s upport , which includes specific programs such as the Building Better Caregivers program and REACH VA, as well as online tools to assist in caregiving duties. This is separate and distinct from the required training that family caregivers must participate in to qualify under the family caregivers program. Building Better Caregivers is an online workshop that offers weekly lessons, guidance, group support, and access to an alumni community for graduates of the program. The workshops are anonymous to facilitate open communication among caregivers. REACH VA is an individual coaching program for caregivers designed to help them build skills to take care of themselves and the veterans for whom they are providing personal care services. This program, unlike others available to general caregivers, is available only to caregivers of veterans diagnosed with amyotrophic lateral sclerosis (ALS), dementia, multiple sclerosis (MS), PTSD, or spinal cord injury/disorder. Coaches generally provide four individual hour-long coaching sessions over a period of two to three months. Additional sessions can be provided if the caregiver and coach believe that they will be beneficial. Telehealth services are provided directly to the veteran. However, they are an indirect benefit to the caregiver, because they allow the veteran to receive medical services without needing a caregiver's assistance in transporting the veteran to medical appointments. Caregivers are able to access VA mobile applications, such as MyHealtheVet , which allows them to view electronic health records, reorder medication, and contact health care providers via secure messaging, among other things. The counseling services provided to general caregivers include consultation, professional counseling, marriage and family counseling, training, and mental health services. However, these services are available only if a veteran's medical team determines that the service is "in connection with the treatment" of a veteran's disability. In other words, the counseling services may be authorized only if they further the objectives of a veteran's treatment plan. For instance, marriage and family counseling may be provided only if it is intended to address the veteran's mental health. VA clinicians are authorized to refer caregivers to the community for counseling when it is not related to the veteran's treatment. Veterans are eligible for 30 days of respite care per calendar year, in general. Respite care is short-term relief for the caregiver, in which another individual acts as the primary caregiver. This care can be provided in an institutional setting or as 24-hour per day in-home care. The respite care must be medically and age-appropriate. Respite care can be provided at the home, in a VA community Living Center, through a contracted community skilled nursing home, or through a VA adult day care program. <2.4.2. Services and Benefits for Secondary Family Caregivers> Secondary family caregivers are eligible for the same suite of benefits as general caregivers. In addition, veterans under the family caregivers program receive primary care team support and monitoring. Secondary family caregivers receive more comprehensive mental health services and travel reimbursement (described below). Unlike the counseling services provided to general caregivers, secondary family caregivers can receive mental health services regardless of the medical benefit to the veteran. These services can be provided with the health of the caregiver in mind rather than treatment of the veteran. Services include individual and group therapy, individual counseling, and peer support groups. Mental health services are limited to outpatient care and do not include medication or medication management. Secondary family caregivers are eligible for travel reimbursement through the VA Beneficiary Travel program when travel is related to the veteran's medical treatment. Reimbursement is not provided when travel is related solely to the treatment of the caregiver (e.g., travel to a VA medical center for mental health services). To receive travel reimbursement, the veteran must be eligible for the program. If eligible, reimbursement includes expenses for lodging and meals, as well as for travel to and from medical appointments. <2.4.3. Services and Benefits for Primary Family Caregivers> Primary family caregivers are eligible for all of the benefits available to both general caregivers and secondary family caregivers. In addition to those benefits, primary family caregivers are eligible to receive health care through the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) and to receive a monthly stipend based on the number of hours of personal care services that a veteran requires. Enrollment in the family caregivers program does not confer eligibility for h ealth care services to all primary family caregivers. Individuals must meet additional criteria to be eligible for enrollment in CHAMPVA. Specifically, caregivers must be unable to access any other form of health plan contract, such as health insurance or a state health plan. Distinct from VA health care provided to enrolled veterans, CHAMPVA is primarily a health insurance program where individuals receive care from private sector health care providers. <2.4.3.1. Caregiver Stipend> In the clinical determination process during the initial assessment, VA assigns veterans to one of three tier levels based on the amount of hours of personal care service required: Tier 1. A maximum of 10 hours of caregiver assistance per week. Tier 2. A maximum of 25 hours of caregiver assistance per week. Tier 3. A maximum of 40 hours of caregiver assistance per week. The tier level is used to calculate monthly stipend levels for primary family caregivers. VA determines the monthly value of the stipend by multiplying the hours corresponding to the assigned tier level by the hourly wage for a home health aide, then multiplying the result by 4.35 weeks (the average number of weeks in a month, according to VA). VA uses the 75 th percentile hourly wage index for a home health aide for the geographic region in which the veteran and caregiver reside, as determined by the Bureau of Labor Services (see the text box "Caregiver Stipend Formula" for the stipend formula). The monthly stipend varies based on the assigned tier level and the geographic region in which the veteran and caregiver reside. The 75 th percentile hourly wage for home health aides ranges from $8.91 in Ponce, PR, to $36.48 in Santa Rosa, CA, with a median nationwide of $13.00. Table 2 provides the average monthly stipend amounts nationwide by tier level. Despite receiving a stipend, primary family caregivers are not considered VA employees and the stipend is not considered taxable income. <2.5. Caregiver Support Program Administration and Funding> This section details the administrative structure of the Caregiver Support Program and provides historical funding for the program. The narrative explaining the administrative structure of the program is largely adapted from the publicly available VHA Directive 1152(1). The funding history is compiled from VA congressional budget submissions. <2.5.1. Caregiver Support Program Administration> The Caregiver Support Program is administered by a central office within VHA. The Caregiver Support Program Office develops national policy and procedures and provides guidance, oversight, and support to regional and local VA staff regarding caregiver support. Two other VA national offices, the Health Eligibility Center (HEC) and the Office of Community Care, perform significant roles in administration of the Caregiver Support Program. The HEC is responsible for processing applications for the family caregiver program. The Office of Community Care calculates and processes stipend payments for family caregivers and administers enrollment and claims processing for family caregivers in CHAMPVA. Regionally, each VISN ensures that every medical center within the VISN employs at least one full-time equivalent Caregiver Support Coordinator and that the program is operated consistently across the VISN. The VISN also maintains a process for appeals related to clinical disputes, which includes independent external review. The VISN employs a clinical staff member as a VISN lead for the Caregiver Support Program. The VISN lead acts as an intermediary between the central office and the Caregiver Support Coordinators at the local level. The VISN lead provides guidance and support to the Caregiver Support Coordinators within the VISN. The caregiver support coordinator administers the program locally at each VA medical center. The coordinator is responsible for managing the family caregiver program at the operational level by coordinating the application process, the initial home care assessment, and ongoing monitoring. The individual also acts as an advocate for caregivers and veterans internally by ensuring that services and benefits are available, as well as by creating educational tools and developing programs. VA has mandated that each medical center have at least one full-time equivalent caregiver support coordinator. <2.5.2. Caregiver Support Program Funding> VA began reporting actual operating expenditures for the Caregiver Support Program in its annual budget submissions in FY2012. Figure 3 shows actual expenditures for FY2012 through FY2019. Between FY2012 and FY2015 the first years of implementation of the Caregiver Support Program expenditures grew by 41.0% annually. Since FY2015, expenditures for the program have stabilized substantially. Between FY2015 and FY2018, expenditures grew by 2.3% annually. In FY2019, expenditures were lower than anticipated, decreasing by 13% from expenditures in FY2018. VA has indicated that decreasing enrollment in recent years may be due to decreasing application approval rates and increases in revocations for veterans and caregivers who do not meet eligibility requirements. The monthly stipend for primary family caregivers in the family caregivers program comprises the largest portion of spending under the Caregiver Support Program. In FY2019, for instance, stipend payments totaled approximately $347 million, or 79% of total program expenditures. Expansion of the family caregiver program to pre-9/11 veterans is expected to significantly increase demand for the program. VA has factored this expected increase into future budget estimates. VA estimates that the program will cost $710 million in FY2020 and nearly $1.2 billion in FY2021. <3. Issues for Congress> Title 1 of the VA MISSION Act expands eligibility for the family caregiver program to pre-9/11 veterans in two phases. This expanded eligibility depends on certification of a new information technology (IT) system to administer the program: Phase 1. 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. Phase 2. Two years after certification, the program is to expand to cover veterans of all eras. Expanding eligibility for the Caregiver Support program raises two potential issues: (1) delays in implementation of an IT system to fully support the system and (2) increased costs associated with eligibility expansion under the act. As program eligibility expands, these issues may be of interest to policymakers. In addition to these two issues, the program may change in other significant ways when VA modifies the regulations necessary to implement the eligibility expansion. VA published a proposed rule to implement the changes required under the VA MISSION Act on March 6, 2020. The public comment period for the proposed rule ends on May 5, 2020. Furthermore, rulemaking to add the expansion populations must be finalized, at the very least, prior to expansion becoming effective. <3.1. IT System Implementation Required for Expansion Is Delayed> The act required VA to implement a new IT system to fully support the family caregiver program by October 1, 2018 nearly four months after the legislation was enacted. The IT system must be able to (1) retrieve the data needed to assess and monitor program and workload trends, (2) manage data for program participation that exceeds VA estimates, and (3) integrate the system with other VHA IT systems. The act required VA to certify that the system had been implemented no later than October 1, 2019. The first phase of eligibility expansion is to become effective when the IT system is certified. However, VA has not yet certified an IT system. Prior to enactment of the VA MISSION Act, the IT system used to support the family caregivers program, the Caregiver Application Tracker (CAT), was deemed inadequate. Specifically, limitations with CAT did not grant the Caregiver Support Program office ready access to the workload data needed to monitor the effects of the program on VA medical center resources. VA attempted to add functionality to CAT in a project called CAT Rescue. However, CAT Rescue was terminated in April 2018 after VA reported defects during system testing. When the VA MISSION Act was enacted, VA was in the midst of replacing CAT with a new IT system, called the Caregivers Tool (CareT). This project began in September 2015. However, VA identified deficiencies in CareT during acceptance testing and terminated the project in February 2019. In March 2019, VA began a third effort to acquire a replacement system, which is based on an existing commercial product. The new system is referred to as the Caregiver Record Management Application (CARMA). VA is deploying CARMA in three phases. The first phase replaced CAT with CARMA and was completed in October 2019. The second phase automated stipend processing within CARMA and was completed in January 2020. The third phase is expected to be completed in summer 2020. In this third phase, VA is updating other legacy systems, enabling online application submission, and enhancing reporting functionality (e.g., business analytics tools). VA has indicated that it expects to certify the system at the completion of phase 3 and the first eligibility expansion will occur at that time. Figure 4 illustrates a timeline of VA initiatives designed to replace the current IT system that supports the program and requirements of the VA MISSION Act. <3.2. Expansion Is Expected to Increase Costs> The family caregivers program currently serves approximately 20,000 post-9/11 veterans and their caregivers. When the first phase of expansion begins, to pre-9/11 veterans injured in the line of duty before May 7, 1975, VA projects that approximately 83,000 additional veterans and their caregivers will become eligible for the program. The number of eligible veterans and caregivers would potentially continue to grow when eligibility expands to all pre-9/11 veterans. The largest cost driver in the family caregivers program is the monthly stipend to family caregivers. In FY2019, stipend payments totaled approximately $347 million, or 79% of total program expenditures. With expansion of the magnitude projected by VA, the number of caregivers receiving monthly stipends will increase. VA estimates that expenditures for the stipend will total $870 million in FY2021 and nearly $1.2 billion in FY2022. As the program expands, other program components may require additional resources to meet the demand resulting from the increased numbers of eligible veterans and caregivers. For instance, as it is currently structured, the program requires ongoing monitoring in a veteran and caregiver's home. In general, a VA clinical team that includes at least two individuals must visit each home on at least an annual basis. To continue to meet this requirement, VA will likely need to increase staffing levels to conduct similar program monitoring and oversight. VA requested nearly $1.2 billion in FY2021 (the first full year implementation of phase 1 of the eligibility expansion), a 276% increase from FY2019 (the last full year in which eligibility was available only to post-9/11 veterans). The FY2022 advance appropriation request is $1.5 billion, which represents only a partial year of implementation of phase 2 of the eligibility expansion. <3.2.1. Appendix. Program Evolution and Legislative History> Program Evolution As military operations in Afghanistan and Iraq progressed, the provision of services and supports to family caregivers of veterans seriously injured in these conflicts moved to the forefront. Family caregiver issues became a focus of the President's Commission on Care for America's Returning Wounded Warriors, established by President G.W. Bush on March 8, 2007. Tasked with providing a comprehensive review of the care provided to injured servicemembers returning from the recent conflicts in Afghanistan and Iraq, the commission issued several recommendations to the President, Congress, DOD, and VA in a final report. Among these recommendations were several DOD and VA recommendations to strengthen family support programs, including providing "families of servicemembers who require long-term personal care with appropriate training and counseling to support them in their new caregiving roles." VA Advisory Committee on OEF/OIF Veterans and Families In April 2007, VA established an independent advisory committee to assess the situation of OEF/OIF veterans and families. The committee was tasked with examining existing VA benefits and services and the need for new benefits and services tailored to OEF/OIF veterans. Committee membership included representation from veterans, family members, and caregivers, as well as veteran service organizations and other advocates and specialists. In 2008, the committee issued an interim report with preliminary observations and recommendations that centered around several themes, including family and caregivers. The Advisory Committee's recommendations, among others, were to increase support to families and caregivers. Specifically, the committee's recommendations and findings consisted of three priorities for caregivers: (1) mental health counseling services for those caregiving for severely injured veterans, particularly over a prolonged time period; (2) financial counseling and fiscal support while caring for severely disabled veterans, as well as training programs; and (3) enhanced efforts regarding information and education about available VA benefits and services. VA Caregiver Advisory Board In June 2008, VA established an interdisciplinary Caregiver Advisory Board to develop a caregiver assistance program. The board's chartered activities include identifying core caregiver needs, developing initial recommendations for VA caregiver support services, and overseeing eight caregiver assistance pilot programs. The pilot programs were conceptualized in December 2007 to examine ways to improve education and to provide training and resources for caregivers assisting veterans. Most of the programs focus on supporting caregivers of veterans with specific conditions, such as dementia and traumatic brain injury. These pilot programs were conducted through the end of FY2009. Caregivers and Veterans Omnibus Health Services Act of 2010 Leading up to enactment of the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ), the 111 th Congress engaged in considerable debate and deliberation about various legislative proposals to assist family caregivers of veterans. The following provides a legislative history of significant proposals to address assistance to family caregivers of veterans and, more specifically, veterans injured in the conflicts in Afghanistan and Iraq. This history begins with legislation first enacted in the 109 th Congress to address greater services and support to family caregivers and ends with passage of the Caregivers and Veterans Omnibus Health Services Act of 2010 in the 111 th Congress. The initial congressional response to providing assistance to family caregivers of veterans from recent conflicts in Iraq and Afghanistan dates back to the 109 th Congress. On May 4, 2006, S. 2753 was introduced by Senator Daniel Akaka. The bill would have required a VA program to improve the provision of caregiver assistance services for veterans. Although the bill did not necessarily focus on caregiving assistance to veterans serving in recent conflicts, but rather all veterans, in his introductory speech Senator Akaka stated: With more veterans returning from combat with severely debilitating injuries, young spouses and parents have been forced to take on an unexpected role as caregivers. Many have interrupted their own careers to dedicate time and attention to the care and rehabilitation of loved ones. These caregivers do not plan for this to happen and are not prepared mentally or financially for their new role. Therefore, we must protect, educate, and lend a helping hand to the caregivers who take on the responsibility and costly burden of caring for veterans, both young and old. This legislation serves to provide comprehensive assistance to these caregivers. Provisions from S. 2753 were included as Section 214 of the Veterans Benefits, Healthcare, and Information Technology Act of 2006 ( P.L. 109-461 ) and enacted on December 22, 2006. P.L. 109-461 authorized VA to conduct a two-year pilot program to improve assistance provided to caregivers, particularly in home-based settings, and authorized $5 million to be appropriated for each of FY2007 and FY2008. The 110 th Congress extended authorization of the caregiver assistance pilot programs through the end of FY2009 under Section 809 of the Veterans' Mental Health and Other Care Improvements Act of 2008 ( P.L. 110-387 ). Assistance to family caregivers received further legislative attention in the 111 th Congress, with legislative proposals introduced to specifically target caregivers of veterans injured while serving in OEF/OIF. In the Senate, Senator Akaka introduced the Family Caregiver Program Act of 2009 ( S. 801 ) on April 2, 2009. In his introductory remarks, Senator Akaka stated: Some veterans returning from the recent wars in Iraq and Afghanistan, as well as previous conflicts, suffer from disabilities that prevent them from being fully independent. This is a sad fact of war. The legislation I am introducing today is designed to provide for several improvements in health care for veterans by supporting the family members who care for them. The challenges faced by family caregivers are well known to us. We have been working on this issue for nearly two years I think we are now beyond the scope of that original pilot program and I believe that a full-fledged permanent program is needed in VA that would have a national program for the caregivers of seriously injured veterans to provide them with education, grants, counseling, and other support services. An amended version of S. 801 was reported by Senator Akaka on September 29, 2009 ( S.Rept. 111-80 ). The amended version would have, among other things, authorized VA to waive the cost of emergency care for caregivers of veterans; created a comprehensive program to provide assistance to the caregivers of severely injured veterans; authorized VA to pay for the caregivers' lodging and subsistence, as well as the expenses of travel for the period consisting of travel to and from a treatment facility and the duration of a treatment episode at that facility; and required VA to collaborate with DOD to conduct a national survey of family caregivers. The House also introduced legislation that would specifically provide assistance to caregivers of OEF/OIF veterans. On July 9, 2009, Representative Michael H. Michaud introduced the Caregiver Assistance and Resource Enhancement Act ( H.R. 3155 ). On July 15, 2009, H.R. 3155 as amended, was ordered reported out of the House Veterans' Affairs Committee ( H.Rept. 111-224 ). The bill was then passed by the House on July 27, 2009. As passed by the House, H.R. 3155 would have required VA to provide support services (including CHAMPVA medical care and stipends) to the eligible caregivers of OEF and OIF veterans. To be eligible, veterans would need to meet three conditions: (1) have a severe service-connected disability or illness; (2) be in need of caregiver services, such that without such services, the veteran would require hospitalization, nursing home care, or other residential institutional care; and (3) be unable to carry out the activities of daily living (including instrumental activities of daily living). A "hold" was placed on S. 801 that prevented the Senate from considering this measure. Subsequently, on October 28, 2009, Senator Akaka introduced a separate bill, the Caregivers and Veterans Omnibus Health Services Act of 2010 ( S. 1963 ), which included provisions from S. 801 , among other provisions. S. 1963 was passed by the Senate on November 11, 2009. The family caregiver provisions in the Senate-passed bill would have waived charges for humanitarian care to attendants of covered veterans under certain circumstances; provided family caregiver assistance including training, respite care, mental health services, and stipends; and provided lodging and subsistence for family caregivers. It would have also required VA, in coordination with DOD, to design and conduct a survey on caregivers and family caregivers. On April 22, 2010, an amended version of S. 1963 was passed by Congress. The final version reflected a compromise agreement between the House and the Senate and included provisions derived from a number of bills, including the earlier Senate-passed S. 1963 and House-passed H.R. 3155 . On May 5, 2010, President Obama signed into law P.L. 111-163 , the Caregivers and Veterans Omnibus Health Services Act of 2010. Title I of the act provides programs and services to provide support to caregivers of veterans. Following enactment of the 2010 legislation that established the Caregiver Support Program, there were a number of legislative attempts to expand eligibility for the Program of Comprehensive Assistance for Family Caregivers to veterans of all eras. This effort ultimately culminated with the enactment of the VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (VA MISSION Act; P.L. 115-182 , as amended).

The conflicts in Iraq and Afghanistan have presented a new challenge for the United States as servicemembers returned from combat with serious injuries that may have been fatal in previous conflicts. These servicemembers require ongoing personal care services, which are often provided by family members and loved ones. In recognition of this significant challenge, Congress enacted the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ), which required the Department of Veterans Affairs (VA) to establish specific supports for caregivers of veterans. The Veterans Health Administration (VHA), within VA, offers caregiver support through two programs that were established by the act: a Program of General Caregiver Support Services ( general caregivers program ); and a Program of Comprehensive Assistance for Family Caregivers ( family caregiver s program ). The general caregivers program offers a basic level of support, such as education and training, to caregivers of veterans of all eras enrolled in VA health care. The family caregivers program offers comprehensive supports, such as health care benefits and a monthly stipend, to caregivers of veterans who were seriously injured in the line of duty on or after September 11, 2001 (post-9/11 veterans). VA refers to these two programs collectively as the Caregiver Support Program. The general caregivers program does not have an application or eligibility determination process. The limited services provided under this program are, generally, available to all caregivers of veterans enrolled in VA health care. Veterans and caregivers who apply for the family caregivers program undergo a multistep eligibility determination process that includes an initial assessment, education, training, and an in-home assessment. VA determines both administrative and clinical eligibility of veterans and caregivers. Caregivers who are eligible and designated as a family caregiver receive a unique suite of comprehensive services and benefits to help them provide care to the veteran. The VA Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018 (VA MISSION Act; P.L. 115-182 , as amended) required VA to expand eligibility for the family caregivers program to caregivers of veterans of all eras. Expansion is being implemented in two phases, as required by the VA MISSION Act. Veterans who were seriously injured in the line of duty before May 7, 1975, are to become eligible first. Two years later, veterans who served and were injured in the line of duty between May 7, 1975, and September 11, 2001, are to become eligible for the program. This expansion, which has yet to go into effect, is expected to generate a large increase in enrollment and may lead to changes to the underlying structure of the family caregivers program due to a large increase in the number of eligible individuals. Unlike the population currently eligible for the program, this newly eligible population comprises older individuals who may have different disabling conditions that require personal care assistance, which may present a challenge to eligibility determination based on an injury in the line of duty. Eligibility expansion is contingent on the implementation and certification of a functioning information technology (IT) system required to fully support the program. The VA MISSION Act required that VA complete certification of a system by October 1, 2019. VA did not meet that deadline and has not yet certified an IT system. VA published a proposed rule to implement the changes required under the VA MISSION Act on March 6, 2020. The public comment period for the proposed rule ends on May 5, 2020. This report provides an overview of the VA Caregiver Support Program, including eligibility criteria that veterans and caregivers must meet to qualify for both the family caregivers program and the general caregivers program; a catalogue of the services and benefits provided under the two programs; and current issues related to implementation of modifications under the VA MISSION Act. The Appendix provides background on the program evolution and a legislative history of the program.

crs_R45755

crs_R45755_0

<1. FY2020 Consideration: Overview of Actions> The first section of this report provides an overview of the consideration of FY2020 legislative branch appropriations, with subsections covering each action to date, including the initial submission of the request on March 11, 2019; hearings held by the House Legislative Branch Appropriations Subcommittee in February, March, and April 2019 and hearings held by the Senate Legislative Branch Appropriations Subcommittee in March and April 2019; the House subcommittee markup held on May 1, 2019; the House full committee markup on May 9, 2019, and reporting of H.R. 2779 ; the Office of Management and Budget (OMB) letter from May 8, 2019, with the Administration's position on the legislative branch budget; discussion in June of the potential inclusion of legislative branch funding in H.R. 2740 (Rules Committee Print 116-17); the Senate full committee markup on September 26, 2019, and reporting of S. 2581 ; the enactment on September 27, 2019, of a continuing resolution providing funding through November 21 ( P.L. 116-59 ), and the enactment on November 21, 2019, of a continuing resolution providing funding through December 20 ( P.L. 116-69 ); and the enactment of the Further Consolidated Appropriations Act ( P.L. 116-94 ) on December 20, 2019, which included funding for legislative branch activities for FY2020 in Division E and additional language related to the legislative branch in Division P. It is followed by a section on prior year actions and funding, which contains a historical table and figure. The report then provides an overview of the FY2020 budget requests of individual legislative branch agencies and entities. Table 5 through Table 9 list enacted funding levels for FY2019 and the requested, House-reported, Senate-reported, and enacted levels for FY2020, while the Appendix lists House, Senate, and conference bills and reports; public law numbers; and enactment dates since FY1998. <1.1. Status of FY2020 Appropriations: Dates and Documents> <1.2. Submission of FY2020 Budget Request on March 11, 2019> The White House submitted its budget for FY2020, which includes the legislative branch budget request, on March 11, 2019. As explained by OMB, The budget covers the agencies of all three branches of Government Executive, Legislative, and Judicial and provides information on Government-sponsored enterprises. In accordance with law or established practice, OMB includes information on agencies of the Legislative Branch, the Judicial Branch, and certain Executive Branch agencies as submitted by those agencies without change. The independence of the submissions by the legislative branch agencies and entities is codified in Title 31, Section 1105, of the U.S. Code , which states the following: Estimated expenditures and proposed appropriations for the legislative branch and the judicial branch to be included in each budget ... shall be submitted to the President ... and included in the budget by the President without change. Furthermore, Division C of the FY2012 Consolidated Appropriations Act ( P.L. 112-74 ) added language to Title 31, Section 1107, relating to budget amendments, stating the following: The President shall transmit promptly to Congress without change, proposed deficiency and supplemental appropriations submitted to the President by the legislative branch and the judicial branch. The FY2020 budget contained a request for $5.288 billion in new budget authority for legislative branch activities (+9.3%). <1.3. Senate and House Hearings on the FY2020 Budget Requests> Table 2 lists the dates of hearings of the legislative branch subcommittees in February, March, and April 2019. Prepared statements of witnesses were posted on the subcommittee websites, and hearing transcripts were published by the Government Publishing Office. <1.4. House Appropriations Committee Subcommittee on the Legislative Branch Markup> On May 1, 2019, the House Appropriations Committee Subcommittee on the Legislative Branch held a markup of the FY2020 bill. The subcommittee recommended $3.943 billion, a $135.2 million increase (+3.6%) from the comparable 2019 enacted level, not including Senate items, which are historically considered by the Senate and not included in the House bill. No amendments were offered, and the bill was ordered reported to the full committee by voice vote. <1.5. House Appropriations Committee Legislative Branch Markup> On May 9, 2019, the House Appropriations Committee met to mark up the FY2020 bill reported from its legislative branch subcommittee. The following amendments were considered: A manager's amendment, offered by Subcommittee Chairman Tim Ryan of Ohio, that would increase funding for the Veterans' History Project by $1.0 million, add report language, and include one technical change. The amendment was adopted by voice vote. A manager's amendment, offered by Subcommittee Chairman Tim Ryan of Ohio, that would increase the overall funding for the bill by $29.0 million to reflect revised 302(b) subcommittee allocations adopted by the committee on May 8 ( H.Rept. 116-59 ). The amendment would increase total House funding by $19.0 million and Architect of the Capitol funding by $10.0 million. Subcommittee Ranking Minority Member Jaime Herrera Beutler offered an amendment to the manager's amendment that would have stricken this additional funding and instead placed it in a spending reduction account. The amendment to the amendment failed by recorded vote (23-28), and the amendment was adopted by voice vote. The bill was ordered reported by recorded vote (28-22). As amended, the bill provided $3.972 billion, not including Senate items (+$164.2 million). <1.6. OMB Letter of May 8, 2019> As it did during consideration of the FY2019 legislative branch appropriations bill, OMB submitted a letter with the Administration's views on the overall size of the legislative branch bill as well as the funding levels for specific accounts. In particular, the Administration letter cited funding levels for the House of Representatives and the Government Accountability Office (GAO). <1.7. Discussion of the Legislative Branch Bill During Consideration of a Rule for Consideration of H.R. 2740> On June 3, the House Committee on Rules announced its intention to consider and report a resolution that would structure consideration in the House of H.R. 2740 , the Labor, Health and Human Services, and Education appropriations bill. The committee indicated that the resolution reported from the Rules Committee would add the text of four additional appropriations bills to the text of H.R. 2740 . This proposal would include the text of H.R. 2779 , the legislative branch appropriations bill as reported by the Committee on Appropriations (to be included as Division B of H.R. 2740 ). The Rules Committee made available the legislative text that included the five appropriations bills and directed Members to draft their amendments to that text (House Rules Committee Print 116-17). Proposed amendments were due to the committee by 10:00 a.m. on Friday, June 7, 2019. A total of 41 draft amendments were submitted related to legislative branch appropriations (Division B). Following reported discussions related to the automatic Member pay adjustment, the resolution reported from the House Rules Committee further altered the version of H.R. 2740 that would be considered by the House, removing the text of the legislative branch appropriations bill. The legislative branch appropriations bill neither funds nor adjusts Member salaries. Provisions prohibiting the automatic Member pay adjustment are sometimes included in the annual appropriations bills. A provision prohibiting the automatic Member pay adjustments could be included in any bill, or be introduced as a separate bill. H.R. 2740 , the Labor, Health and Human Services, Education, Defense, State, Foreign Operations, and Energy and Water Development Appropriations Act, 2020, was ultimately agreed to in the House on June 19, 2019, without the legislative branch appropriations funding. <1.8. Senate Appropriations Committee Legislative Branch Markup and Reporting> On September 26, the Senate Appropriations Committee met to mark up its version of the FY2020 legislative branch appropriations bill. It reported the bill on the same day (by recorded vote, 31-0; S. 2581 , S.Rept. 116-124 ). S. 2581 would have provided $3.600 billion, not including House items, an increase of $187.6 million (+5.5%) from the comparable FY2019 enacted level. <1.9. Continuing Appropriations Resolutions Enacted> Prior to the start of FY2020 on October 1, 2019, a continuing appropriations resolution (CR) providing funding for legislative branch activities through November 21, 2019, was enacted ( P.L. 116-59 , September 27). Another CR, providing funding through December 20, 2019, was enacted on November 21, 2019 ( P.L. 116-69 ). <1.10. FY2020 Funding Enacted on December 20, 2019> The Further Consolidated Appropriations Act ( P.L. 116-94 ) was enacted on December 20, 2019. The act provides $5.049 billion for legislative branch activities for FY2020 in Division E (+$202.8 million, or +4.2%, from the FY2019 level). In addition, Division P (Other Matter) contains titles related to the legislative branch, including Title XIV Library of Congress Technical Corrections . This title includes amendments related to the American Folklife Preservation Act; the National Library Service for the Blind and Print Disabled; establishing a uniform pay scale for Library of Congress Career Senior Executive Positions; and removing a cap on personnel for the Copyright Royalty Judges Program. Title XV Senate Entities . This title includes amendments to 2 U.S.C. 6567 ("Funds for Secretary of Senate to assist in proper discharge within United States of responsibilities to foreign parliamentary groups or other foreign officials") and 2 U.S.C. 6616 ("Support services for Senate during emergency; memorandum of understanding with an executive agency"). Title XVI Legislative Branch Inspectors General Independence . This title focuses on the Inspectors General for the Library of Congress, the Office of the Architect of the Capitol, and the Government Publishing Office. It includes sections on pay, limits on bonuses, counsel, and authorities; law enforcement authority; budgetary independence; and hiring authority. Title XVII Managing Political Fund Activity . This title states that the "Majority Leader and the Minority Leader may each designate up to 2 employees of their respective leadership office staff as designees referred to in the second sentence of paragraph 1 of rule XLI of the Standing Rules of the Senate." <2. Funding in Prior Years: Brief Overview and Trends> <2.1. Legislative Branch: Historic Percentage of Total Discretionary Budget Authority> The percentage of total discretionary budget authority provided to the legislative branch has remained relatively stable at approximately 0.4% since at least FY1976. The maximum level (0.48%) was in FY1995, and the minimum (0.31%) was in FY2009. <2.2. FY2019> FY2019 funding was provided in Division B of the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 ), which was enacted on September 21, 2018. The $4.836 billion provided for the legislative branch represents an increase of $136.0 million (+2.9%) from the FY2018 enacted level. An additional $10.0 million in FY2019 supplemental appropriations for GAO "for audits and investigations related to Hurricanes Florence, Lane, and Michael, Typhoons Yutu and Mangkhut, the calendar year 2018 wildfires, earthquakes, and volcano eruptions, and other disasters declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act" was included in two bills considered in the 116 th Congress: H.R. 268 , which passed the House on January 16, 2019, but cloture was not invoked in the Senate; and H.R. 2157 , which passed the House on May 10 (Roll no. 202) and the Senate (with an amendment) on May 23, 2019 (Record Vote Number: 129). H.R. 2157 was enacted June 6, 2019 ( P.L. 116-20 ). <2.3. FY2018> FY2018 funding was provided in Division I of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), which was enacted on March 23, 2018. The $4.700 billion provided by the act represented an increase of $260.0 million (+5.9%) from the FY2017 enacted level. In addition, P.L. 115-123 , enacted February 9, 2018, provided $14.0 million to GAO "for audits and investigations relating to Hurricanes Harvey, Irma, and Maria and the 2017 wildfires." (Title IX of Division B). <2.4. FY2017> FY2017 funding was provided in Division I of the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which was enacted on May 5, 2017. The $4.440 billion provided by the act represented a $77.0 million increase (+1.7%) from the FY2016 enacted level. <2.5. FY2016> FY2016 funding was provided in Division I of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), which was enacted on December 18, 2015. The $4.363 billion provided by the act represented a $63.0 million increase (+1.5%) from the FY2015 enacted level. <2.6. FY2015> FY2015 funding was provided in Division H of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), which was enacted on December 16, 2014. The $4.300 billion provided by the act represented an increase of $41.7 million (+1.0%) from FY2014. <2.7. FY2014> Neither a legislative branch appropriations bill nor a continuing resolution (CR) containing FY2014 funding was enacted prior to the beginning of the fiscal year on October 1, 2013. A funding gap, which resulted in a partial government shutdown, ensued for 16 days. The funding gap was terminated by the enactment of a CR ( P.L. 113-46 ) on October 17, 2013. The CR provided funding through January 15, 2014. Following enactment of a CR on January 15, 2014 ( P.L. 113-73 ), a consolidated appropriations bill was enacted on January 17 ( P.L. 113-76 ), providing $4.259 billion for the legislative branch for FY2014. <2.8. FY2013> FY2013 funding of approximately $4.061 billion was provided by P.L. 113-6 , which was signed into law on March 26, 2013. The act funded legislative branch accounts at the FY2012 enacted level, with some exceptions (also known as "anomalies"), not including across-the-board rescissions required by Section 3004 of P.L. 113-6 . Section 3004 was intended to eliminate any amount by which the new budget authority provided in the act exceeded the FY2013 discretionary spending limits in Section 251(c)(2) of the Balanced Budget and Emergency Deficit Control Act, as amended by the Budget Control Act of 2011 ( P.L. 112-25 ) and the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ). Subsequent to the enactment of P.L. 113-6 , OMB calculated that additional rescissions of 0.032% of security budget authority and 0.2% of nonsecurity budget authority would be required. The act did not alter the sequestration reductions implemented on March 1, which reduced most legislative branch accounts by 5.0%. The accompanying OMB report indicated a dollar amount of budget authority to be canceled in each account containing nonexempt funds. <2.9. FY2012 and Prior> Division G of the FY2012 Consolidated Appropriations Act ( P.L. 112-74 ) provided $4.307 billion for the legislative branch. This level was $236.9 million below (-5.2%) the FY2011 enacted level. P.L. 112-10 provided $4.543 billion for legislative branch operations in FY2011. This level represented a $125.1 million decrease (-2.7%) from the $4.668 billion provided in the FY2010 Legislative Branch Appropriations Act ( P.L. 111-68 ) and the FY2010 Supplemental Appropriations Act ( P.L. 111-212 ). The FY2009 Omnibus Appropriations Act provided $4.402 billion. In FY2009, an additional $25.0 million was provided for GAO in the American Recovery and Reinvestment Act of 2009. P.L. 111-32 , the FY2009 Supplemental Appropriations Act, also contained funding for a new Capitol Police radio system ($71.6 million) and additional funding for the Congressional Budget Office (CBO) ($2.0 million). As seen in Table 3 , legislative branch funding decreased each year from FY2010 through FY2013. Funding did not exceed the FY2010 level until FY2018. Figure 1 shows the same information graphically, while also demonstrating the division of budget authority across the legislative branch in FY2019. Figure 2 shows the timing of legislative branch appropriations actions, including the issuance of House and Senate reports, bill passage, and enactment, from FY1996 through FY2020. It shows that fiscal year funding for the legislative branch has been determined on or before October 1 six times during this period (FY1997, FY2000, FY2004, FY2006, FY2010, and FY2019); twice during the first month of the fiscal year (FY1998 and FY1999); twice in November (FY1996 and FY2002); seven times in December (FY2001, FY2005, FY2008, FY2012, FY2015, FY2016, and FY2020); and eight times in the next calendar year (FY2003, FY2007, FY2009, FY2011, FY2013, FY2014, FY2017, and FY2018). FY2017 funding, enacted on May 5, 2017, represented the latest date of enactment during this period. <3. FY2020 Legislative Branch Funding Issues> The following sections discuss the various legislative branch accounts. During consideration of the legislative branch bills, the House and Senate conform to a "longstanding practice under which each body of Congress determines its own housekeeping requirements and the other concurs without intervention." <3.1. Senate> <3.1.1. Overall Funding> The Senate requested $1.046 billion for FY2020, an 11.9% increase over the $934.8 million provided in FY2019. The Senate-reported bill recommended, and the FY2020 act provides, $969.4 million (+$34.6 million, +3.7%). Additional information on the Senate account is presented in Table 6 . <3.1.2. Senate Committee Funding> Appropriations for Senate committees are contained in two accounts. 1. The inquiries and investigations account contains funds for all Senate committees except Appropriations. The FY2019 level of $133.3 million was continued in the FY2020 request, the Senate-reported bill, and the FY2020 act. 2. The Committee on Appropriations account contains funds for the Senate Appropriations Committee. The FY2020 enacted level of $15.8 million, which is equivalent to the Senate-requested and -reported level, represents an increase of $297,000 (+1.9%) from the $15.5 million provided in FY2019. <3.1.3. Senators' Official Personnel and Office Expense Account19> The Senators' Official Personnel and Office Expense Account provides each Senator with funds to administer an office. It consists of an administrative and clerical assistance allowance, a legislative assistance allowance, and an official office expense allowance. The funds may be used for any category of expenses, subject to limitations on official mail. The Senate requested $531.1 million, $102.1 million above (+23.8%) the $429.0 million provided in FY2019. Of this amount, $5.0 million is provided for compensating Senate interns. The Senate-reported bill recommended, and the FY2020 act provides, $449.0 million, an increase of $20.0 million (+4.7%). <3.1.3.1. Administrative Provisions> S. 2581 included two administrative provisions: 1. One provision, which was first included in FY2016, would require amounts remaining in the Senators' Official Personnel and Expense Account (SOPOEA) to be used for deficit reduction or to reduce the federal debt. This provision was included in P.L. 116-94 . 2. One provision would continue the freeze on Member salaries at the 2009 level. Member salaries are funded in a permanent appropriations account, and the legislative branch bill does not contain language funding or increasing Member pay. A provision prohibiting the automatic Member pay adjustments could be included in any bill, or be introduced as a separate bill. This provision was included in Section 7 of P.L. 116-94 . <3.2. House of Representatives> <3.2.1. Overall Funding> The House requested $1.356 billion for FY2020, an increase of 10.1% over the $1.232 billion provided for FY2019. The FY2020 act provides $1.366 billion, an increase of 10.8%. Additional information on headings in the House of Representatives account is presented in Table 7 . <3.2.2. House Committee Funding> Funding for House committees is contained in the appropriation heading "committee employees," which typically comprises two subheadings. The first subheading contains funds for personnel and nonpersonnel expenses of House committees, except the Appropriations Committee, as authorized by the House in a committee expense resolution. The House requested $139.1 million, an increase of $11.2 million (+8.8%) from the FY2019 enacted level of $127.9 million. The House-reported bill recommended, and the FY2020 act provides, $135.4 million, an increase of $7.5 million (+5.8%). The second subheading contains funds for the personnel and nonpersonnel expenses of the Committee on Appropriations. The House requested $25.4 million, an increase of $2.3 million (+10.0%) from the FY2019 enacted level of $23.1 million. The House-reported bill recommended, and the FY2020 act provides, $24.3 million, an increase of $1.2 million (+5.0%). <3.2.3. Members' Representational Allowance21> The Members' Representational Allowance (MRA) is available to support Members in their official and representational duties. The House-requested level of $613.0 million represents an increase of $39.4 million (+6.9%) from the $573.6 million provided in FY2019. The House-reported bill recommended, and the FY2020 act provides, $615.0 million, an increase of $41.4 million (+7.2%). A separate account, included in the House-reported bill and the FY2020 act, contains $11.0 million for interns in House Member offices, and $365,000 for interns in House leadership offices. <3.2.3.1. Administrative Provisions> The House requested several administrative provisions related to unexpended balances from the MRA; limiting amounts available from the MRA for leased vehicles; providing additional transfer authority; establishing the allowance for compensation of interns in Member offices; providing for cybersecurity assistance from other federal entities; limiting or prohibiting the delivery of the printed B udget of the United States , the Federal Register , and the House telephone directory; allowing the use of expired funds for the payment of death gratuities for House employees; and allowing the use of expired funds for the employee compensation fund and unemployment compensation. The House-reported bill contained the provisions related to the unexpended MRA balances, leased vehicles, cybersecurity assistance, and use of expired funds. In addition, the House-reported bill included provisions relating to the compensation of interns in Member and Leadership offices; rescinding amounts in the Stationery and Page Dorm revolving funds; and providing for reduction in the amount of tuition charged for children of House Child Care Center employees. P.L. 116-94 includes the provisions from the House-reported bill. <3.3. Support Agency Funding> <3.3.1. U.S. Capitol Police (USCP)> The USCP is responsible for the security of the Capitol Complex, including, for example, the U.S. Capitol, the House and Senate office buildings, the U.S. Botanic Garden, and the Library of Congress buildings and adjacent grounds. The FY2019 enacted level was $456.3 million. In comparison, levels considered for FY2020 include the following: Requested: $463.3 million (+1.5%) House-reported: $463.3 million (+1.5%) Senate-reported: $464.3 million (+1.8%) Enacted: $464.3 million (+1.8%) Additional information on the USCP is presented in Table 8 . Appropriations for the police are contained in two accounts a salaries account and a general expenses account. 1. Salaries the FY2019 act provided $374.8 million for salaries. The USCP requested, and the House-reported bill would have provided, $378.1 million (+0.9%). The Senate-reported bill recommended, and the FY2020 act provides, $379.1 million (+1.1%). 2. General expenses the FY2019 act provided $81.5 million for general expenses. The USCP-requested level of $85.3 million (+4.6%) was contained in the House-reported and Senate-reported bills and the FY2020 act. Another appropriation relating to the USCP appears within the Architect of the Capitol account for Capitol Police buildings and grounds. The FY2019 level was $57.7 million. The USCP requested $54.97 million (-4.8%); the House-reported bill would have provided $52.8 million (-8.4%); the Senate-reported bill would have provided $50.3 million (-12.8%); and the FY2020 act provides $55.2 million (-4.3%). <3.3.1.1. Administrative Provision> The USCP requested, and the House-reported bill and P.L. 116-94 contain, an administrative provision increasing the total limit on student loan repayments from $40,000 to $60,000. The Senate-reported bill did not include this provision. <3.3.2. Office of Congressional Workplace Rights> Formerly known as the Office of Compliance, the Office of Congressional Workplace Rights (OCWR) was renamed by the Congressional Accountability Act of 1995 Reform Act ( P.L. 115-397 ). It is an independent and nonpartisan agency within the legislative branch, and it was originally established to administer and enforce the Congressional Accountability Act of 1995. The act applies various employment and workplace safety laws to Congress and certain legislative branch entities. The FY2019 enacted level was $6.3 million, which was continued in the FY2020 request, the House-reported and Senate-reported versions of the bill, and the FY2020 act. <3.3.3. Congressional Budget Office (CBO)> CBO is a nonpartisan congressional agency created to provide objective economic and budgetary analysis to Congress. CBO cost estimates are required for any measure reported by a regular or conference committee that may affect revenues or expenditures. The FY2019 level was $50.7 million. In comparison, levels considered for FY2020 include the following: Requested: $53.6 million (+5.6%) House-reported: $52.7 million (+3.8%) Senate-reported: $54.9 million (+8.3%) Enacted: $54.9 million (+8.3%) <3.3.4. Office of Technology Assessment (OTA)> Since the closure of OTA, which was a legislative branch agency established in 1972 and last funded in FY1996, Congress has periodically reexamined funding for scientific and technological studies by the legislative branch. Some Members have expressed support for the refunding of OTA through the distribution of "Dear Colleague" letters, at committee hearings and in committee prints, and through the introduction of legislation or amendments. Since FY2002, funding for technology assessments has also been provided to GAO, with frequent references in appropriations and conference reports on the legislative branch appropriations bills. More recently, and in response to language in the FY2019 Senate and conference reports, GAO announced the formation of a new Science, Technology Assessment, and Analytics Team on January 29, 2019. Additionally, the conference report to accompany the FY2019 legislative branch appropriations bill ( H.R. 5895 ) required a study on technology assessments available to Congress: Technology Assessment Study: The Committees have heard testimony on, and received dozens of requests advocating for restoring funding to the Office of Technology Assessment, and more generally on how Congress equips itself with the deep technical advice necessary to understand and tackle the growing number of science and technology policy challenges facing our country. The conferees direct the Congressional Research Service (CRS) to engage with the National Academy of Public Administration or a similar external entity to produce a report detailing the current resources available to Members of Congress within the Legislative Branch regarding science and technology policy, including the GAO. This study should also assess the potential need within the Legislative Branch to create a separate entity charged with the mission of providing nonpartisan advice on issues of science and technology. Furthermore, the study should also address if the creation of such entity duplicates services already available to Members of Congress. CRS should work with the Committees in developing the parameters of the study and once complete, the study should be made available to relevant oversight Committees. The FY2020 House-reported bill would have provided $6.0 million for restarting OTA. The funding would remain available through FY2021. H.Rept. 116-64 further stated the following: To do its job in this modern era, Congress needs to understand and address the issues and risks resulting from a wide range of rapid technological developments such as cryptocurrencies, autonomous vehicles, gene editing, artificial intelligence, and the ever-expanding use of social media platforms, to give just a few examples. A re-opened OTA will play an important role in providing accurate, professional, and unbiased information about technological developments and policy options for addressing the issues those developments raise. In that role, OTA will complement the work of the Government Accountability Office in the area of science and technology.... Since the de-funding of OTA in 1995, there have been several unsuccessful attempts to restore the office. During that time, it has become increasingly clear that Congress does not have adequate resources available for the in-depth, high level analysis of fast-breaking technology developments and their public policy implications that was formerly provided by OTA. While the Government Accountability Office (GAO) has increased its technology assessment activities attempting to fill that gap, the structure and culture of GAO somewhat constrain its ability to replicate OTA. The Office's governance by a bipartisan board and its ability to tap outside expert resources and rely on a Technology Assessment Advisory Council provide the capacity to offer policy recommendation options to Congress, which are not available from other Congressional sources. The Senate-reported bill would not restart OTA, but S.Rept. 116-124 states that the Committee looks forward to reviewing the recommendations of the National Academy of Public Administration study currently underway, including the evaluation of options available to Congress in the area of science and technology. The Committee will continue to engage key authorizing committees and interested members as these discussions continue. S.Rept. 116-124 also addresses the role of the new GAO Science, Technology Assessment, and Analytics Team (STAA), stating In consultation with internal and external stakeholders, academic and nonprofit organizations, and Members of Congress, the STAA team submitted its plan for staffing needs, resources, areas of expertise, and the products and services that the team will provide or are currently providing to Congress. The plan demonstrates STAA's value and ability to assess upcoming technological and digital innovations. Presently, the STAA is providing Congress with technology assessments, technical assistance, and reports in the areas of oversight of Federal technology and science programs, as well as best practices in engineering sciences and cybersecurity. The Committee applauds the efforts of GAO's STAA team and encourages STAA to continue providing Congress with unbiased explanatory data while also exploring new areas for independent science and technology guidance, relevant to Congress. The National Academy of Public Administration (NAPA) study was released on November 14, 2019. It examined three options: Option 1 Enhancing Existing Entities Option 2 Creating a New Agency Option 3 Enhance Existing Entities and Create an Advisory Office NAPA recommended enhancing technology assessment capabilities of both CRS and GAO, while also establishing (1) an Office of the Congressional Science and Technology Advisor led by an appointee of the House and Senate leadership and assisted by a small staff and (2) a Congressional Science and Technology Coordinating Council chaired by the Congressional Science and Technology Advisor to enhance coordination between GAO and CRS. The FY2020 act did not provide funding for restarting OTA. Rather, the explanatory statement accompanying H.R. 1865 stated the following: Science and Technology Needs in Congress : The report released on November 14, 2019, by the National Academy of Public Administration (NAPA) identified the existing gaps in science and technology expertise and resources available to Congress. The Committees, Members, stakeholders and other committees of jurisdiction working together will continue to evaluate the recommendations in the report to address this gap.... Science and Technology Issues : The funding provided will allow GAO to increase support for Congress' work on evolving science and technology issues. The 2019 report from the National Academy of Public Administration (NAPA) identified the need for GAO to focus its advice to Congress on technical assessments and short-to-medium term studies. The study also highlighted that although GAO's support requests from Congress have increased, GAO should consider expanding its outreach to the science and technology community and coordination with CRS to better fill these gaps. GAO is encouraged to dedicate a specific number of experts to work exclusively on GAO's Science, Technology Assessment, and Analytics (STAA) team that was created in January 2019, a recommendation that was included in the NAPA report. <3.3.5. Architect of the Capitol (AOC)> The Architect of the Capitol (AOC) is responsible for the maintenance, operation, development, and preservation of the U.S. Capitol Complex, which includes the Capitol and its grounds, House and Senate office buildings, Library of Congress buildings and grounds, Capitol Power Plant, Botanic Garden, Capitol Visitor Center, and USCP buildings and grounds. The AOC is responsible for the Supreme Court buildings and grounds, but appropriations for their expenses are not contained in the legislative branch appropriations bill. The FY2019 level was $733.7 million. In comparison, levels considered for FY2020 include the following: Requested: $831.7 million (+13.3%) House-reported: $624.7 million (-2.4%, not including Senate-items) Senate-reported: $585.8 million (+9.2%, not including House-items) Enacted: $695.9 million (-5.2%) Operations of the AOC are funded in the following 10 accounts: capital construction and operations, Capitol building, Capitol grounds, Senate office buildings, House office buildings, Capitol Power Plant, Library buildings and grounds, Capitol Police buildings and grounds, Capitol Visitor Center, and Botanic Garden. Additional funding information on the individual AOC accounts is presented in Table 9 . <3.3.5.1. Administrative Provision> The AOC also requested one administrative provision that prohibits the use of funds for bonuses for contractors behind schedule or over budget. This provision has been included in the annual appropriations acts since FY2015. The House-reported version of the provision would apply to FY2020 and each succeeding fiscal year. The Senate-reported bill included the annual provision, which was included in P.L. 116-94 . <3.3.6. Library of Congress (LOC)> The LOC serves simultaneously as Congress's parliamentary library and the de facto national library of the United States. Its broader services to the nation include the acquisition, maintenance, and preservation of a collection of more than 167 million items in various formats; hosting nearly 1.9 million visitors annually; service to the general public and scholarly and library communities; administration of U.S. copyright laws by its Copyright Office; and administration of a national program to provide reading material to the blind and physically handicapped. Its direct services to Congress include the provision of legal research and law-related services by the Law Library of Congress, and a broad range of activities by CRS, including in-depth and nonpartisan public policy research, analysis, and legislative assistance for Members and committees and their staff; congressional staff training; information and statistics retrieval; and continuing legal education for Members of both chambers and congressional staff. The FY2019 level was $696.1 million. In comparison, levels considered for FY2020 include the following: Requested: $747.1 million (+7.3%) House-reported: $720.3 million (+3.5%) Senate-reported: $735.8 million (+5.7%) Enacted: $725.4 million (+4.2%) These figures do not include additional authority to spend receipts. The House Appropriations Committee report ( H.Rept. 116-64 ) explains a change in the technology funding practice that affected the four LOC appropriations headings: Appropriations Shifts to Reflect Centralized Funding for Information Technology : During fiscal year 2018, in an effort to reduce duplication, increase efficiency, and better utilize specialized expertise, the Library of Congress began providing more Information Technology (IT) services centrally though its Office of the Chief Information Officer (OCIO) rather than in the Library's various component organizations. In fiscal years 2018 and 2019, Library components which have separate appropriations accounts reimbursed the main Library of Congress Salaries and Expenses account through intra-agency agreements for the IT services being provided to them centrally by the OCIO under this initiative. For fiscal year 2020, however, the Library has requested that funding for centralized IT services be appropriated directly to the main Salaries and Expenses account for use by the OCIO instead of to the component organizations receiving the services, in order to reflect where services are actually being performed and avoid the need for repeated reimbursement transactions. The Committee has agreed to this request. As a result, the Committee bill reflects a shift in appropriations totaling $13,556,000 to the Library of Congress Salaries and Expenses account, with $2,708,000 of that shift coming from the Copyright Office, $8,767,000 coming from the Congressional Research Service, and $2,081,000 coming from the National Library Service for the Blind and Physically Handicapped. H.Rept. 116-64 further contains a "note regarding IT centralization" accompanying each heading, comparing the FY2020 House-reported level to the FY2019 enacted level after accounting for this shift. The Senate Appropriations Committee report ( S.Rept. 116-124 ) similarly addressed the centralization, stating the following: The recommendation for this account also reflects a shift in appropriations associated with the centralization of information technology [IT] funding from across the Library into the Office of Chief Information Officer [OCIO]. A total of $13,556,000 will move to the OCIO in fiscal year 2020, reflecting the cost of IT activities that were funded previously within the Congressional Research Service, Copyright Office, and the National Library Service for the Blind and Physically Handicapped. The realignment of these funds will help facilitate the final phases of IT centralization across the Library. The Committee expects the Library to provide a detailed spend plan, including any increase in FTE levels for the IT modernization intended to be addressed with the funds provided in fiscal year 2020. The LOC headings include the following: 1. Salaries and expenses The FY2019 level was $474.1 million. The LOC requested $522.6 million (+10.2%). The House-reported bill would have provided $501.3 million, an increase of $13.7 million when reflecting the centralized IT funding, according to H.Rept. 116-64 . The Senate-reported bill would have provided $514.6 million. The FY2020 act provides $504.2 million. These figures do not include authority to spend receipts ($6.0 million in the FY2019 act, the FY2020 request, the House-reported and Senate-reported bills, and the FY2020 act). 2. Copyright Office The FY2019 level was $43.6 million. The LOC requested $43.3 million (-0.7%). The House-reported bill would have provided $42.15 million, an increase of $1.3 million when reflecting the centralized IT funding, according to H.Rept. 116-64 . The Senate-reported bill recommended, and the FY2020 act provides, $42.14 million. These figures do not include authority to spend receipts and prior year unobligated balances ($49.8 million in FY2019; $49.7 million in the FY2020 request, the House-reported and Senate-reported bills, and the FY2020 act). 3. Congressional Research Service The FY2019 level was $125.7 million. The FY2020 request contains $121.6 million (-3.3%). The House-reported bill would have provided $119.9 million, an increase of $2.99 million when reflecting the centralized IT funding, according to H.Rept. 116-64 . The Senate-reported bill recommended, and the FY2020 act provides, $120.5 million. 4. Books for the b lind and p hysically h andicapped The FY2019 level was $52.8 million. The LOC requested $59.6 million (+13.0%). The House-reported bill would have provided $56.9 million, an increase of $6.2 million when reflecting the centralized IT funding, according to H.Rept. 116-64 . The Senate-reported bill recommended, and the FY2020 act provides, $58.6 million. The AOC's budget also contains funds for LOC buildings and grounds. In FY2019, $68.5 million was provided. The FY2020 request contains $121.3 million (+77.1%), the House-reported bill would have provided $86.8 million (+26.7%), the Senate-reported bill would have provided $63.6 million (-7.1%), and the FY2020 act provides $55.7 million (-18.6%). <3.3.6.1. Administrative Provision> The LOC received authority to obligate funds for reimbursable and revolving fund activities ($194.6 million in the FY2019 act; $231.98 million in the FY2020 request , the House-reported and Senate-reported versions of the bill, and the FY2020 act). <3.3.7. Government Publishing Office (GPO)44> The FY2019 enacted level of $117.0 million was continued in the FY2020 request, the House-reported and Senate-reported versions of the bill, and the FY2020 act. This level is approximately equivalent (-0.1%) to the level provided in FY2018 and FY2017. GPO's budget authority is contained in three accounts, with the allocation in the FY2020 request and bills varying slightly from the FY2019 enacted level: 1. Congressional publishing The FY2019 enacted level of $79.0 million is continued in the FY2020 request, the House-reported and Senate-reported versions of the bill, and the FY2020 act. 2. Public information programs of the Superintendent of Documents (salaries and expenses) The FY2020 requested, House-reported, Senate-reported, and enacted level of $31.3 million is $704,000 (-2.2%) less than the FY2019 enacted level of $32.0 million. 3. GPO Business Operations Revolving Fund The FY2020 requested, House-reported, Senate-reported, and enacted level of $6.7 million is $704,000 above the FY2019 enacted level of $6.0 million. <3.3.8. Government Accountability Office (GAO)> GAO responds to requests for studies of federal government programs and expenditures. GAO may also initiate its own work. The FY2019 enacted level was $589.8 million. In comparison, levels considered for FY2020 include the following: Requested: $647.6 million (+9.8%). House-reported: $615.6 million (+4.4%) Senate-reported: $639.4 million (+8.4%) Enacted: $630.0 million (+6.8%) These levels do not include offsetting collections ($35.9 million in the FY2019 act; $24.8 million in the FY2020 request, the House-reported and Senate-reported versions of the bill, and the FY2020 act). <3.3.9. Open World Leadership Center> Open World requested, and the House-reported bill would have provided, $5.8 million for FY2020, an increase of $200,000 (+3.6%) from the $5.6 million provided each year since FY2016. The Senate-reported bill recommended, and the FY2020 act provides $5.9 million, an increase of $300,000 (+5.4%). The Open World Leadership Center administers a program that supports democratic changes in other countries by inviting their leaders to observe democracy and free enterprise in the United States. Congress first authorized the program in 1999 to support the relationship between Russia and the United States. The program encouraged young federal and local Russian leaders to visit the United States and observe its government and society. Established at the LOC as the Center for Russian Leadership Development in 2000, the center was renamed the Open World Leadership Center in 2003, when the program was expanded to include specified additional countries. In 2004, Congress further extended the program's eligibility to other countries designated by the center's board of trustees, subject to congressional consideration. The center is housed in the LOC and receives services from the LOC through an interagency agreement. The legislative branch bills have included a provision since FY2016, also contained in the FY2020 act: That funds made available to support Russian participants shall only be used for those engaging in free market development, humanitarian activities, and civic engagement, and shall not be used for officials of the central government of Russia. The location and future of Open World, attempts to assess its effectiveness, and its inclusion in the legislative branch budget have been discussed at appropriations hearings and in report language for more than a decade. The funding level for Open World has also varied greatly during this period. For additional discussion, see the "Prior Year Discussion of Location and Funding of Open World" section in CRS Report R44899, Legislative Branch: FY2018 Appropriations , by Ida A. Brudnick. <3.3.10. John C. Stennis Center for Public Service Training and Development> The center was created by Congress in 1988 to encourage public service by congressional staff through training and development programs. The FY2020 request, the House- and Senate- reported versions of the bill, and the FY2020 act contain $430,000, which is approximately the same level provided annually since FY2006. <3.4. General Provisions> As in past years, Congress considered a number of general provisions related to the legislative branch. These provisions and their status are listed in Table 4 . <3.5. Introduction to Summary Tables and Appendix> Table 5 through Table 9 provide information on funding levels for the legislative branch overall, the Senate, the House of Representatives, the USCP, and the AOC. The tables are followed by an Appendix , which lists House, Senate, and conference bills and reports; public law numbers; and enactment dates since FY1998. <3.5.1. Appendix. Fiscal Year Information and Resources>

The legislative branch appropriations bill provides funding for the Senate; House of Representatives; Joint Items; Capitol Police; Office of Congressional Workplace Rights (formerly Office of Compliance); Congressional Budget Office (CBO); Architect of the Capitol (AOC); Library of Congress (LOC), including the Congressional Research Service (CRS); Government Publishing Office (GPO); Government Accountability Office (GAO); Open World Leadership Center; and the John C. Stennis Center. The legislative branch budget request was submitted on March 11, 2019. Following hearings in the House and Senate in February, March, and April, the House Appropriations Committee Subcommittee on the Legislative Branch held a markup on May 1, 2019. No amendments were considered, and the bill was ordered reported to the full committee by voice vote. On May 9, 2019, the House Appropriations Committee held a markup of the bill. Two manager's amendments were considered. The first amendment was adopted by voice vote. The second amendment was adopted by voice vote after an amendment to the amendment was not adopted (23-28). The bill was ordered reported ( H.Rept. 116-64 ; H.R. 2779 ). As amended, the bill would have provided $3.972 billion, not including Senate items (+$164.2 million). On June 3, the House Committee on Rules announced its intention to consider and report a resolution that would structure the consideration in the House of H.R. 2740 , the Labor, Health and Human Services, and Education appropriations bill. The committee indicated that the resolution would add the text of four additional appropriations bills to the text of H.R. 2740 , including the text of H.R. 2779 as Division B. Although draft amendments were submitted related to legislative branch appropriations, that division was stricken prior to consideration of H.R. 2740 on the House floor. On September 26, the Senate Appropriations Committee met to mark up its version of the FY2020 legislative branch appropriations bill. It reported the bill on the same day by recorded vote (31-0). S. 2581 ( S.Rept. 116-124 ) would have provided $3.600 billion, not including House items (+$187.6 million). Continuing appropriations resolutions ( P.L. 116-59 and P.L. 116-69 ) provided funding for legislative branch activities until the enactment of P.L. 116-94 on December 20, 2019. Division E provides $5.049 billion (+$202.8 million, or +4.2%, from the FY2019 level). Additional language related to the legislative branch was included in Division P. During consideration of the FY2020 funding levels, Congress also considered $10.0 million in FY2019 supplemental appropriations for GAO for audits and investigations related to storms and disasters ( P.L. 116-20 , enacted June 6, 2019). Previously, over the last decade The FY2019 level of $4.836 billion represented an increase of $136.0 million (+2.9%) from FY2018, not including the FY2019 supplemental. The FY2018 level of $4.700 billion represented an increase of $260.0 million (+5.9%) from FY2017. The FY2017 level of $4.440 billion represented increase of $77.0 million (+1.7%) from FY2016. The FY2016 level of $4.363 billion represented an increase of $63.0 million (+1.5%) from FY2015. The FY2015 level of $4.300 billion represented an increase of $41.7 million (+1.0%) from FY2014. The FY2014 level of $4.259 billion represented an increase of $198 million (+4.9%) from FY2013. The FY2013 level of $4.061 billion represented a decrease of $246 million (-5.6%), including the sequestration and rescission, from FY2012. The FY2012 level of $4.307 billion represented a decrease of $236.9 million (-5.2%) from FY2011. The FY2011 level of $4.543 billion represented a decrease of $125.1 million (-2.7%) from the $4.669 billion provided for FY2010. The smallest of the appropriations bills, the legislative branch bill comprises approximately 0.4% of total discretionary budget authority.

crs_RL32048

crs_RL32048_0

<1. Political History> Iran is a country of nearly 80 million people, located in the heart of the Persian Gulf region. The United States was an ally of the late Shah of Iran, Mohammad Reza Pahlavi ("the Shah"), who ruled from 1941 until his ouster in February 1979. The Shah assumed the throne when Britain and Russia forced his father, Reza Shah Pahlavi (Reza Shah), from power because of his perceived alignment with Germany in World War II. Reza Shah had assumed power in 1921 when, as an officer in Iran's only military force, the Cossack Brigade (reflecting Russian influence in Iran in the early 20 th century), he launched a coup against the government of the Qajar Dynasty, which had ruled since 1794. Reza Shah was proclaimed Shah in 1925, founding the Pahlavi dynasty. The Qajar dynasty had been in decline for many years before Reza Shah's takeover. That dynasty's perceived manipulation by Britain and Russia had been one of the causes of the 1906 constitutionalist movement, which forced the Qajar dynasty to form Iran's first Majles (parliament) in August 1906 and promulgate a constitution in December 1906. Prior to the Qajars, what is now Iran was the center of several Persian empires and dynasties whose reach shrank steadily over time. After the 16 th century, Iranian empires lost control of Bahrain (1521), Baghdad (1638), the Caucasus (1828), western Afghanistan (1857), Baluchistan (1872), and what is now Turkmenistan (1894). Iran adopted Shiite Islam under the Safavid Dynasty (1500-1722), which ended a series of Turkic and Mongol conquests. The Shah was anti-Communist, and the United States viewed his government as a bulwark against the expansion of Soviet influence in the Persian Gulf and a counterweight to pro-Soviet Arab regimes and movements. Israel maintained a representative office in Iran during the Shah's time and the Shah supported a peaceful resolution of the Arab-Israeli dispute. In 1951, under pressure from nationalists in the Majles (parliament) who gained strength in the 1949 Majles elections, he appointed a popular nationalist parliamentarian, Dr. Mohammad Mossadeq, as prime minister. Mossadeq was widely considered left-leaning, and the United States was wary of his drive for nationalization of the oil industry, which had been controlled since 1913 by the Anglo-Persian Oil Company. His followers began an uprising in August 1953 when the Shah tried to dismiss him, and the Shah fled. The Shah was restored to power in a CIA-supported uprising that toppled Mossadeq ("Operation Ajax") on August 19, 1953. The Shah tried to modernize Iran and orient it toward the West, but in so doing he alienated the Shiite clergy and religious Iranians. He incurred broader resentment by using his SAVAK intelligence service to repress dissent. The Shah exiled Ayatollah Ruhollah Khomeini in 1964 because of Khomeini's active opposition to what he asserted were the Shah's anticlerical policies and forfeiture of Iran's sovereignty to the United States. Khomeini fled to and taught in Najaf, Iraq, a major Shiite theological center. In 1978, three years after the March 6, 1975, Algiers Accords between the Shah and Iraq's Baathist leaders that temporarily ended mutual hostile actions, Iraq expelled Khomeini to France, where he continued to agitate for revolution that would establish Islamic government in Iran. Mass demonstrations and guerrilla activity by pro-Khomeini forces caused the Shah's government to collapse. Khomeini returned from France on February 1, 1979, and, on February 11, 1979, he declared an Islamic Republic of Iran. Khomeini's concept of velayat-e-faqih (rule by a supreme Islamic jurisprudent, or "Supreme Leader") was enshrined in the constitution that was adopted in a public referendum in December 1979 (and amended in 1989). The constitution provided for the post of Supreme Leader of the Revolution. The regime based itself on strong opposition to Western influence, and relations between the United States and the Islamic Republic turned openly hostile after the November 4, 1979, seizure of the U.S. Embassy and its U.S. diplomats by pro-Khomeini radicals, which began the so-called hostage crisis that ended in January 1981 with the release of the hostages. Ayatollah Khomeini died on June 3, 1989, and was succeeded by Ayatollah Ali Khamene'i. The regime faced serious unrest in its first few years, including a June 1981 bombing at the headquarters of the Islamic Republican Party (IRP) and the prime minister's office that killed several senior elected and clerical leaders, including then-Prime Minister Javad Bahonar, elected President Ali Raja'i, and IRP head and top Khomeini disciple Ayatollah Mohammad Hussein Beheshti. The regime used these events, along with the hostage crisis with the United States, to justify purging many of the secular, liberal, and left-wing personalities that had been prominent in the years just after the revolution. Examples included the regime's first Prime Minister Mehdi Bazargan; the pro-Moscow Tudeh Party (Communist); the People's Mojahedin Organization of Iran (PMOI, see below); and the first elected president, Abolhassan Bani Sadr. The regime was under economic and military threat during the 1980-1988 Iran-Iraq War. <2. Regime Structure, Stability, and Opposition> Some experts attribute the acrimony that has characterized U.S.-Iran relations since the Islamic revolution to the structure of Iran's regime. Although there are some elected leadership posts and diversity of opinion, Iran's constitution adopted in public referenda in 1980 and again in 1989 reserves paramount decisionmaking authority for a "Supreme Leader" (known in Iran as "Leader of the Revolution"). The President and the Majles (unicameral parliament) are directly elected, and since 2013, there have been elections for municipal councils that set local development priorities and select mayors. Even within the unelected institutions, factional disputes between those who insist on ideological purity and those considered more pragmatic are evident. In part because of the preponderant political power of the clerics and the security services, the regime has faced repeated periodic unrest from minorities, intellectuals, students, labor groups, the poor, women, and members of Iran's minority groups. (Iran's demographics are depicted in a text box below.) U.S. officials in successive Administrations have accused Iran's regime of widespread corruption, both within the government and among its pillars of support. In a speech on Iran on July 22, 2018, Secretary of State Michael Pompeo characterized Iran's government as "something that resembles the mafia more than a government." He detailed allegations of the abuse of privileges enjoyed by Iran's leaders and supporting elites to enrich themselves and their supporters at the expense of the public good. The State Department's September 2018 "Outlaw Regime" report (p. 41) states that "corruption and mismanagement at the highest levels of the Iranian regime have produced years of environmental exploitation and degradation throughout the country." <2.1. Unelected or Indirectly Elected Institutions: The Supreme Leader, Council of Guardians, and Expediency Council> Iran's power structure consists of unelected or indirectly elected persons and institutions. <2.1.1. The Supreme Leader> At the apex of the Islamic Republic's power structure is the "Supreme Leader." He is chosen by an elected body the Assembly of Experts which also has the constitutional power to remove him, as well as to redraft Iran's constitution and submit it for approval in a national referendum. The Supreme Leader is required to be a senior Shia cleric. Upon Ayatollah Khomeini's death, the Assembly selected one of his disciples, Ayatollah Ali Khamene'i, as Supreme Leader. Although he has never had Khomeini's undisputed political or religious authority, the powers of the office ensure that Khamene'i is Iran's paramount leader. Under the constitution, the Supreme Leader is commander-in-chief of the armed forces, giving him the power to appoint commanders. Khamene'i makes five out of the nine appointments to the country's highest national security body, the Supreme National Security Council (SNSC), including its top official, the secretary of the body. Khamene'i also has a representative of his office as one of the nine members, who typically are members of the regime's top military, foreign policy, and domestic security organizations. The Supreme Leader can remove an elected president, if the judiciary or the Majles (parliament) assert cause for removal. The Supreme Leader appoints half of the 12-member Council of Guardians , all members of the Expediency Council , and the judiciary head. <2.1.1.1. Succession to Khamene'i> There is no announced successor to Khamene'i. The Assembly of Experts could conceivably use a constitutional provision to set up a three-person leadership council as successor rather than select one new Supreme Leader. Khamene'i reportedly favors as his successor Hojjat ol-Eslam Ibrahim Raisi, whom he appointed in March 2019 as new head of the judiciary, and in 2016 to head the powerful Shrine of Imam Reza (Astan-e Qods Razavi) in Mashhad, which controls vast property and many businesses in the province. Raisi is a hardliner who has served as state prosecutor and was allegedly involved in the 1988 massacre of prisoners and other acts of repression. The 2019 judiciary appointment suggests that Raisi's chances of becoming Supreme Leader were not necessarily diminished by his loss in the May 2017 presidential elections. Still, the person Raisi replaced as judiciary chief, Ayatollah Sadeq Larijani, remains a succession candidate. Another contender is hardline Tehran Friday prayer leader Ayatollah Ahmad Khatemi, and some consider President Rouhani as a significant contender as well. <2.1.2. Council of Guardians and Expediency Council> Two appointed councils play a major role on legislation, election candidate vetting, and policy. <2.1.2.1. Council of Guardians> The 12-member Council of Guardians (COG) consists of six Islamic jurists appointed by the Supreme Leader and six lawyers selected by the judiciary and confirmed by the Majles . Each councilor serves a six-year term, staggered such that half the body turns over every three years. Currently headed by Ayatollah Ahmad Jannati, the conservative-controlled body reviews legislation to ensure it conforms to Islamic law. It also vets election candidates by evaluating their backgrounds according to constitutional requirements that each candidate demonstrate knowledge of Islam, loyalty to the Islamic system of government, and other criteria that are largely subjective. The COG also certifies election results. Municipal council candidates are vetted not by the COG but by local committees established by the Majles . <2.1.2.2. Expediency Council> The Expediency Council was established in 1988 to resolve legislative disagreements between the Majles and the COG. It has since evolved into primarily a policy advisory body for the Supreme Leader. Its members serve five-year terms. Longtime regime stalwart Ayatollah Ali Akbar Hashemi-Rafsanjani was reappointed as its chairman in February 2007 and served in that position until his January 2017 death. In August 2017, the Supreme Leader named a new, expanded (from 42 to 45 members) Council, with former judiciary head Ayatollah Mahmoud Hashemi Shahroudi as chairman. Shahroudi passed away in December 2018 and Sadeq Larijani, who was then head of the judiciary, was appointed by the Supreme Leader as his replacement. President Hassan Rouhani and Majles Speaker Ali Larijani were not reappointed as Council members but attend the body's sessions in their official capacities. The council includes former president Ahmadinejad. <2.1.3. Domestic Security Organs> The leaders and senior officials of a variety of overlapping domestic security organizations form a parallel power structure that is largely under the direct control of the Supreme Leader in his capacity as Commander-in-Chief of the Armed Forces. State Department and other human reports on Iran repeatedly assert that internal security personnel are not held accountable for human rights abuses. The domestic security organs include the following: The Islamic Revolutionary Guard Corps (IRGC). The IRGC's domestic security role is generally implemented through the IRGC-led volunteer militia force called the Basij . The Basij is widely accused of arresting women who violate the regime's public dress codes and raiding Western-style parties in which alcohol, which is illegal in Iran, might be served. However, IRGC bases are often located in urban areas, giving the IRGC a capability to quickly intervene to suppress large antigovernment demonstrations. Law Enforcement Forces. This body is an amalgam of regular police, gendarmerie, and riot police that serve throughout the country. It is the regime's first "line of defense" in suppressing antiregime demonstrations or other unrest. Ministry of Interior. The ministry exercises civilian supervision of Iran's police and domestic security forces. The IRGC and Basij are generally outside ministry control. Ministry of Intelligence and Security (MOIS). Headed by Mahmoud Alavi, the MOIS conducts domestic surveillance to identify regime opponents and try to penetrate antiregime cells. The Ministry works closely with the IRGC and Basij . Several of these organizations and their senior leaders or commanders are sanctioned by the United States for human rights abuses and other violations of U.S. Executive Orders. <2.2. Elected Institutions/Recent Elections> Several major institutional positions are directly elected by the population, but international observers question the credibility of Iran's elections because of the role of the COG in vetting candidates and limiting the number and ideological diversity of the candidate field. Women can vote and run for most offices, and some women serve as mayors, but the COG interprets the Iranian constitution as prohibiting women from running for the office of president. Candidates for all offices must receive more than 50% of the vote, otherwise a runoff is held several weeks later. Another criticism of the political process in Iran is the relative absence of political parties; establishing a party requires the permission of the Interior Ministry under Article 10 of Iran's constitution. The standards to obtain approval are high: to date, numerous parties have filed for permission since the regime was founded, but only those considered loyal to the regime have been granted license to operate. Some have been licensed and then banned after their leaders opposed regime policies, such as the Islamic Iran Participation Front and Organization of Mojahedin of the Islamic Revolution, discussed in the text box below. <2.2.1. The Presidency> The main directly elected institution is the presidency, which is formally and in practice subordinate to the Supreme Leader. Virtually every successive president has tried but failed to expand his authority relative to the Supreme Leader. Presidential authority, particularly on matters of national security, is also often circumscribed by key clerics and the generally hardline military and security organization called the Islamic Revolutionary Guard Corps (IRGC). But, the presidency is often the most influential economic policymaking position, as well as a source of patronage. The president appoints and supervises the cabinet, develops the budgets of cabinet departments, and imposes and collects taxes on corporations and other bodies. The presidency also runs oversight bodies such as the Anticorruption Headquarters and the General Inspection Organization, to which government officials are required to submit annual financial disclosures. Prior to 1989, Iran had both an elected president and a prime minister selected by the elected Majles (parliament). However, the holders of the two positions were constantly in institutional conflict and a 1989 constitutional revision eliminated the prime ministership. Because Iran's presidents have sometimes asserted the powers of their institution against the office of the Supreme Leader itself, since October 2011, Khamene'i has periodically raised the possibility of eventually eliminating the post of president and restoring the post of prime minister . <2.2.2. The Majles> Iran's Majles , or parliament, is a 290-seat, all-elected, unicameral body. There are five "reserved seats" for "recognized" minority communities Jews, Zoroastrians, and Christians (three seats of the five). The Majles votes on each nominee to a cabinet post, and drafts and acts on legislation. Among its main duties is to consider and enact a proposed national budget (which runs from March 21 to March 20 each year, coinciding with Nowruz). It legislates on domestic economic and social issues, and tends to defer to executive and security institutions on defense and foreign policy issues. It is constitutionally required to ratify major international agreements, and it ratified the JCPOA in October 2015. The ratification was affirmed by the COG. Women regularly run and some generally are elected; there is no "quota" for the number of women. Majles elections occur one year prior to the presidential elections; the latest were held on February 26, 2016. <2.2.3. The Assembly of Experts> A major but little publicized elected institution is the 88-seat Assembly of Experts. Akin to a standing electoral college, it is empowered to choose a new Supreme Leader upon the death of the incumbent, and it formally "oversees" the work of the Supreme Leader. The Assembly can replace him if necessary, although invoking that power would, in practice, most likely occur in the event of a severe health crisis. The Assembly is also empowered to amend the constitution. It generally meets two times a year. Elections to the Assembly are held every 8-10 years, conducted on a provincial basis. Assembly candidates must be able to interpret Islamic law. In March 2011, the aging compromise candidate Ayatollah Mohammad Reza Mahdavi-Kani was named chairman, but he died in 2014. His successor, Ayatollah Mohammad Yazdi, lost his seat in the Assembly of Experts election on February 26, 2016 (held concurrently with the Majles elections), and COG Chairman Ayatollah Ahmad Jannati was appointed concurrently as the Assembly chairman in May 2016. <2.2.4. Recent Elections> Following the presidency regime stalwart Ali Akbar Hashemi-Rafsanjani during 1989-1997, a reformist, Mohammad Khatemi, won landslide victories in 1997 and 2001. However, hardliners marginalized him by the end of his term in 2005. Aided by widespread voiding of reformist candidacies by the COG, conservatives won a slim majority of the 290 Majles seats in the February 20, 2004, elections. In June 2005, the COG allowed eight candidates to compete (out of the 1,014 persons who filed), including Rafsanjani, Ali Larijani, IRGC stalwart Mohammad Baqer Qalibaf, and Tehran mayor Mahmoud Ahmadinejad. With reported tacit backing from Khamene'i, Ahmadinejad advanced to a runoff against Rafsanjani and then won by a 62% to 36% vote. Splits later erupted among hardliners, and pro-Ahmadinejad and pro-Khamene'i candidates competed against each other in the March 2008 Majles elections. Disputed 2009 Election . Reformists sought to unseat Ahmadinejad in the June 12, 2009, presidential election by rallying to Mir Hossein Musavi, who served as prime minister during the 1980-1988 Iran-Iraq War and, to a lesser extent, former Majles speaker Mehdi Karrubi. Musavi's generally young, urban supporters used social media to organize large rallies in Tehran, but pro-Ahmadinejad rallies were large as well. Turnout was about 85%. The Interior Ministry pronounced Ahmadinejad the winner (63% of the vote) only two hours after the polls closed. Supporters of Musavi, who received the second-highest total (about 35% of the vote) immediately protested the results as fraudulent because of the hasty announcement of the results but some outside analysts said the results tracked preelection polls. Large antigovernment demonstrations occurred June 13-19, 2009. Security forces killed over 100 protesters (opposition figure Iran government figure was 27), including a 19-year-old woman, Neda Soltani, who became an icon of the uprising. The opposition congealed into the "Green Movement of Hope and Change." Some protests in December 2009 overwhelmed regime security forces in some parts of Tehran, but the movement's activity declined after the regime successfully suppressed its demonstration on the February 11, 2010, anniversary of the founding of the Islamic Republic. As unrest ebbed, Ahmadinejad promoted his loyalists and a nationalist version of Islam that limits clerical authority, bringing him into conflict with Supreme Leader Khamene'i. Amid that rift, in the March 2012 Majles elections, candidates supported by Khamene'i won 75% of the seats, weakening Ahmadinejad. Since leaving office in 2013, and despite being appointed by Khamene'i to the Expediency Council, Ahmadinejad has emerged as a regime critic. His following appears to be limited, and he has faced prosecutions of alleged corruption, meanwhile returning to his prior work as a professor of civil engineering. <2.2.4.1. June 2013 Election of Rouhani> In the June 14, 2013, presidential elections, held concurrently with municipal elections, the major candidates included the following: Several hardliners that included Qalibaf (see above); Khamene'i foreign policy advisor Velayati; and then-chief nuclear negotiator Seyed Jalilli. Former chief nuclear negotiator Hassan Rouhani, a moderate and Rafsanjani ally. The COG denial of Rafsanjani's candidacy, which shocked many Iranians because of Rafsanjani's prominent place in the regime, as well as the candidacy of an Ahmadinejad ally. Green Movement supporters, who were first expected to boycott the vote, mobilized behind Rouhani after regime officials stressed that they were committed to a fair election. The vote produced a 70% turnout and a first-round victory for Rouhani, garnering about 50.7% of the 36 million votes cast. Hardliners generally garnered control of municipal councils in the major cities. Most prominent in Rouhani's first term cabinet were Foreign Minister: Mohammad Javad Zarif, a former Ambassador to the United Nations in New York, who was assigned to serve concurrently as chief nuclear negotiator (a post traditionally held by the chairman of the Supreme National Security Council). In September 2013, Rouhani appointed senior IRGC leader and former Defense Minister Ali Shamkhani, who generally espouses more moderate views than his IRGC peers, to head that body. Oil Minister: Bijan Zanganeh, who served in the same post during the Khatemi presidency and attracted significant foreign investment to the sector. He replaced Rostam Qasemi, who was associated with the corporate arm of the IRGC. Defense Minister: Hosein Dehgan. An IRGC stalwart, he was an early organizer of the IRGC's Lebanon contingent that evolved into the IRGC-Qods Force. He also was IRGC Air Force commander and deputy Defense Minister. Justice Minister: Mostafa Pour-Mohammadi. As deputy intelligence minister in late 1980s, he was reportedly a decisionmaker in the 1988 mass executions of Iranian prisoners. He was interior minister under Ahmadinejad. In the 115 th Congress, H.Res. 188 would have condemned Iran for the massacre. <2.2.4.2. Majles and Assembly of Experts Elections in 2016> On February 26, 2016, Iran held concurrent elections for the Majles and for the Assembly of Experts. A runoff round for 68 Majles seats was held on April 29. For the Majles, 6,200 candidates were approved, including 586 female candidates. Oversight bodies invalidated the candidacies of about 6,000, including all but 100 reformists. Still, pro-Rouhani candidates won 140 seats, close to a majority, and the number of hardliners in the body was reduced significantly. Independents, whose alignments vary by issue, hold about 50 seats. Seventeen women were elected the largest number since the revolution. The body reelected Ali Larijani as Speaker. For the Assembly of Experts election, 161 candidates were approved out of 800 who applied to run. Reformists and pro-Rouhani candidates defeated two prominent hardliners the incumbent Assembly Chairman Mohammad Yazdi and Ayatollah Mohammad Taqi Mesbah-Yazdi. COG head Ayatollah Jannati retained his seat, but came in last for the 30 seats elected from Tehran Province. He was subsequently named chairman of the body. <2.2.4.3. Presidential Election on May 19, 2017> In the latest presidential election on May 19, 2017, Rouhani won a first-round victory with about 57% of the vote. He defeated a major figure, Hojjat ol-Eslam Ibrahim Raisi a close ally of Khamene'i. Even though other major hardliners had dropped out of the race to improve Raisi's chances, Raisi received only about 38% of the vote. Municipal elections were held concurrently. After vetting by local committees established by the Majles , about 260,000 candidates competed for about 127,000 seats nationwide. More than 6% of the candidates were women. The alliance of reformists and moderate-conservatives won control of the municipal councils of Iran's largest cities, including all 21 seats on the Tehran municipal council. The term of the existing councils expired in September 2017 and a reformist official, Mohammad Ali Najafi, replaced Qalibaf as Tehran mayor. However, Najafi resigned in March 2018 after criticism from hardliners for his viewing of a dance performance by young girls during a celebration of a national holiday. The current mayor, selected in November 2018, is Pirouz Hanachi. <2.2.4.4. Second-Term Cabinet> Rouhani was sworn into a second term in early August 2017. His second-term cabinet nominations retained most of the same officials in key posts, including Foreign Minister Zarif. Since the Trump Administration withdrew from the JCPOA in May 2018, hardliners have threatened to try to impeach Zarif for his role in negotiating that accord. In late February 2019, after being excluded from a leadership meeting with visiting President Bashar Al Asad of Syria, Zarif announced his resignation over the social media application Instagram. Rouhani did not accept the resignation and Zarif resumed his duties. Key changes to the second-term cabinet include the following: Minister of Justice Seyed Alireza Avayee replaced Pour-Mohammadi. Formerly a state prosecutor, Avayee oversaw trials of protesters in the 2009 uprising and is subject to EU travel ban and asset freeze. Defense Minister Amir Hatami, a regular military officer, became the first non-IRGC Defense Minister in more than 20 years and the first regular military officer in that position. The cabinet has two women vice presidents, and one other woman as a member of the cabinet (but not heading any ministry). <2.2.4.5. Periodic Unrest Challenges Regime7> In December 2017, significant unrest erupted in more than 80 cities, mostly over economic conditions, although demonstrations were smaller than the 2009-2010 protests. Protests initially cited economic concerns the high prices of staple foods but quickly evolved to expressions of opposition to Iran's leadership and the expenditure of resources on interventions throughout the Middle East. Some protesters were motivated by Rouhani's 2018-2019 budget proposals to increase funds for cleric-run businesses (" bonyads ") and the IRGC, while cutting subsidies. Rouhani sought to defuse the unrest by acknowledging the right to protest and the legitimacy of some demonstrator grievances. Khamene'i at first attributed the unrest to covert action by Iran's foreign adversaries, particularly the United States, but he later acknowledged unspecified "problems" in the administration of justice. Security officers used force against protester violence in some cities, but experts say they generally exercised restraint. The government also temporarily shut down access to the social media site Instagram and a widely used messaging system called "Telegram." Iranian official media reported that 25 were killed and nearly 4,000 were arrested during that period of unrest. Since February 2018, some women have continued protesting the strict public dress code, and some have been detained. Small protests and other acts of defiance have continued since, including significant unrest in the Tehran bazaar in July 2018 in the context of shortages of some goods and shop closures due to the inability to price their goods for profit. Since September 2018, workers in various industries, including trucking and teaching, have conducted strikes to demand higher wages to help cope with rising prices. Rounds of nationwide teachers' strikes began in mid-February 2019. In mid-2018, possibly to try to divert blame for Iran's economic situation, the regime established special "anticorruption courts" that have, in some cases, imposed the death penalty on businessmen accused of taking advantage of reimposed sanctions for personal profit. Iran also has used military action against armed factions that are based or have support outside Iran. In early 2019, protests have taken place in southwestern Iran in response to the government's missteps in dealing with the effects of significant flooding in that area. The regime has tasked the leadership of the relief efforts to the IRGC and IRGC-QF, working with Iraqi Shia militias who are powerful on the Iraqi side of the border where the floods have taken place. President Trump and other senior officials have supported protests by warning the regime against using force and vowing to hold officials responsible for harming protestors. The Administration also has requested U.N. Security Council meetings to consider Iran's crackdown on the unrest, although no formal U.N. action was taken. The Administration also imposed U.S. sanctions on identified regime officials and institutions responsible for abuses against protestors, including then-judiciary chief Sadeq Larijani, representing the highest-level Iranian official sanctioned by the United States to date. In the 115 th Congress, several resolutions supported the protestors, including H.Res. 676 (passed House January 9, 2018), S.Res. 367 , H.Res. 675 , and S.Res. 368 . <3. Human Rights Practices10> U.S. State Department reports, including the Iran Action Group's September 2018 "Outlaw Regime" document, and reports from a U.N. Special Rapporteur, have long cited Iran for a wide range of abuses aside from its suppression of political opposition including escalating use of capital punishment, executions of minors, denial of fair public trial, harsh and life-threatening conditions in prison, and unlawful detention and torture. In a speech on Iran on July 22, 2018, Secretary of State Pompeo recited a litany of U.S. accusations of Iranian human rights abuses, and stated "America is unafraid to expose human rights violations and support those who are being silenced." State Department and U.N. Special Rapporteur reports have noted that the 2013 revisions to the Islamic Penal Code a nd the 2015 revisions to the Criminal Procedure Code made some reforms, including eliminating death sentences for children convicted of drug-related offenses and protecting the rights of the accused. A "Citizen's Rights Charter," issued December 19, 2016, at least nominally protects free expression and is intended to raise public awareness of citizen rights. It also purportedly commits the government to implement the Charter's 120 articles. In August 2017, Rouhani appointed a woman, former vice president Shahindokht Molaverdi, to oversee implementation of the Charter. The State Department's human rights report for 2018 says that key Charter protections for individual rights of freedom to communicate and access information have not been implemented. A U.N. Special Rapporteur on Iran human rights was reestablished in March 2011 by the U.N. Human Rights Council (22 to 7 vote), resuming work done by a Special Rapporteur on Iran human rights during 1988-2002. The Rapporteur appointed in 2016, Asma Jahangir, issued two Iran reports, the latest of which was dated August 14, 2017 (A/72/322), before passing away in February 2018. The special rapporteur mandate was extended on March 24, 2018 and British-Pakistani lawyer Javaid Rehman was appointed in July 2018. The U.N. General Assembly has insisted that Iran cooperate by allowing the Special Rapporteur to visit Iran, but Iran has instead only responded to Special Rapporteur inquiries through agreed "special procedures." Despite the criticism of its human rights record, on April 29, 2010, Iran acceded to the U.N. Commission on the Status of Women. It also sits on the boards of the U.N. Development Program (UNDP) and UNICEF. Iran's U.N. dues are about $9 million per year. Iran has an official body, the High Council for Human Rights, headed by former Foreign Minister Mohammad Javad Larijani (brother of the Majles speaker and the judiciary head). It generally defends the government's actions to outside bodies rather than oversees the government's human rights practices, but Larijani, according to the Special Rapporteur, has questioned the effectiveness of drug-related executions and other government policies. As part of its efforts to try to compel Iran to improve its human rights practices, the United States has imposed sanctions on Iranian officials alleged to have committed human rights abuses, and on firms that help Iranian authorities censor or monitor the internet. Human rights-related sanctions are analyzed in significant detail in CRS Report RS20871, Iran Sanctions , by Kenneth Katzman. <4. U.S.-Iran Relations, U.S. Policy, and Options> The February 11, 1979, fall of the Shah of Iran, who was a key U.S. ally, shattered U.S.-Iran relations. The Carter Administration's efforts to build a relationship with the new regime in Iran ended after the November 4, 1979, takeover of the U.S. Embassy in Tehran by radical pro-Khomeini "Students in the Line of the Imam." The 66 U.S. diplomats there were held hostage for 444 days, and released pursuant to the January 20, 1981 "Algiers Accords." Their release was completed minutes after President Reagan's inauguration on January 20, 1981. The United States broke relations with Iran on April 7, 1980, two weeks prior to a failed U.S. military attempt to rescue the hostages. Iran has since then pursued policies that successive Administrations considered inimical to U.S. interests in the Near East region and beyond. Iran's authoritarian political system and human rights abuses have contributed to, but have not necessarily been central to, the U.S.-Iran rift, although some observers assert that Iran's behavior flows directly from the nature of its regime. Iran has an interest section in Washington, DC, under the auspices of the Embassy of Pakistan, and staffed by Iranian Americans. The former Iranian Embassy closed in April 1980 when the two countries broke diplomatic relations, and remains under the control of the State Department. Iran's Mission to the United Nations in New York runs most of Iran's diplomacy inside the United States. The U.S. interests section in Tehran, under the auspices of the Embassy of Switzerland, has no American personnel. The following sections analyze some key hallmarks of past U.S. policies toward Iran. <4.1. Reagan Administration: Iran Identified as Terrorism State Sponsor> The Reagan Administration designated Iran a "state sponsor of terrorism" in January 1984 a designation established by the Export Administration Act of 1979 largely in response to Iran's backing for the October 1983 bombing of the Marine Barracks in Beirut. The Administration also "tilted" toward Iraq in the 1980-1988 Iran-Iraq War. During 1987-1988, U.S. naval forces fought several skirmishes with Iranian naval elements while protecting oil shipments transiting the Persian Gulf from Iranian mines and other attacks. On April 18, 1988, Iran lost one-quarter of its larger naval ships in an engagement with the U.S. Navy, including a frigate sunk. However, the Administration contradicted its efforts to favor Iraq's war effort by providing arms to Iran ("TOW" antitank weapons and I-Hawk air defense batteries) in exchange for Iran's help in the releasing of U.S. hostages held in Lebanon. On July 3, 1988, U.S. forces in the Gulf mistakenly shot down Iran Air Flight 655 over the Gulf, killing all 290 on board, contributing to Iran's decision to accept a cease-fire in the war with Iraq in August 1988. <4.2. George H. W. Bush Administration: "Goodwill Begets Goodwill"> In his January 1989 inauguration speech, President George H.W. Bush, in stating that "goodwill begets goodwill" with respect to Iran, implied that U.S.-Iran relations could improve if Iran helped obtain the release of U.S. hostages held by Hezbollah in Lebanon. Iran's apparent assistance led to the release of all remaining U.S. hostages there by the end of December 1991. However, no U.S.-Iran thaw followed, possibly because Iran continued to back violent groups opposed to the U.S. push for Arab-Israeli peace that followed the 1991 U.S. liberation of Kuwait. <4.3. Clinton Administration: "Dual Containment"> The Clinton Administration articulated a strategy of "dual containment" of Iran and Iraq an attempt to keep both countries simultaneously weak rather than alternately tilting to one or the other. In 1995-1996, the Administration and Congress banned U.S. trade and investment with Iran and imposed penalties on foreign investment in Iran's energy sector, in response to Iran's support for terrorist groups seeking to undermine the Israeli-Palestinian peace process. The election of the moderate Mohammad Khatemi as president in May 1997 precipitated a U.S. offer of direct dialogue, but Khatemi did not accept the offer. In June 1998, then-Secretary of State Madeleine Albright called for mutual confidence building measures that could lead to a "road map" for normalization. In a March 17, 2000, speech, the Secretary admitted past U.S. interference in Iran. <4.4. George W. Bush Administration: Iran Part of "Axis of Evil"> In his January 2002 State of the Union message, President Bush named Iran as part of an "axis of evil" including Iraq and North Korea. However, the Administration enlisted Iran's diplomatic help in efforts to try to stabilize post-Taliban Afghanistan and post-Saddam Iraq. The Administration rebuffed a reported May 2003 Iranian overture transmitted by the Swiss Ambassador to Iran for an agreement on all major issues of mutual concern ("grand bargain" proposal). State Department officials disputed that the proposal was fully vetted within Iran's leadership. The Administration aided victims of the December 2003 earthquake in Bam, Iran, including through U.S. military deliveries into Iran. As Iran's nuclear program advanced, the Administration worked with several European countries to persuade Iran to agree to limit its nuclear program. President Bush's January 20, 2005, second inaugural address and his January 31, 2006, State of the Union message stated that the United States would be a close ally of a "free and democratic" Iran appearing to support regime change. <4.5. Obama Administration: Pressure, Engagement, and the JCPOA> President Obama asserted that there was an opportunity to persuade Iran to limit its nuclear program through diplomacy and to potentially rebuild a U.S.-Iran relationship after decades of mutual animosity. The approach emerged in President Obama's first message to the Iranian people on the occasion of Nowruz (Persian New Year, March 21, 2009), in which he stated that the United States "is now committed to diplomacy that addresses the full range of issues before us, and to pursuing constructive ties among the United States, Iran, and the international community." He referred to Iran as "The Islamic Republic of Iran," appearing to reject a policy of regime change. The Administration reportedly also loosened restrictions on U.S. diplomats' meeting with their Iranian counterparts at international meetings. In a speech to the "Muslim World" in Cairo on June 4, 2009, President Obama acknowledged that the United States had played a role in the overthrow of Mossadeq and said that Iran had a right to peaceful nuclear power. In addition, President Obama exchanged several letters with Supreme Leader Khamene'i, reportedly expressing the Administration's support for engagement with Iran. In 2009, Iran's crackdown on the Green Movement uprising and its refusal to accept compromises to limit its nuclear program caused the Obama Administration to shift to a "two track" strategy: stronger economic pressure coupled with offers of negotiations that could produce sanctions relief. The sanctions imposed during 2010-2013 received broad international cooperation and caused economic difficulty in Iran, but the Administration also altered U.S. regulations to help Iranians circumvent their government's restrictions on internet usage. In early 2013, the Administration began direct but unpublicized talks with Iranian officials in the Sultanate of Oman to probe Iran's willingness to reach a comprehensive nuclear accord. The Administration also repeatedly stated that a military option is "on the table." The election of Rouhani in June 2013 contributed to a U.S. shift to emphasizing diplomacy. President Obama, in his September 24, 2013 U.N. General Assembly speech, confirmed an exchange of letters with Rouhani stating U.S. willingness to resolve the nuclear issue peacefully and that the United States "[is] not seeking regime change." The two presidents spoke by phone on September 27, 2013 the first direct U.S.-Iran presidential contact since Iran's revolution. After the JCPOA was finalized in July 2015, the United States and Iran held bilateral meetings at the margins of all nuclear talks and in other settings, covering regional and bilateral issues. President Obama expressed hope that the JCPOA would "usher[] in a new era in U.S.-Iranian relations," while at the same time asserting that the JCPOA would benefit U.S. national security even without a broader rapprochement. President Obama met Foreign Minister Zarif at the September 2015 General Assembly session, but no contact was reported during the September 2016 U.N. General Assembly session. Still, the signs that U.S.-Iran relations could improve as a result of the JCPOA were mixed, including as discussed below. Coinciding with Implementation Day of the JCPOA (January 16, 2016), the dual citizens held by Iran at that time were released and a long-standing Iranian claim for funds paid for undelivered military equipment from the Shah's era was settled resulting in $1.7 billion in cash payments (euros, Swiss francs, and other non-U.S. hard currencies) to Iran $400 million for the original DOD monies and $1.3 billion for an arbitrated amount of interest. Administration officials asserted that the nuclear diplomacy provided an opportunity to resolve these outstanding issues, but some Members of Congress criticized the simultaneity of the financial settlement as paying "ransom" to Iran. Obama Administration officials asserted that it had long been assumed that the United States would need to return monies to Iran for the undelivered military equipment and that the amount of interest agreed was likely less than what Iran might have been awarded by the U.S.-Iran Claims Tribunal. Iran subsequently jailed several other dual nationals (see box below). Iran continued to provide support to allies and proxies in the region, and it continued "high speed intercepts" of U.S. warships in the Persian Gulf. Iran conducted at least four ballistic missile tests from the time the JCPOA was finalized in 2015 until the end of the Obama Administration, which termed the tests "defiant of" or "inconsistent with" Resolution 2231. The tests prompted additional U.S. designations for sanctions of entities that support Iran's program. Iranian officials argued that new U.S. visa requirements in the FY2016 Consolidated Appropriations Act ( P.L. 114-113 ) would cause European businessmen to hesitate to travel to Iran and thereby limit Iran's economic reintegration. Then-Secretary of State Kerry wrote to Foreign Minister Zarif on December 19, 2015, that the United States would implement the provision so as to avoid interfering with "legitimate business interests of Iran." In January 2016, Kerry worked with Zarif to achieve the rapid release of 10 U.S. Navy personnel who the IRGC took into custody when their two riverine crafts strayed into what Iran considers its territorial waters. There was no expansion of diplomatic representation such as the posting of U.S. nationals to staff the U.S. interests section in Tehran, nor did then-Secretary of State Kerry visit Iran. In 2014, Iran appointed one of those involved in the 1979 seizure of the U.S. embassy in Tehran Hamid Aboutalebi as ambassador to the United Nations. But, in April 2014, Congress passed S. 2195 ( P.L. 113-100 ), which gave the Administration authority to deny him a visa to take up his duties. The United States subsequently announced he would not be admitted. Iran replaced him with Gholam Ali Khoshroo, who studied in the United States and served in Khatemi's government. In May 2015, the two governments granted each other permission to move their respective interests sections to more spacious locations. Khoshroo was replaced in April 2019 by Majid Takht Ravanchi. <4.6. Trump Administration: Return to Hostility and "Maximum Pressure"> The Trump Administration has shifted policy back to the pre-JCPOA stance, asserting that the JCPOA addressed only nuclear issues and hindered the U.S. ability to roll back Iran's "malign" regional activities or reduce its military and missile capabilities. Administration officials assert that Administration policy is to pressure Iran's economy to (1) compel it to renegotiate the JCPOA to address the broad range of U.S. concerns and (2) deny Iran the revenue to continue to develop its strategic capabilities or intervene throughout the region. Administration statements of opposition to how Iran is governed suggest that an element of the policy is to create enough economic difficulties to stoke unrest in Iran, possibly to the point where the regime collapses. The policy, and elements of it, have been articulated as follows: Citing Iran's arming of the Houthis in Yemen, on February 1, 2017, then-National Security Adviser Michael Flynn stated that Iran was "officially on notice" about its provocative behavior. In April 2017, the Administration announced a six-month Iran policy review based on the premise that the JCPOA "only delays [Iran's] goal of becoming a nuclear state" and had failed to curb Iran's objectionable regional behavior. During his May 20-24, 2017, visit to the region, President Trump told Arab leaders in Saudi Arabia that "Until the Iranian regime is willing to be a partner for peace, all nations of conscience must work together to isolate Iran, deny it funding for terrorism, and pray for the day when the Iranian people have the just and righteous government they deserve." The following month, then-Secretary of State Tillerson testified that the Administration would work to support elements in Iran that would lead to a "peaceful transition" of Iran's government. On October 13, 2017, President Trump, citing the results of the policy review, stated that he would not certify Iranian JCPOA compliance (under the Iran Nuclear Agreement Review Act, INARA, P.L. 114-17 ), and that the United States would only stay in the accord if Congress and U.S. allies (1) address the expiration of JCPOA nuclear restrictions, (2) curb Iran's ballistic missile program, and (3) counter Iran's regional activities. The denial of certification under INARA triggered a 60-day period for Congress to take legislative action under expedited procedures to reimpose those sanctions that were lifted. Congress did not take such action. On January 12, 2018, the President announced that he would not continue to waive Iran sanctions at the next expiration deadline (May 12) unless the JCPOA's weaknesses were addressed by Congress and the European countries. <4.6.1. Withdrawal from the JCPOA and Subsequent Pressure Efforts> On May 8, 2018, following visits to the United States by the leaders of France and Germany imploring the United States to remain in the JCPOA, President Trump announced that the United States would withdraw from the JCPOA and reimpose all U.S. secondary sanctions, with full effect as of November 5, 2018. Statements by President Trump and Secretary of State Pompeo have since articulated U.S. policy as follows: On May 21, 2018, in his first speech as Secretary of State, Michael Pompeo announced a return to a U.S. strategy of pressuring Iran through sanctions and by working with allies against Iran's regional activities and proxies, as well as against its ballistic missile program, cyberattacks, and human rights abuses. He also expressed U.S. "solidarity" with the Iranian people. On July 22, 2018, in a speech to Iranian Americans at the Reagan Library in California, Secretary Pompeo recited a litany of Iranian human rights abuses, official corruption, and efforts to destabilize the region. The Secretary stated that "I have a message for the people of Iran. The United States hears you; the United States supports you; the United States is with you." On July 23, 2018, following threats by Rouhani and other Iranian leaders to cut off the flow of oil through the Persian Gulf if Iran's oil exports are prevented by sanctions, President Trump posted the following on Twitter: "To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!" The tweet suggested to some that the United States might be intent on military action against Iran. On August 16, 2018, Secretary Pompeo announced the creation of an "Iran Action Group" at the State Department responsible for coordinating the department's Iran-related activities. The group is headed by Brian Hook, who holds the title of "Special Representative for Iran." In late September 2018, the group issued its "Outlaw Regime" report on Iran, in which Secretary of State Pompeo wrote in a preface that "The policy President Trump has laid out comes to terms fully with fact that the Islamic Republic of Iran is not a normal state ... " On October 3, 2018, the Administration abrogated the 1955 U.S.-Iran "Treaty of Amity, Economic Relations, and Consular Rights." Iran's legal representatives had cited the treaty to earn a favorable October 2 judgment from the International Court of Justice demanding that the United States reverse some humanitarian-related sanctions on Iran. The treaty, which provides for freedom of commerce between the two countries and unfettered diplomatic exchange, has long been mooted by post-1979 developments in U.S.-Iran relations. The abrogation of the treaty did not affect the status of the interests sections in each others' countries. Illustrating the extent to which the Administration wants U.S. partners to adopt U.S. policy toward Iran, the Administration organized a ministerial meeting in Warsaw, Poland, during February 13-14, 2019, focused on Middle East issues and with particular focus on countering the threat posed by Iran. For further information, see CRS In Focus IF11132, Coalition-Building Against Iran , by Kenneth Katzman On April 8, 2019, the Administration designated the IRGC as a foreign terrorist organization (FTO), blaming it for involvement in multiple past acts of Iran-backed terrorism and anti-U.S. actions. For further information, see CRS Insight IN11093, Iran's Revolutionary Guard Named a Terrorist Organization , by Kenneth Katzman. On April 22, 2019, the Administration announced it would no longer provide exceptions to countries that pledged to reduce their purchases of Iranian oil under the FY2012 National Defense Authorization Act ( P.L. 112-81 ). For further information, see CRS Insight IN11108, Iran Oil Sanctions Exceptions Ended , by Kenneth Katzman. As of May 3, 2019, U.S.-Iran tensions escalated following intelligence reports that Iran and/or its allies and proxies might be preparing to attack U.S. forces or personnel in the region, and the United States deployed additional forces to the Gulf to deter such action. As tensions escalated, U.S. officials issued a variety of statements. For example, on May 20, 2019, President Trump posted the following on Twitter: "If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!" Yet, as May ended, President Trump and his senior aides and Cabinet officers all indicated that the United States did not seek war with Iran, did not seek to change Iran's regime, and welcomed talks to ease tensions and renegotiate a JCPOA. <5. Policy Elements and Options> As have its predecessors, the Trump Administration has not publicly taken any policy option "off the table." Some options, such as sanctions, are being emphasized, while others are being considered or threatened to varying degrees. <5.1. Engagement and Improved Bilateral Relations> Successive Administrations have debated the degree to which to pursue engagement with Iran, and U.S. efforts to engage Iran sometimes have not coincided with Iranian leadership willingness to engage the United States. President Trump has publicly welcomed engagement with Iran's President Rouhani, but Administration officials have set strict conditions for any significant improvement in U.S.-Iran relations. Secretary of State Pompeo, in his May 21, 2018, speech referenced above, stipulated a list of 12 behavior changes by Iran that would be required for a normalization of U.S.-Iran relations and to be included in a revised JCPOA. Many of the demands such as ending support for Lebanese Hezbollah would strike at the core of Iran's revolution and are unlikely to be met by Iran under any circumstances. At a July 30, 2018, press conference, President Trump stated he would be willing to meet President Rouhani without conditions, presumably during the September 2018 General Assembly meetings in New York. Rouhani indicated that the U.S-Iran relationship was not conducive to such a meeting, and President Trump later stated he would not meet with Rouhani during the General Assembly meetings, even though President Rouhani is probably "an absolutely lovely man." In December 2018, President Rouhani stated that the United States directly requested negotiations with Iran on eight occasions in 2017, and "indirectly" requested negotiations on three occasions in 2018. He said that Iran rebuffed these overtures. Following the U.S. designation of the IRGC as an FTO and the denial of further sanctions exceptions for the purchases of Iranian oil, Foreign Minister Zarif appeared to raise the possibility for some U.S.-Iran talks on selected issues. At an April 24, 2019 research institute public meeting in New York, Zarif offered to negotiate an exchange of Iranians held in U.S. jails for some or all of the U.S.-Iran nationals held by Iran (see box above). In the context of escalating U.S.-Iran tensions in May 2019, President Trump apparently sought to de-escalate by restating his interest in direct talks, stating the following on May 9, 2019: What they [Iranian leaders] should be doing is calling me up, sitting down; we can make a deal, a fair deal ... but they should call, and if they do, we're open to talk to them. In late May 2019, in the course of an official visit to Japan, President Trump said he would support Japanese Prime Minister Shinzo Abe's efforts to act as a mediator between the United States and Iran. Concurrently, Secretary Pompeo and other U.S. officials were in contact with leaders of Oman, Qatar, and Switzerland, apparently in an effort to explore the potential for talks with Iran. Possibly in connection, foreign ministers and other high-ranking diplomats from Iran and Oman, Qatar, and Kuwait exchanged visits. <5.2. Military Action> Successive Administrations have sought to back up other policy options with a capability to use military force against Iran. Prior to the JCPOA, supporters of military action against Iran's nuclear program argued that such action could set back Iran's nuclear program substantially. A U.S. ground invasion to remove Iran's regime apparently has not been considered at any time. The Obama Administration repeatedly stated that "all options are on the table" to prevent Iran from acquiring a nuclear weapon. However, the Obama Administration asserted that military action would set back Iran's nuclear advancement with far less certainty or duration than would a nuclear agreement. And Iranian retaliation could potentially escalate and expand throughout the region, reduce Iran's regional isolation, strengthen Iran's regime domestically, and raise oil prices. After the JCPOA was finalized, President Obama reiterated the availability of this option should Iran violate the agreement. Obama Administration officials articulated that U.S. military action against Iran might also be used if Iran attacked or prepared to attack U.S. allies or attempted to interrupt the free flow of oil or shipping in the Gulf or elsewhere. The Trump Administration has similarly stated that "all options are open," referring to military action. The Administration's pullout from the JCPOA was accompanied by threats to take unspecified action if Iran were to leave the accord and restart banned aspects of its nuclear program. In the context of significant U.S.-Iran tensions in May 2019 that resulted in added U.S. military deployments to the Gulf region, the Administration has reiterated threats to use force against Iran's nuclear program or if Iran were to attack U.S. forces or personnel in the region. Yet, as noted, President Trump has sought to de-escalate tensions and has told his top officials that the Administration does not want conflict with Iran. For more information on the potential for U.S. military action in the context of U.S.-Iran tensions, see CRS In Focus IF11212, U.S.-Iran Tensions Escalate , by Kenneth Katzman. Whereas the United States has not initiated military action against Iranian or Iran-backed forces in Syria, the Administration has publicly supported Israel's frequent strikes on Iranian and Hezbollah infrastructure there. And, the U.S. Navy has conducted operations to interdict Iranian weapons shipments to the Houthi rebels in Yemen. For detailed information on U.S. military activity in the region that is, in whole or in part, directed against Iran and Iranian allies, see CRS Report R44017, Iran's Foreign and Defense Policies , by Kenneth Katzman. <5.2.1. Authorization for Force Issues> With regard to presidential authorities, S.J.Res. 41 , which passed the Senate on September 22, 2012, in the 112 th Congress, rejects any U.S. policy that relies on "containment" of a potential nuclear Iran. No legislation has been enacted that would limit the President's authority to use military force against Iran, but neither has there been legislation authorizing the use of force against Iran. At a Senate Foreign Relations Committee hearing on April 10, 2019, Secretary of State Pompeo answered questions on whether the Administration considers the use of force against Iran as authorized, indicating that he would defer to Administration legal experts on that question. However, he indicated, in response to questions whether the 2001 authorization for force against Al Qaeda could apply to Iran, that Iran has harbored members of Al Qaeda. <5.3. Economic Sanctions> The U.S. withdrawal from the JCPOA and reimposition of all U.S. sanctions has major implications. The table below summarizes sanctions that have been used against Iran. <5.4. Regime Change> One recurring U.S. policy question has been whether the United States should support efforts within Iran to overthrow Iran's leadership. During the 2009 Green Movement uprising, the Obama Administration asserted that extensive U.S. support for the uprising would undermine the opposition's position in Iran. President Obama did, however, give some public support to the demonstrators, and his 2011 Nowruz (Persian New Year) address mentioned specific dissidents and said "young people of Iran ... I want you to know that I am with you." However, in a September 24, 2013, General Assembly speech, President Obama explicitly stated that the United States does not seek to change Iran's regime. The Trump Administration in cited statements by Secretary Pompeo and other U.S. officials asserts that its policy is to change Iran's behavior, not to change its regime. However, the content of these and other statements by Administration officials, in particular Secretary Pompeo's speech to Iranian Americans at the Reagan Library on July 22, 2018, suggests support for a regime change outcome. In his speech on May 21, 2017, in Saudi Arabia, President Trump stated that his Administration is hoping that Iran's government will change to one that the Administration considers "just and righteous." In testimony before two congressional committees in June 2017, then-Secretary of State Rex Tillerson said the Administration supports a "philosophy of regime change" for Iran (Senate Appropriations Committee) and that the Administration would "work toward support of those elements inside of Iran that would lead to a peaceful transition of that government" (House Foreign Affairs Committee). In his October 13, 2017, policy announcement on Iran, President Trump stated that we stand in total solidarity with the Iranian regime's longest-suffering victims: its own people. The citizens of Iran have paid a heavy price for the violence and extremism of their leaders. The Iranian people long to and they just are longing, to reclaim their country's proud history, its culture, its civilization, its cooperation with its neighbors. Subsequently, President Trump issued statements of support for the December 2017-January 2018 protests in Iran on Twitter and in other formats. In his May 8, 2018, announcement of a U.S. withdrawal from the JCPOA, President Trump stated Finally, I want to deliver a message to the long-suffering people of Iran. The people of America stand with you.... But the future of Iran belongs to its people. They are the rightful heirs to a rich culture and an ancient land, and they deserve a nation that does justice to their dreams, honor to their history and glory to God. In his speech to the Heritage Foundation on May 21, 2018, Secretary of State Pompeo added that the United States expresses total solidarity with the Iranian people. In his Reagan Library speech on July 22, 2018, Pompeo recited a litany of Iranian regime human rights abuses and governmental corruption that called into question its legitimacy and, in several passages and answers to questions, clearly expressed the hope that the Iranian people will oust the current regime. The apparent support for a regime change policy was furthered by Secretary Pompeo's announcement during that speech that the Broadcasting Board of Governors is launching a new full-time Persian-language service for television, radio, digital, and social media to help "ordinary Iranians inside of Iran and around the globe can know that America stands with them." Yet, there were signs of a possible modification or shift, at least in tone, in the context of escalating U.S.-Iran tensions in May 2019 that some assessed as potentially leading to conflict. During his visit to Japan in late May, President Trump specifically ruled out a policy of regime change, stating the following on May 27: These are great people has a chance to be a great country with the same leadership. We are not looking for regime change. I just want to make that clear. We're looking for no nuclear weapons. At times, some in Congress have advocated that the United States adopt a formal policy of overthrow of the regime. In the 111 th Congress, one bill said that it should be U.S. policy to promote the overthrow of the regime (the Iran Democratic Transition Act, S. 3008 ). Many of Iran's leaders, particularly Supreme Leader Khamene'i, continue to articulate a perception that the United States has never accepted the 1979 Islamic revolution. Khamene'i and other Iranian figures note that the United States provided funding to antiregime groups, mainly promonarchists, during the 1980s. <5.4.1. Democracy Promotion and Internet Freedom Efforts> Successive Administrations and Congresses have sought to at least lay the groundwork for eventual regime change through "democracy promotion" programs and sanctions on Iranian human rights abuses. Legislation authorizing democracy promotion in Iran was enacted in the 109 th Congress. The Iran Freedom Support Act ( P.L. 109-293 , signed September 30, 2006) authorized funds (no specific dollar amount) for Iran democracy promotion. Several laws and Executive Orders issued since 2010 are intended to promote internet freedom, and the Administration has amended U.S.-Iran trade regulations to allow for the sale to Iranians of consumer electronics and software that help them communicate. Then-Under Secretary of State Wendy Sherman testified on October 14, 2011, that some of the democracy promotion funding for Iran was used to train Iranians to use technologies that circumvent regime internet censorship. Many have argued that U.S. funding for such programs is counterproductive because the support has caused Iran to use the support as a justification to accuse the civil society activists of disloyalty. Some civil society activists have refused to participate in U.S.-funded programs, fearing arrest. The Obama Administration altered Iran democracy promotion programs somewhat toward working with Iranians inside Iran who are organized around apolitical issues such as health, education, science, and the environment. The State Department, which often uses appropriated funds to support prodemocracy programs run by organizations based in the United States and in Europe, refuses to name grantees for security reasons. The funds shown below have been obligated through DRL and the Bureau of Near Eastern Affairs in partnership with USAID. Some of the funds have also been used for cultural exchanges, public diplomacy, and broadcasting to Iran. A further indication of the sensitivity of specifying the use of the funds is that, since FY2010, funds have been provided for Iran civil society/democracy promotion as part of a broader "Near East Regional Democracy programs" (NERD). Iran asserts that funding democracy promotion represents a violation of the 1981 "Algiers Accords" that settled the Iran hostage crisis and provide for noninterference in each other's internal affairs. The George W. Bush Administration asserted that open funding of Iranian prodemocracy activists (see below) was a stated effort to change regime behavior, not to overthrow the regime, although some saw the Bush Administration's efforts as a cover to achieve a regime change objective. <5.4.1.1. Broadcasting/Public Diplomacy Issues> Another part of the democracy promotion effort has been the development of Iran-specific U.S. broadcasting services to Iran. Radio Farda ("tomorrow," in Farsi) began under Radio Free Europe/Radio Liberty (RFE/RL), in partnership with the Voice of America (VOA), in 2002. The service was established as a successor to a smaller Iran broadcasting effort begun with an initial $4 million from the FY1998 Commerce/State/Justice appropriation ( P.L. 105-119 ). It was to be called Radio Free Iran but was never formally given that name by RFE/RL. Based in Prague, Radio Farda broadcasts 24 hours/day, and its budget is over $11 million per year. No U.S. assistance has been provided to Iranian exile-run stations. As noted above, Secretary Pompeo has announced a new Persian-language channel for Iranians through various media, but it is not clear whether this new service will augment existing programs or form an entirely new program. VOA Persian Service. The VOA established a Persian-language service to Iran in July 2003. It consists of radio broadcasting (one hour a day of original programming); television (six hours a day of primetime programming, rebroadcast throughout a 24-hour period); and internet. The service has come been criticized by observers for losing much of its audience among young, educated, antiregime Iranians who are looking for signs of U.S. official support. The costs for the service are about $20 million per year. <5.4.1.2. State Department Public Diplomacy Efforts> The State Department has sought outreach to the Iranian population. In May 2003, the State Department added a Persian-language website to its list of foreign-language websites, under the authority of the Bureau of International Information Programs. The website was announced as a source of information about the United States and its policy toward Iran. In February 14, 2011, the State Department began Persian-language Twitter feeds in an effort to connect better with internet users in Iran. Since 2006, the State Department has been increasing the presence of Persian-speaking U.S. diplomats in U.S. diplomatic missions around Iran, in part to help identify and facilitate Iranian participation in U.S. democracy-promotion programs. The Iran unit at the U.S. Consulate in Dubai has been enlarged significantly into a "regional presence" office, and "Iran-watcher" positions have been added to U.S. diplomatic facilities in Baku, Azerbaijan; Istanbul, Turkey; Frankfurt, Germany; London; and Ashkabad, Turkmenistan, all of which have large expatriate Iranian populations and/or proximity to Iran.

U.S.-Iran relations have been mostly adversarial—but with varying degrees of intensity—since the 1979 Islamic Revolution in Iran. Since then, U.S. officials have consistently identified Iran's support for militant Middle East groups as a significant threat to U.S. interests and allies, and Iran's nuclear program took precedence in U.S. policy after 2002 as that program advanced. In 2010, the Obama Administration led a campaign of broad international economic pressure on Iran to persuade it to agree to strict limits on the program—an effort that contributed to the June 2013 election of the relatively moderate Hassan Rouhani as president of Iran and the July 2015 multilateral nuclear agreement—the Joint Comprehensive Plan of Action (JCPOA). That agreement exchanged sanctions relief for limits on Iran's nuclear program, but did not contain binding limits on Iran's missile program or on its regional influence or human rights abuses. The Trump Administration cited the JCPOA's deficiencies in its May 8, 2018, announcement that the United States would exit the JCPOA and reimpose all U.S. secondary sanctions. The stated intent of that step, as well as subsequent actions such as the April 2019 designation of the Islamic Revolutionary Guard Corps (IRGC) as a foreign terrorist organization (FTO) and the May 2019 ending of sanctions exceptions for buyers of Iranian oil, is to apply "maximum pressure" on Iran to compel it to change its behavior, including negotiating a new JCPOA that takes into account the broad range of U.S. concerns. Included in these concerns is Iran's support for pro-Iranian regimes and armed factions. Iran has responded by abrogating some of its JCPOA commitments. Before and particularly during an escalation of U.S.-Iran tensions in May 2019, President Trump has indicated a willingness to meet with Iranian leaders. However, Administration statements and reports detail a long litany of objectionable behaviors that Iran must change for there to be any dramatic change in U.S.-Iran relations. Iranian leaders say they will not talk with the Administration unless and until it reenters the 2015 JCPOA. Some experts assert that the threat posed by Iran stems from the nature and ideology of Iran's regime, and that the underlying, if unstated, goal of Trump Administration policy is to bring about regime collapse. In the context of escalating U.S.-Iran tensions in May 2019, President Trump has specifically denied that this is his Administration's goal. Any U.S. regime change strategy presumably would take advantage of divisions and fissures within Iran, as well as evident popular unrest. In part as a response to repression as well as economic conditions, unrest erupts periodically, most recently during December 2017-January 2018, and sporadically since then, including in response to the regime's apparent mishandling of relief efforts for vast flooding in southwestern Iran. But the unrest evident to date is not at a level where it threatens the leadership's grip on power. U.S. pressure has widened leadership differences in Iran. Hassan Rouhani, who seeks to improve Iran's relations with the West, including the United States, won successive presidential elections in 2013 and 2017, and reformist and moderate candidates won overwhelmingly in concurrent municipal council elections in all the major cities. But hardliners continue to control the state institutions that maintain internal security in large part through suppression. And Iran's Supreme Leader, Grand Ayatollah Ali Khamene'i, is increasingly critical of Rouhani's commitment to the JCPOA in public statements. See also CRS Report R43333, Iran Nuclear Agreement and U.S. Exit, by Paul K. Kerr and Kenneth Katzman; CRS Report RS20871, Iran Sanctions, by Kenneth Katzman; CRS Report R44017, Iran's Foreign and Defense Policies, by Kenneth Katzman; and CRS In Focus IF11212, U.S.-Iran Tensions Escalate, by Kenneth Katzman.

crs_R45913

crs_R45913_0

<1. Introduction> Legislative proposals have been introduced since the 105 th Congress to create a national electricity portfolio standard that would require electric utilities to procure a certain share of the electricity they sell from specified sources. Twenty-nine states, three U.S. territories, and the District of Columbia are currently implementing mandatory portfolio standards, and an additional eight states and one territory have voluntary versions. Various existing and proposed portfolio standards use a range of terms for similar concepts. A renewable portfolio standard (RPS) typically means a requirement to procure electricity from renewable sources. A clean energy standard (CES) typically means a variant of an RPS that includes some nonrenewable sources, such as nuclear or selected fossil fuels, in the requirement. Some lawmakers and stakeholders use these terms interchangeably, and some use the term CES or "clean energy" to refer only to renewable sources. This report uses the more general term "portfolio standard" to avoid confusion between RPS and CES. At both the federal and state level, lawmakers express multiple goals for portfolio standards. These include greenhouse gas reduction, technology innovation, and job creation. Policy design choices, as discussed in this report, can influence the extent to which portfolio standards might achieve those or other goals. Other policies could potentially achieve the same goals as portfolio standards. For example, tax incentives or funding for technology research, development, and deployment could promote the use of certain types of electricity generation sources by reducing their costs. This report does not compare portfolio standards with other policy options, nor does it fully examine the costs and benefits of establishing a national portfolio standard compared to business-as-usual trends in the electric power sector. This report provides background on portfolio standards and an overview of policy design elements to inform debate around proposals introduced in the 116 th Congress, building on previous CRS reports addressing this topic. This report also analyzes potential effects of portfolio standard design choices, with an emphasis on economic effects, environmental effects, and potential interactions with state energy policies. Other potential effects that may be of congressional interest, but are outside the scope of this report, include public health, considerations regarding critical minerals used in some energy sources, electric reliability, cybersecurity, and geopolitics. <2. U.S. Electricity Generation Profile> A number of government agencies, nongovernmental organizations, academic researchers, and private sector entities analyzed potential effects of a national portfolio standard in 2011 and 2012 because of congressional interest at that time. Since 2012, the U.S. electric power sector has seen several changes in its generation profile that were unanticipated in those analyses. These include an increase in generation from sources using natural gas and renewable energy, along with a decrease in coal-fired generation. The current U.S. electricity generation profile and market trends may be important context for any congressional debate about a potential national portfolio standard. The U.S. Energy Information Administration (EIA) reports that total electricity generation was 4,047,766 gigawatt-hours (GWh) in 2012 and 4,207,353 GWh in 2018, an increase of 4%. Most of this increase occurred between 2017 and 2018, as shown in Figure 1 . Between 2012 and 2018, the share of electricity generation from different sources has changed. Coal generated 37% of total generation in 2012 and 27% in 2018. Natural gas generated 30% of total generation in 2012 and 35% in 2018. Renewable sources, including hydropower, wind, solar, geothermal, and biomass, generated 12% of total generation in 2012 and 18% in 2018. Many expect these trends to continue. For example, EIA's projection of current laws, regulations, and market trends show coal contributing 17% of total generation in 2050, natural gas contributing 39%, and renewable sources contributing 31%. Electric power sector observers generally agree on the factors causing these trends, although the relative importance of each factor is subject to some debate. The changes from 2012 to 2018 are due to a combination of (1) continued low natural gas prices and low wholesale electricity prices; (2) federal environmental regulations, especially on coal-fired power plants; (3) declining capital costs for wind and solar sources; (4) federal tax incentives for wind and solar sources; (5) state portfolio standards and other policies; (6) changing consumer preferences, especially large corporations' and institutions' commitments to procure more electricity from renewable sources; and (7) natural turnover as generators age. Differing perspectives over the relative influence of these factors could affect stakeholder views on the merits of a federal policy to promote greater use of certain energy sources for electricity generation. Some might argue that sources that are now cost competitive (e.g., natural gas, wind) may not require policy support to increase their share of the electricity generation profile. Others may see electricity generation as solely an area for state policy as discussed further in the section " Interaction with Other State Energy Policies ," below. A related consideration may be whether increasing the pace of change in the U.S. electricity portfolio could pose reliability risks. <3. Key Portfolio Standard Concepts> Key concepts in portfolio standard policymaking may or may not have identical meaning when used in other contexts. For convenience and clarity, this section introduces key concepts used in this report. As noted above, lawmakers and observers are not consistent in their use of terms related to portfolio standards. Renewable portfolio standard (RPS) is the most frequently used term to describe a portfolio standard, though renewable energy standard, alternative energy portfolio standard, and others are in use. The term clean energy standard (CES) is frequently used to refer to a variant of RPS in which certain nonrenewable sources are eligible in addition to renewable sources, but some federal legislative proposals have used the term "clean energy" to refer only to renewable sources. The Appendix provides more information about previously introduced bills. Banking refers to the extent to which credits issued in the program may be used for compliance after their vintage year (see definition, below). Banking provisions can equivalently be described in terms of expiration. For example, if credits expire after two years, then banking for two years is allowed. A related concept is borrowing which allows credits of future vintage years to be used for compliance. Base quantity of electricity is the sales volume to which the portfolio standard applies. The base quantity could equal total electricity sales, but it need not. Excluding sources from the calculation of the base quantity changes the required amount of generation from eligible sources in absolute terms. The base quantity to which the portfolio standard applies also affects the financial incentive that different sources receive. Even sources deemed ineligible under the portfolio standard could receive some policy support if they were excluded from the base quantity of electricity. This concept is discussed further in the section " Base Quantity of Electricity ." Carve outs , tiers, multipliers, partial crediting, and usage limits are all policy options for influencing the relative support that different types of eligible sources receive under a portfolio standard. Eligible sources will be available at different costs. Policymakers may want to avoid a situation where compliance is achieved mostly through the use of a single, low-cost source. A carve out is a requirement within the overall policy requirement to achieve a minimum level of compliance by using a certain source. Carve outs have been used, for example, to require use of solar energy even when that was more expensive than other eligible sources. The same goal might be accomplished through use of tiers . Typically, a carve out will apply to a single source type while a tier might apply to multiple source types. A related concept is that of usage limits that set maximum levels for compliance from certain sources. Multipliers are rules under which selected sources receive more than the usual amount of credit for generating electricity, but the credits are completely fungible (see definition, below) with others. Sources that are eligible for multipliers would receive extra policy support, relative to other sources. Multipliers could be used, for example, to encourage demonstration and commercialization of new technologies. P artial crediting would give selected sources less than the usual amount of credit and could be applied to sources lawmakers wanted to give less policy support. Clean energy , as used in this report, refers to the set of sources that lawmakers might choose to include in a portfolio standard. These sources could include wind, solar, geothermal, biomass, hydropower, marine energy, nuclear, natural gas combined cycle generators, or fossil fuel-fired generators equipped with carbon capture and sequestration technology (herein, CCS). Lawmakers could also choose to include nongenerating sources such as energy storage or energy efficiency. Other considerations about the choice of eligible sources are discussed in the section " Source Eligibility ." Covered entities are the entities with a compliance obligation under a portfolio standard. Most portfolio standards being implemented by states or proposed at the federal level have electricity distribution utilities as the covered entities. These utilities may or may not own electricity generators, depending on state and local regulatory regimes. Typically, a utility procures electricity from a number of different generators using a variety of energy sources (its portfolio ). Other considerations about the choice of covered entities are discussed in the section " Utility Applicability ." Credits are the unit of accounting for portfolio standards and other market-based policies. Electricity cannot easily be traced from its point of generation to its point of consumption, so accounting measures are required to assess compliance with a portfolio standard. In many existing portfolio standards, credits are issued by an administrator to a generator that uses a clean energy source. The number of credits issued is based on actual measured electricity generation (i.e., ex post ). The generator can then sell credits to a utility, and the utility surrenders them to the program administrator to demonstrate compliance. If a generator sells both electricity and associated credits to the same entity, the credit is bundled . If a generator sells electricity and associated credits to different entities, the credit is unbundled . Lawmakers could allow entities other than generators and utilities (e.g., financial institutions) to buy and sell credits, or they could allow only utilities with a compliance obligation to purchase credits. The price that utilities would pay for credits would depend on the portfolio standard stringency, the overall volume of electricity generated by clean energy sources, and other market factors. The sale of credits could create an additional source of revenue for a generator, potentially improving its economic performance relative to a business-as-usual scenario with no portfolio standard. In some cases, the ability to sell credits might be the deciding factor for whether a new generator would be constructed (or, for existing generators, whether a generator would remain operational instead of being retired). In other cases, generators may be profitable without the sale of credits, and the credits might create a windfall profit. The requirement to buy credits would likely increase the overall costs for a utility. Typically, a utility's costs for complying with a portfolio standard would be passed on to its customers. If a utility were unable to fully pass on its compliance costs, it might see reduced profitability. Fungibility is the attribute of credits allowing them to be used interchangeably and without penalty. Since many state portfolio standards already exist, federal policymakers would have to decide if these state credits would be fungible with federal credits under a federal portfolio standard. If they were, then current holders of state-issued credits could use them for compliance with a federal portfolio standard or sell them to another entity for that purpose. If they were not, then state-issued credits could potentially lose value, depending on the relative stringency of a national portfolio standard and the state portfolio standard. Some states have implemented cap-and-trade programs in addition to portfolio standards, both of which aim to reduce greenhouse gas emissions from the electricity generation. Like portfolio standards, cap-and-trade uses credits (also called allowances) as an accounting mechanism and for compliance purposes. Under existing state policies and federal proposals, credits under portfolio standards are not fungible with allowances under cap-and-trade programs for greenhouse gases. Market-based policies attempt to use financial incentives to achieve policy goals. Many discussions contrast them with command-and-control policies that set specific permissions or prohibitions. Portfolio standards indirectly provide financial incentives because they create demand for generation from certain eligible sources in electricity markets, even if those eligible sources are more expensive than ineligible sources. Some observers argue this mechanism is a disruption of market forces. In comparison, tax credits, grants, and loan guarantees provide direct financial incentives for eligible sources and therefore lower the cost of those sources in the market. Most portfolio standard proposals do not expressly prohibit use of ineligible sources, but they do create a financial disincentive to use them. Monitoring, reporting, and verification (MRV) are three distinct steps that ensure that market-based policies achieve the desired goals. In the case of portfolio standards, MRV practices would measure the amount of electricity generated by eligible sources and verify that each unit of electricity from eligible sources was used only once for the purpose of compliance. Monitoring and reporting electricity generation is commonplace in the industry, at least for large-scale generators connected to the electricity transmission system. Verification for market-based policies is often completed by an independent third party. Qualifying facilities (QFs) are established in the Public Utility Regulatory Policies Act of 1978 ( P.L. 95-617 ; PURPA) as certain small power production facilities and cogeneration facilities that receive special treatment. Utilities must purchase electricity from QFs at a price determined by what the utility would otherwise have to pay for electricity. There is no direct relationship between QFs under PURPA and sources that would be eligible under a portfolio standard, though the term "qualifying source" is sometimes used in both contexts. To avoid confusion, this report refers to sources defined as clean energy under a portfolio standard as "eligible sources." Registries , sometimes called tracking systems, are electronic databases used to facilitate credit issuance and transfer. State portfolio standards typically make use of registries in the following way. After an administrator verifies the amount of electricity generated from an eligible source, the administrator creates an appropriate number of credits. These credits are assigned a serial number and placed in the account of the appropriate entity in the registry. If the credit owner agrees to sell the credits to another entity, the owner files the necessary documentation with the administrator, who then authorizes the credits to be transferred to a different account in the registry. A covered entity would demonstrate compliance by transferring the required number of credits from its account to the administrator's account. The administrator would take action to retire the submitted credits to make sure they cannot be used again for compliance. Cybersecurity measures can help prevent theft of portfolio standard credits or other fraudulent activity. Some government agencies currently operate registries that could potentially be used to administer a national portfolio standard, and some private firms operate registries as well. Vintage refers to the time period in which a tradeable credit in a market-based policy is issued. Portfolio standards typically have annual compliance periods, with vintage expressed in years. In policies with shorter or longer compliance periods, the vintage could be associated with a specific month or a series of years. For example, if an eligible source generated electricity in the year 2025, it would receive a vintage 2025 credit. The banking and borrowing rules (see definitions, above) determine the years in which credits of a given vintage may be used for compliance. <4. Portfolio Standard Design Elements> If Congress chose to establish a national portfolio standard, lawmakers would face choices about the design of the policy. This section discusses some key design elements and potential effects of different choices. Often, design choices reflect a balance between increasing the certainty of achieving policy goals and decreasing the likelihood that consumers will experience undesirable cost increases. Design elements can interact with each other, so the potential effect of a choice about one element may be influenced by choices about others. Not all portfolio standard design choices must be made in legislation. Congress could direct an agency to promulgate regulations that implement a portfolio standard. The previous federal proposals summarized in the Appendix take different approaches. Some proposals made very few design choices and left most decisions to an agency, while others specified most design choices and left few decisions to an agency. Specifying details in legislation could add complexity that potentially impedes the legislative process or creates challenges in policy implementation. On the other hand, specifying details in legislation would give lawmakers greater control over policy design decisions. <4.1. Source Eligibility> Portfolio standards achieve their policy goals by increasing electricity generation from certain eligible energy sources, as defined by lawmakers. The various energy sources used for electricity generation have many different attributes that lawmakers might weigh in determining which sources could be eligible under a national portfolio standard. Recent state policy debates and many current discussions at the federal level have centered around three attributes: carbon intensity, technology maturity, and market competitiveness (i.e., cost). The debate around carbon intensity has focused on whether to include sources with a carbon intensity less than conventional coal-fired generators (i.e., low carbon sources), such as natural gas combined-cycle power plants, or include only those with a carbon intensity of zero (i.e., zero carbon sources). This debate closely relates to the desired environmental outcome of a portfolio standard. All else being equal, a portfolio standard that includes low carbon sources would likely result in higher greenhouse gas emissions from the electric power sector than a portfolio standard under which only zero carbon sources were eligible. Advocates for substantial greenhouse gas reductions disagree about whether all zero carbon sources should be eligible, with nuclear energy and CCS being particularly contentious. Advocates who support nuclear energy and CCS often present cost arguments, while advocates who oppose those sources often present arguments about environmental quality and environmental justice. The debates around technology maturity and market competitiveness both focus on the desired balance between supporting new technologies and supporting existing technologies. These debates closely relate to the desired economic and technological outcomes of a portfolio standard. Many mature technologies are less expensive than new technologies, so including them as eligible sources might achieve the policy goals at a lower overall cost. Mature technologies may be easier to deploy, from an operational point of view, since industry best practices and standards for their use are established. At the same time, a portfolio standard that includes mature technologies might not encourage the desired level of investment in new technologies. A compromise may be the use of carve outs, tiers, multipliers, partial crediting, or usage limits, as described above, to attempt to influence the extent to which covered entities used new or mature technologies for compliance. Energy storage and energy efficiency are not electricity sources, in the usual sense, because they do not generate electricity. Their supporters argue their deployment helps achieve similar policy goals as portfolio standards, namely technology innovation, greenhouse gas reduction, and job creation. Portfolio standards could incentivize energy storage and energy efficiency directly, for example, by defining them as eligible sources and providing an accounting methodology for issuing credits to them. Such accounting methodologies may be more complex than those used for electricity generation, especially for energy efficiency since energy savings cannot be directly measured. Alternatively, portfolio standards could indirectly incentivize deployment of energy storage or energy efficiency in the setting of the base quantity, as discussed in the section " Base Quantity of Electricity ." If lawmakers wanted to incentivize their deployment, another option could be to establish separate targets for energy storage deployment and energy efficiency alongside a portfolio standard. Some states with portfolio standards have taken that approach, and some previous federal proposals took that approach as well. Distributed energy resources (DER) are located near the point of consumption in the electric power sector (e.g., an individual home, commercial facility, or manufacturing plant). Federal portfolio standard proposals to date put a compliance obligation on electric utilities; however, utilities do not always own or operate DER. From the perspective of an electric utility, many DER are like energy efficiency in that they reduce electricity sales. Some, but not all, DER use renewable sources, so lawmakers might consider whether to include these as eligible sources. The electric power industry does not have established methodologies for measuring generation from DER, so these would need to be developed if DER were to receive credits. Alternatively, the setting of base quantities can influence the incentive DERs receive as discussed below. Other energy source attributes may be of interest to Congress. These include energy density, which can affect land requirements, and the geographic variability in resource quality. As is also the case for other topics, geographic variability in natural resources can potentially raise concerns about uneven wealth impacts in portfolio standard policymaking. For example, the nation's wind resources most suitable for wind energy development are concentrated in the central United States and offshore of the Northeast and Mid-Atlantic. The nation's largest solar resources are concentrated in the Southwest. If eligible sources under a portfolio standard were all concentrated in one region (or, similarly, if a lack of eligible sources were concentrated in one region), wealth transfer could occur, raising potential concerns over fairness. Relatedly, some regions have developed some resources more than others, for example via implementation of state portfolio standards. Including existing sources, such as those incentivized under state policies, could potentially result in wealth transfer from states that had not previously implemented supportive policies. On the other hand, excluding existing sources could be perceived as penalizing early actors. <4.2. Utility Applicability> Most homes, businesses, and other consumers acquire electricity from the electric grid and pay electric utilities to provide that electricity to them. Over 3,200 electric utilities operate in the United States, and they are generally classified by three ownership models. Investor-owned utilities (IOUs) are operated by private companies on a for-profit basis, and they deliver electricity in at least portions of every state except Nebraska. Publicly owned utilities (POUs, sometimes municipal utilities or munis) are owned by local governments and operated on a not-for-profit basis. Electric co-operatives (co-ops, sometimes rural co-ops) are member-owned organizations operated on a not-for-profit basis, typically located in rural areas. State governments allow IOUs to act as monopolies in their service territory, with no competition on electricity distribution, in exchange for accepting electricity rates as determined by state regulators. Similar to IOUs, POUs and co-ops are allowed to operate as monopolies with respect to electricity distribution. Unlike IOUs, they are generally exempt from regulation by state governments regarding electricity rates, investment decisions, and other operations. POUs and co-ops together serve about 27% of Americans. Lawmakers would have to decide to which type of utility a national portfolio standard would apply, if they chose to implement such a policy. If one class of utilities, such as co-ops, were excluded, then the overall effect of the policy might be reduced, since the excluded utilities could still procure electricity from ineligible sources above the levels set by the portfolio standard. On the other hand, excluding some utilities based on ownership model might be desirable in order to address concerns about overall compliance costs and cost distribution. POUs and co-ops often serve fewer customers than IOUs, so any fixed administrative costs associated with compliance must be shared by a smaller number of customers, resulting in relatively larger shares of administrative costs. Some state portfolio standards establish different (usually less stringent) targets for POUs and co-ops, while some exclude them altogether. Utility size, expressed as annual electricity sales, could be a more precise characteristic than ownership model in addressing concerns about higher administrative costs for smaller utilities, since some IOUs are small and some POUs are large. Figure 2 shows the share of utilities of each ownership model for selected utility size ranges. Table 1 shows the total number of utilities of each ownership model in the selected size ranges. Previous legislation has included different utility size thresholds for inclusion. Utilities that did not meet the specified size threshold would not have had a compliance obligation under those proposals. For example, S. 2146 in the 112 th Congress would have initially included utilities with at least 2 million megawatt-hours (MWh) of sales and then phased in smaller utilities of at least 1 million MWh of sales. The provisions of Title I of the Public Utility Regulatory Policies Act of 1978 (PURPA; P.L. 95-617 ) apply to utilities with at least 0.5 million MWh of sales. A potential consideration is the share of total U.S. electricity sales that would be covered by a portfolio standard if utility size thresholds were established. Figure 3 shows the share of total U.S. electricity sales associated with utilities of different sizes, for all ownership models. In 2017, 82% of U.S. electricity sales came from distribution utilities that had annual sales volumes greater than 2 million MWh, 87% came from utilities with sales greater than 1 million MWh, and 92% came from utilities with sales greater than 0.5 million MWh. <4.3. Target and Stringency> The target of a portfolio standard refers to "how much?" and "by when?" A target might be defined for a single year (e.g., 50% of electricity sales in 2050), or it might be phased in over multiple interim periods (e.g., 25% of electricity sales in 2020 2029; 40% of electricity sales in 2030 2039; 80% of electricity sales in 2040 2049). Target phase-in can be implemented in different approaches, as shown in Figure 4 . Each of these approaches has different implications for how individual source types might be affected, though actual outcomes would be influenced by other factors such as future technology costs and electricity demand. Linear phase-in would tend to benefit existing sources and mature technologies with relatively short development timelines, such as wind and solar. These sources could be available to generate electricity and meet near-term compliance obligations. A back-end loaded phase-in might avoid near-term electricity price increases and allow time for commercialization of new technologies, but it might not result in desired environmental results in the near term. A stepped phase-in could balance the advantages and disadvantages of the other two options. It might also lead to uneven investment patterns, with periods of relatively high project development associated with target increases followed by periods of relatively low project development during target plateau periods. The stringency of a policy indicates the changes the policy might make in generation profile compared to a business-as-usual scenario. Generally, the stringency of the policy will be positively correlated to the costs and benefits of implementing the policy, so as policy stringency increases, the costs and benefits will also increase. For example, a portfolio standard target of 50% of electricity sales by 2050 would likely cost more to implement than a target of 25% of electricity sales by 2050, all else being equal. Similarly, a portfolio standard target of 30% of electricity sales by 2030 would likely cost more to implement than a target of 30% of electricity sales by 2050. At the same time, the more stringent options (i.e., the higher target percentage or the earlier target date) could result in greater technology innovation and lower greenhouse gas emissions than the less stringent options. Another way to describe portfolio standards' stringency is the net change in generation from eligible sources. This approach acknowledges that the national electricity generation profile is currently quite diverse with many types of sources. The net change is the difference between the final requirement of the portfolio standard (i.e., the target) and the share of generation from eligible sources before the policy is implemented. Suppose a portfolio standard required 20% of generation to come from wind and solar sources by 2020. These sources contributed 9% of electricity generation in 2018, so the net change required by such a portfolio standard would be 11%. The different ways to describe portfolio standard stringency could influence public perception of it. In this example, the same target could either be described as 20% or 11%, with potentially different implications for perceived costs and benefits. <4.4. Base Quantity of Electricity> For portfolio standards that express compliance obligation as the percentage of electricity sales coming from clean energy sources, the base quantity is the denominator used to calculate the compliance obligation. The base quantity of electricity can determine the amount of generation from eligible sources a portfolio standard requires in absolute terms. It has been described as "perhaps the most important and least understood concept in the design of a [portfolio standard]." The base quantity could equal total electricity sales, but it need not. The base quantity could instead be a specified subset of total sales. Some portfolio standard proposals have excluded electricity generated from certain sources in the base quantity calculation (see Appendix ). Under such an approach, a utility with a compliance obligation would be incentivized to procure electricity from sources excluded from the base quantity because doing so would lower the amount of electricity from clean sources it would have to procure. To illustrate this point, consider a hypothetical portfolio standard with a 50% clean energy requirement. The compliance obligation for this portfolio standard would be expressed as If a utility sold 10 million MWh annually and the base quantity of electricity equaled the total sales, then the utility would have to procure 5 million MWh from clean energy sources. If electricity from certain sources were excluded from the base quantity, the required procurement changes. If a utility procured 1 million MWh of the 10 million MWh it sold from sources excluded from the base quantity, then the utility would have to procure 4.5 million MWh from clean energy sources. The portfolio standard, in this case, would incentivize the utility to procure electricity from both kinds of sources, namely those excluded from the base quantity and those defined as clean energy by the policy. The utility's incentive to procure electricity from sources excluded from the base quantity would generally be less than the incentive to procure electricity from clean energy sources, depending upon the cost of different energy sources and the overall portfolio standard stringency. If policymakers wanted to provide some policy support to certain sources, but less support than other sources receive, they might exclude certain sources from the base quantity calculation. A related consideration is the treatment of energy efficiency (EE) and DER (including, potentially, customer-sited energy storage). These result in reduced utility sales, so, to some extent, they are inherently included in the base quantity calculation. Utility investments that increased EE or generation from DER could also help the utility achieve compliance with a portfolio standard by reducing the amount of electricity it would have to procure from clean energy sources. For many utilities, reducing sales reduces the company's profitability, but some regulatory models are being developed and implemented in which profitability can be maintained or can increase as use of EE and DER increases. <4.5. Cost Containment Mechanisms> Future electricity demand, technology development, and technology costs are all uncertain. Ultimately, these uncertainties result in uncertainties around the cost to consumers of a portfolio standard, which could be an important consideration for lawmakers. To protect consumers from undesirably high electricity costs, portfolio standards can include provisions that reduce stringency in response to high costs. These various provisions are sometimes called safety valves. Safety valves need not be included in legislation, since Congress could amend a law establishing a portfolio standard in response to any concerns that developed. Including safety valves in legislation could, however, promote regulatory certainty for covered entities and consumers, because legislative action to address any concerns that might arise could potentially be a lengthy process. Another option could be for Congress to explicitly authorize an agency to implement safety valves. An alternative compliance payment (ACP) allows a utility to pay a fee in lieu of surrendering credits. The degree of cost control it might provide would depend on the level at which an ACP were set. For example, if electricity generation from eligible sources were available at 5 cents per kilowatt-hour (cents/kWh) and an ACP were 10 cents/kWh, utilities would likely procure electricity from the eligible sources instead of paying the ACP. If, however, the ACP were 3 cents/kWh, utilities would likely pay the ACP and procure electricity from ineligible sources. Use of ACP could be unlimited, or it could be limited to a certain share of overall compliance. If an ACP were included in a national portfolio standard, lawmakers would also have to decide how any collected revenue would be disbursed. One option would be to use the revenue to further desired policy goals, for example by funding greenhouse gas reduction programs or technology research and development. Another option would be to return the revenue to electricity consumers as a way of further reducing the cost impacts of a portfolio standard. Other options include treating it as general fund revenue, deficit or debt reduction, or other spending. Portfolio standards could include provisions to suspend or delay compliance with targets under certain conditions. These conditions could include compliance costs reaching a specified threshold or identification of reliability risks. Some cost containment for portfolio standards comes from the use of tradable credits to demonstrate compliance, especially if a portfolio standard allows unbundled credits. A low cost eligible source might be located outside of a utility's service territory. When utilities can use unbundled credits, they can demonstrate compliance by surrendering credits from this low cost source. The alternative, namely, disallowing tradable credits, could require utilities to procure electricity from high cost sources or could require the development of more sources than would be required to meet electricity demand, resulting in overall higher costs for consumers. One argument against unbundled credits is that they might not address concerns over localized concentrations of co-pollutants from conventional generators, known as hot spots. For example, if a utility procured electricity from an ineligible source that also emitted harmful air pollutants such as particulate matter or nitrogen dioxide, and the utility complied with the portfolio standard with credits associated with eligible sources located outside its service territory, hot spots might not be reduced to the extent they might be if unbundled credits were not allowed. Banking or borrowing could also decrease overall compliance costs. For instance, in years when utilities had access to many credits from low cost eligible sources, relative to what were required by the target, utilities might bank credits. If fewer credits were available in future years, relative to what were required by the target, a utility could surrender the banked credits, resulting in lower compliance costs. Banking could reduce a utility's exposure to volatility that can occur in electricity markets. This reduced risk can also reduce overall compliance costs, since a utility would not have to take other actions to reduce its risk exposure. To the extent that banking or borrowing could reduce the net change in generation, it might lead to reduced environmental benefits and reduced incentive for technology innovation. Alternatively, lawmakers could establish mechanisms to increase the stringency of a portfolio standard if certain thresholds were passed. Stringency could be increased by increasing the target to a higher percentage of electricity sales or moving the deadline to achieve the target to an earlier year. The trigger for such an action could be credit price, greenhouse gas emissions levels, technology development, or other thresholds. This might be one way to increase the desired benefits of a portfolio standard in cases where compliance costs were unexpectedly low. It might also create uncertainty for covered entities and potentially result in unintended consequences such as market participants avoiding actions they might otherwise take in order to avoid triggering a change in stringency. <5. Selected Policy Considerations> The previous section discussed some potential effects of different choices about design elements for a portfolio standard. A key theme in discussion of design elements is the balance between achieving policy objectives and minimizing electricity cost increases for consumers, assuming a portfolio standard were implemented. The potential effects discussed in this section might be characterized instead as the potential effect of a portfolio standard compared to business as usual. While the previous section addressed the question "How can a portfolio standard be designed?," this section addresses the question "What might happen if a portfolio standard were implemented?" Any projections of the effects of a policy on the U.S. electric power sector are subject to uncertainty around various factors. These include future economic activity, electricity demand, energy costs (e.g., natural gas prices), and technology costs. Some factors may be more strongly influenced by decisions made by foreign governments than by the federal government. For example, international demand for electricity from solar energy could lower the cost to produce solar panels, or countries with large critical mineral resources could impose export bans, increasing the cost in the United States of any technology using those minerals. <5.1. Potential Economic Effects> The overall effect on the American economy of a national portfolio standard would be influenced by multiple factors. Increased electricity costs could reduce economic activity, depending on the price response throughout the economy. Potential price responses are reduced electricity consumption, increased investment in efficiency measures, or reduced spending on other goods or services. Some price responses might have minimal effect on overall economic activity, for example if consumers shifted spending from electricity consumption to energy efficiency improvements. Potential economic effects might not be uniformly distributed. There could be regional differences in electricity price changes, given the geographic variability in energy resources. Utilities in regions with relatively less potential to develop eligible sources (i.e., regions in which eligible sources are relatively costlier) might buy credits from eligible generators in other regions. The cost of credits might result in higher electricity prices for customers of the utility buying credits. At the same time, customers of any utilities selling credits might see lower electricity prices. As discussed above, the ability to use unbundled credits for compliance could reduce overall compliance costs relative to the case where only bundled credits were allowed because utilities across the country could take advantage of low cost eligible sources. At the same time, unbundled credits could result in wealth transfer between different regions of the country. Policy design choices might affect any potential wealth transfer. Electricity prices already vary across the country as a result of differences in resource availability, electricity demand, and utility regulatory models. There might also be differences in cost distribution among household income levels. Generally, poorer Americans spend a larger portion of their income on electricity than wealthier Americans, so electricity cost increases could disproportionately affect them. Within the electric power sector, businesses associated with eligible sources might be positively affected while businesses associated with ineligible sources might be negatively affected. The affected businesses might be individual generators and also firms associated with their supply chains. For negatively affected businesses, the potential impacts might include loss of capital investment (sometimes referred to as stranded costs) and reduced employment. Communities surrounding a negatively affected generator might experience negative effects such as loss of tax revenue base and increased demands on social services. For positively affected businesses and communities, the opposite might be true, namely increased capital investment, increased employment, and other positive economic effects. Additionally, American businesses that develop goods or services used to comply with a portfolio standard could potentially expand into international markets, depending on whether eligible sources also experienced demand growth internationally. Depending on policy design details, local electricity market factors, and local energy resources, some existing businesses in the electric power sector could experience negligible effects of a potential national portfolio standard. <5.2. Potential Environmental Effects> Proponents of portfolio standards describe multiple environmental benefits, such as reduced greenhouse gas (GHG) emissions (i.e., climate change mitigation) and reduced air pollutants (i.e., improved air quality). The extent to which a portfolio standard might produce potential environmental benefits would depend in part on choices about source eligibility and stringency. Potential eligible sources vary in their GHG and air pollutant emissions, as well as other attributes such as water consumption and power density (which can affect land requirements). Implementation could affect environmental outcomes too. For example, some eligible sources might be deployable in either large-scale or small-scale installations, with differing effects on environmental factors such as land use. Some would argue these potential effects should be compared with potential effects of other energy options. A comprehensive comparison of potential environmental effects of various energy sources is beyond the scope of this report. <5.3. Interaction with State Portfolio Standards> The conditions under which federal law preempts state law can vary, and determination of federal preemption can be complex. Twenty-nine states, three U.S. territories, and the District of Columbia are currently implementing mandatory portfolio standards, and an additional eight states and one territory have voluntary versions. As of September 6, 2019, nine of these have targets of 100%. If Congress implemented a national portfolio standard, it could expressly preempt existing state portfolio standards. If a national portfolio standard were enacted that did not preempt state portfolio standards, utilities in states with existing portfolio standards might have to comply with both simultaneously. In practice, whichever standard had the higher stringency would determine the amount of eligible sources in a utility's portfolio. In this case, the relevant stringency could be either the required percentage of generation from eligible sources or the set of eligible sources itself. For example, some existing state portfolio standards include nuclear energy as an eligible source. If a national portfolio standard did not include nuclear energy, then a utility might be out of compliance with the federal standard even if it were in compliance with the state standard and the state and federal standard required the same amount of electricity from eligible sources. Assuming a generator were eligible for both a state and national program, a utility could procure electricity (or credits) from that generator to demonstrate compliance with both. In other words, the presence of two portfolio standards would not necessarily double the amount of procurement from eligible sources required. A utility covered under two portfolio standards might, however, face increased administrative costs associated with compliance. Although few technical barriers exist to the simultaneous operation of state and federal portfolio standards, other concerns may make this undesirable. Administrative cost burden for covered entities is one such concern. Another might be confusion for eligible sources about whether and how to receive credits for two portfolio standards. If Congress chose to preempt state programs, this could potentially disrupt project finances for recently developed or proposed sources and lead to investment losses in clean energy industries. Congress might also consider exempting utilities facing state portfolio standards of equal or greater stringency than the federal portfolio standards. Congress could also allow credits issued by states to be used for compliance with a federal program. This option would, effectively, allow a utility to use one credit to demonstrate compliance with two portfolio standards, though it could also reduce the policy outcomes relative to a utility having two distinct compliance obligations. An option included in some of the bills listed in the Appendix is to compensate utilities facing a state standard with a specified number of federal credits. Alternatively, Congress could choose not to explicitly address the question, and instead let state governments or judicial review decide whether state programs would be suspended if a national one were implemented. <5.4. Interaction with Other State Energy Policies> Under current law, state and local governments have authority for approving electricity generation and transmission assets. Compliance with a national portfolio standard might require new generation and transmission assets, but it is unclear to what extent state approval processes would consider national clean energy policy goals. Some stakeholders have argued that state approval processes for new electricity transmission lines, in particular, create barriers for deployment of certain electricity generation sources, especially wind. To the extent that a national portfolio standard required new transmission capacity, interest might increase in a stronger federal role in approving electricity transmission infrastructure. Congress has considered this in the past. For example, the Energy Policy Act of 2005 ( P.L. 109-58 ) authorized federal approval for some transmission infrastructure under certain conditions, though this authority has never been used. As noted in " Potential Environmental Effects " a national portfolio standard might alternatively incentivize distributed energy development or projects in other locations that might not require new transmission capacity. Some states have adopted policies to create competition among electricity generators, an effort known as deregulation or restructuring. In these states (and some portions of states), competitive electricity markets create price signals meant to, among other things, drive long-term investment decisions. Congress demonstrated support for restructuring efforts in the Energy Policy Act of 1992 ( P.L. 102-486 ). Portfolio standards require utilities to purchase electricity from sources that might be more expensive than other sources. This creates so-called out-of-market payments, sometimes characterized as subsidies, for eligible sources that could distort the operation of electricity markets. Eligible sources would still compete with each other for market share, creating some competitive pressure on prices among eligible sources. <5.4.1. Appendix. Legislative Proposals in the 105th-116th Congresses> This section lists previously introduced legislation that would have established national portfolio standards. CRS searched congress.gov using the phrases "renewable portfolio standard," "clean energy standard," "renewable energy standard," "renewable electricity standard," "renewable energy," and "clean energy," in full bill text or bill summaries for all Congresses. The earliest bill identified in this search was introduced in the 105 th Congress. Search results were refined by including only the Subject-Policy Area terms "Energy" and "Environmental Protection." Table A-1 provides selected policy design elements of the bills that would have established national portfolio standards that were identified using this search methodology. Bills are listed in order of introduction by Congress, with House bills listed first and Senate bills listed second. This table only provides information related to the bills' portfolio standards. Some of the bills in the table had multiple provisions, including some that might also affect the electric power sector, but those are not described here.

Electricity portfolio standards, such as renewable portfolio standards and clean energy standards, are policies aimed at changing the energy sources used to generate electricity. Supporters identify multiple policy goals, including greenhouse gas reduction, technology inno vation, and job creation. Twenty-nine states, three U.S. territories, and the District of Columbia are currently implementing mandatory portfolio standards. Congress, to date, has not established a national portfolio standard, though bills that would do so have been introduced in every Congress since the 105 th . Congressional interest in 2011 and 2012 prompted a variety of analyses about potential impacts of a national portfolio standard. The national electricity generation profile has changed since then in ways that might make previous analyses less relevant to any future policy debate. Between 2012 and 2018, in the U.S. generation from coal fell (from 37% to 27%), generation from natural gas increased (from 30% to 35%), and generation from renewable sources (e.g., hydropower, wind, solar) increased (from 12% to 18%). Many expect these trends to continue, regardless of any new federal policy related to the electric power sector. Portfolio standards are generally envisioned as market-based policies in the sense that they use financial incentives rather than prohibitions to achieve policy goals. Several key concepts in portfolio standards are common to other market-based policies. Credits are an accounting mechanism used for compliance and are tracked in electronic databases sometimes called registries. Lawmakers can choose the degree of flexibility around credit use in a portfolio standard, with potential impacts on overall policy costs and benefits. Procedures to monitor, report, and verify credits can help portfolio standards achieve their policy goals and reduce the risk of fraud. Other concepts are specific to portfolio standards. Choices about these design elements can strongly influence policy outcomes. Generally, choices that would tend to reduce costs would also tend to result in fewer changes in the electricity generation profile. The choice of which energy sources would be eligible for compliance, and therefore would be incentivized by the program, is often central to policy discussions about portfolio standards. Past proposals have included a range of eligible sources, including renewable sources, nuclear, fossil fuel-fired power plants equipped with carbon capture and sequestration technology (CCS), and natural gas combined cycle power plants. Some proposals have included nongenerating sources like energy storage and energy efficiency as well. Other design elements include whether all utilities should have to comply with a portfolio standard or whether some would be exempted; how much generation from eligible sources a portfolio standard is designed to achieve; by when should the desired amount of generation from those sources be achieved; to what share of a utility's electricity sales should a portfolio standard apply; and whether any provisions should be included that delay or halt compliance under certain circumstances (e.g., undesirably high prices). If established, a national portfolio standard would likely have economic effects, though estimating these in advance is subject to some uncertainty. Any sources and associated industries excluded from the definition of eligible sources would likely experience negative economic effects. At the same time, industries associated with sources included in the standard would likely experience positive economic effects. The net effect on national economic activity would depend on the design details of any portfolio standard and the ways that consumers might respond to potentially higher electricity prices. A national portfolio standard might also have environmental effects compared to a business-as-usual scenario, depending on design choices such as source eligibility and the change from business as usual a portfolio standard is designed to achieve. Potential eligible sources vary in their GHG and air pollutant emissions, as well as other attributes such as water consumption and power density (which can affect land requirements). Implementation could affect environmental outcomes too. For example, deploying small-scale distributed eligible sources might have different effects than deploying large-scale eligible sources. Another policy consideration is potential interaction with state energy policies like existing portfolio standards, electricity infrastructure siting, and the use of competitive markets to influence electricity investment decisions. Such interactions may generate debate regarding preemption and highlight potential federalism concerns.

crs_R45878

crs_R45878_0

<1. Introduction> Small businesses are owned by and employ a wide variety of entrepreneurs skilled trade technicians, medical professionals, financial consultants, technology innovators, and restaurateurs, among many others. As do large corporations, small businesses rely on loans to purchase inventory, to cover cash flow shortages that may arise from unexpected expenses or periods of inadequate income, or to expand operations. The Federal Reserve has reported that lending to small businesses declined during the Great Recession of 2007-2009. During the recession, many firms scaled down operations in anticipation of fewer sales, and lenders also tightened lending standards. A decade after the recession, evidence on whether lending to small business has increased is arguably inconclusive. Some small firms may be able to access the credit they need; however, others may still face credit constraints, and still others may be discouraged from applying for credit. Furthermore, drawing direct conclusions about small business access to credit can be difficult because available data are limited and fragmented. Congress has demonstrated an ongoing interest in small business loans (SBLs), viewing small businesses as a medium for stimulating the economy and creating jobs. Congress's interest in small business credit access generally focuses on (1) whether small businesses can secure credit from private lenders and (2) whether small businesses can obtain such credit at fair and competitive lending rates. In other words, policymakers are interested in whether market failures exist that impede small business access to credit and, if so, what policy interventions might be warranted to address those failures. Market failures, in economics and specifically in the SBL market context, refer to barriers that impede credit allocation by private lenders. For example, some lenders may be reluctant to lend to businesses with collateral assets (e.g., inventories) that are difficult to liquidate, as may be typical of some small businesses (e.g., restaurants). Under certain financial or regulatory circumstances, small loans may not generate sufficient returns to justify their origination costs, which also may be considered a market failure. In addition, market failures may exist when borrowers pay noncompetitive lending rates in excess of their default risk. Start-ups and some small businesses that provide niche products frequently must rely on mortgage or consumer credit or private equity investors rather than more traditional SBLs because lenders find it challenging to price loans for these firms, which could be another indicator of SBL market failure. Obtaining conclusive evidence on SBL market performance in terms of quantities and pricing is difficult for several reasons. First, there is no consensus definition of a small business across government and industry. Moreover, as the Federal Reserve stated, "fully comprehensive data that directly measure the financing activities of small businesses do not exist." Drawing conclusions about the availability and costs of SBLs is not possible using existing data sources, which lack information such as the size and financial characteristics of the businesses that apply for credit, the types of loan products they seek, the types of lenders to whom they applied for credit, and which credit requests were rejected and which were approved. Second, the risks small business owners take are not standardized and vary extensively across industries and locations. For this reason, determining whether SBL prices (lending rates and fees) are competitive is difficult without standardized benchmark prices that can be used to compare the relative prices of other SBLs. To address SBL market failures, Congress passed legislation to facilitate lending to small businesses that are likely to face hurdles obtaining credit. For example, the Small Business Act of 1953 (P.L. 83-163) established the Small Business Administration (SBA), which administers several types of programs to support capital access for small businesses that can demonstrate the inability to obtain credit at reasonable terms and conditions from private-sector lenders. The Community Reinvestment Act (CRA; P.L. 95-128 ) encouraged banks to address persistent unmet small business credit demands in low- and moderate-income (LMI) communities. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) required the Bureau of Consumer Financial Protection (CFPB) to collect data from small business lenders to identify the financing needs of small businesses, especially those owned by women and minorities. (The CFPB has not yet implemented this requirement.) In addition, various bills addressing the SBL market have been introduced in the 116 th Congress. For example, H.Res. 370 would express "the sense of the House of Representatives that small business owners seeking financing have fundamental rights, including transparent pricing and terms, competitive products, responsible underwriting, fair treatment from financing providers, brokers, and lead generators, inclusive credit access, and fair collection practices." H.R. 3374 would amend the Equal Credit Opportunity Act to require the collection of small business loan data related to LGBTQ-owned businesses. H.R. 1937 and S. 212 , the Indian Community Economic Enhancement Act of 2019, among other things, would require the Government Accountability Office to assess and quantify the extent to which federal loan guarantees, such as those provided by the SBA, have been used to facilitate credit access in these communities. This report examines th e difficulty of assessing and quantifying market failures in the SBL market, which consists of small business borrowers (demanders) and lenders (suppliers). It begins by reviewing various ways to define a small business, illustrating that there is no consensus definition of the demand side of the SBL market across government or industry. The focus then shifts to describing the supply side namely the types of lenders that lend to small businesses, as well as their lending business models and practices. The report subsequently attempts to identify credit shortages in certain SBL market segments (e.g., the market for small loans, loans for businesses with risky or unsuitable collateral, and loans for businesses in underserved communities). It also examines whether market failures associated with SBL pricing can be identified. Finally, the report concludes by briefly discussing the Dodd-Frank Act requirement that the CFPB collect data to facilitate the understanding of SBL market activity. <2. The Demand for SBLs: Multiple Definitions of a Small Business> There is no universally accepted definition of a small business. The federal government and industry define small businesses differently in different circumstances. Although factors such as annual earnings, number of employees, type of business, and market share are typically considered, determining the universe of small businesses from which to collect data is difficult without a consensus definition. If a consensus definition existed, then identifying a small business for data-collection purposes would become more feasible for example, a concise question on a loan application might identify whether the business applying for the loan met certain defined factors making it a small business. Below are examples of the ways regulators, researchers, Congress, and industry have defined small businesses: The SBA defines a small business primarily by using a size standards table it compiles and updates periodically. The table lists size thresholds for various industries by either average annual receipts or number of employees. The SBA also defines small businesses differently for different SBA programs. For example, the SBA's 7(a), Certified Development Company/504, and Small Business Investment Company (SBIC) programs have alternative size standards based on tangible net worth and average net income. Academic research frequently uses a firm that has 500 employees or fewer (but does not monopolize an industry) as a proxy measure for a small business. This definition has been adopted by various federal agencies, such as the U.S. Census Bureau, the Bureau of Labor Statistics, and the Federal Reserve. In addition, some research views microbusinesses as a subset of small businesses. A common academic definition of a microbusiness is a firm with only one owner, five employees or fewer, and annual sales and assets under $250,000. Small business definitions in statute also vary. For example, the Internal Revenue Service (IRS) sets different size standards for small businesses under various tax laws. The IRS provides certain tax forms for self-employed taxpayers and small businesses with assets under $10 million. The Patient Protection and Affordable Care Act of 2010 (ACA; P.L. 111-148 ), however, defined a small business in multiple ways (e.g., fewer than 50 full-time employees to avoid ACA's employer shared responsibility provision; fewer than 25 full-time equivalent employees for tax credits, etc.). According to a Federal Deposit Insurance Corporation (FDIC) survey, small and large banks have their own definitions of a small business. Small banks (defined as banks with $10 billion or less in assets) view a small business as one in which the owner "wears many hats," referring to an owner who performs multiple tasks, perhaps because the firm is a start-up or still in its early growth stage. Large banks define small businesses more formally, in terms of annual revenues and sales. <3. The Supply of SBLs: Background on Lenders and Industry Underwriting and Funding Practices> This section provides background on small business lenders and underwriting practices. Although small businesses rely on a variety of credit sources that include personal (consumer or mortgage) credit, family, friends, and crowd-funding, they also rely on various types of financial institutions (banks and nonbanks). Financial institutions vary in how they are regulated, the business models they adopt, the types of loans they offer, and the growth stages of the small businesses they serve. These differences are all factors involved when evaluating whether shortages exist in the SBL market. Some lenders are increasingly using business credit scores to assess creditworthiness, and they may deny SBLs due to either a lack of or poor business credit history. The SBA since 2014 has also relied upon credit scores to qualify applicants for its 7(a) loan program. In 2016, the Small Business American Dream Gap Report found that many businesses failed to understand their business scores or even know that they had one. The text box below summarizes the information used to compute credit scores specifically for businesses. <3.1. Types of Small Business Lenders> Because banks have historically been the principal sources for commercial business lending, credit availability is frequently evaluated in terms of banking trends; however, nonbank financial institutions also engage in commercial business and industrial (C&I) lending. The Federal Reserve has reported that smaller firms are more likely than large firms to apply to nonbank lenders for credit. Credit unions have become an important source of small business loans in recent years. Likewise, nonbank fintech lenders have become an important source of credit in market segments that banks may have exited (e.g., business loans of $100,000 or less). <3.1.1. Bank Lending to Small Businesses> Because the types of SBLs made by a bank may be related to its size, this section begins with bank size definitions. Small community banks , which may be defined as having total assets of $1 billion or less, are considered a subset of the larger category of community banks; c ommunity banks may be defined as having total assets up to $10 billion. Large banks have total assets that exceed $10 billion. Community banks hold approximately 50% of outstanding SBLs (defined as the share of loans with principal amounts less than $100,000); however, the number and market share of community banks have been declining for more than a decade. Overall, the number of FDIC-insured institutions fell from a peak of 18,083 in 1986 to 5,477 in 2018. The number of institutions with less than $1 billion in assets fell from 17,514 to 4,704 during that time period, and the share of industry assets held by those banks fell from 37% to 7%. Meanwhile, the number of banks with more than $10 billion in assets rose from 38 to 138, and the share of total banking industry assets held by those banks increased from 28% to 84%. 87 The decline in community banks is meaningful because they have historically been one of the largest sources of funding for small businesses. Furthermore, some academic research suggests that, as banks grow, their enthusiasm for lending to starts-ups and small businesses may diminish. In 2015, the Federal Reserve highlighted a decline in the share of community banks' business loan portfolios with initial principal amounts under $100,000, suggesting that these banks were making fewer loans to small businesses. <3.1.2. Credit Union Lending to Small Business Members> Although some credit unions make SBLs, their commercial lending activities are limited. The Credit Union Membership Access Act of 1998 (CUMAA; P.L. 105-219 ) codified the definition of a credit union member business loan (MBL) and established a commercial lending cap, among other provisions. An MBL is any loan, line of credit, or letter of credit used for an agricultural purpose or for a commercial, corporate, or other business investment property or venture. The CUMAA limited (for one member or group of associated members) the aggregate amount of outstanding business loans to a maximum of 15% of the credit union's net worth or $100,000, whichever is greater. The CUMAA also limited the aggregate amount of MBLs made by a single credit union to the lesser of 1.75 times the credit union's actual net worth or 1.75 times the minimum net worth required to be well-capitalized. Three exceptions to the credit union aggregate MBL limit were authorized for (1) credit unions that have low-income designations or participate in the Community Development Financial Institutions program; (2) credit unions chartered for making business loans; and (3) credit unions with a history of primarily making such loans. Generally speaking, the volume of credit union MBL lending is minor in comparison to the banking system. As of September 30, 2015, for example, credit unions reportedly accounted for approximately 1.4% of the commercial lending done by the banking system. A large credit union one with $10 million or more in assets might adopt a business lending model comparable to a small community bank or perhaps a midsize regional bank in the commercial loan market. Similar to community banks, approximately 85% of MBLs were secured by real estate in 2013, with some credit unions heavily concentrated in agricultural loans. A larger credit union (e.g., $1 billion or more in assets) could originate larger loans relative to most community banks with assets less than $1 billion. Despite competition with some banks in certain localities, the credit union system is significantly smaller than the banking system in terms of overall asset holdings and, correspondingly, has a smaller footprint in the broader commercial lending market. <3.1.3. Marketplace (Fintech) Lending> The share of SBLs originated by nonbank fintech lenders has expanded. However, whether the increase in originations reflects an increase in small business lending is unclear because not all fintechs retain their loan originations in their asset portfolios. Fintechs may generate revenues by (1) originating loans and collecting underwriting fees; (2) selling the loans to third-party investors (via adoption of a private placement funding model, discussed in the below text box "Funding Options for Lenders"); and (3) collecting loan servicing fees (from either the borrowers or investors). The fintech lending model has attained a competitive edge by streamlining and expediting the more traditional labor- and paper-intensive manual underwriting process by, for example, adopting online application submission and proprietary artificial intelligence for underwriting. For this reason, marketplace lending has been both a substitute (providing credit in some loan markets not served by banks) and a complement (via numerous bank partnerships) to the banking system. If, for example, a fintech partners with a bank and subsequently transfers (sells) its loan originations to a bank's balance sheet, the loan would be reported as a banking asset; such scenarios make it difficult to isolate fintech firms' impact in the broader SBL market. <3.2. Access to Funding in Different Growth Stages> This section explains the relationship between the growth stage of a small business and its access to credit. Start-ups and more established firms are likely to have different experiences obtaining business loans. In addition, underwriting requirements and the degree of loan product customization, which vary among lenders, may also be more suitable for borrowers at different stages. The text box at the end of this section summarizes some funding options for lenders that may also influence their underwriting practices and the types of loans they offer. <3.2.1. Funding for Start-ups> A firm's growth stage matters for credit access. During the initial start-up stage, small businesses typically have little collateral; their financial statements often lack sufficient histories of earnings and tax returns to meet lender requirements; and they typically do not have a performance track record during an economic downturn. As a result, lenders often find it difficult, time-consuming, and costly to determine whether a start-up is creditworthy. For this reason, start-ups often obtain funds from friends and family and drawdowns of personal savings. In addition, start-ups rely on financing from the owner's personal consumer credit products (e.g., credit cards, home equity loans) rather than a traditional commercial loan made by a financial institution. According to the Federal Reserve Small Business Credit Survey, which defines a small business as having $1 million or less in annual revenue, 42% of the small business owners surveyed used their personal credit scores to secure a loan and 45% used both their business and personal credit scores. Furthermore, having a low business credit score was reported as the number one reason why small businesses were rejected for credit, followed by an insufficient credit history. Because many small businesses rely on personal credit history and consumer credit products (rather than business credit), declines in consumer credit availability during economic downturns are also likely to affect small businesses' access to credit. Home equity credit during the 2007-2009 recession declined along with real estate collateral prices, contributing to tighter lending standards. Likewise, any consumer credit cost increase is likely to affect certain small businesses. For example, given the rise in credit card rates over the recession, small businesses that carried large debt balances over several payment cycles might have paid higher borrowing costs relative to a more conventional business loan. Hence, changes in the availability and pricing of consumer credit are likely to have similar effects on consumers and some small businesses, especially start-ups. <3.2.2. Funding for Later-Stage Small Firms> Once a firm enters into a more advanced growth stage, it may have one or more of the following attributes: a positive cash flow, more than two years of experience, a high business credit score, or achieves $1 million or more in annual revenues. Lenders can subsequently provide more mature businesses with one or more loans secured by their assets, supported by their credit and earnings histories. Accordingly, firms in later growth stages tend to have greater access to SBLs. Nevertheless, small firms still are more likely to obtain credit via relationship lending . Two prevailing commercial lending underwriting models are relationship and transactional lending . Small and community banks typically engage in relationship lending (or relationship banking), meaning that they develop close familiarity with their customers (i.e., soft information) and provide financial services within a circumscribed geographical area. Relationship lending provides a comparative advantage for pricing lending risks that are unique, infrequent, and localized. A relationship lender may also prefer being in close geographical proximity to the collateral (e.g., local real estate) borrowers used to secure their loans. The nature of the risks requires the loan underwriting process to be more labor-intensive. By contrast, large institutions typically engage in transactional lending that frequently relies on automated, statistical underwriting methodologies and large volumes. Transactional lending provides a comparative advantage for loan pricing when the borrowers face more conventional business risks (i.e., hard information, such as sales fluctuations, costs of inputs, specific industry factors, and other relevant metrics) rather than idiosyncratic risks that are difficult for an automated underwriting model to quantify. By relying on conventional financial metrics and documentation, transactional lenders do not need to be located near their borrowers to monitor their financial health. Moreover, because underwriting is more automated for these institutions, credit requests are most frequently denied because of (1) weak business performance, (2) insufficient loan collateral, and (3) having too much existing debt outstanding. A lender's underwriting model influences the way it defines a small business. As previously mentioned, community banks tend to describe small businesses as those whose owners multitask, meaning that they perform multiple large-scale tasks rather than relying on designated, full-time employees. Small businesses who face these types of challenges are unlikely to provide (in a timely manner) the metrics necessary for automated underwriting and, therefore, tend to be underwritten manually when requesting credit. For manual underwriting, small firms' credit scores are often not essential to evaluate creditworthiness and determine loan terms. Instead, relationship lending allows for more tailoring of loans (e.g., customized lending terms or repayment schedules) to small firms' idiosyncratic needs. Hence, lenders with relationship lending models are likely more well-adapted to underwrite businesses with risks that are unusual and oftentimes difficult to quantify. By contrast, large banks use metrics such as the dollar amount of annual sales revenues to categorize a small business. Automated underwriting becomes more amenable for businesses with business credit scores and the ability to provide financial documentation in a timely manner. A bank may offer an unsecured credit card loan to a firm with reliable financial performance records, thus reducing the monitoring costs associated with collateralized lending. Furthermore, firms with standardized financials can obtain more standardized (noncustomized) and competitively priced loans, which can be delivered faster. In general, the average costs to originate (and fund) loans decrease as the volume of loans or loan amounts increase. Lenders with transactional lending models can benefit more (relative to manual underwriters) from such economies of scale because their customer bases include more borrowers with standardized and quantifiable risks. Although they tend to rely on different types of credit, both start-ups and well-established firms may be highly dependent on certain lenders that specialize in underwriting loans for certain industries (e.g., maritime, breweries and distilleries, or moving). In addition, some lenders primarily engaged in transactional underwriting may still rely on relationship lending under some limited circumstances. For example, a larger firm may be willing to relax supplementary financial requirements (known as covenants) designed to reduce credit risk for borrowers with whom the firm has an ongoing relationship. This type of action may be considered a form of manual underwriting. <4. Attempting to Identify SBL Market Failures> This section attempts to find evidence of market failures that may be addressed by policy interventions. The specific areas of potential concern are (1) whether the lending industry is providing enough small loans for small businesses; (2) whether certain small businesses lack the type of collateral that lenders require to secure the loans; (3) whether the amount of credit provided in low- and moderate-income (LMI) communities is insufficient; and (4) whether the price of credit is too expensive for small businesses. <4.1. Shortage of Small Loans> Reviewing the number of small-sized loans may help determine if a SBL market shortage exists, assuming that (1) lenders make small-sized loans to small businesses and (2) an ideal size definition exists. The FDIC provides multiple size definitions of SBLs: loans with origination amounts less than or equal to $100,000; loans with origination amounts less than or equal to $250,000; loans to firms with gross annual revenues less than or equal to $1 million; and loans with origination amounts greater than $250,000 to firms satisfying any amenable small business definition. The FDIC's 2018 Small Business Lending Survey of 1,200 banks uses a C&I loan size limit of $1 million as a proxy for small business lending. In 2015, the Federal Reserve specifically highlighted the decline of community banks' business loans with initial principal amounts under $100,000. The current interest-rate environment, which has been at a historic low since the recent recession, may influence this outcome. In a low-interest-rate environment, even relationship lenders may have a greater incentive to increase loan sizes to generate sufficient interest income to cover the costs of providing them. Assuming that the underwriting, servicing, and compliance costs do not vary with loan size, then incurring those fixed costs for larger-sized loans, which may be more likely to generate more interest revenue, may be more economical for lenders. The retreat from the $100,000 loan market might be temporary if interest rates rise in the future. Nonetheless, denials of SBL requests because of a shift in lenders' preferences toward originating larger loans may indicate a market failure. Attempting to find a proxy for market failure by examining the availability of SBLs of $100,000 or any size threshold is challenging for the following reasons: According to the Federal Reserve's Survey of Lending Terms , at the beginning of 2017, the average C&I loan size for all domestic commercial banks (excluding U.S. branches and agencies of foreign banks) was approximately $575,000; the average business loan size at small domestic banks was approximately $123,000; and the average loan size at large domestic banks was approximately $729,000. By contrast, at the beginning of 2007 (prior to the 2007-2009 recession), the average C&I loan size for all domestic commercial banks was approximately $379,000; the average business loan size at small domestic banks was approximately $117,000; and the average loan size at large domestic banks was approximately $578,000. Despite the 51.7% increase in average C&I loan size for all domestic commercial banks, the average C&I loan size for small commercial banks which hold approximately 50% of outstanding SBLs increased by a relatively modest 5.13%. Thus, it is not apparent that the smaller-size SBL market segment has been displaced. If lenders increase the total amount of SBLs made at $250,000 or $1 million, for example, while simultaneously making fewer loans of $100,000, then whether that outcome represents an increase or decrease in overall small business lending is subject to debate. Similarly, the FDIC noted that even the $1 million loan size limit may underestimate the amount of loans made to small firms. Some small firms (with annual revenues under $1 million) may get loans that exceed $1 million. Some SBLs may be secured by residential real estate and counted as mortgages. Conversely, the data collected may overstate SBLs to small businesses. The financial data on bank C&I loans do not report on loans made to a well-defined group of small firms. Instead, the data only report on small loans to all businesses (regardless of size), thus overstating the amount of SBLs, given that large businesses also receive loans of these sizes. The demand for $100,000 SBLs (from community banks) may have decreased. For example, technology firms, which represent many start-ups since the 2007-2009 recession, frequently do not purchase large amounts of inventory. Such firms that are able to operate out of the owners' homes may finance operations with personal savings and credit cards. Conversely, the demand for large loans may have increased . For example, some firms may determine that obtaining larger-size loans during the current low-interest-rate environment is more economical than having to reborrow at some point in the future at higher lending rates. In addition to the abovementioned issues, drawing conclusions about SBL shortages based primarily on the lending practices of community banks is premature in the absence of a comprehensive dataset that includes loans made by nonbank lenders. Fintech lenders may be filling the gap in small business lending left by a decline in community banks. Because fintech lenders generally are not required to hold capital against their portfolio loans or can fund via private placement, they may be able to take advantage of opportunities to lend to small businesses that would not generate sufficient profit margins for community banks. Loans retained in fintech lenders' portfolios or funded via private placement, however, are currently not reported to the federal banking regulators. Furthermore, businesses may have multiple loans and often seek credit from multiple lenders. In some cases, small businesses may be able to obtain credit from some lenders and not others, particularly in cases when borrowers inadvertently seek credit from lenders using incompatible underwriting models. In short, the focus on a particular loan size or particular lender type is arguably too narrow for evaluating performance in the SBL market. <4.2. Collateral Eligibility for Secured Lending> A market failure may exist if lenders are unwilling to provide loans backed by illiquid collateral (i.e., collateral that cannot be easily liquidated if the borrower fails to repay the loan) an issue that may disproportionately affect certain small businesses. Banks and credit unions provide business loans via asset-based lending (ABL) guidelines that require firms to pledge assets (e.g., cash, receivables from inventory sales, inventory) as collateral for loans. For ABL purposes, federal banking regulators define a SBL as any loan to a small business (as defined by Section 3(a) of the Small Business Act of 1953 [P.L. 83-163 as amended] and implemented by the SBA) or a loan that does not exceed $2 million for commercial, corporate, business, or agricultural purposes. A bank typically provides fully collateralized short-term loans (under five years) to firms based upon their performance records (e.g., sufficient credit and earnings histories and assets), and it monitors the risks to the collateral that would need to be liquidated (sold) if the small business experienced financial distress. Similarly, credit unions can provide MBLs that comply with NCUA's ABL guidelines. Some firms' inventory, however, may not be ideal for ABL guidelines. Collateral that would be difficult to liquidate without losing too much value may not be acceptable. For example, restaurants (a common type of small business) have leases, cooking equipment (likely to resell for less than its initial sale price), and inventories of food that would not generate the income necessary to recoup losses from a loan default. Restaurants also have difficulty demonstrating the ability to repay a loan over a period of years. For this reason, lenders may not accept a restaurant's collateral as security for a loan. In response to this market failure, the SBA administers various programs to facilitate small business credit access (typically loans for up to $5 million and for 5-25 years) for financially healthy firms with collateral or inventory less likely to satisfy ABL requirements. Some borrowers that can demonstrate the ability to repay (e.g., minimum business credit score, management experience, minimum levels of cash flow, some collateral, and personal guarantees by the business owners) still may not be able to obtain affordable credit elsewhere (i.e., from other lenders), which might seem paradoxical. This may be because the firm's inventory does not turn over at a steady pace (e.g., seasonal merchandise), and a lender would face difficulty quickly liquidating the collateral if the firm became financially distressed. For a fee, the SBA may retain the credit risk of a small business loan up to a certain percentage, and the lender assumes the remaining share of credit risk to ensure incentive alignment during underwriting. SBA-guaranteed loans frequently have higher lending rates relative to ABL loans, taking into account the guarantee (and loan servicing) fees charged to borrowers to compensate the federal agency for retaining a majority of the default risk and the additional risk correlated with illiquid collateral. Following the recent recession, the SBA has reported an increase in the dollar amount of guaranteed lending over 2013-2018, which might indicate the ability to mitigate more market failures. If, however, borrowers fail to repay their loans and it is not possible to recover sufficient fees and proceeds from asset liquidations to cover the losses, then the SBA may need additional appropriations from Congress to account for the shortfall. The utility of government intervention in the form of SBA-guaranteed lending, therefore, is debatable. When borrowers are unable to obtain private-sector credit but subsequently repay their SBA loans, that outcome may suggest that a government guarantee helped correct a failure and improve SBL market performance. Conversely, when borrowers are unable to obtain private-sector credit and subsequently default on their SBA loans, that outcome suggests no market failure initially existed in the private SBL market. Monitoring loan performance is useful in distinguishing between a legitimate credit market barrier and an excessive lending risk, but such monitoring can only occur after loans have been originated and guaranteed, which underscores the difficulty of correctly identifying and effectively mitigating market failures. <4.3. SBLs and the Community Reinvestment Act> A market failure may exist if lenders make fewer SBLs in low- and moderate-income (LMI) areas than in higher-income areas. The Community Reinvestment Act of 1977 (CRA; P.L. 95-128 ) was designed to encourage banking institutions to meet the credit needs of their entire communities. The federal banking regulatory agencies the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency currently implement the CRA. The regulators issue CRA credits, or points, when banks engage in qualifying activities such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities that occur within a designated assessment area. These credits are then used to issue each bank a performance rating. The CRA requires these ratings be considered when banks apply for charters, branches, mergers, and acquisitions, among other things. Under the CRA, the banking regulators award CRA credit to certain SBLs (including small farm loans), provided these loans meet both (1) a size test and (2) a purpose test. Small businesses that receive an SBL must either (1) meet the size eligibility standards for the SBA's Certified Development Company/504 or SBIC programs or (2) have gross annual revenues of $1 million or less to qualify for CRA credit. The loans must also promote community and economic development, as explained in the federal bank regulators' guidelines, to qualify for CRA credit. Figure 1 shows the distribution of SBLs for $1 million or less that were eligible for CRA credit over the 2009-2017 period across census tracts grouped into four relative income categories as measured against median family income (MFI). For comparison, the last column shows the median percentages of total SBLs over the entire period. The median figures are as follows: 5.2% in the low-income tracts (< 50% of MFI), 16.7% in the moderate-income tracts (50% MFI < 80%), 40% in the middle-income tracts (80% MFI <120%), and 37.9% in the upper-income tracts (120% of MFI). This figure does not capture all CRA business lending because SBLs exceeding $1 million may also receive CRA credit. (In addition, the data in this figure represent a subset of lending activity that occurs in LMI tracts because large C&I loans, as well as consumer loans, may qualify for CRA credit.) Furthermore, changes in the number of SBL or CRA loans could indicate a change in the percentage of CRA credit awarded to SBLs, a change in total SBL originations, or both. Despite data limitations, the trends suggest that the share of SBLs in LMI areas has remained steady at approximately 20% for almost a decade. Whether that share can increase further which would suggest that credit may not be accessible for small businesses located in LMI areas is difficult to determine. For example, the demand for small business credit in LMI areas may be lower relative to higher-income areas. The number of potential businesses and lending opportunities in LMI areas may be comparatively lower if a greater percentage of small businesses locate in areas where their prospective customers would have sufficient incomes to sustain demand for the products or services they offer. In short, the data on SBLs awarded CRA credit do not provide a way to measure the demand for SBLs. There is no information on the number of businesses located in LMI areas that applied for loans and were subsequently rejected, making it difficult to conclude that a failure exists in the SBL market in LMI areas. Accordingly, Congress has called for the collection of data from small business lenders, discussed in more detail in the section entitled " CFPB Collection of Small Business Data ." <4.4. Small Business Loan Pricing> The pricing of SBLs specifically interest rates and fees is another consideration for evaluating the small business credit market's overall performance. A small business might not seek credit if it is too expensive. A small business might determine that it cannot afford an offer for credit if more of its financial resources (e.g., net income) must be devoted to paying interest than reinvesting in operations. When loan prices are set substantially higher than the risks posed by borrowers and the costs to acquire the funds used to make the loans, the pricing is not considered competitive. In economics, a competitive price is one that multiple suppliers would offer to buyers for the same good or service. A competitive price is often the best or lowest that a buyer can find for a good or service and, therefore, can be used as a benchmark price when comparison shopping to evaluate other offers. Determining whether SBLs are competitively priced is challenging. A common market failure is imperfect information, or information asymmetry when one party in a transaction has more accurate or more detailed information than the other party. This imbalance can result in inefficient outcomes. In the case of the small business credit market, the risks taken by small business owners are not standardized and vary extensively across industries and geographical locations. It is difficult for lenders to determine competitive loan pricing without sufficient comparable businesses from which to obtain reasonable estimates of expected losses and predict cash flows. Similarly, it may be difficult for small businesses to determine whether a loan offer is competitive without sufficient comparable business loans. Relationship lending, as previously discussed, can alleviate an SBL market failure that arises from the inability to price credit risks. Relationship lending allows a lender to collect more information about a borrower's financial behaviors, which may result in less stringent collateral requirements and greater access to credit at a lower price over time. Disclosure laws are another way to potentially resolve this type of market failure. In consumer credit markets, the Truth-In-Lending Act of 1968 (TILA; P.L. 90-301) requires lenders to disclose the total cost of credit to consumers in the form of an annual percentage rate (APR). TILA is designed to ensure borrowers are aware of their loan costs. For some consumer products, regulators require lenders to provide greater disclosures about product features that could result in borrowers paying excessive rates and fees, especially in cases where they are unaware of assessed penalty fees and interest-rate increases. Effective disclosures arguably mitigate the incentive for lenders to charge substantial markups above funding costs and borrowers' risks, thus resulting in lower loan prices. Although TILA applies to mortgage and consumer loans, it does not apply to business loans. For this reason, legislative proposals have been introduced in Congress to extend TILA disclosures to small firms. For example, H.R. 5660 , the Small Business Credit Card Act of 2018, would extend TILA disclosures to firms with 50 or fewer employees. Whether TILA protections for business credit would result in more competitive business loan terms is unclear. First, evidence suggests that TILA protections do not necessarily encourage consumers to shop for lower borrowing rates despite having more standardized (e.g., collateral) lending risks relative to businesses, suggesting it is unlikely TILA protections for small business would encourage them to shop around for credit. Second, some small businesses may already rely on certain types of credit to which TILA does apply. For example, some businesses obtain credit via personal credit cards and home equity loans, to which TILA disclosure requirements already apply. In addition, many lenders already disclose APRs on their business credit cards. <5. CFPB Collection of Small Business Data> The Dodd-Frank Act requires financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. This data collection is intended to "facilitate enforcement of fair lending laws" and to "enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses." The Dodd-Frank Act authorizes the CFPB to collect various data from financial institutions about the credit applications they receive from small businesses, including the number of the application and date it was received; the type and purpose of loan or credit applied for; the amount of credit applied for and approved; the type of action taken with regard to each application and the date of such action; the census tract of the principal place of business; the business's gross annual revenue; and the race, sex, and ethnicity of the business's principal owners. On May 10, 2017, the CFPB announced that it was seeking public comment about the small business financing market, including relevant business lending data used and maintained by financial institutions and the costs associated with the collection and reporting of data. Specifically, the CFPB requested information on five categories: "(1) small business definition, (2) data points, (3) financial institutions engaged in business lending, (4) access to credit and financial products offered to businesses, and (5) privacy." With respect to definition, the CFPB sought comment on the best definition of a small business and the burden of collecting data under that definition. In addition, the CFPB requested information on what data financial institutions should be required to collect and report, and which institutions should be exempted. The CFPB also requested feedback on product types offered to small businesses because the variety of terms and loan covenants that can be used to tailor loans, in addition to the interest rate, are part of the overall cost (price) of credit. The comment period closed on September 14, 2017. The CFPB has not yet issued a proposed rule, but it recently announced that such a rule was part of its spring 2019 regulatory agenda. Evaluating the small business lending market's overall performance (in terms of market failures) would be easier with less fragmented, more complete data. Collecting data, however, poses challenges for the CFPB and industry lenders. First, the Equal Credit Opportunity Act prohibits the collection of race and gender information, thus increasing the difficulty for the CFPB to implement a rule that would require such reporting. In addition, the collection and reporting of SBL data would likely need to be converted to a digital format. The fixed costs to implement digital reporting systems could be relatively larger for small financial institutions than for large institutions. Large institutions have more customers (to justify the initial expense) and offer a more limited range of standardized products. Depending upon the collection requirements eventually implemented, some institutions might decide to offer more standardized, less tailored financial products to reduce reporting costs. It is possible that more financial institutions may require minimum loan amounts (e.g., exit the loan market delineated as $100,000 and below) to ensure that the loans generate enough revenue to cover the costs to fund and report data. <6. Conclusion> From an economics viewpoint, the ability to evaluate the performance of various SBL market segments specifically whether (1) a small business credit shortage exists or (2) pricing for loans to small businesses is significantly above the lending risks and funding costs is extremely challenging. Policymakers have been interested in whether market failures that impede small business access to capital exist and, if so, what policy interventions might address those market failures. However, it is difficult to discern which policy interventions would be most well-suited to addressing potential small business credit market failures without better data about the market itself. Arriving at more definitive conclusions about the availability and costs of SBLs might be possible with information such as the size and financial characteristics of the businesses that apply for loans, the types of loan products they request, the type of lenders to whom they applied, and which applications were approved and rejected. Collecting the necessary data, however, presents both legal and cost challenges.

Small businesses are owned by and employ a wide variety of entrepreneurs—skilled trade technicians, medical professionals, financial consultants, technology innovators, and restaurateurs, among many others. As do large corporations, small businesses rely on credit to purchase inventory, to cover cash flow shortages that may arise from unexpected expenses or periods of inadequate income, or to expand operations. During the Great Recession of 2007-2009, lending to small businesses declined. A decade after the recession, it appears that while many small businesses enjoy increased access to credit, others might still face credit constraints. Congress has demonstrated an ongoing interest in credit availability for small businesses, viewing them as a medium for stimulating the economy and creating jobs. In general, Congress's interest in the small business credit market focuses on quantity and price—specifically (1) whether small businesses can reasonably obtain loans from private lenders and (2) whether the prices (lending rates and fees) of such credit are fair and competitive. Congress passed legislation to facilitate lending to small businesses that are likely to face hurdles in obtaining credit: The Small Business Act of 1953 (P.L. 83-163) established the Small Business Administration (SBA), which administers several types of programs to support capital access for small businesses that struggle to obtain credit on reasonable terms and conditions from private-sector lenders. The Community Reinvestment Act (CRA; P.L. 95-128 ) encouraged banks to address persistent unmet small business credit demands in low- and moderate-income (LMI) communities. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) required the Bureau of Consumer Financial Protection (CFPB) to collect data from small business lenders concerning credit applications made by women-owned, minority-owned, and small businesses with the goal of better understanding their financing needs. The CFPB has not yet implemented this requirement. Data that capture small business borrowers' characteristics and lenders' underwriting processes (i.e., their processes for determining whether borrowers are creditworthy) could help to accurately determine whether small businesses have sufficient and fairly priced access to private credit. Various government agencies and financial institutions define small business using factors that may be based upon annual revenues, number of employees, market scope, market share, and some or all of the above factors. Because no consensus definition of a small business exists, data to analyze the small business credit market's performance are limited and fragmented. Moreover, certain small businesses face additional challenges that may force them to seek financing outside of traditional business credit markets. Many new start-up firms, for example, do not have the financial track records to qualify for standard business loans and frequently must rely on mortgage and consumer credit. In addition, many small businesses rely on customized lending products, thus limiting their choice of lenders to those with specialized underwriting methodologies or business models. The lack of a consensus definition of small business, along with the wide variety of idiosyncratic business risks, hinders the availability of conclusive evidence on the small business credit market's overall performance and, therefore, the ability to assess the effectiveness of various policy actions designed to increase small business lending. In 2017, the CFPB issued a request for information on the small business lending market to solicit feedback on how to implement the Dodd-Frank requirement to collect data from financial institutions on small business credit applications. Final rulemaking, however, has been delayed. In addition, various bills regarding the small business credit market have been introduced in the 116 th Congress. For example, H.Res. 370 would express "the sense of the House of Representatives that small business owners seeking financing have fundamental rights, including transparent pricing and terms, competitive products, responsible underwriting, fair treatment from financing providers, brokers, and lead generators, inclusive credit access, and fair collection practices." H.R. 3374 would amend the Equal Credit Opportunity Act to require the collection of small business loan data related to LGBTQ-owned businesses. H.R. 1937 and S. 212 , the Indian Community Economic Enhancement Act of 2019, among other things, would require the Government Accountability Office to conduct a study to assess and quantify the extent to which federal loan guarantees, such as those provided by the SBA, have been used to facilitate credit access in these communities.

crs_R46111

crs_R46111_0

<1. Introduction> Medicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports (LTSS), to a diverse low-income population. This population includes children, pregnant women, adults, individuals with disabilities, and those aged 65 and older. Medicaid is authorized under Title XIX of the Social Security Act (SSA) and financed by the federal government and the states. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and enrollees' use of services. Participation in Medicaid is voluntary, though all states, the District of Columbia, and the territories choose to participate. States design and administer their Medicaid programs based on broad federal guidelines. The federal government requires states to cover certain mandatory populations and services but allows states to cover other optional populations and services. In addition, several waiver and demonstration authorities in statute allow states to operate their Medicaid programs outside of certain federal rules. Due to this flexibility, factors such as eligibility, covered benefits, and provider payment rates vary substantially by state. At the federal level, the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS) is responsible for administering Medicaid. This report focuses on Medicaid eligibility for adults aged 65 and older referred to as older adults and adults under the age of 65 and children with disabilities. Specifically, this report examines the statutory provisions that provide Medicaid eligibility for individuals who are considered to be aged, blind, or disabled. These populations are of interest to lawmakers primarily for two reasons: (1) they are more likely to need LTSS, and (2) they account for a large share of Medicaid spending. Older adults and individuals with disabilities are more likely to need LTSS due to physical limitations, cognitive impairment, or chronic disabling health conditions. Those with LTSS needs are a diverse group that range in age from very young children to older adults. Disabilities can be wide ranging, including, for example, physical limitations, visual impairments (i.e., blindness), intellectual or developmental disabilities, cognitive and behavioral health conditions, traumatic brain injuries, and HIV/AIDS. Federal policymakers have an interest in understanding Medicaid eligibility as the program is an important source of coverage for those with long-term care needs. Medicaid provides LTSS coverage (e.g., extended nursing facility care, personal care, and other home and community-based services) that is generally not covered by Medicare or major health insurance plans offered in the private market. As the largest single payer of LTSS in the United States, Medicaid plays a key role in providing LTSS coverage. In 2016, total Medicaid LTSS spending (federal and state combined) was $154 billion, accounting for 42% of all LTSS expenditures nationally. Because many older adults and individuals with disabilities use LTSS, they tend to account for a disproportionate share of Medicaid spending, which has implications for both federal and state budgets. In FY2016, Medicaid provided health care services to about 71 million enrollees, with expenditures of approximately $538 billion (federal and state combined). Although older adults and individuals with disabilities made up only about one-quarter (23%) of all Medicaid enrollees that year, they accounted for more than half (54%) of all benefit spending. Among all Medicaid enrollees, 30% of Medicaid spending in FY2013 was on LTSS, compared with 62% among older adults (i.e., aged) and 36% among individuals with disabilities (i.e., disabled). The next section of this report provides an overview of Medicaid eligibility, followed by a summary of eligibility pathways for older adults and individuals with disabilities. The report then describes specific information about each eligibility pathway for older adults and individuals with disabilities. The Appendix includes summary tables with statutory references and general financial eligibility criteria for each of the eligibility pathways described in this report. <2. Overview of Medicaid Eligibility> Eligibility for Medicaid is determined by both federal and state law, whereby states set individual eligibility criteria within federal minimum standards. This arrangement results in substantial variability in Medicaid eligibility across states. Therefore, the ways that individuals can qualify for Medicaid reflect state policy decisions within broad federal requirements. In general, individuals qualify for Medicaid coverage by meeting the requirements of a specific eligibility pathway (sometimes referred to as an eligibility group) offered by the state. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them. Other eligibility groups are optional, meaning states may elect to cover them. Within this framework, states may have some discretion to determine certain eligibility criteria for both mandatory and optional eligibility groups. In addition, states may apply to CMS for a waiver of federal law to expand health coverage beyond the mandatory and optional eligibility groups specified in federal statute. <2.1. Eligibility Pathways> An "eligibility pathway" is the federal statutory reference(s) under Title XIX of the SSA that extends Medicaid coverage to one or more groups of individuals. Each eligibility pathway specifies the group of individuals covered by the pathway (i.e., the categorical criteria), the financial requirements applicable to the group (i.e., the financial criteria), whether the pathway is mandatory or optional, and the extent of the state's discretion over the pathway's requirements. Individuals who have met the categorical and financial requirements of a given eligibility pathway and are in need of Medicaid-covered LTSS must also meet additional requirements. In general, they must demonstrate the need for such care by meeting state-based level-of-care criteria. They may also be subject to a separate set of Medicaid financial eligibility rules to receive LTSS coverage. All Medicaid applicants, regardless of their eligibility pathway, must meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Not all Medicaid enrollees have access to the same set of services. An applicant's eligibility pathway often dictates the Medicaid services that a program enrollee is entitled to (e.g., women eligible due to their pregnancy status are entitled to Medicaid pregnancy-related services). Most Medicaid beneficiaries receive services in the form of what is sometimes called "traditional" Medicaid an array of required or optional medical assistance items and services listed in statute. However, states may furnish Medicaid in the form of alternative benefit plans (ABPs). In addition, states may also offer LTSS under traditional Medicaid or through a waiver program for individuals who meet state-based level-of-care criteria for services. Low-income older adults and individuals with disabilities may qualify for Medicaid through a number of eligibility pathways. In general, Medicaid data report the following broad categorical eligibility groups: children, adults, aged, and disabled. This report focuses on the eligibility of older adults and individuals with disabilities based on their age or disability status; that is, the pathways where the categorical criteria are being aged, blind, or disabled (sometimes referred to as "ABD" or "ABD eligibility"). Individuals who qualify for Medicaid on the basis of being blind or disabled include adults under the age of 65 as well as children. Most (but not all) ABD pathways recognize blindness as a distinct condition from other disabilities and, as such, provide separate categorical criteria for this condition. However, when reporting data on broad categorical eligibility groups, CMS includes statutorily blind individuals in the "disabled" category. Individuals with disabilities may also be eligible for Medicaid under pathways available more broadly to able-bodied children and adults for a number of reasons; for example, because they do not meet the definition of disability under an ABD eligibility pathway, have income or assets above certain limits, do not meet the state-based level-of-care criteria, or have one or more chronic condition(s) but have not developed a chronic-disabling condition. Adults under the age of 65 and children who qualify for Medicaid on the basis of a reason other than being blind or disabled are classified by CMS as "adults" and "children," respectively. Individuals applying for Medicaid may be eligible for the program through more than one pathway. In this situation, applicants may choose the pathway that would be most beneficial to them both in terms of how income and sometimes assets are used to determine Medicaid eligibility, and in terms of the available services associated with each eligibility pathway. This report classifies the ABD eligibility pathways for older adults and individuals with disabilities into two broad coverage groups: (1) Supplemental Security Income (SSI)-Related Pathways and (2) Other ABD Pathways (see Table 1 ). The SSI-Related Pathways consist of mandatory and optional eligibility groups that generally meet the requirements of the federal SSI program. These groups include older adults and individuals with disabilities who are SSI eligible, are deemed to be SSI eligible, or would be SSI eligible if not for a certain SSI program rule. The Other ABD Pathways consist of optional eligibility groups that have levels of income or resources above SSI program rules. These groups generally use SSI categorical criteria to define older adults and individuals with disabilities and may use certain SSI financial criteria to determine their financial eligibility for Medicaid. Each of the specific pathways under these broad coverage groups are described in more detail below. Table A-1 in the Appendix lists the statutory references and certain eligibility criteria for each Medicaid ABD eligibility pathway. <2.1.1. Categorical Eligibility Criteria> Medicaid categorical eligibility criteria are the characteristics that define the population qualifying for Medicaid coverage under a particular eligibility pathway; in other words, the nonfinancial requirements that an individual must meet to be considered eligible under an eligibility group. Medicaid covers several broad coverage groups, including children, pregnant women, adults, individuals with disabilities, and individuals aged 65 and older (i.e., aged). Each of these broad coverage groups includes a number of distinct Medicaid eligibility pathways. Historically, Medicaid eligibility was limited to poor families with dependent children who received cash assistance under the former Aid to Families with Dependent Children (AFDC) program, as well as poor aged, blind, or disabled individuals who received cash assistance under the SSI program. Medicaid eligibility rules reflected these historical program linkages both in terms of the categories of individuals who were served, and because the financial eligibility rules were generally based on the most closely related social program for the group involved (e.g., AFDC program rules for low-income families with dependent children and pregnant women, and SSI program rules for aged, blind, or disabled individuals). Over time, Medicaid eligibility has expanded to allow states to extend coverage to individuals whose eligibility is not based on the receipt of cash assistance, including the most recent addition of the ACA Medicaid expansion population (i.e., individuals under the age of 65 with income up to 133% of the federal poverty level). Moreover, Medicaid's financial eligibility rules have been modified over time for certain groups. <2.1.2. Financial Eligibility Criteria> Medicaid is a means-tested program that is limited to those with financial need. However, the criteria used to determine financial eligibility income and, sometimes, resource (i.e., asset) tests vary by eligibility group. These income and resource tests are expressed separately as an income standard and a resource standard . The income standard is expressed as a dollar amount or as a share of the federal poverty level (FPL). The resource standard is expressed as a dollar amount. The ways in which income and resources are counted for the purposes of applying the respective standard are referred to as the income - counting methodology and resource - counting methodology (see text box "Medicaid Financial Criteria: Terminology"). Under the income-counting methodology, certain types of income may be disregarded before comparing a person's (or household's) income against the income standard, enabling individuals with higher amounts of gross income to meet the income standard and qualify for Medicaid. Similarly, certain rules determine how an applicant's resources (i.e., assets) are counted before they are compared to the specified resource standard. For most eligibility groups nonelderly and nondisabled individuals, children under the age of 18, and adults and pregnant women under the age of 65 the financial criteria used to determine Medicaid eligibility are based on Modified Adjusted Gross Income (MAGI) income-counting rules. No resource or asset test is used to determine Medicaid financial eligibility for MAGI-eligible individuals. Although MAGI applies to most Medicaid eligible populations, certain populations (e.g., older adults and individuals with disabilities) are statutorily exempt from MAGI income-counting rules. Instead, Medicaid financial eligibility for MAGI-exempted populations is based on the income-counting rules that match the most closely related social program for the group involved (e.g., SSI program rules for the aged, blind, or disabled eligibility groups). Thus, SSI program rules form the foundation of Medicaid eligibility for older adults and individuals with disabilities under mandatory and optional eligibility pathways and include both an income and a resource or asset test (see the next section for more information on SSI rules). However, under optional SSI-Related and Other ABD eligibility pathways, states may modify SSI program rules when determining income- and resource-counting methodologies. For example, some optional eligibility pathways allow states to choose their own income- or resource-counting methodology. Other eligibility pathways allow states to use Section 1902(r)(2) of the SSA, which lets them choose more liberal income- or resource-counting methodologies than those under the SSI program. Thus, for certain optional eligibility pathways, a state can choose to include or disregard certain sources of income or resources, in part or in whole, when determining whether an applicant meets the income or resource standards for that optional eligibility pathway. (See Table A-2 in the Appendix , which lists the financial eligibility criteria income standard and counting methodologies and resource standard and counting methodologies for each Medicaid eligibility pathway identified in this report.) In addition, state Medicaid programs are required to establish an Asset Verification System (AVS) that meets certain minimum requirements to determine and re-determine Medicaid eligibility for aged, blind, or disabled Medicaid applicants and enrollees. Further discussion of AVS is beyond the scope of this report. <2.2. Medicaid Eligibility and SSI Program Rules> SSI program rules form the foundation of Medicaid categorical and financial eligibility criteria for older adults and individuals with disabilities. Medicaid generally uses SSI categorical criteria to define the ABD populations. In addition, Medicaid often uses or adapts SSI's financial standards and counting methodologies to specify the financial eligibility requirements applicable to the SSI-Related Pathways and the Other ABD Pathways. Thus, understanding SSI program rules is important to understanding Medicaid eligibility rules for older adults and individuals with disabilities. SSI is a federal assistance program authorized under Title XVI of the SSA that provides monthly cash payments to aged, blind, or disabled individuals who have limited income and resources. SSI is intended to provide a guaranteed minimum income to adults who have difficulty covering their basic living expenses due to age or disability and who have little or no Social Security or other income. It is also designed to supplement the support and maintenance of needy children under the age of 18 who have severe disabilities. Unlike Medicaid, SSI eligibility requirements and benefit levels are based on nationally uniform standards. SSI is administered by the Social Security Administration but is not part of the Old Age, Survivors, and Disability Insurance program, commonly known as Social Security. The following sections provide a brief overview of SSI's categorical and financial eligibility criteria. For more information on these and other SSI criteria, see CRS Report R44948, Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI): Eligibility, Benefits, and Financing . <2.2.1. SSI Categorical Eligibility Criteria> To be categorically eligible for SSI, a person must be an "aged, blind, or disabled individual," as defined in Title XVI of the SSA ( Table 2 ). The term "aged" refers to individuals aged 65 and older. The term "blind" refers to individuals of any age who have central visual acuity of 20/200 or less in the better eye with the use of a correcting lens, or a limitation in the fields of vision so that the widest diameter of the visual field subtends an angle of 20 degrees or less (i.e., tunnel vision). Adults aged 18 and older are considered "disabled" if they are unable to engage in any substantial gainful activity (SGA) by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months. The Social Security Administration uses a monthly earnings standard to determine whether an individual's work activity constitutes SGA. The agency adjusts this standard annually to reflect changes in national wage levels. In 2019, the SGA earnings standard is $1,220 per month. (The SGA earnings standard is a proxy measure for total disability; it is not used to determine financial eligibility for SSI.) Adults generally qualify as disabled if they have an impairment (or combination of impairments) of such severity that they are unable to perform any kind of substantial work that exists in the national economy in significant numbers, taking into consideration their age, education, and work experience. Children under the age of 18 are considered "disabled" if they have a medically determinable physical or mental impairment that (1) results in marked and severe functional limitations and (2) can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than 12 months. Children typically qualify as disabled if they have a severe impairment (or combination of impairments) that limits their ability to engage in age-appropriate childhood activities at home, in childcare, at school, or in the community. In addition, the child's earnings must not exceed the SGA standard. The Social Security Administration periodically reevaluates blind or disabled SSI recipients to determine if they continue to meet the applicable definition of blindness or disability. In general, the Social Security Administration schedules continuing disability reviews (CDRs) of blind or disabled SSI recipients at least once every three to seven years, depending on the likelihood of medical improvement. In addition, the agency reevaluates child SSI recipients under the adult definition of disability when they attain age 18. <2.2.2. SSI Financial Eligibility Criteria> To be financially eligible for SSI, a person must have income and resources within certain limits ( Table 2 ). The SSI income standard is equal to the SSI federal benefit rate (FBR), which is the maximum monthly SSI payment available under the program. In 2019, the SSI FBR is $771 per month for an individual and $1,157 per month for a married couple if both members are SSI eligible. Expressed as a share of the federal poverty level (FPL), the SSI FBR in 2019 is about 74% of FPL for an individual and 82% of FPL for a couple. The SSI FBR is adjusted annually for inflation by the same cost-of-living adjustment (COLA) applied to Social Security benefits. The SSI resource standard is $2,000 for an individual and $3,000 for a couple. These amounts are not adjusted for inflation and have remained at their current levels since 1989. Under the SSI program, a person's income and resources are counted against the income and resource standards unless they are excluded by federal law or by the Commissioner of Social Security pursuant to discretionary authority provided in statute. The SSI income-counting methodology excludes, among other things, the first $20 per month of any income, as well as the first $65 per month of earned income plus one-half of any earnings above $65. These amounts are not adjusted for inflation and have remained in place since SSI was enacted in 1972. The SSI resource-counting methodology excludes, among other things, a person's primary residence, household goods and personal effects, one automobile used for transportation, and property essential to self-support. For an eligible individual without an eligible spouse, the SSI income- and resource-counting methodologies are generally person-based, meaning the program counts the income and resources owned or used by the individual to determine eligibility for SSI and the amount of the payment. In certain situations, however, SSI may count a portion of the income or resources of certain ineligible family members toward the eligible individual's income or resource standard. This process, known as "deeming," applies primarily to eligible children under the age of 18 who live in the same household as their ineligible parent(s) and to eligible married adults who live in the same household as their ineligible spouse. SSI deeming rules are complex and beyond the scope of this report. The Social Security Administration calculates a person's countable income and resources (i.e., gross income and resources less applicable exclusions) and then subtracts those amounts from the income and resource standards to determine financial eligibility and the amount of the cash payment (if any). Individuals with countable income and resources at or below the applicable standards are eligible for SSI. The Social Security Administration periodically reevaluates an SSI recipient's financial circumstances (i.e., income, resources, and living arrangements) to determine if the person is still eligible for SSI and receiving the correct payment amount. Automatic redeterminations are scheduled annually or once every six years, depending on the likelihood of change in a recipient's circumstances. <2.3. Additional Eligibility Requirements for LTSS Coverage> Medicaid enrollees including the ABD populations may have long-term care needs as well. In general, to receive Medicaid LTSS coverage, enrollees must also meet state-based level-of-care eligibility criteria. In other words, they must demonstrate the need for long-term care. In addition, such individuals may be subject to a separate set of Medicaid financial eligibility rules to receive LTSS coverage. Level-of-care eligibility criteria for most Medicaid-covered LTSS specify that individuals must require care provided in a nursing facility or other institutional setting. A state's institutional level-of-care criteria, in general, are also applied to Medicaid Home and Community-Based Services (HCBS) eligibility. That is, eligibility for Medicaid LTSS, both institutional care and most HCBS, is tied to needs-based criteria that require an individual to meet an institutional level-of-care need. There is no federal definition for Medicaid institutional level-of-care, and each state defines its level-of-care criteria. To define institutional level-of-care criteria, states may use "functional" criteria, such as an individual's ability to perform certain activities of daily living (ADLs). States may also use "clinical" level-of-care criteria, such as the diagnosis of an illness, injury, disability or other medical condition; treatment and medications; and cognitive status or behavioral issues, among other criteria. Most states use a combination of functional and clinical criteria in defining the need for LTSS. Certain optional ABD eligibility pathways (as described in the section entitled " Other ABD Pathways ") are available for older adults and individuals with disabilities Special Income Level, Special Home and Community-Based Waiver Group, Home and Community-Based Services (HCBS) State Plan, and Katie Beckett. These optional eligibility pathways establish eligibility to Medicaid, in general, along with Medicaid-covered LTSS for individuals who receive institutional care, or for those who need the level of care provided in an institution and receive Medicaid-covered HCBS. Medicaid enrollees in other mandatory or optional eligibility pathways may also be eligible to receive LTSS if they meet the level of care criteria. Applicants seeking Medicaid-covered LTSS are subject to a separate set of Medicaid financial eligibility rules (e.g., limits on the value of home equity and asset transfer rules). These additional financial rules are in place to ensure that program applicants apply their assets toward the cost of their care and do not divest them to gain eligibility sooner. In addition, Medicaid specifies rules for equitably allocating income and assets to non-Medicaid-covered spouses to determine LTSS coverage eligibility for nursing facility services and some HCBS. Commonly referred to as spousal impoverishment rules , these rules are intended to prevent the impoverishment of the spouse who does not need LTSS. Medicaid has another set of rules for the treatment of income after an individual is determined eligible for certain Medicaid-covered LTSS, referred to as Post-Eligibility Treatment of Income (PETI) rules. In general, eligible beneficiaries whose income exceeds specified amounts are required to apply their income toward the cost of their care. Within federal guidelines, a participant may retain a certain amount of income for personal use based on the services he or she receives. This amount varies by care setting (i.e., institutional versus HCBS). These specific financial eligibility rules for Medicaid-covered LTSS are not described in this report; for more information, see CRS Report R43506, Medicaid Financial Eligibility for Long-Term Services and Supports . In addition, most states offer Medicaid-covered LTSS under waiver programs that operate outside requirements under the Medicaid State plan. Under SSA Section 1915(c), states can cover HCBS, which includes a wide variety of nonmedical, social, and supportive services that allow individuals who require an institutional level of care to live independently in the community. SSA Section 1915(c) authorizes the HHS Secretary to waive requirements regarding comparability of services and offering services statewide (i.e., referred to as statewideness). In addition, states may waive certain income and resource rules applicable to persons in the community, so that a spouse's or parent's income (and, to some extent, resources) are not considered available to the applicant for the purposes of determining Medicaid financial eligibility. States may use Section 1915(c) concurrently with other waiver authorities. For example, states may combine Section 1915(b) and 1915(c) authorities to offer mandatory managed care for HCBS. States may also limit or cap program enrollment in the waiver. For each Section 1915(c) waiver program, states must identify the Medicaid eligibility groups receiving waiver services from those groups already covered under the Medicaid State plan. In doing so, states may include both mandatory and optional groups. To expand LTSS coverage, states may use Section 1115 of the SSA to waive certain state plan requirements. States have used Section 1115 waivers to expand eligibility to groups beyond those the statute allows, to cap program enrollment, and to impose waiting periods prior to enrollment. States have also used Section 1115 waiver programs to modify the income- and resource-counting rules and methodologies for specified groups for example, to encourage participation in managed LTSS, and to otherwise liberalize or limit income-counting rules for specified subpopulations. Moreover, states have used Section 1115 waiver authority to modify spend-down requirements, and to modify periods of retroactive eligibility and/or periods for eligibility redeterminations, among other eligibility-related purposes. Further discussion of Medicaid eligibility under these waiver programs is beyond the scope of this report. <3. SSI-Related Pathways> SSI-Related Pathways consist of mandatory and optional eligibility groups that meet the general requirements of the SSI program. These groups include aged, blind, or disabled individuals who are SSI eligible, deemed to be SSI eligible, or would be SSI eligible if not for a certain SSI program rule. This report organizes the SSI-Related Pathways into three subgroups, each of which contains multiple eligibility pathways: (1) SSI Recipients, (2) Special Groups of Former SSI Recipients, and (3) Other SSI-Related Groups. <3.1. SSI Recipients> The pathways for SSI Recipients extend Medicaid coverage to individuals who are enrolled in the SSI program and who either receive SSI, are deemed to receive SSI, or receive only state supplementary payments (SSPs, discussed below). States are generally required to provide Medicaid coverage for SSI recipients. However, states may use more restrictive eligibility criteria than those of the SSI program if they were using such criteria in 1972. Individuals in receipt of SSI for a given month are usually eligible for Medicaid for that month. SSI recipients typically become ineligible for Medicaid whenever their cash payments are suspended or terminated. In December 2018, 8.1 million individuals received SSI or federally administered SSP. <3.1.1. SSI Recipients in "1634 States" or "SSI Criteria States"> Unless states elect the option discussed in the next section, they must provide Medicaid coverage for all SSI recipients. Most states that provide Medicaid coverage for all SSI recipients do so automatically. Section 1634 of the SSA allows states to enter into an agreement with the Social Security Administration for the agency to conduct Medicaid eligibility determinations and redeterminations for SSI recipients on the state's behalf. In these states, an SSI application is also an application for Medicaid, and an SSI redetermination is also a redetermination of Medicaid eligibility. States that choose to contract with the Social Security Administration under Section 1634 of the SSA are known as "1634 states." In 2019, 34 states and the District of Columbia provide Medicaid coverage for SSI recipients using this option (see Table 3 ). Some states that provide Medicaid coverage for all SSI recipients choose to conduct their own Medicaid eligibility determinations and redeterminations. These states use the same standards and methodologies of the SSI program to determine Medicaid eligibility but require SSI recipients to file a separate Medicaid application with the state or local Medicaid office. States that elect this option are known as "SSI criteria states." In 2019, eight states provide Medicaid coverage for SSI recipients using this option (see Table 3 ). <3.1.2. SSI Recipients and Other ABD Individuals in "209(b) States"> Under Section 1902(f) of the SSA, states have the option of applying eligibility criteria that are more restrictive than those of the SSI program in determining Medicaid eligibility for SSI recipients. However, any more restrictive eligibility criteria that are applied to SSI recipients may not be more restrictive than those contained in the state's Medicaid plan that was in effect on January 1, 1972. States that provide Medicaid coverage for only those SSI recipients who meet more restrictive eligibility criteria than SSI criteria are known as "209(b) states," after the section of the Social Security Amendments of 1972 (P.L. 92-603) that established the option. In 2019, eight states provide Medicaid coverage for SSI recipients using this option (see Table 3 ). 209(b) states apply at least one eligibility criterion that is more restrictive than SSI criteria in determining Medicaid eligibility for SSI recipients, such as a stricter definition of blindness or disability, a lower income or resource standard, a less generous methodology for counting income or resources, or some combination of those factors. For example, New Hampshire imposes a longer duration-of-impairment requirement for individuals with a disability other than blindness (48 months instead of SSI's 12-month standard), and Virginia limits ownership of property contiguous to an individual's home (i.e., land other than the lot occupied by the home) to $5,000. 209(b) states may also use eligibility criteria that are more liberal than those of the SSI program under the authority provided in Section 1902(r)(2) of the SSA; however, they must retain at least one eligibility criterion that is more restrictive than SSI criteria to remain in 209(b) status. 209(b) states are required to deduct the value of SSI and any optional state supplementary payments (discussed below) from an SSI recipient's income in determining Medicaid eligibility. They must also allow SSI recipients to "spend down" or deduct incurred medical expenses from their income to the point where they meet the applicable income standard needed for Medicaid eligibility. Because SSI program rules form the foundation of Medicaid eligibility criteria for the ABD populations, 209(b) states may apply their more restrictive eligibility criteria to most other eligibility pathways for ABD individuals, subject to the same terms and conditions discussed above. <3.1.3. Individuals Eligible for Only Optional SSPs> Some states complement federal SSI payments with optional state supplementary payments (SSPs), which are made solely with state funds. SSPs are intended to help individuals whose basic needs are not fully met by the SSI federal benefit rate (FBR). States may provide SSPs to all SSI recipients, or they may limit payments to certain individuals, such as residents of domiciliary-care facilities or blind individuals. SSP amounts, standards, and methodologies are determined by the states, pursuant to certain federal requirements. States may self-administer their SSP program (i.e., state administered SSP), or they may contract with the Social Security Administration for the agency to administer the program on the state's behalf (i.e., federally administered SSP). In 2019, 44 states and the District of Columbia provide optional SSPs to some or all SSI recipients. States have the option to provide Medicaid coverage for individuals who receive only an optional SSP. Individuals receive an optional SSP, but no SSI payment, if their countable income is at least equal to the SSI income standard but less than the state-established income standard used to determine optional SSPs. The "SSP income standard" is effectively the combined amount of the SSI FBR and the maximum applicable SSP. For example, in 2019, the SSP income standard for a disabled individual living independently in California is $931.72 per month: the SSI FBR of $771 per month plus the maximum applicable SSP of $160.72 per month. In this case, the disabled individual would receive only an optional SSP if his or her countable income were at least $771 per month but less than $931.12 per month. In general, states must apply the same standards and methodologies to individuals under this pathway that they apply to individuals receiving SSI, including any standards or methodologies that are more restrictive than those of the SSI program in the case of 209(b) states. However, 209(b) states and SSI criteria states that self-administer their SSP program may apply a more restrictive income-counting methodology to individuals under this pathway than the one they apply to individuals receiving SSI. According to the Medicaid and CHIP Payment and Access Commission (MACPAC), 43 states and the District of Columbia provide Medicaid for individuals who receive only an optional SSP. <3.1.4. Individuals Receiving Mandatory SSPs> (This pathway is closed to new enrollment and applies to relatively few people.) Section 212 of P.L. 93-66 requires nearly all states to maintain the December 1973 income levels of individuals who were transferred from the former federal-state cash assistance programs for the aged, blind, and disabled (hereinafter "former adult assistance programs") to the SSI program in January 1974. To receive federal Medicaid funding, states must provide a special payment, known as a mandatory SSP, to individuals who were converted from the former adult assistance programs to the SSI program if the individual's SSI payment plus other income from the current month is less than his or her December 1973 state grant amount plus certain other income. The amount of the mandatory SSP is the difference between the current SSI payment and the individual's December 1973 payment under the former adult assistance program. Section 13(c) of P.L. 93-233 requires states to provide Medicaid coverage for individuals who receive mandatory SSPs. <3.1.5. Individuals with Earnings Above Certain Limits (1619[a] and 1619[b])> All states (including 209[b] states) are required to provide Medicaid coverage for individuals who are enrolled in the SSI program but have earnings above certain SSI limits. Under Section 1619(a) and 1619(b) of the SSA, individuals who would continue to be eligible to receive SSI if not for their earnings may be deemed to be receiving SSI for Medicaid eligibility purposes if they continue to work and meet certain other requirements. To qualify under the 1619 provisions, individuals must have been eligible for and received SSI for at least one month before the month the 1619 determination is made. (Adults aged 65 and older may qualify for the 1619 provisions, provided they meet the SSI definition of blindness or disability.) Individuals who live in 209(b) states must also have been eligible for Medicaid in the month immediately prior to becoming eligible for 1619 status. Section 1619(a) of the SSA provides for the continuation of cash payments for disabled SSI recipients with earnings that would otherwise disqualify them from SSI. Under this provision, disabled individuals who have earnings at or above the substantial gainful activity (SGA) standard ($1,220 per month in 2019) but whose countable income is less than the SSI income standard are eligible to receive special SSI payments in lieu of regular SSI payments. (SSI does not require blind individuals to meet the SGA standard; thus, 1619[a] does not apply to blind SSI recipients.) These 1619(a) payments are calculated in the same manner as regular SSI payments and are payable for as long as an individual performs SGA and meets all other SSI eligibility criteria. In addition to providing special payments, Section 1619(a) requires all states to provide Medicaid coverage for 1619(a) recipients on the same basis as they provide Medicaid coverage for regular SSI recipients. Section 1619(b) of the SSA requires all states to provide Medicaid coverage for blind or disabled individuals who would continue to be eligible for regular SSI payments or 1619(a) payments if not for their earnings. Under this provision, blind or disabled individuals who lose SSI eligibility because their countable income exceeds the SSI income standard (or applicable SSP income standard) due to excess earnings are deemed to be receiving SSI for Medicaid eligibility purposes. To qualify under this pathway, individuals must (1) continue to be blind or disabled, (2) meet all SSI financial eligibility requirements except for earnings, (3) need Medicaid to continue working, and (4) have earnings that are considered insufficient to provide a reasonable equivalent of the benefits that would be provided if they did not have those earnings (i.e., SSI, SSP, Medicaid, and publically funded personal or attendant care). The Social Security Administration uses an annual earnings standard to determine when 1619(b) eligibility ends. The agency calculates this standard based on the sum of the amount of gross earnings that would reduce the SSI payment (or the combined amount of the SSI payment and the SSP) to zero for an individual living independently with no other income, and the state's average annual per capita Medicaid expenditures for blind or disabled SSI recipients. The standard varies from state to state, depending on the amount of the SSP (if any) and per capita Medicaid expenditures. In 2019, the annual earnings standard for disabled 1619(b) participants ranges from $27,826 in Alabama to $66,452 in Connecticut, with the median being $36,548. If an individual's annual earnings exceed the predetermined standard, then the Social Security Administration will determine his or her eligibility using an individualized standard that takes into account the person's actual Medicaid expenditures, as well as the value of any publicly funded personal or attendant care that the individual receives from a program other than Medicaid. <3.2. Special Groups of Former SSI Recipients> The pathways for Special Groups of Former SSI Recipients extend Medicaid coverage to special former SSI/SSP recipients who would continue to be eligible for SSI/SSP if not for receipt of certain Social Security benefits. Special former recipients are deemed to be receiving SSI/SSP for Medicaid eligibility purposes; however, unlike 1619 participants, they no longer have a current connection to the SSI program (i.e., they have been formally terminated from the rolls). In determining Medicaid eligibility, most states must disregard the applicable Social Security benefit or increases in that benefit from the special former recipient's countable income. In most instances, 209(b) states have the option to disregard all, some, or none of the applicable Social Security benefit or increases in that benefit from the special former recipient's countable income in determining Medicaid eligibility. However, 209(b) states must provide Medicaid coverage for special former recipients on the same basis as they provide Medicaid coverage for individuals who receive SSI/SSP. <3.2.1. Recipients of Social Security COLAs After April 1977 ("Pickle Amendment")> Section 503 of P.L. 94-566 generally requires states to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their Social Security benefits due to COLAs. Individuals qualify under this pathway it they are receiving Social Security benefits, lost SSI/SSP but would still be eligible for those benefits if Social Security COLAs received since losing SSI/SSP were deducted from their income, and were eligible for and receiving SSI/SSP concurrently with Social Security for at least one month after April 1, 1977. 209(b) states may exclude all, some, or none of the Social Security benefit increases that caused ineligibility for SSI/SSP. This pathway is often known as the "Pickle Amendment" after the late Representative J.J. Pickle. <3.2.2. Disabled Widow(er)s Receiving Benefit Increases Under P.L. 98-21 ("ARF Widow[er]s")> (This pathway is closed to new enrollment and applies to relatively few people.) Social Security provides widow(er)'s benefits starting at age 60, or at age 50 if the individual is disabled and meets certain other criteria. The amount of the aged or disabled widow(er)'s benefit is based on the deceased insured worker's past earnings from covered employment, subject to a permanent reduction for each month of entitlement before the widow(er)'s full retirement age (65-67, depending on year of birth). Under P.L. 98-21 , lawmakers eliminated the additional reduction factor (ARF) for disabled widow(er)s aged 50-59, meaning their reduction penalty for claiming benefits before their full retirement age was capped at the percentage applicable to aged widow(er)s who first claim at age 60. All states (including 209[b] states) are required to provide Medicaid coverage for individuals who would continue to be eligible for SSI/SSP if not for increases in their widow(er)'s benefits due to the elimination of the ARF (known as "ARF Widow[er]s"). Individuals qualify under this pathway if they were entitled to Social Security benefits in December 1983 and received disabled widow(er)'s benefits and SSI/SSP in January 1984, lost SSI/SSP eligibility because of the elimination of the ARF, have been continuously entitled to widow(er)'s benefits since January 1984, filed for Medicaid continuation before July 1, 1988 (or a slightly later date in some cases), and would continue to be eligible for SSI/SSP if the value of the increase in disabled widow(er)'s benefits under P.L. 98-21 and any subsequent COLAs were deducted from their countable income. <3.2.3. Disabled Adult Children> Disabled adult children of retired, disabled, or deceased insured workers typically qualify for Social Security disabled adult child's (DAC) benefits if they are at least age 18 and became disabled before they attained age 22. States are generally required to provide Medicaid coverage for individuals who lose eligibility for SSI/SSP due to entitlement to or an increase in DAC benefits. Individuals qualify under this pathway if they lose eligibility for SSI/SSP due to receipt of DAC benefits on or after July 1, 1987, and would continue to be eligible for SSI/SSP if not for their entitlement to or an increase in DAC benefits. 209(b) states may exclude all, some, or none of the DAC benefit or increases in that benefit that caused ineligibility for SSI/SSP. <3.2.4. Widow(er)s Not Entitled to Medicare Part A ("Early Widow[er]s")> States are generally required to provide Medicaid coverage for individuals aged 50 to 64 who lose eligibility for SSI/SSP due to entitlement to Social Security widow(er)'s benefits but who are not yet entitled to Medicare Part A (Hospital Insurance). Individuals qualify under this pathway if they are at least age 50 but have not yet attained age 65, received SSI/SSP in the month before their widow(er)'s benefits began, are not entitled to Medicare Part A, and would continue to be eligible for SSI/SSP if not for their entitlement widow(er)'s benefits. Eligibility for Medicaid under this pathway continues until the individual becomes entitled to Medicare Part A. 209(b) states may exclude all, some, or none of the widow(er)'s benefit that caused ineligibility for SSP/SSI. <3.2.5. Recipients of a 1972 Social Security COLA> (This pathway is closed to new enrollment and applies to relatively few people.) Section 249E of P.L. 92-603 requires states to provide Medicaid coverage for individuals who would be eligible for SSI/SSP in the absence of a Social Security COLA enacted in 1972 under P.L. 92-336. Individuals qualify under this provision if they were entitled to Social Security benefits in August 1972, were receiving cash assistance under the former adult assistance programs in August 1972 (or would have been eligible for such assistance in certain instances), and would be eligible for SSI/SSP had the COLA under P.L. 92-336 not been applied to their Social Security benefits. <3.3. Other SSI-Related Groups> The pathways for Other SSI-Related Groups extend Medicaid coverage to certain individuals who were eligible for Medicaid just prior to SSI's start in 1974, and to aged, blind, or disabled individuals who would be eligible for SSI/SSP today if not for a certain requirement in those programs. Although these groups may have received SSI/SSP in the past, their eligibility for Medicaid under these pathways is not conditional on their prior receipt of such payments. <3.3.1. Grandfathered 1973 Medicaid Recipients> (These pathways are closed to new enrollment and apply to relatively few people.) Sections 230 to 232 of P.L. 93-66 require states to provide Medicaid to three groups that were eligible for Medicaid in December 1973: (1) essential spouses, (2) institutionalized individuals, and (3) blind or disabled individuals. Essential spouses are the spouses of cash assistance recipients under the former adult assistance programs whose needs were included in determining the amount of the cash payment to the recipient. Institutionalized individuals are inpatients of medical institutions or residents of intermediate care facilities who received cash assistance under the former adult assistance programs (or who would have been eligible for such assistance if they were not institutionalized). Blind or disabled individuals are individuals who met the state-established criteria for blindness or disability under the state's Medicaid plan in December 1973. States must provide Medicaid for these groups if they continue to meet the respective eligibility criteria that were in effect in December 1973, in addition to meeting certain other requirements. <3.3.2. Individuals Eligible For but Not Receiving SSI/SSP> States have the option to provide Medicaid coverage for aged, blind, or disabled individuals who meet the income and resource requirements for SSI/SSP but who do not receive cash payments. Individuals may be eligible for but not receiving SSI/SSP because they have not applied for benefits. According to estimates from HHS' Office of the Assistant Secretary for Planning and Evaluation, about 60% of single adults aged 18 and older who were eligible for SSI in 2015 participated in the program that year. In 209(b) states, eligibility under this pathway is determined before the deduction of any incurred medical expenses recognized under a state plan (i.e., before spend-down). <3.3.3. Individuals Who Would be Eligible for SSI/SSP if They Were Not Institutionalized> Residents of public institutions are generally ineligible for SSI. However, residents of certain medical institutions are eligible for a reduced SSI payment if more than 50% of the cost of their care is paid for by Medicaid (or in the case of a child under the age of 18, by any combination of Medicaid and private health insurance). The reduced SSI payment, known as a personal needs allowance (PNA), is used to pay for small comfort items not provided by the facility. Capped at $30 per month, or $60 per month for couples in certain situations, the PNA is not indexed to inflation and has remained at its current level since July 1988. Some states supplement the PNA (i.e., provide an SSP) for institutionalized individuals who meet certain requirements. Any countable income reduces the PNA for institutionalized individuals; however, the SSI/SSP income standard is used in determining their eligibility for the SSI program. States have the option to provide Medicaid coverage for institutionalized individuals who are ineligible for SSI/SSP because of the lower income standards used to determine eligibility for the PNA but who would be eligible for SSI/SSP if they were not institutionalized. In other words, states may provide Medicaid to individuals who reside in certain Title XIX-reimbursable institutions who have countable income at or above the PNA standard ($30 for an individual) but within the SSI/SSP income standard ($771 for an individual in 2019). <3.3.4. Individuals Who Would be Eligible for SSI/SSP if Not for Criteria Prohibited by Medicaid> States are generally required to provide Medicaid coverage for aged, blind, or disabled individuals who would be eligible for SSI/SSP if not for an eligibility requirement used in those programs that is prohibited by Medicaid. For example, Section 4735 of the Balanced Budget Act of 1997 ( P.L. 105-33 ) requires states to exclude from eligibility determinations certain settlement payments made to hemophilia patients who were infected with HIV. However, federal law does not exempt such payments from being counted as income or resources under the SSI program. CMS regulations require states to provide Medicaid coverage for individuals who lost SSI eligibility because they received settlement payments. <4. Other ABD Pathways> States may extend Medicaid coverage to older adults and individuals with disabilities who have higher levels of income or resources than those permitted by SSI program rules under optional aged, blind, or disabled (ABD) eligibility pathways. In addition, some optional ABD eligibility pathways allow states to choose their own methodology for counting income and resources; others permit states to use less restrictive income- or resource-counting methodologies compared with SSI rules. As previously mentioned, certain optional eligibility pathways for older adults and individuals with disabilities (e.g., Special Income Level, Special Home and Community-Based Waiver Group, Home and Community-Based Services [HCBS] State Plan, and Katie Beckett) establish eligibility to Medicaid, in general, along with Medicaid-covered LTSS. In addition, Medicaid gives states the option to extend eligibility to individuals who "spend down" or deplete their income on medical expenses, including LTSS, to specified levels. Therefore, some individuals with higher levels of income and resources compared with those permitted under SSI rules may be Medicaid-eligible. This section describes the following optional Medicaid eligibility pathways for ABD individuals: (1) Poverty-Related; (2) Special Income Level; (3) Special Home and Community-Based Services Waiver Group; (4) Home and Community-Based Services State Plan Option; (5) Katie Beckett; (6) Buy-In Groups; and (7) Medically Needy. <4.1. Poverty-Related> Enacted under the Omnibus Budget Reconciliation Act of 1986 (OBRA '86; P.L. 99-509 ), the optional Poverty-Related eligibility pathway allows states to cover aged and/or disabled individuals who have incomes that are higher than SSI standards, with family income up to 100% of the federal poverty level (FPL), provided that the state also covers certain eligible pregnant women and children. Aged individuals are defined as being 65 years old and older, and disabled individuals must meet the SSI program's applicable definition of disability. States may employ a reasonable definition of a "family" for purposes of the individual's countable income. In general, states must use SSI rules in determining what income is counted or not counted. An individual's resources cannot exceed the SSI resource standard with SSI rules used in determining countable resources. However, states may use Section 1902(r)(2) of the SSA to disregard additional countable income or resources. In 2018, 24 states and the District of Columbia (DC) offered the optional Poverty-Related eligibility pathway. Seventeen states and DC had an income standard that was set at 100% of the FPL under the Poverty-Related pathway; seven maintained a more restrictive income standard than 100% of the FPL. For example, Florida's standard was 88% of the FPL, and Idaho's was 77% of the FPL. <4.2. Special Income Level> The optional Special Income Level eligibility pathway allows states to establish a higher income standard for Medicaid coverage of nursing facility services and other institutional services, sometimes referred to as the special income rule , or the "the 300% rule." To be eligible for Medicaid through this pathway, individuals must require care provided by a nursing facility or other medical institution for no less than 30 consecutive days, and have an income standard that does not exceed a specified level no greater than 300% of the SSI FBR (i.e., the maximum SSI payment), which is approximately 222% of the FPL. Only the applicant's income (i.e., no income from spouses) is counted, and all income sources are counted in determining eligibility; there are no income disregards or deductions. For individuals seeking eligibility based on being aged 65 and older, or having blindness, or disability, the SSI resource standard and resource-counting methodology are used to determine eligibility. States may also use Section 1902(r)(2) of the SSA to disregard additional income or resources. Under the Special Income Level pathway, eligibility starts on the first of the 30 days that the individual resides in an institution. Thus, Medicaid can cover all of the care an individual receives in a nursing facility. In 2018, 42 states and the District of Columbia used the Special Income Level to enable persons to qualify for Medicaid coverage of institutional care. <4.3. Special Home and Community-Based Services Waiver Group> The Special Home and Community-Based Services (HCBS) Waiver Group eligibility pathway allows states to extend Medicaid eligibility to individuals receiving HCBS under a waiver program who require the level of care provided by a nursing facility or other medical institution. This eligibility pathway is sometimes referred to as the "217 Group" in reference to the specific regulatory section for this group, 42 C.F.R. Section 435.217. States use the highest income and resource standard of a separate eligibility group covered by the state plan under which an individual would otherwise qualify if institutionalized. For example, states that offer the Special Income Level pathway described above can extend eligibility to waiver program participants with income up to 300% of the SSI FBR. States must use the income- and resource-counting methodologies used to determine eligibility for this same eligibility group. States may also apply Section 1902(r)(2)'s more liberal income-counting rules to this group. <4.4. Home and Community-Based Services State Plan Option> States may establish an independent eligibility pathway into Medicaid through the Home and Community-Based Services (HCBS) State Plan option. This option is made available by extending the required and optional Medicaid state plan services, sometimes referred to as "traditional" Medicaid services, to individuals who are also receiving a targeted package of HCBS state plan services. In general, receipt of the Medicaid HCBS State Plan option is conditional on an individual having a need for long-term care (i.e., individuals must meet certain level-of-care criteria). Unlike Section 1915(c) HCBS waiver programs, which require that eligible individuals need the level of care provided in an institution (e.g., hospital or nursing facility), the HCBS state plan option delinks this requirement so that individuals with long-term care needs are not required to meet an institutional level of care need. The HCBS State Plan option was first enacted under the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) and amended under the ACA. The income standard for the HCBS State Plan option applies to individuals who have income no higher than 150% of the FPL. For individuals who otherwise meet the requirements for an approved waiver program, the income standard can be no higher than 300% of the SSI FBR. States may choose to cover individuals under either or both income standards. Generally, states use SSI income-counting methodologies; however, states have some discretion to apply alternative methodologies, subject to the approval of the Secretary of HHS. There are no resource standards for this eligibility group, with the exception for those individuals who seek to establish eligibility based on an approved waiver program. For these individuals, states must use the same income and resource standards and counting methodologies as applied to those individuals eligible under the applicable waiver program. States may also use Section 1902(r)(2) of the SSA to disregard additional income or resources. In 2018, the most recent year for which data are available, 15 states and the District of Columbia offered at least one Section 1915(i) HCBS State Plan option; however, only two states (Indiana and Ohio) used this state plan authority as an independent eligibility pathway to Medicaid. As another option, states may choose to provide HCBS state plan services to those who are eligible for Medicaid under one of the state's existing Medicaid eligibility pathways. <4.5. Katie Beckett> Enacted under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA; P.L. 97-248 ), the Katie Beckett optional pathway provides coverage to severely disabled children whose parents' income is otherwise too high for the child to qualify for Medicaid LTSS at home. Under the Katie Beckett pathway, states may extend Medicaid coverage to disabled children who meet the applicable SSI definition of disability and who are age 18 or younger and live at home. In addition, the state must determine that (1) the child requires the level of care provided in an institution, (2) it is appropriate to provide care outside the facility, and (3) the cost of care at home is no more than institutional care. States electing this option are required to cover all disabled children who meet these criteria. States must use SSI income and resources rules to determine eligibility; however, only the child's income and resources, if any, are counted. Parents' income and resources are not counted. A child's income cannot exceed the highest income standard used to determine eligibility for any separate group under which the individual would be eligible if institutionalized. In general, states set income standards up to 300% of the SSI FBR, which is about 222% of the FPL. States may not use Section 1902(r)(2) of the SSA to use more liberal income- or resource-counting methodologies. In 2018, the most recent year for which data are available, 24 states and the District of Columbia offered the Katie Beckett pathway under their Medicaid state plan. <4.6. Buy-In Groups> There are several optional Medicaid Buy-In eligibility pathways for working individuals with disabilities or working families who have a child with a disability. In general, individuals eligible under Buy-In pathways would be eligible for Medicaid except for the fact that their income is higher than the income standard allowed by the SSI program under Section 1619(b) of the SSA, which varies by state. Medicaid Buy-In pathways are designed to allow disabled individuals to work and still retain their Medicaid coverage, or to use their Medicaid coverage to access wraparound services that are not covered under an employer-sponsored plan. States can also impose premiums or other types of cost-sharing requirements on eligible individuals, which can be done on a sliding scale based on income. The extent to which states impose premiums and cost-sharing varies by state. Medicaid Buy-In pathways include the BBA 97 Eligibility Group, the Basic Eligibility Group, and the Medical Improvement Group. There is also a separate Buy-In pathway for disabled children, called the Family Opportunity Act. In 2018, the most recent year for which data are available, 44 states and the District of Columbia chose to offer coverage through at least one Buy-In pathway. <4.6.1. BBA 97 Eligibility Group> Enacted under Section 4733 of the Balanced Budget Act of 1997 (BBA 97; P.L. 105-33 ), this optional pathway is available to individuals with disabilities who work and have family income below 250% of the FPL, based on the size of the family. Individuals with disabilities must meet the SSI program's applicable definition of disability. Each state determines what constitutes a "family" for the purposes of this eligibility group. Family income is determined by applying the SSI income-counting methodology. In addition to the family income requirement, the applicant's unearned income must be less than the SSI income standard. All earned income is disregarded. An individual's countable resources must be less than or equal to the SSI resource standard using the SSI resource-counting methodology. However, states may use Section 1902(r)(2) of the SSA to disregard additional income or resources. <4.6.2. Ticket to Work Basic Eligibility Group> Enacted under Section 201 of the Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA; P.L. 106-170 ), this optional pathway is similar to the BBA 97 Eligibility Group but is available to people with higher levels of income (i.e., above 250% of the FPL). There are no federal income or resource standards for the Basic Eligibility Group; rather, states can determine the income and resource standards, including no standards, rather than using the SSI program's requirements. However, if a state chooses to establish an income and/or resource standard, SSI income- and resource-counting methodologies apply. States may use Section 1902(r)(2) of the SSA to disregard additional earned income above the SSI-earned-income disregard, including disregarding all earned income. Individuals with disabilities eligible under this pathway must be aged 16 to 64 and meet the SSI program's applicable definition of disability. <4.6.3. Ticket to Work Medical Improvement Group> The Medical Improvement Group pathway was also enacted under Section 201 of TWWIIA. For states to cover this eligibility group, they must also cover the TWWIIA Basic Eligibility Group. Individuals eligible under the Medical Improvement Group were previously eligible under the Basic Eligibility Group but lost that eligibility because they were determined to have "medically improved," meaning they no longer meet the definition of disability under the SSI or Social Security Disability Insurance (SSDI) programs but continue to have a severe medically determinable impairment. Eligible individuals must be aged 16 to 64, earn at least the federal minimum wage, and work at least 40 hours per month or be engaged in a work effort that meets certain criteria for hours of work, wages, or other measures, as defined by the state and approved by the Secretary of HHS. As with the Basic Eligibility Group, states may determine the income and resource standards, including no standards, for this pathway. Similarly, states may use Section 1902(r)(2) of the SSA to disregard additional earned income above the SSI-earned-income disregard, including disregarding all earned income. <4.6.4. Family Opportunity Act> Established under Section 6061 of the DRA, the Family Opportunity Act (FOA) optional pathway allows families with income up to 300% of the FPL to buy Medicaid coverage for their disabled child aged 18 or younger (states can exceed 300% of the FPL without federal matching funds for such coverage). When determining a child's Medicaid eligibility, states choosing this pathway use the SSI program's applicable definition of disability, as well as SSI's income-counting methodology for a family, based on its size. There is no resource standard or applicable resource-counting methodology. States may use Section 1902(r)(2) of the SSA to disregard additional earned income above the SSI-earned-income disregard. States must require certain parents of eligible children under the FOA optional coverage group to enroll in, and pay premiums for, family coverage through employer-sponsored insurance as a condition of continuing Medicaid eligibility for the child. <4.7. Medically Needy> The Medically Needy option is targeted toward individuals with high medical expenses who would otherwise be eligible for Medicaid except that their income exceeds the income standards for other state-covered eligibility pathways. Individuals may qualify in one of two ways: either (1) their income or resources are at or below a state established standard, or (2) they spend down their income to the state-established standard by subtracting incurred medical expenses from their income. For example, if an individual has $1,000 in monthly income and the state's income threshold is $600, then the applicant would be required to incur $400 in out-of-pocket medical expenses during a state-determined budget period before being eligible for Medicaid. Examples of medical expenses that may be deducted from income include Medicare and other health insurance premiums, deductibles and coinsurance charges, and other medical expenses included in the state's Medicaid plan or recognized under state law. For individuals who spend down to Medicaid eligibility, states select a specific time period for determining whether or not the applicant meets the spend-down obligation, often referred to as a "budget period," which generally ranges from one to six months. States that choose to offer the Medically Needy option must cover pregnant women and children under the age of 18, and may choose to extend eligibility to the aged, blind, or disabled, among other groups. The Medically Needy option allows aged and disabled individuals who need expensive institutional LTSS to qualify for Medicaid nursing facility services. However, nursing facility services are optional services that states may elect to cover for Medically Needy individuals. Under the Medically Needy option, states establish the income eligibility standard; however, it may be no higher than 133 % of the state's AFDC level in 1996. Typically, the AFDC level is lower than the income standard for SSI benefits. For example, in 2015 the median Medically Needy income standard for an individual was $483 per month, or about 49% of the FPL. States use the SSI income-counting methodology for aged, blind, or disabled individuals. States also set the resource standards within certain federal requirements. For aged, blind, or disabled individuals, the resource standard is generally the same as in the SSI program. In general, states must use SSI's applicable definition of disability when determining eligibility for the disabled eligibility group. In 2018, 32 states and the District of Columbia offered coverage to the Medically Needy. <4.7.1. Appendix. Medicaid Eligibility Pathways That Cover Older Adults and Individuals with Disabilities> Table A-1 lists selected Medicaid eligibility pathways that cover older adults and individuals with disabilities. These eligibility pathways are organized into two broad coverage groups: (1) SSI-Related Pathways and (2) Other ABD Pathways. The table includes a brief description of each pathway, the age criterion for eligibility, whether the pathway is mandatory or optional, the Social Security Act citation, and any applicable regulatory citations. Table A-2 lists the income and resource standards, as well as the counting methodology, that applies to each standard for the selected Medicaid eligibility pathways that cover older adults and individuals with disabilities. In general, standards or limits on the amount of income and resources required for eligibility are expressed in relationship to the federal poverty level (FPL) or the SSI federal benefit rate (FBR). Where applicable, the income standard is presented as a monthly dollar amount for an individual in 2019. For state-specific information on Medicaid eligibility pathways for older adults and individuals with disabilities, see the following resources: M. Musumeci, P. Chidambaram, and M. O'Malley Watts, Medicaid Financial Eligibility for Seniors and People with Disabilities: Findings from a 50-State Survey , The Kaiser Family Foundation, June 2019, https://www.kff.org/medicaid/issue-brief/medicaid-financial-eligibility-for-seniors-and-people-with-disabilities-findings-from-a-50-state-survey/ . MACPAC, MACStats: Medicaid and CHIP Data Book , Exhibit 37, pp. 109-111, December 2018, https://www.macpac.gov/wp-content/uploads/2018/12/December-2018-MACStats-Data-Book.pdf .

Medicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports (LTSS), to a diverse low-income population. In general, individuals qualify for Medicaid coverage by meeting the requirements of a specific eligibility pathway. An eligibility pathway is the federal statutory reference that extends Medicaid coverage to certain groups of individuals. Each eligibility pathway specifies the group of individuals covered by the pathway (i.e., the categorical criteria). It also specifies the financial requirements applicable to the group (i.e., the financial criteria), including income and, sometimes, resources (i.e., assets). In addition, an eligibility pathway often dictates the services that individuals are entitled to under Medicaid. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them; other eligibility groups are optional. Older adults and individuals with disabilities are more likely to require LTSS due to chronic disabling conditions or other functional or cognitive impairments (e.g., extended nursing facility care, personal care, and other home and community-based services). Federal policymakers have an interest in understanding Medicaid eligibility pathways for these populations, as Medicaid plays a key role in providing LTSS coverage. Generally, LTSS is not covered by Medicare or major health insurance plans in the private market. In fact, Medicaid is the largest single payer of LTSS in the United States, accounting for 42% of all LTSS expenditures in 2016 (or $154 billion). Individuals eligible for or enrolled in Medicaid who are in need of Medicaid-covered LTSS must demonstrate the need for long-term care by meeting state-based level-of-care criteria. They may also be subject to a separate set of Medicaid financial eligibility rules. This report focuses on the ways in which adults aged 65 and older and individuals with disabilities qualify for Medicaid based on their age or disability status; that is, the eligibility pathways where the categorical criteria are being aged, blind, or disabled (referred to as "ABD" or "ABD eligibility"). Individuals who qualify for Medicaid on the basis of being blind or disabled include adults under the age of 65 as well as children. Generally, ABD populations qualify for Medicaid through an eligibility pathway under one of two broad coverage groups described in this report: Supplemental Security Income (SSI)-Related Pathways and Other ABD Pathways. SSI-Related Pathways SSI is a federal program that provides cash assistance to aged, blind, or disabled individuals who have limited income and resources. SSI rules form the foundation of Medicaid eligibility criteria for ABD populations. Thus, the relationship between SSI and Medicaid is important to understanding Medicaid eligibility for ABD populations, as states are generally required to provide Medicaid coverage for SSI recipients. The SSI-Related Pathways consist of Medicaid eligibility groups that generally meet the categorical and financial criteria of the SSI program, including SSI Recipients, Special Groups of Former SSI Recipients, and Other SSI-Related Groups. Other ABD Pathways States may extend Medicaid coverage to older adults and individuals with disabilities who have higher levels of income or resources than SSI program rules permit. These optional pathways allow states to offer Medicaid eligibility to individuals receiving LTSS either in an institution or home and community-based setting; working individuals who may need LTSS to support employment; and individuals with high medical expenses who "spend down" or deplete their income and resources. These optional eligibility pathways, referred to as Other ABD Pathways, include the following: Poverty-Related, Special Income Level, Special Home and Community-Based Services (HCBS) Waiver Group, HCBS State Plan, Katie Beckett, Buy-In, and Medically Needy. Topics Covered in This Report This report begins with an overview of Medicaid eligibility, followed by a summary of ABD eligibility pathways (i.e., SSI-Related Pathways and Other ABD Pathways). Next, it provides information about the categorical and financial eligibility criteria for each Medicaid ABD eligibility pathway. The Appendix provides tables that include statutory references and certain financial eligibility criteria for each Medicaid ABD eligibility pathway.

crs_R46175

crs_R46175_0

<1. Overview> The Republic of Kosovo declared independence from Serbia in 2008, nearly a decade after the end of a brief but lethal conflict between Serbian forces and a Kosovo Albanian insurgency led by the Kosovo Liberation Army (KLA). Since 2008, Kosovo has been recognized by more than 100 countries. The United States and most European Union (EU) member states recognize Kosovo. Serbia, Russia, China, and various other countries (including some EU member states) do not. The United States has strongly supported Kosovo's state-building and development efforts, as well as its ongoing dialogue with Serbia to normalize their relations. Kosovo regards the United States as a security guarantor and key ally. Congress has maintained interest in Kosovo for many decades from concerns over Serbia's treatment of ethnic Albanians in the former Yugoslavia to the armed conflict in Kosovo in 1998-1999 after the Yugoslav federation disintegrated. Many Members were active in debates over the U.S.- and NATO-led military intervention in the conflict. After Serbian forces withdrew in 1999, many Members backed Kosovo's independence. Today, many in Congress continue to support Kosovo through country- or region-specific hearings, congressional visits, and foreign assistance funding levels averaging around $50 million per year since 2015. Looking ahead, Members may consider how the United States can support the Kosovo-Serbia dialogue, Kosovo's Euro-Atlantic ambitions, transitional justice processes, the ongoing political crisis arising from the March 2020 government collapse, and regional security. <2. Domestic Issues> Current key issues in Kosovo's domestic situation include the March 2020 collapse of the government; responding to the Coronavirus Disease 2019 (COVID-19) pandemic; managing relations with the country's ethnic Serb minority, particularly in northern Kosovo; and economic growth. <2.1. Politics> Kosovo is a parliamentary republic with a prime minister, who serves as head of government, and an indirectly elected president, who serves as head of state and has largely ceremonial powers. The unicameral National Assembly has 120 seats, of which 20 are reserved for ethnic minorities. Albin Kurti currently serves as acting Prime Minister. In 2016, the National Assembly elected Hashim Tha i to a five-year term as president. Tha i previously served as prime minister and has long been a major political figure in the country. Kosovo's domestic politics have been volatile for much of the past year, marked by government turnover, escalating tension between the president and prime minister, and divisions over various issues including a stalled dialogue to normalize relations with Serbia. More recently, the country entered a period of uncertainty when the Kurti government lost a vote of confidence on March 25, 2020, less than two months after it had formed (see textbox below, "March 2020 Government Collapse and Aftermath"). Many had viewed that government as a potentially pivotal shift in power from long-ruling parties to the opposition. The government breakdown coincided with the COVID-19 pandemic, and some have expressed concern that the ensuing political crisis could impede the public health response. Outgoing governing partners Vet vendosje and the Democratic League of Kosovo (LDK) were the top-performing parties in early parliamentary elections in October 2019 (see Table 1 ). Their victory was considered to reflect deep voter dissatisfaction with corruption and economic conditions, as well as a desire to hold accountable the small number of parties that have largely rotated in government over the past several decades. Prior to 2020, the Democratic Party of Kosovo (PDK), led by Tha i until 2016, had participated in all governments since independence. The PDK and several other former ruling parties grew out of factions of the KLA resistance and, along with several other parties, sometimes are referred to as the war wing . Critics charge that these parties became entrenched in state institutions. By contrast, neither Vet vendosje nor its leader, Albin Kurti, had been in national government prior to 2020. The party grew out of a 2000s-era protest movement that channeled popular frustration with government corruption. Vet vendosje also railed against aspects of post-1999 administration of Kosovo, accusing international missions of failing to establish the rule of law despite their vast powers. The party has steadily built support across election cycles. In the past, Vet vendosje was criticized for using obstructionist tactics (including releasing tear gas in parliament) and for seeking to subvert several agreements with Serbia and Montenegro that were seen as important to regional reconciliation. Kurti maintains that the party will govern responsibly and prioritize socioeconomic reforms and the rule of law. Vet vendosje at times has floated the idea of eventual unification with Kosovo's neighbor and close ally, Albania; however, unification does not appear likely to become a serious proposal under current conditions, not least of all due to U.S. and EU objections. Analysts generally have been positive in their assessments of Kosovo's democratic development since 2008, particularly its active civil society, pluralistic media sector, and track record of competitive elections. At the same time, U.S. and EU officials, as well as watchdog groups such as the U.S.-based nongovernmental organization Freedom House, have urged Kosovo to more rigorously enforce anti-corruption rules and uphold judicial independence. Many regard corruption and weak rule of law to be serious problems. The so-called Pronto Affair, one of several scandals to emerge in recent years, raised allegations of nepotism on the part of the then-governing PDK. In 2018, 11 PDK officials, including a minister and a lawmaker, were indicted for allegedly offering public jobs to party backers. According to the U.S.-based nongovernmental organization Freedom House, the Pronto case showed "a systemic abuse of power and informal control over state structures." In April 2020, 19 individuals (thought to include former ministers) were indicted for abuse of position relating to the 2013 privatization of four hydropower plants and a distribution network. <2.2. Kosovo Serbs and Northern Kosovo> About 100,000 to 120,000 Serbs live in Kosovo, primarily in semi-isolated rural communities. Kosovo Serbs are accorded various forms of representation and partial autonomy under the 2008 constitution and related legislation. This framework is partly the result of U.S. and other external pressure on Kosovo's leaders to incorporate power-sharing measures to bolster minority rights and protection. These provisions established a municipal level of governance with specific areas of responsibility (most Serbs live in municipalities where they form a majority). Power-sharing arrangements require Serb representation in parliament, the executive, and other institutions. Majority consent from minority members of parliament is mandatory on some votes, and Serbian has official language status. Nevertheless, some question the actual effectiveness of these measures in integrating Serbs. More than half of Kosovo Serbs live in minority-majority municipalities in central and southeastern Kosovo. These municipalities do not border Serbia and are largely integrated into Kosovo institutions, although wartime legacies of distrust and fear persist. By contrast, the situation in northern Kosovo is one of the most enduring challenges in Kosovo's state building since independence (see also "Relations with Serbia," below). About 40% of the Serb population lives in four Serb-majority municipalities north of the Ibar River that are adjacent to Serbia (see map in Figure 1 ). Pristina has been unable to exert full authority in northern Kosovo, whereas Serbia has retained strong influence (albeit not full authority) in the region despite the withdrawal of its forces in 1999. Kosovo Serbs turned to Serbian-supported parallel structures for security, health care, education, and other services. Due to its grey-zone status, northern Kosovo is considered a regional hub for smuggling and other illicit activities. Serbian List ( Srpska Lista ), the party that has dominated recent elections in northern Kosovo, is considered to be close to the Serbian government. There have been reports of harassment and intimidation against opposition Serb politicians in the north, most recently in the October 2019 elections. The 2018 murder of opposition Serb politician Oliver Ivanovi raised questions about the power structures and vested interests that prevail in northern Kosovo. <2.3. Economy> The 1998-1999 war with Serbia caused extensive damage to Kosovo's infrastructure and economy. Two decades later, economic recovery continues. Employment is an acute policy challenge; Kosovo's average 40% labor force participation rate is the lowest in the Western Balkans. The unemployment rate stood at about 26% in 2019, with disproportionately higher levels among working-age females and youth. The economy and perceived limits to upward socioeconomic mobility contribute to high rates of emigration. Kosovo's gross domestic product (GDP) grew by 3.8% in 2018 and 4.2% in 2019. The International Monetary Fund (IMF) estimates that Kosovo's economy could contract by 5% in 2020 due to the COVID-19 pandemic. Foreign direct investment (FDI) in Kosovo in 2018 was 214 million (about $232 million), the lowest in the Western Balkans. By contrast, remittances received from citizens abroad (primarily in European countries) amounted to 801 million (about $868.6 million) in 2018, equivalent to 12% of GDP. Kosovo's key trade partners are the EU and neighboring countries in the Western Balkans. Kosovo has largely liberalized trade with both blocs through its Stabilization and Association Agreement with the EU (a cooperation framework that includes steps to liberalize trade) and as a signatory to the Central European Free Trade Agreement (CEFTA) alongside other non-EU Balkan countries. Kosovo's 2019 exports totaled about 382 million ($414 million), of which the largest shares went to CEFTA countries and the EU. India, Switzerland, and Turkey were other significant export markets. Kosovo's top exports are metals; mineral products; plastics and rubber; and prepared foods, beverages, and tobacco. In lobbying for greater FDI, Kosovo officials tout the country's young workforce, natural resources, low corporate tax rate, use of the euro, and preferential access to the EU market. However, various impediments to investment remain, including corruption, weak rule of law, uncertainties over Kosovo's dispute with Serbia, and energy supply disruptions. <3. Relations with Serbia23> Kosovo declared independence from Serbia in 2008 with U.S. support. Serbia does not recognize Kosovo and relies on Russia in particular for diplomatic support. Many believe that the lack of normalized relations between Kosovo and Serbia impedes both countries' prosperity and progress toward EU membership and imperils Western Balkan stability. <3.1. War and Independence> After centuries of Ottoman rule, Kosovo became part of Serbia in the early 20 th century. After World War II, Kosovo eventually had the status of a province of Serbia, one of six republics of Yugoslavia. Some Serbian perspectives view Kosovo's incorporation as the rightful return of territory that was the center of a medieval Serbian kingdom and is prominent in national identity narratives. Kosovo Albanian perspectives, by contrast, largely view Kosovo's incorporation into Serbia as an annexation that resulted in the marginalization of the Albanian-majority population. During the 1980s, Kosovo Albanians grew increasingly mobilized and sought separation from Serbia. In 1989, Serbia then led by autocrat Slobodan Milo evi , who leveraged Serbian nationalism to consolidate power imposed direct rule in Kosovo. Throughout the 1990s, amid Yugoslavia's violent breakup and Milo evi 's continued grip on power in Serbia, human rights groups condemned Serbian repression of Albanians in Kosovo, including suppression of the Albanian language and culture, mass arrests, and purges of Albanians from the public sector and education institutions. In the late 1990s, the Albanian-led Kosovo Liberation Army (KLA) launched an insurgency against Serbian rule in Kosovo. Serbia responded with increasingly heavy force in 1998 and 1999 (see "Transitional Justice," below). Following a NATO air campaign against Serbian targets in early 1999, Serbia agreed to end hostilities and withdraw its forces from Kosovo. U.N. Security Council (UNSC) Resolution 1244 authorized the U.N. Interim Administration Mission (UNMIK) to provide transitional civil administration and the NATO-led KFOR mission to provide security (both missions still operate on a smaller scale). Milo evi lost power in 2000 amid mass protests in Serbia. Kosovo's decision to declare independence in 2008 followed protracted and ultimately unsuccessful efforts on the part of the international community to broker a settlement with Serbia. Serbia challenged Kosovo's actions before the International Court of Justice (ICJ); however, the ICJ's 2010 advisory opinion found that Kosovo had not contravened international law. <3.2. European Union-Facilitated Dialogue> Following the ICJ ruling, the EU and the United States urged Kosovo and Serbia to participate in a dialogue aimed at eventual normalization of relations, but with an initial focus on technical measures to facilitate the movement of goods and people and otherwise improve the quality of life. In 2012, the talks advanced to a political level, bringing together leaders from the two countries for EU-brokered meetings. Leaders in both countries are constrained by public opinion and a political climate that tends to make major concessions costly. Kosovo and Serbia's goal to join the EU helps incentivize their participation in the dialogue; the EU maintains that neither country can join the union until they normalize relations. Kosovo's participation in the dialogue also is motivated by its desire to clear a path to U.N. membership and, eventually, NATO membership (Serbian approval is seen as a key step to unlocking Kosovo's U.N. membership). To date, the dialogue has produced 33 agreements, mostly of a technical nature. In 2013, Serbia and Kosovo reached the Brussels Agreement, which set out principles to normalize relations, including measures to dismantle Serbian-backed parallel structures in northern Kosovo and create an Association of Serb Municipalities (ASM) linking Kosovo's 10 Serb-majority municipalities. Implementation of the dialogue's agreements has progressed in some areas, such as Kosovo Serb electoral participation and the integration of law enforcement and the judiciary in the north into statewide institutions. It has lagged in other areas, such as in the energy sector and in the ASM. Although the dialogue format does not predetermine a specific outcome, the EU has urged a "comprehensive, legally binding" agreement between the parties. Two particularly thorny issues in any such agreement are the scope of Serbian recognition of Kosovo and the situation in northern Kosovo. It remains undetermined whether Serbia would fully recognize Kosovo or accept Kosovo's institutions and U.N. membership without formal recognition. It is also uncertain how northern Kosovo would be addressed in any final settlement. Prior to 2018 (see below), U.S. and EU officials rejected local (primarily Serbian) leaders' occasional hints at partition as a potential solution. The United States and the EU feared that transferring territory or changing borders along ethnic lines could set a dangerous precedent and destabilize the region. Alternatively, some consider the integration of the north into statewide institutions through autonomy measures, such as the ASM, to be a potential compromise that could preserve Kosovo's territorial integrity while offering concessions to Kosovo Serbs. However, the ASM has faced resistance from some in Kosovo due to concerns that it could undermine state integrity if it is endowed with significant executive functions and formalized links to Serbia. Since late 2015, there has been little progress in reaching new agreements or implementing existing ones. Further, a shift in focus absorbed some of the dialogue's energies: in 2018, President Tha i and Serbian President Aleksandar Vu i raised the prospect of redrawing borders as an approach to normalizing relations (sometimes described as a land swap , a partition, or a border adjustment ). Analysts believe such a measure could entail transferring Serb-majority municipalities in northern Kosovo to Serbia, possibly in exchange for Albanian-majority areas of Serbia's Pre evo Valley. To the surprise of some, Trump Administration officials broke with long-standing U.S. and EU opposition to redrawing borders/partition by signaling willingness to consider such a proposal if Kosovo and Serbia were to reach a mutually satisfactory agreement. However, some European allies, particularly Germany, remain opposed to any such proposal. Acting Prime Minister Kurti and much of Kosovo's political class and population also oppose ceding territory. The dialogue has been suspended since late 2018, when Kosovo imposed tariffs on Serbian goods in retaliation for Serbia's campaign to block Kosovo's Interpol membership bid and its efforts to lobby countries to "de-recognize" Kosovo. Serbian leaders say they will not return to negotiations until the tariffs are lifted. U.S. and European officials repeatedly called upon the two parties to return to talks. In March 2020, Prime Minister Kurti announced the repeal of tariffs on raw material imports from Serbia. The following month, amid continued U.S. pressure, he announced the decision to conditionally repeal tariffs against Serbian goods and replace them with gradual reciprocity measures to match existing Serbian measures impacting the movement of goods and people. EU officials welcomed the tariff removal; however, U.S. officials expressed dissatisfaction with the reciprocity measures. Kosovo's parties and leaders have become increasingly divided over several aspects of the dialogue, particularly the terms of lifting tariffs against Serbia. Furthermore, acting Prime Minister Kurti has challenged President Tha i's leadership of Kosovo's participation in the dialogue, arguing that the authority of the government (rather than the head of state) to lead efforts was confirmed in a prior Constitutional Court ruling. Separately, some observers caution that growing uncertainty over the Western Balkan countries' EU membership prospects could alter the incentive structure weaving together the dialogue and the accession process. Recently, the United States has played a more direct role in Kosovo-Serbia negotiations (see "U.S.-Kosovo Relations"). <3.3. Transitional Justice> Transitional justice relating to the 1998-1999 war is a sensitive, emotionally charged issue in Kosovo and Serbia and a source of friction in efforts to normalize relations. Serbian police, soldiers, and paramilitary forces were accused of systematic, intentional human rights violations during the conflict. About 13,000 people were killed, and nearly half of the population was forcibly driven out of Kosovo. An estimated 20,000 people were victims of conflict-related sexual violence. The vast majority of all victims were ethnic Albanians. On a smaller scale, some KLA fighters particularly at the local level carried out retributive acts of violence against Serb civilians, other minority civilians, and Albanian civilians whom they viewed as collaborators. Before closing in 2017, the International Criminal Tribunal for the former Yugoslavia tried several high-profile cases relating to the Kosovo conflict, including those of deposed Serbian leader Milo evi , who died before his trial finished, and former Kosovo Prime Minister Haradinaj, who was twice acquitted of charges relating to his role as a KLA commander. Domestic courts in Kosovo and Serbia now handle most war crimes cases. Weak law enforcement and judicial cooperation between Kosovo and Serbia is an impediment in the many cases in which evidence, witnesses, victims, and alleged perpetrators are no longer in Kosovo. Critics assert that low political will in Serbia in particular hampers transitional justice. Officials from successive post-Milo evi Serbian governments have been criticized for downplaying or failing to acknowledge Serbia's role in the wars in Bosnia, Croatia, and Kosovo in the 1990s and for fostering a climate that is hostile to transitional justice and societal reconciliation with the past. Transitional justice processes concerning the KLA are controversial in Kosovo. Under U.S. and EU pressure, in 2015 the National Assembly adopted a constitutional amendment and legislation to create the Kosovo Specialist Chambers and Specialist Prosecutor's Office. These institutions are part of Kosovo's judicial system but are primarily staffed by international jurists and located in The Hague, Netherlands, to allay concerns over witness intimidation and political pressure. They are to investigate the findings of a 2011 Council of Europe report concerning allegations of war crimes committed by some KLA units. The Specialist Chambers is controversial in Kosovo, because it is to try only alleged KLA crimes. In 2017, lawmakers from the then-governing coalition moved to abrogate the Specialist Chambers but backed down after the United States and allies warned that doing so would have "severe negative consequences." More than 120 former KLA fighters are reported to have received summons for questioning during 2019, and analysts believe some Kosovo politicians could face indictment. <4. Relations with the EU and NATO> The EU and NATO have played key roles in Kosovo; these institutional relationships continue to evolve alongside Kosovo's state-building processes. <4.1. European Union> The EU has played a large role in Kosovo's postwar development. A European Union Rule of Law Mission (EULEX) was launched in 2008, assuming some tasks that UNMIK had carried out since 1999. The mission's scope has decreased over time as domestic institutions assume more responsibilities; today, EULEX's primary role is to monitor and advise on rule-of-law issues, with some executive functions. EULEX's current mandate runs through June 2020. Additionally, the EU provided over 1.48 billion (about $1.6 billion) in assistance from 2007 to 2020, as well as emergency support to address the COVID-19 pandemic (see "Coronavirus Disease 2019 (COVID-19) Response"). Kosovo is a potential candidate for EU membership and signed a Stabilization and Association agreement with the EU in 2014. The next steps in Kosovo's EU membership bid are obtaining candidate status and launching accession negotiations, which would commence the lengthy process of harmonizing domestic legislation with that of the EU. Kosovo's EU membership bid is complicated by the fact that five EU member states do not recognize it. Kosovo's more immediate goal in its relationship with the EU is to obtain for its citizens visa-free entry into the EU's Schengen area of free movement, which allows individuals to travel without passport checks between most European countries. Kosovo is the only Western Balkan country that does not have this status, despite EU officials' assessment that it fulfilled key requirements in 2018. Some observers contend that the EU's continued denial of visa liberalization to Kosovo has undercut the bloc's credibility and influence in the country. <4.2. NATO> The NATO-led Kosovo Force (KFOR) was launched in 1999 with 50,000 troops as a peace-support operation with a mandate under UNSC Resolution 1244. KFOR's current role is to maintain safety and security, support free movement of citizens, and facilitate Kosovo's Euro-Atlantic integration. As the security situation in Kosovo improved, NATO defense ministers in 2009 resolved to shift KFOR's posture toward a deterrent presence. Some of KFOR's functions have been transferred to the Kosovo Police. The United States remains the largest contributor to KFOR, providing about 660 of the 3,500 troops deployed as of November 2019. Any changes to the size of the mission would require approval from the North Atlantic Council and be "dictated by continued positive conditions on the ground." Many analysts assert that KFOR continues to play an important role in regional security. KFOR has played a key role in developing the lightly armed Kosovo Security Force (KSF) and bringing it to full operational capacity. KSF's current role is largely nonmilitary in nature and is focused instead on emergency response. A recurring issue is how KSF may transform into a regular army. In December 2018, Kosovo lawmakers amended existing legislation to gradually transform KSF, drawing sharp objections from Kosovo Serb leaders and Serbia. NATO Secretary-General Jens Stoltenberg called the measure "ill timed" given heightened tensions with Serbia, cautioned that the decision could jeopardize cooperation with NATO, and expressed concern that the decisionmaking process had not been inclusive. The United States, however, expressed support for the Kosovo government's decision and urged officials to ensure that the transformation is gradual and inclusive of all communities. <5. U.S.-Kosovo Relations> The United States enjoys broad popularity in Kosovo due to its support during the Milo evi era, its leadership of NATO's 1999 intervention in the Kosovo war, its backing of Kosovo's independence in 2008, and its subsequent diplomatic support. The United States supports Kosovo's Euro-Atlantic ambitions. Kosovo regards the United States as a security guarantor and critical ally, and many believe the United States retains influence in domestic policymaking and politics. The Trump Administration has signaled growing interest in securing a deal to resolve the Kosovo-Serbia dispute and stepping up U.S. engagement in the Western Balkans more broadly. U.S. officials assert that the full normalization of Kosovo-Serbia relations is a "strategic priority." In August 2019, U.S. Secretary of State Michael Pompeo appointed Deputy Assistant Secretary of State Matthew Palmer as his Special Representative for the Western Balkans. Shortly thereafter, President Donald Trump appointed U.S. Ambassador to Germany (now also Acting Director of National Intelligence) Richard Grenell as Special Presidential Envoy for Serbia and Kosovo Peace Negotiations. Many officials in Kosovo and Serbia have welcomed the prospect of a greater U.S. role in efforts to normalize relations. In January 2020, U.S. officials announced two new Kosovo-Serbia agreements on transportation links, pursuant to a strategy that focuses on economic growth and job creation as foundations for the normalization process. In March 2020, the White House hosted informal talks between President Tha i and President Vu i . U.S. efforts currently center on bringing the two parties back to negotiations. As mentioned, U.S. officials criticized the reciprocity principles that acting Prime Minister Kurti announced in April 2020 alongside the conditional lifting of tariffs. The direct U.S. role in brokering the recent transportation agreements and greater U.S. involvement in efforts to normalize Kosovo-Serbia relations is largely a departure from the approach taken under previous Administrations, which strongly supported EU-led efforts to normalize relations but did not play a formal, direct role. News of the January 2020 U.S.-brokered agreements reportedly came as a surprise to some European officials, who in turn have underscored the EU's long-standing role in the normalization process and appointed an EU special representative for the dialogue. Some analysts, while welcoming greater U.S. involvement, assert that the United States is more effective in engaging the Western Balkans when its actions and positions are aligned with those of its European allies; they contend that recent gaps between the United States and allies such as Germany on the Kosovo-Serbia dialogue, as well as on the March 2020 no-confidence session, have undercut overall engagement efforts. Some observers and several Members of Congress have expressed concern over recent U.S. policies toward Kosovo's government, such as pausing implementation of a $49 million Millennium Challenge Corporation (MCC) Threshold Program and delaying the development of its proposed Compact Program, until Kosovo rescinds the tariffs. Some Kosovo officials expressed dismay over what they describe as U.S. pressure on Kosovo to lift tariffs against Serbia without equivalent pressure on Serbia to cease its campaign to undercut Kosovo's international legitimacy. On April 13, 2020, the Chairman of the House Committee on Foreign Affairs and the Ranking Member of the Senate Committee on Foreign Relations released a joint letter to Secretary Pompeo that welcomed greater U.S. diplomatic engagement in efforts to normalize relations between Kosovo and Serbia but expressed concern over what they described as "heavy-handed" treatment of the weeks-old Kurti government. They urged greater cooperation with the EU and restarting implementation of Kosovo's MCC Threshold Program. Separately, acting Prime Minister Kurti alleged that U.S. officials had aided efforts to unseat his government in the March 2020 no-confidence session in hopes that a more pliable government in Pristina would quickly reach a deal with Serbia. U.S. officials have underscored that the United States is "committed to working with any government formed through the constitutional process" and rejected speculation that the United States was brokering a "secret plan for land swaps." <5.1. Foreign Aid> The United States is a significant source of foreign assistance to Kosovo (see Figure 2 ). U.S. assistance aims to support the implementation of agreements from the Kosovo-Serbia dialogue and to improve transparent and responsive governance, among other goals. Additional assistance is provided through a $49 million Millennium Challenge Corporation (MCC) Threshold Program that launched in 2017, with focus on governance and energy efficiency and reliability. Threshold programs are intended to help countries become eligible to participate in a larger Compact Program; in December 2018 and again in December 2019, the MCC board determined that Kosovo was eligible to participate in a compact. As discussed above, MCC assistance is currently on hold. <5.2. Cooperation on Transnational Threats and Security Issues> The United States and Kosovo cooperate to combat transnational threats and bolster security. Like elsewhere in the Western Balkans, Kosovo is a transit country and in some cases a source country for trafficking in humans, contraband smuggling (including illicit drugs), and other criminal activities. Observers consider Kosovo to have a relatively strong legal framework to counter trafficking, smuggling, and other transborder crimes. At the same time, the United States and the EU have urged officials in Kosovo to better implement the country's domestic laws by more strenuously investigating, prosecuting, and convicting traffickers, as well as by improving victim support. Combatting terrorism and violent extremism is a core area of U.S.-Kosovo security cooperation. Kosovo is a secular state with a moderate Islamic tradition, but an estimated 400 Kosovo citizens traveled to Syria and Iraq in the 2010s to support the Islamic State amid the terrorist group's growing recruitment efforts. As this policy challenge emerged, the United States assisted Kosovo with tightening its legal framework to combat recruitment, foreign fighter travel, and terrorism financing, as well as strengthening its countering violent extremism strategy. The United States provides support to Kosovo law enforcement and judicial institutions to combat terrorism and extremism. The State Department's Antiterrorism Assistance program, for example, has provided training or capacity-building support for the Kosovo Police's Counterterrorism Directorate and for the Border Police. Kosovo and the United States agreed to an extradition treaty in March 2016. In April 2019, the United States provided diplomatic and logistical support for the repatriation of about 110 Kosovo citizens from Syria primarily women and children who had supported the Islamic State or were born to parents who had. Some repatriated persons were indicted on terrorism-related charges. Kosovo has a sister-state relationship with Iowa that grew out of a 2011 State Partnership Program (SPP) between the Iowa National Guard and the Kosovo Security Force. That relationship has been hailed as a "textbook example" of the scope and aims of the SPP. <5.3. Congressional Engagement> Congressional interest in Kosovo predates Yugoslavia's disintegration. Through resolutions, hearings, and congressional delegations, many Members of Congress highlighted the status of ethnic Albanian minorities in Yugoslavia, engaged in heated debates over intervention during the Clinton Administration, urged the George W. Bush Administration to back Kosovo's independence, and supported continued financial assistance. Congressional interest and support continues. In the 116 th Congress, several hearings have addressed Kosovo in part or in whole, including an April 2019 House Foreign Affairs Committee hearing on Kosovo's wartime victims and recent hearings on Western Balkan issues held by the Senate Armed Services Committee and the Senate Foreign Relations Committee's Subcommittee on Europe and Regional Security Cooperation. Given Kosovo's geography, history, and current challenges, the country also factors into wider U.S. foreign policy issues in which Congress remains engaged. Such issues include transitional justice, corruption and the rule of law, combatting human trafficking and organized crime, U.S. foreign assistance, security in Europe, and EU and NATO enlargement.

Kosovo, a country in the Western Balkans with a predominantly Albanian-speaking population, declared independence from Serbia in 2008, less than a decade after a brief but lethal war. It has since been recognized by about 100 countries. The United States and most European Union (EU) member states recognize Kosovo. Serbia, Russia, China, and various other countries (including some EU member states) do not. Key issues for Kosovo include the following: Resuming talks with Serbia. An EU-facilitated dialogue between Kosovo and Serbia, aimed at normalization of relations, stalled in 2018 when Kosovo imposed tariffs on Serbian goods in response to Serbia's efforts to undermine Kosovo's international legitimacy. Despite U.S. and EU pressure, the parties have not resumed talks. On April 1, 2020, acting Prime Minister Albin Kurti conditionally lifted tariffs against Serbian imports; this step was praised by EU officials but drew U.S. criticism because of the government's simultaneous pledge to gradually introduce measures to match Serbian barriers to the movement of goods and people. Government collapse . The governing coalition led by Albin Kurti of the Self-Determination Party (Vetëvendosje) lost a vote of confidence in March 2020, less than two months after it had formed. The outgoing government comprises two parties formerly in opposition, both of which had campaigned on an anti-corruption platform. Among other factors, the collapse was attributed to divisions over managing relations with Serbia amid U.S. pressure on the government to immediately lift tariffs against Serbian imports, as well as to domestic political infighting. Kosovo's leaders disagree over how to proceed from the current political crisis. Strengthening the rule of law. The victory of Kurti's Vetëvendosje in the October 2019 election partly reflected widespread voter dissatisfaction with corruption. Weakness in the rule of law contributes to Kosovo's difficulties in attracting foreign investment and complicates the country's efforts to combat transnational threats. Relations with the United States. Kosovo regards the United States as a key ally and security guarantor. Kosovo receives the largest share of U.S. foreign assistance to the Balkans, and the two countries cooperate on numerous security issues. The United States is the largest contributor of troops to the NATO-led Kosovo Force (KFOR), which has contributed to security in Kosovo since 1999. In 2019, the Trump Administration appointed a Special Representative for the Western Balkans and a Special Presidential Envoy for Serbia and Kosovo Peace Negotiations. These appointments are considered to reflect the Administration's interest in securing a comprehensive settlement between Kosovo and Serbia and may signal a potentially greater U.S. role in a process that the EU has largely facilitated to date. Leaders in Kosovo generally have welcomed greater U.S. engagement, but some observers expressed concern over reported U.S. pressure on the Kurti government to lift tariffs on Serbian goods—including pausing some U.S. assistance to Kosovo—and over perceived U.S. support for the no-confidence session that resulted in the March 2020 government collapse. U.S. officials maintain that the United States is committed to working with any government formed in compliance with constitutional processes. Transatlantic cooperation . Since the Kosovo war ended in 1999, the United States, the EU, and key EU member states have largely coordinated their efforts to promote regional stability in the Western Balkans, including efforts to normalize relations between Kosovo and Serbia. More recently, however, some observers have expressed concern that transatlantic coordination has weakened on some issues relating to the Kosovo-Serbia dialogue and to Kosovo's current political impasse. Congress was actively involved in debates over the U.S. response to a 1998-1999 conflict in Kosovo and subsequently supported Kosovo's declaration of independence. Today, many Members of Congress continue to support Kosovo through country- or region-specific hearings, congressional visits, and foreign assistance funding levels averaging around $50 million per year since 2015.

crs_R46368

crs_R46368_0

<1. Introduction> This report is intended to serve as a primer on U.S. foreign assistance to sub-Saharan Africa ("Africa") to help inform Congress' authorization, appropriation, and oversight of U.S. foreign aid for the region. It focuses primarily on assistance administered by the State Department and U.S. Agency for International Development (USAID), which administer the majority of U.S. aid to the region. It covers recent funding trends and major focus areas of such assistance, select programs managed by other U.S. agencies and federal entities, and the Trump Administration's FY2021 aid budget request for Africa. In addition to discussing aid appropriations, this report notes a range of legislative measures that have authorized specific assistance programs or placed conditions or restrictions on certain types of aid, or on aid to certain countries. Select challenges for congressional oversight are discussed throughout this report. For more on U.S. engagement in Africa, see also CRS Report R45428, Sub-Saharan Africa: Key Issues and U.S. Engagement . Definitions. Unless otherwise indicated, this report discusses State Department- and USAID-administered assistance allocated for African countries or for regional programs managed by the State Department's Bureau of African Affairs (AF), USAID's Bureau for Africa (AFR), and USAID regional missions and offices in sub-Saharan Africa. It does not comprehensively discuss funding allocated to African countries via global accounts or programs, which publicly available budget materials do not disaggregate by country or region. Except as noted, figures refer to actual allocations of funding appropriated in the referenced fiscal year (hereafter, "allocations"). <2. Recent Assistance Trends and Key Rationales> Africa has received a growing share of annual U.S. foreign assistance funding over the past two decades: the region received 37% of State Department- and USAID-administered aid obligations in FY2018, up from 28% of global obligations in 2008 and 16% in 1998. U.S. aid to Africa grew markedly during the 2000s as Congress appropriated substantial funds to support the President's Emergency Plan for AIDS Relief (PEPFAR), which the George W. Bush Administration launched in 2003. Development and security aid to Africa also increased during that period, albeit to a lesser extent (see Figure 2 ). Assistance for Africa plateaued during the Obama Administration, fluctuating between $7.0 billion and $8.0 billion in annual allocations, excluding emergency humanitarian assistance and other funding allocated from global accounts and programs. Africa received roughly $7.0 billion in annual U.S. aid allocations in the first three years of the Trump Administration, despite the Administration's repeated proposals to curtail aid to the region. Over the past decade, roughly 70% of U.S. assistance to African countries has supported health programs, notably focused on HIV/AIDS, malaria, nutrition, and maternal and child health. U.S. assistance also seeks to encourage economic growth and development, bolster food security, enhance governance, and improve security. As discussed below, African countries also receive assistance administered by other federal agencies. The United States channels additional funding to Africa through multilateral bodies, such as U.N. agencies and international financial institutions like the World Bank. Policymakers, analysts, and advocates continue to debate the value and design of assistance programs in Africa. Proponents of such assistance often contend that foreign aid advances U.S. national interests in the region, or that U.S. assistance (e.g., to respond to humanitarian need) reflects U.S. values of charity and global leadership. Critics often allege that aid has done little to improve socioeconomic outcomes in Africa overall, that aid flows may have negative unintended consequences (such as empowering undemocratic regimes), or that other countries should bear more responsibility for providing aid to the region. Assessing the effectiveness of foreign aid is complex particularly in areas afflicted by conflict or humanitarian crisis further complicating such debates. Selected considerations concerning U.S. aid to Africa and issues for Congress are discussed in further detail below (see " Select Issues for Congress "). <3. U.S. Assistance to Africa: Objectives and Delivery> U.S. assistance seeks to address a range of development, governance, and security challenges in Africa, reflecting the continent's size and diversity as well as the broad scope of U.S. policy interests in the region. State Department- and USAID-administered assistance for Africa totaled roughly $7.1 billion in FY2019, not including funding allocated to Africa via global accounts and programs (see " Select Assistance Provided through Global Accounts and Programs ," below). Health. At $5.3 billion, health assistance comprised 75% of U.S. aid to Africa in FY2019. The majority of this funding supported HIV/AIDS programs (see Figure 4 ), with substantial assistance provided through the global President's Emergency Plan for AIDS Relief (PEPFAR) a State Department-led, interagency effort that Congress first authorized during the George W. Bush Administration and reauthorized through 2023 under P.L. 115-305 . Programs to prevent and treat malaria, a leading cause of death in Africa, constituted the second-largest category of health assistance; such funding is largely provided through the USAID-led President's Malaria Initiative (PMI), which targeted 24 countries in Africa (out of 27 globally) as of 2019. Beyond disease-specific initiatives, U.S. assistance has supported health system strengthening, nutrition, family planning and reproductive health, and maternal and child health programs. The United States also has supported global health security efforts, including pandemic preparedness and response activities, notably through the U.S.-supported Global Health Security Agenda. In recent years, USAID and the U.S. Centers for Disease Control and Prevention (CDC) led robust U.S. responses to two Ebola outbreaks on the continent, in West Africa (2014-2016) and the Democratic Republic of Congo (DRC, 2018-present). Agriculture and E conomic Growth. U.S. support for economic growth in Africa centers on agricultural development assistance. USAID agriculture programs seek to improve productivity by strengthening agricultural value chains, enhancing land tenure systems and market access road infrastructure, promoting climate-resilient farming practices, and funding agricultural research. Nearly 60% of U.S. agricultural assistance to Africa in FY2019 benefitted the eight African focus countries under Feed the Future (FTF) a USAID-led, interagency initiative launched by the Obama Administration that supports agricultural development to reduce food insecurity and enhance market-based economic growth. (There are 12 FTF focus countries worldwide; the initiative supports additional countries under "aligned" and regional programs.) The Global Food Security Act of 2016 ( P.L. 114-195 , reauthorized through 2023 in P.L. 115-266 ) endorsed an approach to U.S. agricultural and food assistance similar to FTF. Other U.S. economic assistance programs support trade capacity-building efforts, economic policy reforms and analysis, microenterprise and other private sector strengthening, and infrastructure development. Since the early 2000s, USAID has maintained three sub-regional trade and investment hubs focused on expanding intra-regional and U.S.-Africa trade, including by supporting African exports to the United States under the African Growth and Opportunity Act (AGOA, Title I, P.L. 106-200 , as amended) trade preference program. USAID also coordinates Prosper Africa, an emerging Trump Administration trade and investment initiative (see Text B ox ). Electrification is another focus of U.S. economic assistance in Africa. Power Africa, a USAID-led initiative that the Obama Administration launched in 2013, seeks to enhance electricity access through technical assistance, grants, financial risk mitigation tools, loans, and other resources accompanied by trade promotion and diplomatic and advisory efforts. Facilitating private sector contracts is a key focus of the initiative, which aims to build power generation facilities capable of producing 30,000 megawatts of new power and establish 60 million new power connections by 2030. A sub-initiative, Beyond the Grid, supports off-grid electricity access. Power Africa involves a range of U.S. federal entities in addition to USAID, including the Millennium Challenge Corporation (MCC), DFC, Ex-Im Bank, TDA, and Departments of State, Energy, Commerce, and Agriculture. The Electrify Africa Act of 2015 ( P.L. 114-121 ) made it U.S. policy to aid electrification in Africa through an approach similar to that of Power Africa. Peace and Security . The State Department administers a range of programs to build the capacity of African militaries and law enforcement agencies to counter security threats, participate in international peacekeeping and stabilization operations, and combat transnational crime (e.g., human and drug trafficking). State Department security assistance authorities are codified in Title 22 of the U.S. Code . Congress appropriates funds for Title 22 programs in annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations, though the Department of Defense (DOD) implements several of these programs. (For information on DOD security cooperation, see " Assistance Administered by Other U.S. Federal Departments and Agencies .") The Peacekeeping Operations (PKO) account is the primary vehicle for State Department-administered security assistance to African countries ( Figure 5 ). Despite its name, PKO supports not only peacekeeping capacity-building, but also counterterrorism, maritime security, and security sector reform. (A separate State Department-administered account, Contributions to International Peacekeeping Activities [CIPA], funds U.S. assessed contributions to U.N. peacekeeping budgets.) In recent years, the largest PKO allocation for Africa has been for the U.N. Support Office in Somalia (UNSOS), which supports an African Union stabilization operation in that country. PKO funding also supports two interagency counterterrorism programs in Africa: the Trans-Sahara Counter-Terrorism Partnership (TSCTP, in North-West Africa), and the Partnership for Regional East Africa Counterterrorism (PREACT, in East Africa). The Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR) account funds counterterrorism training and other capacity-building programs for internal security forces, as well as other activities such as landmine removal. International Narcotics Control and Law Enforcement (INCLE) funds support efforts to combat transnational crime and strengthen the rule of law, including through judicial reform and law enforcement capacity-building. The International Military Education and Training (IMET) program offers training for foreign military personnel at facilities in the United States and abroad, and seeks to build military-to-military relationships, introduce participants to the U.S. judicial system, promote respect for human rights, and strengthen civilian control of the military. The United States provides grants to help countries purchase defense articles and services through the Foreign Military Financing (FMF) account. USAID also implements programs focused on conflict prevention, mitigation, and resolution. Such assistance seeks to prevent mass atrocities, support post-conflict transitions and peace building, and counter violent extremism, among other objectives. Congress appropriates funding for such programs as economic assistance, as opposed to security assistance. Democracy, Human Rights, and Governance (DRG). State Department- and USAID-administered DRG programs seek to enhance democratic institutions, improve government accountability and responsiveness, and strengthen the rule of law. Activities include supporting African electoral institutions and political processes; training political parties, civil society organizations, parliaments, and journalists; promoting effective and accountable governance; bolstering anti-corruption efforts; and strengthening justice sectors. U.S. assistance also provides legal aid to human rights defenders abroad and funds programs to address particular human rights issues and enable human rights monitoring and reporting. Education and Social Services . U.S. basic, secondary, and higher education programs seek to boost access to quality education, improve learning outcomes, and support youth transitions into the workforce. Some programs specifically target marginalized students, such as girls and students in rural areas or communities affected by conflict or displacement. Youth development activities also include the Young African Leaders Initiative (YALI), which supports young African business, science, and civic leaders through training and mentorship, networking, and exchange-based fellowships. USAID supports four YALI Regional Leadership Centers on the continent in Ghana, Kenya, Senegal, and South Africa which offer training and professional development programs. Additional U.S. assistance programs enhance access to, and delivery of, other social services, such as improved water and sanitation facilities. Environment . Environmental assistance programs in Africa focus on biodiversity conservation, climate change mitigation and adaptation, countering wildlife crime, and natural resource management. In recent years, the largest allocation of regional environmental assistance has been for the Central Africa Regional Program for the Environment (CARPE). Implemented by USAID and the U.S. Fish and Wildlife Service, CAPRE promotes conservation, sustainable resource use, and climate change mitigation in Central Africa's Congo Basin rainforest, with a present focus on landscapes in DRC, the Republic of Congo, and the Central African Republic (CAR). Congress has shown enduring interest in international conservation initiatives and efforts to curb wildlife trafficking and other environmental crime, including in Africa. <3.1. Select Assistance Provided through Global Accounts and Programs> As noted, the discussion above does not account for U.S. development, security, or health assistance allocated to African countries via global accounts and programs funds that are not broken out by region or country in public budget documents. This includes situation-responsive assistance, such as emergency humanitarian aid and certain kinds of governance support, which is appropriated on a global basis and allocated in response to emerging needs or opportunities. Notably, it also includes certain security assistance programs through which some African countries have received considerable funding in recent years. Gaps in region- and country-level aid data may raise challenges for congressional oversight (see " Select Issues for Congress "). Emergency Assistance. As of early 2020, there were U.S.- or U.N.-designated humanitarian crises in Burkina Faso, CAR, DRC, Somalia, South Sudan, Sudan, and the Lake Chad Basin (including parts of Cameroon, Chad, Niger, and Nigeria). The United States administers humanitarian aid to Africa under various authorities. Key accounts and programs include: USAID-administered Food for Peace (FFP) assistance authorized under Title II of the Food for Peace Act of 1954 (P.L. 83-480, commonly known as "P.L. 480"), which primarily provides for the purchase and distribution of U.S. in-kind food commodities. African countries consistently have received a majority of annual FFP Title II emergency assistance in recent years. USAID-administered International Disaster Assistance (IDA), which funds food and nonfood humanitarian assistance including the Emergency Food Security Program (EFSP), which funds market-based food assistance, including cash transfers, food vouchers, and food procured locally and regionally. State Department-administered Migration and Refugees Assistance (MRA) assistance for refugees and vulnerable migrants. <4. Assistance Administered by Other U.S. Federal Departments and Agencies> While the State Department and USAID administer the majority of U.S. foreign assistance to Africa, other federal departments and agencies also manage or support aid programs in the region. For example, the Departments of Agriculture, Energy, Justice, Commerce, Homeland Security, and the Treasury conduct technical assistance programs and other activities in Africa, and may help implement some State Department- and USAID-administered programs on the continent. Other U.S. federal entities involved in administering assistance to Africa notably include: The Department of Defense (DOD). In addition to implementing some State Department-administered security assistance programs, DOD is authorized to engage in security cooperation with foreign partner militaries and internal security entities for a range of purposes. The majority of this assistance has been provided under DOD's "global train and equip" authority, first established by Congress in the National Defense Authorization Act (NDAA) of FY2006 ( P.L. 109-163 ). In the FY2017 NDAA ( P.L. 114-328 ), Congress codified and expanded the "global train and equip" authority under 10 U.S.C. 333 ("Section 333"), consolidating various capacity-building authorities that it had granted DOD on a temporary or otherwise limited basis. Section 333 authorizes DOD to provide training and equipment to foreign military and internal security forces to build their capacity to counter terrorism, weapons of mass destruction, drug trafficking, and transnational crime, and to bolster maritime and border security and military intelligence. Comprehensive regional- or country-level funding data for DOD security cooperation programs are not publicly available, complicating approximations of funding for African countries. A CRS calculation based on available congressional notification data suggests that Kenya, Uganda, Niger, Chad, Somalia, and Cameroon have been the top African recipients of cumulative DOD global train and equip assistance over the past decade. Congress has authorized additional DOD security cooperation programs in Africa under global or Africa-specific authorities (e.g., to help combat the Lord's Resistance Army rebel group in Central Africa between FY2012 and FY2017). Millennium Challenge Corporation (MCC). Authorized by Congress in 2004, the MCC supports five-year development "compacts" in developing countries that meet various governance and development benchmarks. MCC recipient governments lead the development and implementation of their programs, which are tailored to address key "constraints to growth" identified during the compact design phase. The MCC also funds smaller, shorter-term "threshold programs" that assist promising candidate countries to become compact-eligible. As shown in Appendix B , the MCC has supported 32 compacts or threshold programs in 22 African countries since its inception, valued at roughly $8.0 billion in committed funding. There are seven ongoing compacts and threshold programs in the region. The MCC has suspended or terminated compacts with some African governments for failing to maintain performance against selection benchmarks: it terminated engagement in Madagascar and Mali due to military coups, and suspended development of a second compact for Tanzania in 2016 due to a government crackdown on the political opposition. In late 2019, the MCC cancelled a $190 million tranche of funding under Ghana's second compact over concerns with the Ghanaian government's termination of a contract with a private energy utility. The Peace Corps. The Peace Corps supports American volunteers to live in local communities abroad and conduct grassroots-level assistance programs focused on agriculture, economic development, youth engagement, health, and education. As of September 2019, 45% of Peace Corps Volunteers were serving in sub-Saharan Africa by far the largest share by region. Conflict and other crises in Africa have episodically led the Peace Corps to suspend programming over concern for volunteer safety, with recent conflict-related suspensions in Mali (in 2015) and Burkina Faso (2017) and temporary suspensions in Guinea, Liberia, and Sierra Leone during the 2014-2016 West Africa Ebola outbreak. In 2019, the Peace Corps announced that it would resume operations in Kenya after suspending activities in 2014 due to security concerns. The Peace Corps ceased all activities and recalled all volunteers worldwide in March 2020 due to COVID-19. African Development Foundation (USADF). A federally funded, independent nonprofit corporation created by Congress in the African Development Foundation Act of 1980 (Title V of P.L. 96-533 ), the USADF seeks to reduce poverty by providing targeted grants worth up to $250,000 that typically serve as seed capital for small-scale economic growth projects. The USADF maintains a core focus on agriculture, micro-enterprise development, and community resilience. It prioritizes support for marginalized, poor, and often remote communities as well as selected social groups, such as women and youth often in fragile or post-conflict countries. USADF also plays a role in selected multi-agency initiatives, such as Power Africa and YALI. <5. U.S. Aid to Africa During the Trump Administration> In 2018, the Trump Administration identified three core goals of its policy approach toward Africa: expanding U.S. trade and commercial ties, countering armed Islamist violence and other forms of conflict, and imposing more stringent conditions on U.S. assistance and U.N. peacekeeping missions in the region. The Administration also has emphasized efforts to counter "great power competitors" in Africa, namely China and Russia, which it has accused of challenging U.S. influence in the region through "predatory" economic practices and other means. Other stated policy objectives include promoting youth development and strengthening investment climates on the continent. Budget requests and other official documents, such as USAID country strategies, have asserted other priorities broadly similar to those pursued by past Administrations, such as boosting economic growth, investment, and trade, enhancing democracy and good governance, promoting socioeconomic development, and improving health outcomes. The Administration has expressed skepticism of U.S. foreign aid globally, and to certain African countries in particular. For instance, then-National Security Advisor John Bolton pledged in 2018 to curtail aid to African countries whose governments are corrupt and to direct assistance toward states that govern democratically, pursue transparent business practices, and "act as responsible regional stakeholders [...and] where state failure or weakness would pose a direct threat to the United States and our citizens." These objectives do not appear to have been revoked since Bolton's departure from the White House in September 2019. Whether the Administration's budget proposals for aid to Africa have reflected such pledges is debatable, however, as discussed below ("The FY2021 Assistance Request for Africa: Overview and Analysis"). The Trump Administration has maintained several assistance initiatives focused substantially or exclusively on Africa including PEPFAR, the PMI, Feed the Future, Power Africa, and YALI, among others and, as noted above, has launched Prosper Africa, a new Africa-focused trade and investment initiative. At the same time, the Administration has proposed to sharply reduce U.S. assistance to Africa (and globally), even as Congress has provided assistance for Africa at roughly constant levels in recent fiscal years (see Figure 7 ). The Trump Administration also has proposed changes to the manner in which the United States delivers assistance which, if enacted, could have implications for U.S. aid to Africa. These include: C hanges to humanitarian assistance . As part of a consolidation of humanitarian aid accounts, the Administration has repeatedly proposed to eliminate FFP Title II aid, through which African countries received $1.2 billion in emergency food assistance in FY2019. The FY2021 budget request would merge the four humanitarian accounts FFP Title II, International Disaster Assistance (IDA), Migration and Refugee Assistance (MRA), and Emergency Refugee and Migration Assistance (ERMA) into a single International Humanitarian Assistance (IHA) account. Budget documents assert that the consolidation would enhance the flexibility and efficiency of humanitarian assistance. Changes to bilateral economic assistance. The Administration has repeatedly proposed to merge a number of bilateral economic assistance accounts including Development Assistance (DA) and Economic Support Fund (ESF) aid, through which African countries received a cumulative $1.5 billion in FY2019 into a new Economic Support and Development Fund (ESDF) account. The Administration has consistently requested far less in ESDF than prior-year combined allocations for the subsumed accounts. Budget documents contend the consolidation would improve efficiency. Cutting Foreign Military Financing for Africa . Unlike previous Administrations, the Trump Administration has not requested FMF for African countries, with the exception of Djibouti, which hosts the only enduring U.S. military installation in Africa. Eliminating the USADF. The Administration annually has proposed to eliminate the USADF and create a grants office within USAID that would assume responsibility for the agency's work. In successive budget requests, the Administration has included one-time closeout funding for the agency (e.g., $4.7 million for FY2021). To date, Congress has maintained the existing account structures for the delivery of humanitarian aid and economic assistance and continued to appropriate operating funds to the USADF most recently under P.L. 116-94 at a level of $33 million for FY2020. Consideration of the President's FY2021 budget request, released in February 2020, is underway. <5.1. The FY2021 Assistance Request for Africa> Overview. The Administration's FY2021 budget request includes $5.2 billion in aid for Africa, an increase from its FY2020 request ($5.0 billion) but 28% below FY2019 allocations ($7.1 billion). These totals do not include emergency humanitarian aid or funding allocated to African countries from global accounts and programs. Funding for Africa would fall sharply from FY2019 levels across most major funding accounts, including Global Health Programs (which would see a 22% drop), PKO (23%), INCLE (46%), and IMET (16%). Non-health development assistance would see the largest decline from FY2019 levels: the request would provide $797 million in ESDF for Africa, down 48% from $1.5 billion in allocated ESF and DA in FY2019. The request includes $75 million in ESDF for Prosper Africa, up from $50 million requested in FY2020. Separate proposed decreases in U.S. funding for U.N. peacekeeping missions, most of which are in Africa, could have implications for stability and humanitarian operations. Analysis. Overwhelmingly weighted toward health assistance, with the balance largely dedicated to traditional development and security activities, the FY2021 request aligns with long-standing U.S. priorities in the region while at the same time proposing significant cuts to U.S. assistance across all major sectors. Congress has not enacted similar proposed reductions in previous appropriations measures; several Members specifically have raised concerns over the potential ramifications of such cuts for U.S. influence and partnerships abroad. In this regard, it may be debated whether the FY2021 budget, if enacted, would be likely to advance the Administration's stated priority of countering the influence of geostrategic competitors in Africa. For instance, officials have described Prosper Africa as partly intended to counter China's growing influence in the region, yet $75 million in proposed funding for the initiative is arguably incommensurate with the Administration's goal of "vastly accelerat[ing]" two way U.S-Africa trade and investment. Despite the Administration's pledge to curtail aid to countries that fail to govern democratically and transparently, top proposed recipients in FY2021 include several countries with poor or deteriorating governance records (e.g., Uganda, Rwanda, Nigeria, and Tanzania). Sharp proposed cuts to bilateral economic assistance, through which the United States funds most DRG activities, could have implications for U.S. democracy and governance programming in the region. <6. Select Issues for Congress> Below is a selected list of issues that Congress may consider as it weights budgetary proposals and authorizes, appropriates funding for, and oversees U.S. foreign aid programs in Africa. References to specific countries are provided solely as illustrative examples. Scale and balance . Members may debate whether U.S. assistance to Africa is adequately balanced between sectors given the broad scope of Africa's needs and U.S. priorities on the continent, and whether overall funding levels are commensurate with U.S. interests in the region. Successive Administrations have articulated a diverse range of development, governance, and security objectives in Africa yet U.S. assistance to the region has remained dominated by funding for health programs since the mid-2000s. Some Members of Congress have expressed concern over the relatively small share of U.S. aid dedicated to other stated U.S. priorities, such as promoting good governance , ex panding U.S.-Africa commercial ties, and mitigating conflict. Meanwhile, the Trump Administration's repeated proposals to sharply reduce U.S. assistance to Africa have spurred pushback from some Members. Congressional objections have centered on the risks that aid cuts could potentially pose for U.S. national security, foreign policy goals, and U.S. influence and partnerships in Africa. Notably, the proposed cuts in U.S. assistance come at a time when China and other countries, including Russia, India, Turkey, and several Arab Gulf states, are seeking to expand their roles in the region. Transparency and oversight. While this report provides approximate funding figures based largely on publicly available allocation data, comprehensive estimates of U.S. aid to Africa and amounts dedicated to specific focus areas are difficult to determine. Executive branch budget documents and congressional appropriations measures do not fully disaggregate aid allocations by country or region; meanwhile, databases such as USAID's Foreign Aid Explorer and the State Department's ForeignAssistance.gov provide data on obligations and disbursements but do not track committed funding against enacted levels, raising challenges for congressional oversight. As noted above, gaps in region- and country-level assistance data may partly reflect efforts to maintain flexibility in U.S. assistance programs for instance, by appropriating humanitarian aid to global accounts and allocating it according to need. At the same time, Congress has not imposed rigorous reporting requirements evenly across U.S. foreign aid programs. For instance, while DOD "global train and equip" assistance is subject to congressional notification and reporting requirements that require detailed information about country and security force unit recipients and assistance to be provided, there is no analogous reporting requirement governing State Department security assistance. Public budget documents may thus include country- and program-level breakouts of some security assistance, while other funds such as for the Global Peace Operations Initiative (GPOI), a PKO-funded peacekeeping capacity-building program through which some African militaries have received substantial U.S. training and equipment are not reflected in bilateral aid budgets. A lack of data on what U.S. assistance has been provided to African countries may obscure policy dilemmas or inhibit efforts to evaluate impact. Country Ownership. Policymakers may debate the extent to which U.S. assistance supports partner African governments in taking the lead in addressing challenges related to socioeconomic development, security, and governance. The majority of U.S. aid to Africa is provided through nongovernment actors such as U.N. agencies, humanitarian organizations, development practitioners, and civil society entities rather than directly to governments. (Exceptions include U.S. security assistance for African security forces and some healthcare capacity-building programs.) Channeling aid through nongovernment actors may be preferable in countries where the state is unable or unwilling to meet the needs of its population, and may additionally grant the United States greater control and oversight over the use of aid funds. At the same time, experts debate whether this method of assistance adequately equips recipient governments to take primary responsibility for service delivery and other state duties as well as whether this mode of delivery may limit donor influence and leverage with the recipient country government. Conditions on U.S. assistance. Congress has enacted legislation denying or placing conditions on assistance to countries that fail to meet certain standards in, for instance, human rights, counterterrorism, debt repayment, religious freedom, child soldier use, or trafficking in persons. In general, statutes establishing such conditions accord the executive branch the discretion to designate countries for sanction or waive such restrictions. Congress may continue to debate the merits and effectiveness of such restrictions. In FY2020, several African governments are subject to aid restrictions due to failure to meet standards related to: Religious freedom, under the International Religious Freedom Act of 1998 ( P.L. 105-292 ), with Eritrea currently listed as a "Country of Particular Concern." The use of child soldiers, under the Child Soldiers Prevention Act (CSPA, P.L. 110-457 , as amended) and related legislation, with DRC, Mali, Somalia, South Sudan, and Sudan subject to potential security assistance restrictions in FY2020. In October 2019, President Trump exercised his authority under CSPA to waive certain restrictions for DRC, Mali, Somalia, and South Sudan. Trafficking in persons (TIP), under the Trafficking Victims Protection Act of 2000 (TVPA, P.L. 106-386 , as amended) and related legislation, with Burundi, Comoros, DRC, Equatorial Guinea, Eritrea, The Gambia, Mauritania, and South Sudan subject to potential aid restrictions in FY2020. In October 2019, President Trump partially waived such restrictions with regard to DRC and South Sudan, and fully waived them for Comoros. Some African countries periodically have been subject to other restrictions on U.S. foreign aid, such as those imposed on governments that rose to power through a coup d' tat, support international terrorism, or are in external debt arrears. (In contrast to most legislative aid restrictions, a provision in annual appropriations legislation prohibiting most aid to governments that accede to power through a military coup does not grant the executive branch authority to waive the restrictions. ) Congress has also included provisions in annual aid appropriations measures restricting certain aid to specific African countries, notably Sudan and Zimbabwe. In addition, the so-called "Leahy Laws" restrict most kinds of State Department- and DOD-administered security assistance to individual units or members of foreign security forces credibly implicated in a "gross violation of human rights," subject to certain exceptions. The executive branch does not publish information on which units or individual personnel have been prohibited from receiving U.S. assistance pursuant to these laws. Congress also has restricted certain kinds of security assistance deemed likely to be used for unintended purposes; for instance, language in annual foreign aid appropriations measures prohibits the use of funds for providing tear gas and other crowd control items to security forces that curtail freedoms of expression and assembly. Unintended consequences. Some observers have raised concerns that the provision of U.S. foreign assistance may have unintended consequences, including in Africa. For instance, some analysts have questioned whether U.S. food assistance may inadvertently prolong civil conflict by enabling warring parties to sustain operations, though others have challenged that assertion. Whether providing certain forms of U.S. aid, notably security assistance, may at times jeopardize U.S. policy goals in other areas is another potential consideration. For instance, some analysts have questioned whether security assistance to African governments with poor human rights records (e.g., Chad, Cameroon, Nigeria, and Uganda) may strengthen abusive security forces or inhibit U.S. leverage on issues related to democracy and governance. Proponents of U.S. security assistance programs in Africa may contend that aspects of such engagements such as military professionalization and human rights training enhance security sector governance and civil-military relations, and may thus improve human rights practices by partner militaries. <7. Outlook> Congress commenced consideration of the President's FY2021 budget request in February 2020. To date, the 116 th Congress has not adopted many of the Administration's proposed changes regarding assistance to Africa, notably its repeated attempts to significantly reduce aid to the region. Allocated funding has instead hovered around $7 billion per year, excluding emergency humanitarian aid. As Congress debates the FY2021 Department of State, Foreign Operations, and Related Programs appropriations measure, Members may consider issues such as: The economic, humanitarian, and health-related shocks of the COVID-19 pandemic, which is expected to have a severe impact on Africa's development trajectory; Unfolding political transitions in Sudan and Ethiopia, which may have significant implications for governance and conflict trends in the region; Conflicts and humanitarian crises in Burkina Faso, Cameroon, the Central African Republic, the Democratic Republic of Congo, Mali, Nigeria, Somalia, and South Sudan; Repressive governance in several countries that rank as top recipients of U.S. assistance in Africa, including Rwanda, Tanzania, Uganda, and Zambia; The effectiveness of existing conditions on U.S. foreign assistance to Africa, whether additional conditions and restrictions may be necessary, and the appropriate balance between ensuring congressional influence and providing executive branch flexibility; U.S.-Africa trade and investment issues, including as they relate to funding and overseeing the Administration's Prosper Africa initiative; and The involvement in Africa of foreign powers such as China and Russia, and the implications of such engagement for U.S. national security and policy interests. Appendix A. U.S. Assistance to Africa, by Country Appendix B. MCC Programs in Africa: A Snapshot

Overview. Congress authorizes, appropriates, and oversees U.S. assistance to sub-Saharan Africa ("Africa"), which received over a quarter of U.S. aid obligated in FY2018. Annual State Department- and U.S. Agency for International Development (USAID)-administered assistance to Africa increased more than five-fold over the past two decades, primarily due to sizable increases in global health spending and more incremental growth in economic and security assistance. State Department and USAID-administered assistance allocated to African countries from FY2019 appropriations totaled roughly $7.1 billion. This does not include considerable U.S. assistance provided to Africa via global accounts, such as emergency humanitarian aid and certain kinds of development, security, and health aid. The United States channels additional funds to Africa through multilateral bodies, such as the United Nations and World Bank. Objectives and Delivery. Over the past decade, roughly 70-75% of annual U.S. aid to Africa has sought to address health challenges, notably relating to HIV/AIDS, malaria, maternal and child health, and nutrition. Much of this assistance has been delivered via disease-specific initiatives, including the President's Emergency Plan for AIDS Relief (PEPFAR) and the President's Malaria Initiative (PMI). Other U.S. aid programs seek to foster agricultural development and economic growth; strengthen peace and security; improve education access and social service delivery; bolster democracy, human rights, and good governance; support sustainable natural resource management; and address humanitarian needs. What impacts the Coronavirus Disease 2019 (COVID-19) pandemic may have for the scale and orientation of U.S. assistance to Africa remains to be seen. Aid to Africa during the Trump Administration. The Trump Administration has maintained many of its predecessors' aid initiatives that focus wholly or largely on Africa, and has launched its own Africa-focused trade and investment initiative, known as Prosper Africa. At the same time, the Administration has proposed sharp reductions in U.S. assistance to Africa, in line with proposed cuts to foreign aid globally. It also has proposed funding account eliminations and consolidations that, if enacted, could have implications for U.S. aid to Africa. Congressional consideration of the Administration's FY2021 budget request is underway; the Administration has requested $5.1 billion in aid for Africa, a 28% drop from FY2019 allocations. Congress has not enacted similar proposed cuts in past appropriations measures. Selected Considerations for Congress. Policymakers, analysts, and advocates continue to debate the value and effectiveness of U.S. assistance programs in Africa. Some Members of Congress have questioned whether sectoral allocations are adequately balanced given the broad scope of Africa's needs and U.S. priorities in the region. Concern also exists as to whether funding levels are commensurate with U.S. interests. Comprehensive regional- or country-level breakouts of U.S. assistance are not routinely made publicly available in budget documents, complicating estimates of U.S. aid to the region and congressional oversight of assistance programs. In addition to authorizing and appropriating U.S. foreign assistance, Congress has shaped U.S. aid to Africa through legislation denying or placing conditions on certain kinds of assistance to countries whose governments fail to meet standards in, for instance, human rights, debt repayment, or trafficking in persons. Congress also has restricted certain kinds of security assistance to foreign security forces implicated in human rights abuses. Some African countries periodically have been subject to other restrictions on U.S. foreign assistance, including country-specific provisions in annual aid appropriations measures restricting certain kinds of assistance. Congress may continue to debate the merits and effectiveness of such restrictions while overseeing their implementation.

crs_R45982

crs_R45982_0

<1. Introduction> Congress uses an annual appropriations process to fund discretionary spending, which supports the projects and activities of most federal government agencies. This process anticipates the enactment of 12 regular appropriations bills each fiscal year. If regular appropriations are not enacted prior to the start of the fiscal year (October 1), continuing appropriations may be used to provide temporary funding until the consideration of annual appropriations measures is completed. Continuing appropriations acts are often referred to as "continuing resolutions" (CRs), because historically they have been enacted in the form of a joint resolution. CRs also contain numerous provisions that may operate as limitations or restrictions to preserve Congress's prerogative to make funding decisions once final bills are agreed to. Numerous exceptions (or anomalies) are also often included in CRs to provide changes to funding rates, or for other purposes, to address special circumstances that may result with only temporary funding. Other rescissions or cancellations of discretionary budget authority may also be included in CRs. CRs may be enacted for a period of days, weeks, or months. If any of the 12 regular appropriations bills are still not enacted by the time that the first CR for a fiscal year expires, further extensions might be enacted until all regular appropriations bills have been completed or the fiscal year ends. None of the FY2020 regular appropriations bills was enacted prior to the start of the new fiscal year on October 1, 2019. On September 18, 2019, H.R. 4378 was introduced in the House to provide continuing appropriations for projects and activities covered by all 12 of the regular annual appropriations bills from the beginning of the fiscal year through November 21, 2019 (Division A). The legislation also included a separate Division B to extend authorization for multiple federal health care programs. The House passed the legislation on September 19, 2019, by a vote of 301-123. The Senate subsequently passed the legislation by a vote of 81-16 on September 26, 2019. On September 27, 2019, the President signed H.R. 4378 into law ( P.L. 116-59 ). This report provides an analysis of the continuing appropriations provisions included in the CR ( H.R. 4378 , Division A). The first two sections summarize the overall funding provided ("Coverage, Duration, and Rate") and budget enforcement issues associated with the statutory discretionary spending limits ("The CR and the Statutory Discretionary Spending Limits"). The third section of this report provides short summaries of the provisions that are agency-, account-, or program-specific. These summaries are organized by appropriations act title. In some instances, background information about the history of those appropriations, and how they operate under a CR, is provided. <2. Coverage, Duration, and Rate> Three components of a CR generally establish the purpose, duration, and amount of funds provided by the act: 1. A CR's "coverage" relates to the purposes for which funds are provided. The projects and activities funded by a CR are typically specified with reference to regular (and, occasionally, supplemental) appropriations acts from the previous fiscal year. When a CR refers to one of those appropriations acts and provides funds for the projects and activities included in such an act, the CR is often referred to as "covering" that act. 2. The "duration" of a CR refers to the period of time for which budget authority is provided for covered activities. 3. CRs usually fund projects and activities using a "rate for operations" or "funding rate" to provide budget authority at a restricted level but do not prescribe a specified dollar amount. The funding rate for a project or activity is based on the total amount of budget authority that would be available annually for that project or activity under the referenced appropriations acts and is prorated based on the fraction of a year for which the CR is in effect, but it may also be affected by other factors that can have an effect on spending patterns over the course of a fiscal year. <2.1. Coverage> H.R. 4378 ( 101) covers all 12 of the regular annual appropriations bills by generally providing continuing budget authority for FY2020 through November 21, 2019, for projects and activities funded in FY2019. Budget authority is provided by the CR under the same terms and conditions as the referenced FY2019 appropriations acts ( 103). Effectively, this requirement extends many of the provisions in the FY2019 acts that stipulated or limited agency authorities during FY2019. In addition, in general, none of the funds are to be used to initiate or resume an activity for which budget authority was not available in FY2019 ( 104). Such provisions, as well as many of the other provisions discussed in the sections below, may protect Congress's constitutional authority to provide annual funding in the manner it chooses in whatever final appropriations measures may be enacted. Statutory limits on discretionary spending are in effect for FY2020, as adjusted by the Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37 ). The CR includes both budget authority that is subject to those limits and also budget authority that is effectively exempt from those limits including that designated or otherwise provided as "Overseas Contingency Operations/Global War on Terrorism" (OCO/GWOT) or "emergency requirements," as well as limited amounts that may be designated as "disaster relief or "program integrity initiatives." Amounts previously receiving an OCO/GWOT, emergency, or disaster relief designation for FY2019 continue to receive this designation through the length of the CR ( 114). <2.2. Duration> Section 101 provides that funding in the CR is effective through November 21, 2019 roughly a seven-week period of funding. The CR provides that, in general, budget authority for some or all projects and activities could be superseded by the enactment of the applicable regular appropriations act or another CR prior to November 21. For projects and activities funded in the CR that a subsequent appropriations act does not fund, budget authority would immediately cease upon such enactment, even if enactment occurs prior to November 21. However, the CR provides some exceptions to this. For instance, the OCO/GWOT designations ( 114) are specified to remain in effect through November 21. Similarly, an anomaly affecting the Ukraine Security Assistance Initiative is specified to remain in effect until September 30, 2020. <2.3. Rate> In general, the CR provides budget authority at levels provided in FY2019 appropriations acts for the duration of the CR (through November 21). The rate is based on the actual amounts made available in FY2019. A few exceptions, however, to this continued rate of operations are specified in Section 101. These adjustments are in addition to any additional exceptions specified in the various anomalies also included in later sections of the CR. For instance, five agencies are affected by variations to this general rate, including the U.S. Department of Agriculture's (USDA) Rural Water and Waste Disposal Direct Loan Program, the Department of Justice's Assets Forfeiture Fund, the Bureau of Reclamation's Upper Colorado River Basin Fund, immigration authorizations affecting the Department of Homeland Security, and the Department of State's funding for Ebola. In addition, for entitlement and other mandatory spending provided in regular appropriations acts, funding is provided at the rate sufficient to maintain program levels under current law as provided in Section 111(a). <3. The CR and the Statutory Discretionary Spending Limits> <3.1. Background> Appropriations for FY2020 are subject to statutory discretionary spending limits on categories of spending designated as "defense" and "nondefense" spending pursuant to the Budget Control Act of 2011 (BCA), as modified by BBA 2019. The defense category includes all discretionary spending under budget function 050 (defense), and the nondefense category includes discretionary spending in the other budget functions. If discretionary spending is enacted in excess of a statutory limit in either category, the BCA requires the level of spending to be brought into conformance through "sequestration," which involves primarily across-the-board cuts to non-exempt spending in the category of the limit that was breached (i.e., defense or nondefense). Once discretionary spending is enacted, the Office of Management and Budget (OMB) evaluates that spending relative to the spending limits and determines whether sequestration is necessary. For FY2020 discretionary spending, the first such evaluation (and any necessary enforcement) is to occur within 15 calendar days after the 2019 congressional session adjourns sine die . For any FY2020 discretionary spending that becomes law after the session ends, the OMB evaluation and any enforcement of the limits would occur 15 days after enactment. <3.2. FY2020> The Congressional Budget Office (CBO) estimates the budgetary effects of interim CRs on an "annualized" basis, meaning that those effects are measured as if the CR were providing budget authority for an entire fiscal year. According to CBO, the annualized amount for discretionary budget authority for regular appropriations subject to the BCA limits (including projects and activities funded at the rate for operations and anomalies) is $648.452 billion for defense, which is about $18 billion below the defense limit of $666.5 billion, and $604.669 for nondefense, which is about $17 billion below the nondefense limit of $621.5 billion for FY2020. H.R. 4378 specified that each amount incorporated in the legislation by reference, which was previously designated as OCO/GWOT or disaster relief and not subject to the discretionary spending caps, retains that same designation ( 114). Thus when spending effectively not subject to those limits because it was designated or otherwise provided as OCO/GWOT, disaster relief, emergency requirement, or a program integrity adjustment is included, CBO estimates total annualized budget authority in the CR of $1.345 trillion, which is below the BBA 2019 agreement of $1.370 trillion. <4. Agency-, Account-, and Program-Specific Provisions> CRs lasting multiple weeks or longer usually include provisions that are specific to certain agencies, accounts, or programs. These provisions are generally of two types. First, certain provisions designate exceptions to the formula and purpose for which any referenced funding is extended. These are often referred to as "anomalies." They often address specific issues or circumstances that may result from the extension of only current rates of funding. Second, certain provisions may have the effect of creating new law or changing existing law. Most often, these provisions are used to renew expiring provisions of law or extend the scope of certain existing statutory requirements. Substantive provisions that establish major new policies have also been included on occasion. Unless otherwise indicated, such provisions are temporary in nature and expire when the CR expires. These anomalies and provisions that change law may be included at the request of the President. Congress could accept, reject, or modify such proposals in the course of drafting and considering CRs. In addition, Congress may identify or initiate any other anomalies and provisions changing law that it seeks to include in the CR. This section of the report summarizes provisions in H.R. 4378 that are agency-, account-, or program-specific. They are alphabetically organized by appropriations act title for 11 of the 12 regular appropriations acts covered in Section 101. (There are no anomalies concerning items funded in the Legislative Branch Appropriations Act.) The summaries generally provide brief explanations of the provisions. In some cases they include additional information, such as whether a provision was requested by the President or included in prior year CRs. For additional information on specific provisions in the CR, congressional clients may contact the CRS appropriations experts, as noted in the accompanying footnote. <4.1. Agriculture, Rural Development, Food and Drug Administration, and Related Agencies15> <4.1.1. Section 101(1) Rural Water and Waste Disposal Direct Loan Program16> This section authorizes USDA to spend appropriated funds in the Rural Water and Waste Disposal Program Account on the cost of direct loans, in addition to the costs of loan guarantees and grants that were authorized in FY2019. In FY2019, direct loans did not require budget authority because the program had a negative subsidy rate (i.e., the cost of providing loans was less than estimated repayments and fees). For FY2020, OMB estimates that the direct loan program will have a positive subsidy rate. <4.1.2. Section 116 Disaster Assistance for Sugar Beet Processors17> This section amends the list of eligible losses that may be covered under the Additional Supplemental Appropriations for Disaster Relief Act of FY2019 ( P.L. 116-20 , Title I) to include payments to cooperative processors for reduced sugar beet quantity and quality. The FY2019 supplemental provided $3 billion to cover agricultural production losses in 2018 and 2019 from natural disasters. <4.1.3. Section 117 Specialty Crop Research Initiative19> This section allows USDA to waive the non-federal matching funds requirement for grants made under the Specialty Crop Research Initiative (7 U.S.C. 7632(g)(3)). The matching funds provision was added in the 2018 farm bill ( P.L. 115-334 ). <4.1.4. Section 118 Summer Food for Children Demonstrations Projects20> This section allocates funding for the USDA Food and Nutrition Service summer food for children demonstration projects at a rate that ensures that the projects can fully operate by May 2020 (prior to summer meal service, which typically starts in June). Similar provisions have been part of previous CRs. These projects, which include the Summer Electronic Benefit Transfer demonstration, have operated in selected states since FY2010. <4.1.5. Section 119 Commodity Credit Corporation (CCC)22> This section allows CCC to receive its appropriation to reimburse the Treasury for a line of credit about a month earlier than usual prior to a customary final report and audit. Many farm bill payments to farmers are due in October 2019, including to USDA's plan to make supplemental payments under a trade assistance program. Without the anomaly, CCC might have exhausted its $30 billion line of credit in October or November before the audit is completed, which could suspend payments. This provision was part of a CR in FY2019. In addition, the measure requires USDA to submit a report to Congress by October 31, 2019, with various disaggregated details about Market Facilitation Program payments, trade damages, and whether commodities were purchased from foreign-owned companies under the program. <4.1.6. Section 120 Hemp Production Program25> This section provides $16.5 million on an annualized basis to the USDA Agricultural Marketing Service to implement the Hemp Production Program ( P.L. 115-334 , 10113), which was created in the 2018 farm bill. <4.2. Commerce, Justice, Science, and Related Agencies> <4.2.1. Section 101(2) Assets Forfeiture Fund27> In addition to allowing the agencies funded through the annual CJS appropriations act to continue operations at the FY2019-enacted level, Section 101 states that the $674.0 million rescission on the Assets Forfeiture Fund that was enacted as a part of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), will not be in effect for the duration of the CR. The Administration requested this anomaly because the rescission would limit the operations of the Department of Justice's Assets Forfeiture program, including equitable sharing payments made to state and local law enforcement for participating in operations that led to forfeited assets. <4.2.2. Section 121 U.S. International Trade Commission28> This section allows the U.S. International Trade Commission to apportion funding at a rate necessary to meet the commission's responsibilities under the American Manufacturing Competitiveness Act of 2016 ( P.L. 114-159 ). <4.2.3. Section 122 Bureau of the Census30> This section allows the Census Bureau to draw on money from the Periodic Censuses and Programs account which includes the decennial census and other major programs such as the economic census, the census of governments, and intercensal demographic estimates, together with geographic and data-processing support at the rate necessary to maintain the schedule and deliver the required data according to the statutory deadlines in the 2020 Decennial Census Program. <4.3. Department of Defense> <4.3.1. Section 102 Prohibition on 'New Starts' and Increasing Production Rates31> Section 102 is similar to provisions typically included in CRs in previous years. The provision prohibits the Department of Defense (DOD) from funding either so-called new starts that is, procurement or research and development of a major program for which funding was not provided in FY2019 or acceleration of rate of production for any major program for which FY2019 procurement funding was provided. <4.3.2. Section 123 Advance Billing Exemption for Background Investigations32> Section 123 authorizes the DOD to exceed the $1 billion limit on advance billing "for background investigation services and related services" purchased from activities financed using working capital funds. A working capital fund is a type of revolving fund intended to operate as a self-supporting entity to fund business-like activities. The provision is intended to enable DOD to conduct background investigations with minimal interruptions. According to information OMB sent to lawmakers, the Defense Counterintelligence and Security Agency Working Capital Fund, which was scheduled to begin operations October 1, 2019, plans to bill customers prior to completing background investigations and "is likely to exceed $1 billion in advanced billing in FY2020." <4.3.3. Section 124 Ukraine Security Assistance Initiative35> Section 124 appropriates funding for the Ukraine Security Assistance Initiative. The initiative is intended to "increase Ukraine's ability to defend against further aggression by theater adversaries or their proxies by providing support for ongoing training and advisory programs and equipment to enhance Ukraine's command and control; situational awareness systems; secure communications; military mobility; night vision; military medical treatment; maritime and border security operations; and defensive weapons systems," according to DOD. In August 2019, news organizations reported that the Trump Administration withheld funding for the initiative. The department expected to obligate all but approximately $30 million of the $250 million in FY2019 appropriations for the initiative by the end of the fiscal year. Section 124(a) rescinds unobligated FY2019 funds for the initiative. Section 124(b) appropriates an FY2020 amount equal to the unobligated FY2019 funds in addition to the amount otherwise provided for the initiative, at a rate for operations, by the continuing resolution. <4.4. Energy and Water Development and Related Agencies> <4.4.1. Section 125 Colorado River Basins Power Marketing Fund39> Section 125 provides that for the duration of the CR, no funding may be transferred from the Western Area Power Administration's (WAPA) Colorado River Basins Power Marketing Fund to the General Fund of the Treasury. Due to a scorekeeping adjustment by the Trump Administration, the historically common practice of transferring funds from WAPA's Colorado River Basins Power Marketing Fund (which receives revenues from hydropower sales in the Colorado River Basin) to the Bureau of Reclamation's Upper Colorado River Basin Fund (which funds environmental mitigation responsibilities associated with the Colorado River Storage Project, among other things) has not been executed in recent years. Instead, these WAPA funds have been transferred to the General Fund of the Treasury. Congress has opposed the change and attempted to counteract it in appropriations legislation through additional appropriations to the Upper Colorado River Basin Fund and restrictions on WAPA transfers to the General Fund. <4.4.2. Section 126 Calfed Bay-Delta Act Extension41> Section 126 extends the authority for the Bureau of Reclamation to conduct activities under the Calfed Bay-Delta Authorization Act ( P.L. 108-361 , 118 Stat. 1681) from the end of FY2019 to the date of the CR's expiration. This authority allows the Bureau of Reclamation to undertake activities related to formulating a long-term comprehensive plan to restore the ecological health and improve the water management of California's Bay-Delta system. Activities under this authority include long-term levee protection, water quality, ecosystem restoration, water use efficiency, and water-supply-related studies and projects. <4.5. Financial Services and General Government42> <4.5.1. Section 127 Committee on Foreign Investment in the United States43> This section provides $15 million in appropriations for the Committee on Foreign Investment in the United States (CFIUS) Fund. This fund was created in P.L. 115-232 , which authorized $20 million for FY2019-FY2023. Prior to this, CFIUS was not provided a separate appropriation within the Department of the Treasury. <4.5.2. Section 128 District of Columbia45> This section grants congressional approval for DC officials to expend locally raised funds for purposes made available under P.L. 116-6 (Consolidated Appropriations Act, 2019) at a rate set forth in the Fiscal Year 2020 Local Budget Act of 2019 (D.C. Act 23-78). DC political leaders have consistently expressed concern that passage of the appropriations act for the District (in which Congress approves the city's budget) has too often been delayed until well after the start of the District's fiscal year, hindering their ability to manage the District's financial affairs and negatively affecting the delivery of public services. <4.5.3. Section 129 Office of Personnel Management46> This section provides an additional $48 million to the Office of Personnel Management's (OPM) Salaries and Expenses account for administrative expenses for 2019. Of this amount, $29,760,000 is to be transferred from trust funds. Such amounts may be apportioned up to the rate for operations necessary to maintain OPM's operations. OPM previously reported to Congress that the agency would experience a budget shortfall exacerbated by the transfer of the National Background Investigations Bureau from OPM to DOD. <4.5.4. Section 130 Small Business Administration (SBA)47> This section provides an additional $99 million for the Small Business Administration (SBA) 7(a) loan guaranty program. The 7(a) loan guarantees are one of SBA's primary programs, providing loans to small businesses that might not otherwise find financing. The funding under the CR may be apportioned at the rate necessary to meet demand. <4.5.5. Section 131 SBA Disaster Loan Program49> This section provides additional funding for SBA disaster loans at a rate of $177 million, with $167 million of this for administrative expenses to carry out the direct loan program and $151 million of this directed to major disasters. This funding is to be considered designated for disaster relief under the Balanced Budget and Emergency Deficit Control Act of 1985 ( P.L. 99-177 ). <4.6. Department of Homeland Security (DHS)51> <4.6.1. Section 101(6) Immigration Authorization Extensions52> The funding baseline for DHS in H.R. 4378 was the rate of allowable spending and authorities in two separate parts of P.L. 116-6 : Division A, which is the FY2019 DHS appropriations act, and Title I of Division H, which is a series of immigration authorization extensions. These immigration authorization extensions have been carried as anomalies in past CRs, extended by including them as general provisions in the DHS appropriations act (and thus carried forward automatically by the CR, which extends authorities provided in the act), or included in a separate "Immigration Extensions" title in consolidated appropriations legislation and extending that by direct reference in Section 101 of the CR. While the procedural form has varied, the immigration authorization extensions referenced in H.R. 4378 include four that have been extended since FY2016: Extension of authority for pilot programs for employment eligibility confirmation; Extension of religious worker visa program; Extension of rural medical worker immigration authority; and Extension of investor visa program. The reference also includes a fifth extension an increase in the annual cap on H-2B visas, which has been extended through CRs since FY2018. It is the only one of these provisions included in the House Committee-reported version of the FY2020 DHS appropriations act ( H.R. 3931 , 532). <4.6.2. Section 132 Special Apportionment, Secret Service53> H.R. 4378 includes faster apportionment for the Secret Service "to support hiring and operations required for protective activities associated with the 2020 presidential election campaign." The Administration requested a provision with broader authority. A similar provision in a FY2015 CR provided authority for faster apportionment for what was then the Secret Service's "Salaries and Expenses" appropriation to cover presidential candidate nominee protection. <4.6.3. Section 133 FEMA Disaster Relief Fund56> The Administration requested an accelerated rate of apportionment for the Disaster Relief Fund (DRF) to ensure that Stafford Act programs can be carried out. While the Administration stated, "Without the anomaly, the amounts automatically apportioned would impede comprehensive [DRF] response and recovery activities during the period of the CR should a catastrophic event be declared," the side of the DRF that funds major disaster costs is historically flush. Similar provisions were included in both the FY2018 CR ( P.L. 115-56 , Division D, 129) and the first FY2019 CR ( P.L. 115-245 , Division C, 124). <4.6.4. Section 134 National Flood Insurance Program57> The Administration requested an extension of the National Flood Insurance Program (NFIP) as part of the CR. Authority to issue new policies for the NFIP would have expired on September 30, 2019, in the absence of an extension either as a part of this vehicle or on its own. H.R. 4378 extends the program's authorization for the length of the CR. CRs have been a vehicle for extending NFIP authorization as far back as FY1998 ( P.L. 105-46 , 118), although the legislative language has taken different forms. More recently, a short-term reauthorization of the NFIP was carried in the first FY2018 CR ( P.L. 115-56 , Division D, 130). The second CR for FY2019 ( P.L. 115-298 , which added a new Section 136 to P.L. 115-245 , Division C) also extended the authorization. In both cases, the extension was limited to the duration of the CR. <4.6.5. Section 135 Restructuring of the Working Capital Fund60> CRs normally require funds to be apportioned and obligated in the same manner as was the case in the prior annual appropriation. In this case, DHS appropriations is to follow the terms and conditions of P.L. 116-6 , Division A the FY2019 DHS appropriations act. The Administration, however, proposed a restructuring of some accounts in its FY2020 budget request and asked for authority to act as if those changes had been approved by Congress so that if they are approved, manual administrative adjustments to obligations and disbursements would not be required. Section 135 allows apportionment for these specified accounts to occur consistent with the FY2020 budget request. The first FY2018 CR ( P.L. 115-56 , Division D, 125) and FY2019 CR ( P.L. 115-245 , Division C, 128) each carried an almost identical provision requested by the Administration. <4.7. Interior, Environment, and Related Agencies> <4.7.1. Section 136 Indian Health Service61> This provision authorizes the apportionment of appropriations that are provided by the CR of up to $18.4 billion for the Indian Health Services (IHS) account and $631,000 for the Indian Health Facilities account to staff and operate IHS facilities that were or will be opened, renovated, or expanded during either FY2019 or FY2020. The provision allows for higher rates of funding than would otherwise be provided under the CR to operate and provide health services at these newly renovated or constructed health facilities, as new or expanded facilities may need additional resources for operations (e.g., to hire staff and obtain equipment). <4.8. Departments of Labor, Health and Human Services, and Education, and Related Agencies> <4.8.1. Section 137 Strategic National Stockpile62> Section 137 states that amounts obligated for the Centers for Disease Control and Prevention (CDC) Public Health Preparedness and Response budget line and the Public Health and Social Services Emergency Fund (PHSSEF) budget line for the Department of Health and Human Services' (HHS) Office of the Secretary (OS) may be obligated in the account and budget structure and under authorities and conditions set forth in the House-passed Labor, Health and Human Services, and Education, Defense, State, Foreign Operations, and Energy and Water Development Appropriations Act, 2020 ( H.R. 2740 , Division A). This provision would account for the Trump Administration's intradepartmental transfer of the Strategic National Stockpile (SNS) from CDC to the Assistant Secretary of Preparedness and Response in HHS OS in FY2019. The SNS provides select medicines and medical supplies during public health emergencies that overwhelm local availability. H.R. 2740 would provide SNS funding to the HHS OS PHSSEF budget line rather than the CDC Public Health Preparedness and Response budget line (where funds were allocated in previous fiscal years). The report accompanying H.R. 2740 ( H.Rept. 116-62 ) provides the following explanation of congressional intent in the context of that legislative proposal with regard to the SNS and associated policy issues: "The Committee expects that CDC will continue its significant role in providing scientific expertise in decision-making related to procurement of countermeasures, and maintaining strong relationships with State and local public health departments to facilitate efficient deployment of countermeasures in public health emergencies." <4.8.2. Section 138 Ebola Transfer Authority65> Section 138 authorizes the transfer to the CDC of up to $20 million for Ebola preparedness and response activities from the Infectious Disease Rapid Response Reserve Fund. This fund was established by Section 231 of the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 ( P.L. 115-245 ), which included $50 million to support activities "to prevent, prepare for, or respond to an infectious disease emergency." The funds were to remain available until expended and are available to be used only for an infectious disease emergency that (1) is declared by the Secretary of Health and Human Services; or (2) as determined by the Secretary, has significant potential to occur imminently and, on occurrence, potential to affect national security or the health and security of United States citizens, domestically or internationally. This anomaly makes up to $20 million in unobligated reserve funds available without requiring the Secretary to declare the ongoing Ebola outbreak in the Democratic Republic of the Congo a threat to national security or to U.S. citizens. On July 17, 2019, the World Health Organization declared that the ongoing Ebola outbreak was a Public Health Emergency of International Concern (PHEIC). <4.8.3. Section 139 National Advisory Committee on Institutional Quality and Integrity68> Section 139 extends the duration of the National Advisory Committee on Institutional Quality and Integrity (NACIQI) through November 21, 2019. NACIQI is a committee tasked with assessing the process of accreditation and the institutional eligibility and certification of institutions of higher education to participate in federal student aid programs authorized under Title IV of the Higher Education Act of 1965. Section 114(f) of the act provides that NACIQI shall terminate on September 30, 2019. Section 422 of the General Education Provisions Act (GEPA) generally provides an automatic one-year extension of the authorization of appropriations for, or the duration of, programs administered by the Department of Education. This automatic extension would occur only if Congress and the President in the regular session that ends prior to the beginning of the terminal fiscal year of authorization or duration of an applicable program do not enact legislation extending the program. GEPA Section 422 also explicitly states that the automatic one-year extension does not apply to the authorization of appropriations for, or the duration of, committees that are required by statute to terminate on a specific date. Thus, the automatic one-year extension does not apply to NACIQI, and NACIQI would have terminated on September 30, 2019, had it not been extended. <4.9. Military Construction, Veterans Affairs, and Related Agencies> <4.9.1. Section 140 Blue Water Navy Vietnam Veterans71> Section 140 of the CR allows the Department of Veterans Affairs (VA) to use funds in both the Veterans Benefits Administration, General Operating Expenses account and the Departmental Administration, Information Technology Systems account at a higher apportionment rate. This higher rate is provided to allow the VA to begin implementing provisions of the Blue Water Navy Vietnam Veterans Act of 2019 ( P.L. 116-23 ). <4.10. State, Foreign Operations, and Related Programs> <4.10.1. Section 101(11) Exclusion of Provision on Unobligated Ebola Funding73> Section 101(11) of the CR extends the authorities of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019 (Division F of P.L. 116-6 ), to November 21, 2019, with the exception of Section 7058(d) of that law. That section authorized the repurposing of unobligated emergency funds appropriated in FY2015 to address the Ebola outbreak to instead build partner country capacity to prevent, detect, and respond to infectious disease outbreaks and to support an Emergency Reserve Fund. Removing the authorization to repurpose funds may be to ensure emergency funds remain available to respond to the ongoing Ebola outbreak in the Democratic Republic of the Congo (see Section 138). <4.10.2. Section 141 Export-Import Bank74> Section 141 extends the authority of the Export-Import Bank, which would otherwise have expired on September 30, 2019, to November 21, 2019. <4.10.3. Section 142 Commission on International Religious Freedom75> Section 142 extends the authority of the Commission on International Religious Freedom, which would otherwise have expired on September 30, 2019, to November 21, 2019. <4.11. Departments of Transportation, Housing and Urban Development, and Related Agencies> <4.11.1. Section 143 Federal Transit Administration, Capital Investment Grants76> This provision is intended to ensure that applicants for the Federal Transit Administration's (FTA) FY2018 capital investment grants which have been allocated funding but have not yet been able to satisfy the requirements for FTA to obligate the funding to them do not have their allocated funding redistributed to other applicants if they cannot satisfy the requirements for FTA to obligate the money to them by December 31, 2019. These FTA grants typically have a three-year window of availability. The provision in P.L. 115-141 was added with the intent to ensure that the Trump Administration's FTA did not excessively delay providing the transit grants to applicants. <4.11.2. Section 144 Mass Transit Account, Highway Trust Fund77> This provision avoids a situation in which FTA capital investment grants to transit agencies would be reduced due to a reduction in the appropriated level resulting from the application of IRS provision: Section 9503(e)(4) . Similar language is in the House-passed Commerce, Justice, Science, Agriculture, Rural Development, Food and Drug Administration, Interior, Environment, Military Construction, Veterans Affairs, Transportation, and Housing and Urban Development Appropriations Act, 2020 ( H.R. 3055 , 164(1)). <4.11.3. Section 145 Housing for the Elderly78> This section allows amounts made available in the Housing for the Elderly account to be apportioned at a rate necessary to allow the Department of Housing and Urban Development to maintain rental assistance contracts that are coming up for renewal or require additional funding in order to continue to subsidize the rents of low-income elderly residents of Section 202 properties. <4.12. Other Provisions> <4.12.1. Sections 108 and 112 Apportionment> Section 108 provides daily spending rate flexibility to agencies by waiving time limitations. Section 112 allows that the apportionment rate may avoid furloughs, which is consistent with past appropriations acts. These provisions have been included in past CRs. <4.12.2. Section 111(b) Mandatory Payments> Section 111(b) authorizes obligations for mandatory payments due "on or about" the first day of any month that begins between October 1, 2019, and 30 days after the CR is set to expire (i.e., through December 21, 2019, but effectively until December 1, 2019). Programs impacted include the funds for payments through the Supplemental Nutrition Assistance Program (SNAP). These payments, while mandatory spending, are appropriated each year to USDA through the regular appropriations process. This provision has been included in past CRs.

This report provides an analysis of the continuing appropriations provisions for FY2020 included in Division A (Continuing Appropriations Act, 2020) of H.R. 4378 . The legislation also included a separate Division B (Health and Human Services Extenders and Other Matters), which extended multiple federal health care programs that were otherwise set to expire September 30, 2019, and provided for some adjustments to additional health programs. This report examines only Division A, the continuing resolution (CR) portion of the legislation. On September 27, 2019, the President signed H.R. 4378 into law ( P.L. 116-59 ). Division A of H.R. 4378 was termed a CR because it provided temporary authority for federal agencies and programs to continue spending in FY2020 in the same manner as a resolution enacted separately for that purpose. It provides temporary funding for the programs and activities covered by all 12 of the regular appropriations bills, since none of them had been enacted prior to the start of FY2020. These provisions provide continuing budget authority for projects and activities funded in FY2019 by that fiscal year's applicable appropriations acts, with some exceptions. It includes both budget authority that is subject to the statutory discretionary spending limits on defense and nondefense spending and also budget authority that is effectively exempt from those limits, such as that designated for "Overseas Contingency Operations/Global War on Terrorism." Funding under the terms of the CR is effective October 1, 2019, through November 21, 2019—roughly the first seven weeks of the fiscal year. The CR generally provides budget authority for FY2020 for most projects and activities at the rate at which they were funded during FY2019. Although it is effective only through November 21, the cost estimate prepared by the Congressional Budget Office (CBO) provides an annualized projection of the discretionary budget authority provided in the measure. As provided in P.L. 116-59 , the amount subject to the statutory discretionary spending limits is approximately $1.253 trillion. When spending that is effectively not subject to those limits (Overseas Contingency Operations, disaster relief, emergency requirements, and program integrity adjustments) is also included, the CBO estimate is $1.345 trillion. CRs frequently include provisions that are specific to certain agencies, accounts, or programs. These include provisions that designate exceptions to the general funding rate formula or otherwise single out a program, activity, or purpose for which any referenced funding is extended (typically referred to as "anomalies"), as well as provisions that have the effect of creating new law or changing existing law (including the renewal of expiring provisions of law). The CR includes a number of such provisions, each of which is briefly summarized in this report. CRS appropriations experts for each of these provisions are indicated in the accompanying footnotes and Table 1 . Congressional clients may also access CRS Report R42638, Appropriations: CRS Experts . For general information on the content of CRs and historical data on CRs enacted between FY1977 and FY2019, see CRS Report R42647, Continuing Resolutions: Overview of Components and Practices .

crs_RL34499

crs_RL34499_0

Young people who have spent time in foster care as teenagers often face challenges during the transition to adulthood. Compared to their counterparts in the general population, these youth fare poorly in education, employment, and other outcomes. The federal government recognizes that foster youth may ultimately return to the care of the state as adults through the public welfare, criminal justice, or other systems. In response, federal policy has focused on supporting youth while they are in foster care and in early adulthood. This report provides background to Congress on teens and young adults in and exiting from foster care, and the federal support available to them. It begins with a discussion of the characteristics of youth who have had contact with the child welfare system, including those who entered care and those who exited care via "emancipation." This process means that youth reached the state legal age of adulthood without being reunified with their families or placed in new permanent families. The report then discusses child welfare programs authorized under Title IV-E of the Social Security Act specifically the Foster Care Maintenance Payments Program ("foster care program") and the John H. Chafee Program for Successful Transition to Adulthood ("Chafee program") that are intended to help prepare youth for adulthood. The foster care program provides reimbursement to states for providing foster care, including, at state option, to youth between the ages of 18 and 21. It also includes certain requirements that are intended to support older youth in care. The Chafee program is the primary federal program that funds supportive services for teens and young adults during the transition from foster care. The text box below summarizes recent developments in the Chafee program. Appendix A includes funding data for the Chafee program. Appendix B includes a summary of other federal programs, outside of child welfare law, that address older youth in foster care and those who have aged out. <1. Who Are Older Youth in Foster Care and Youth Aging Out of Care?> Children and adolescents can come to the attention of state child welfare systems due to abuse, neglect, or other reasons such as the death of a parent or child behavioral problems. Some children remain in their own homes and receive family support services, while others are placed in out-of-home settings. Such settings usually include a foster home, the home of a relative, or group care (i.e., non-family settings ranging from those that provide specialized treatment or other services to more general care settings or shelters). A significant number of youth spend at least some time in foster care during their teenage years. They may stay in care beyond age 18, typically up to age 21, if they are in a state that extends foster care. <1.1. Older Youth in Foster Care> The U.S. Department of Health and Human Services (HHS), which administers child welfare funding, collects data from states on the number and characteristics of children in foster care. On the last day of FY2017, approximately 122,000 youth ages 13 through 20 comprised 27% of the national foster care caseload. Youth ages 13 through 20 made up 28% of the exits from foster care in FY2017. Most of these youth were reunified with their parents or primary caretakers, adopted, or placed with relatives. However, 19,945 youth aged out that year, or were "emancipated" because they reached the legal age of adulthood in their states, usually at age 18. <1.2. Former Foster Youth> Youth who spend their teenage years in foster care and those who age out of care face challenges as they move to early adulthood. While in care, they may miss opportunities to develop strong support networks and independent living skills that their counterparts in the general population might more naturally acquire. Even older foster youth who return to their parents or guardians can still face obstacles, such as poor family dynamics or a lack of emotional and financial support, that hinder their ability to achieve their goals as young adults. These difficulties are evidenced by the fact that youth who have spent at least some years in care during adolescence exhibit relatively poor outcomes across a number of domains. Two studies the Northwest Foster Care Alumni Study and the Midwest Evaluation of the Adult Functioning of Former Foster Youth have tracked these outcomes. <1.2.1. Northwest and Midwest Studies> The Northwest Foster Care Alumni Study and the Midwest Evaluation of the Adult Functioning of Former Foster Youth have tracked outcomes for a sample of foster youth across several areas and compared them to those of youth in the general population. The studies indicate that youth who spent time in foster care during their teenage years tended to have difficulty as they entered adulthood and beyond. The Northwest Study was retrospective; it looked at the outcomes of young adults who had been in foster care and found that they were generally more likely to have mental health and financial challenges than their peers. They were just as likely to obtain a high school diploma but were much less likely to obtain a bachelor's degree. The Midwest Evaluation followed youth over time to examine the extent to which outcomes in early adulthood are influenced by the individual characteristics of youth or their out-of-home care histories. The study examined the outcomes of youth who were in foster care at age 17, and tracked them through age 26. Compared to their counterparts in the general population, youth in the Midwest study fared poorly in education, employment, and other outcomes. Despite these findings, many former foster youth have overcome obstacles, such as limited family support and financial resources, and have met their goals. For example, youth in the Northwest study obtained a high school diploma or passed the general education development (GED) test at close to the same rates as 25 to 34 year olds generally (84.5% versus 87.3%). Further, youth in the Midwest Evaluation were just as likely as youth in the general population at age 23 or 24 to report being hopeful about their future. <1.2.2. National Youth in Transition Database (NYTD)> States have reported to HHS since FY2010 on the characteristics and experiences of certain current and former foster youth through the National Youth in Transition Database (NYTD). Among other data, states must report on a cohort of foster youth beginning when they are age 17, and then later at ages 19 and 21. Information is collected on a new group of foster youth at age 17 every three years. While the first cohort of NYTD respondents had some positive outcomes by age 21, about 43% reported experiencing homelessness by that age and over one-quarter had been referred for substance abuse assessments or counseling at some point during their lifetimes. States must also report on the supports that eligible current and former foster youth generally those ages 14 to 21, and sometimes older receive to support their transition to adulthood. An analysis of NYTD data for FY2015 found that less than a quarter of youth who received a transition service received services for employment, education, or housing. <2. Overview of Federal Support for Foster Youth> The Children's Bureau at HHS' Administration for Children and Families (ACF) administers programs that are targeted to foster youth and authorized under Title IV-E of the Social Security Act, including the federal foster care program and the Chafee program (which includes the Education and Training Voucher (ETV) program). Under the federal foster care program, states may seek reimbursement for youth to remain in care up to age 18, or up to age 21 at state option. In addition, the program has protections in place to help meet the needs of older youth. Title IV-E entitlement (or mandatory) funding for foster care is authorized on a permanent basis (no year limit) and is provided in annual appropriations acts. Congress typically provides the amount of Title IV-E foster care funding (or "budget authority") that the Administration estimates will be necessary for it to provide state or other Title IV-E agencies with the promised level of federal reimbursement for all of their eligible Title IV-E foster care costs under current law. Separately, the Chafee program provides funding to states for services and supports to help youth who are or were in foster care make the transition to adulthood. It is available up to age 21 (or age 23 under certain circumstances). The ETV component includes a separate authorization for discretionary funding to support Chafee-eligible youth in attending an institution of higher education for up to five years (consecutive or nonconsecutive) until they reach age 26. Chafee program funding is mandatory and has no year limit. The ETV program is funded through discretionary appropriations, also with no year limit. Figure 1 summarizes the programs and the Title IV-E requirements on older youth in foster care and those leaving foster care. Any state, territory, or tribe seeking federal funding under Title IV-E must have a federally approved Title IV-E plan that meets all the requirements of the law. As discussed in Appendix B , other federal programs are intended to help current and former youth in foster care make the transition to adulthood. Federal law authorizes funding for states and local jurisdictions to provide workforce support and housing to this population. States must also provide Medicaid coverage to youth who age out of foster care until they reach age 26. Federal support is available to assist youth in pursuing higher education. <3. Extended Foster Care Program> Historically, states have been primarily responsible for providing child welfare services to families and children. When a child is in out-of-home foster care, the state child welfare agency, under the supervision of the court (and in consultation with the parents or primary caretakers in some cases), serves as the parent and makes decisions on the child's behalf to promote his/her safety, permanence, and well-being. In most cases, the state relies on public and private entities to provide these services. The federal government plays a role in shaping state child welfare systems by providing funds, which are linked to certain requirements under Title IV-E of the Social Security Act. Title IV-E requires states to follow certain case planning and management practices for all children in care ( Figure 1 shows these requirements related to youth in foster care). Though not discussed in this report, Title IV-B of the Social Security Act, which authorizes funding for child welfare services, includes provisions on the oversight of children in foster care and support for families more broadly. The federal foster care program reimburses states and some territories and tribes (hereinafter, "states") for a part of the cost of providing foster care to eligible children and youth who have been removed by the state child welfare agency due to abuse or neglect. The courts have given care and placement responsibility to the state. Under the program, a state may seek partial federal reimbursement to "cover the cost of (and the cost of providing) food, clothing, shelter, daily supervision, school supplies, a child's personal incidentals, liability insurance with respect to a child, and reasonable travel to the child's home for visitation and reasonable travel for the child to remain in the school in which the child is enrolled at the time of placement." Federal reimbursement to states under Title IV-E may be made only on behalf of a child who meets multiple federal eligibility criteria, including those related to the child's removal and the income and assets of the child's family. For the purposes of this report, the most significant eligibility criteria for the federal foster care program are the child's age and placement setting. States may also seek reimbursement on behalf of Title IV-E eligible children for costs related to administration, case planning, training, and data collection. Beginning with FY2020, states can seek federal support for up to 12 months of (1) in-home parent skills-based programs and (2) substance abuse and mental health treatment services for any child a state determines is at "imminent risk" of entering foster care, any pregnant or parenting youth in foster care, and the parents or kin caregivers of these children. Also as of FY2020, any state electing to provide these prevention services and programs under its Title IV-E program will be entitled to receive federal funding equal to at least 50% of its cost, as long as the services and programs meet certain evidence-based standards, and the spending is above the state's maintenance of effort (MOE) level. <3.1. Eligibility> Since FY2011, states have had the option to seek reimbursement for the cost of providing foster care to eligible youth until age 19, 20, or 21. These youth must be completing high school or a program leading to an equivalent credential, enrolled in an institution that provides post-secondary or vocational education, participating in a program or activity designed to promote or remove barriers to employment, employed at least 80 hours per month, or exempted by their state from these requirements due to a medical condition as documented and updated in their case plan. In program guidance, HHS advised that states can make remaining in care conditional upon whether youth are eligible under only specified eligibility criteria. For example, states could extend care only to those youth enrolled in post-secondary education. Still, the guidance advises that states should "consider how [they] can provide extended assistance to youth age 18 and older to the broadest population possible consistent with the law to ensure that there are ample supports for older youth." In other guidance, HHS has advised that youth can remain in foster care at this older age even if they are married or enlist in the military. As of May 2019, HHS had approved Title IV-E state plans for 28 states, the District of Columbia, and nine tribal nations to extend the maximum age of federally funded foster care (see Figure 2 ). In general, the jurisdictions make foster care available to youth until they reach age 21 (except for Indiana, which extends foster care until age 20) and allow them to remain in care under any of the eligibility conditions specified in law (except for Tennessee, West Virginia, Wisconsin, the Eastern Band of Cherokee, and the Penobscot Indian Nation). A recent survey conducted by Child Trends, a nonprofit research organization, found that youth who are eligible to remain in care typically decide to leave earlier than the maximum age for foster care in their state by one to three years. HHS has advised that young people can leave care and later return before they reach the maximum age of eligibility in the state (with certain requirements pertaining to how long youth can leave for and remain eligible for foster care maintenance payments). In addition, state and tribal child welfare agencies can choose to close the original child abuse and neglect case and reopen the case as a "voluntary placement agreement" when the young person turns 18 or if they re-enter foster care between the ages of 18 and 21. In these cases, the income eligibility for Title IV-E would be based on the young adult's income only. HHS has further advised that states can extend care to youth ages 18 to 21 even if they were not in foster care prior to 18, but are not required to do so. <3.2. Eligible Placement Setting> Federal reimbursement of part of the costs of maintaining children in foster care may be sought only for children placed in foster family homes or child care institutions. Title IV-E does not currently include a definition of "foster family"; however, as of FY2020 the following definition of "foster family home" will go into effect: the home of an individual who is licensed as a foster parent, and who is residing with and providing 24-hour substitute care for not more than six children (with some exceptions) placed in foster care in the individual's licensed home. A "child care institution" is defined in law as a private institution, or a public institution that accommodates no more than 25 children, that is approved or licensed by the state. However, if a child in foster care is at least 18 years old, he/she may be placed in a "setting in which the individual is living independently" that meets standards established by the HHS Secretary (it does not have to meet state licensing rules). A child care institution may never include "detention facilities, forestry camps, training schools, or any other facility operated primarily for the detention of children who are determined to be delinquent." In program instructions issued by HHS, the department stated that it did not have plans to issue regulations that describe the kinds of living arrangements considered to be independent living settings, how these settings should be supervised, or any other conditions for a young person to live independently. The instructions advised that states have the discretion to develop a range of supervised independent living settings that "can be reasonably interpreted as consistent with the law, including whether or not such settings need to be licensed and any safety protocols that may be needed." States appear to allow youth ages 18 and older to live in a variety of settings. For example, Florida defines an independent living setting as a licensed foster home, licensed group home, college dormitory, shared housing, apartment, or other housing arrangement if the arrangement is approved and is acceptable to the youth, with the first choice being a licensed foster home. <3.3. Case Planning and Review> Federal child welfare provisions under Title IV-B and Title IV-E of the Social Security Act require state child welfare agencies, as a condition of receiving funding under these titles, to provide certain case management services to all children in foster care. These include monthly case worker visits to each child in care; a written case plan for each child in care that documents the child's placement and steps taken to ensure his/her safety and well-being, including by addressing their health and educational needs; and procedures ensuring a case review is conducted at least once every six months by a judge or an administrative review panel, and at least once every 12 months by a judge or administrative body who must consider the child's permanency plan. As part of the annual hearing, the court or administrative body must ensure that the permanency plan addresses whether and, as applicable, when the child will be returned to his/her parents, placed for adoption (with a petition for termination of parental rights filed by the Title IV-E agency), referred for legal guardianship, or placed in another planned permanent living arrangement. A court or administrative body may determine that a child's permanency plan is "another planned permanent living arrangement" only if the Title IV-E agency documents for the court a compelling reason why every other permanency goal is not in the child's best interest. Further, the court or administrative body conducting the hearings is to consult, in an age-appropriate manner, with the child regarding the proposed permanency plan or transition plan. As shown in Figure 1 , certain other provisions in Title IV-E apply to youth ages 14 and older. For example, the written case plan must include a description of the programs and services that will help the child prepare for a successful transition to adulthood. <4. John H. Chafee Foster Care Program for Successful Transition to Adulthood (Chafee Program)> The John H. Chafee Foster Care Program for Successful Transition to Adulthood, authorized under Section 477 of Title IV-E of the Social Security Act, provides services to older youth in foster care and youth transitioning out of care. This section provides an overview of the program, as well as information about program eligibility, youth participation, program administration, funding, data collection, and training and technical assistance. <4.1. Legislative History> The Foster Care Independence Act of 1999 ( P.L. 106-169 ) replaced the prior-law Independent Living Program that was established in 1986 ( P.L. 99-272 ). The 1999 law created the John H. Chafee Foster Care Independence program and doubled the annual mandatory funds available to states for independent living services from $70 million to $140 million. It also established new purpose areas, activities to be funded, and related requirements. The program has been amended five times, to (1) add the Education and Training Voucher (ETV) program for funding higher education opportunities ( P.L. 107-133 ), (2) expand eligibility for the Chafee and ETV programs to youth who exit foster care at age 16 or older for adoption or kinship guardianship ( P.L. 110-351 ), (3) ensure that foster youth are informed about designating others to make health care treatment decisions on their behalf ( P.L. 111-148 ), (4) increase funding for the Chafee program and add a purpose area about supporting activities that are developmentally appropriate ( P.L. 113-183 ), and (5) change data collection requirements and multiple purpose areas that address program eligibility ( P.L. 115-123 ). <4.2. Purpose Areas> The purposes of the Chafee program are to support all youth who have experienced foster care at age 14 or older in their transition to adulthood through transitional services such as assistance in obtaining a high school diploma and post-secondary education, career exploration, vocational training, job placement and retention, training and opportunities to practice daily living skills (such as financial literacy training and driving instruction), substance abuse prevention, and preventive health activities (including smoking avoidance, nutrition education, and pregnancy prevention); help youth who have experienced foster care at age 14 or older achieve meaningful, permanent connections with a caring adult; help youth who have experienced foster care at age 14 or older engage in age- or developmentally appropriate activities, positive youth development, and experiential learning that reflects what their peers in intact families experience; provide financial, housing, counseling, employment, education, and other appropriate support and services to former foster care youth between the ages of 18 and 21 (or up to age 23 in states that have extended foster care to age 21 using federal, state, or other funds, as determined by the HHS Secretary) to complement their own efforts to achieve self-sufficiency and to ensure that program participants recognize and accept their personal responsibility for preparing for and then making the transition from adolescence to adulthood; make education and training vouchers, including postsecondary training and education, available to youth who have aged out of foster care; provide Chafee-funded services to youth who have left foster care for kinship guardianship or adoption after turning 16; and ensure that youth who are likely to remain in foster care until age 18 have regular, ongoing opportunities to engage in age- or developmentally appropriate activities. <4.3. Supports> States may use Chafee funding to provide supports that are described in the purpose areas and other parts of the law. They may dedicate as much as 30% of their program funding toward room and board for youth ages 18 to 21 (or up to age 23 in states that have extended foster care to age 21 using federal, state, or other funds, as determined by the HHS Secretary). Room and board are not defined in statute, but they typically include food and shelter, and may include rental deposits, rent payments, utilities, and the cost of household startup purchases. Chafee funds may not be used to acquire property to provide housing to current or former foster youth. As described in HHS guidance, states may use Chafee funding to establish trust funds for youth eligible under the program. <4.3.1. Chafee Education and Training Vouchers> The Chafee program authorizes discretionary funding for the ETV program at $60 million annually, with no end year specified. The program is intended to provide financial support for the cost of attendance to Chafee-eligible youth enrolled at an institution of higher education, as defined by the Higher Education Act of 1965 (HEA), either on a full-time or part-time basis. The law refers to this support as a "voucher," which must not exceed the lesser of $5,000 or the cost of attendance. Youth are eligible to receive ETVs for five years until age 26, regardless of whether they attend in consecutive years or not and are making satisfactory progress toward completion of their program. Funding received through the ETV program does not count toward the student's expected family contribution, which is used by the federal government to determine a student's need for federal financial aid. However, the total amount of education assistance provided under the ETV program and other federal programs may not exceed the total cost of attendance, and students cannot claim the same education expenses under multiple federal programs. The state child welfare agency is to take appropriate steps to prevent duplication of benefits under the Chafee ETV program and other federal programs, and to coordinate the program with other appropriate education and training programs. A current fiscal year's ETV funds may not be used to finance a youth's educational or vocational loans incurred prior to that year. <4.4. State Plan> To be eligible for Chafee and ETV funds, a state must submit a five-year plan (as part of what is known as the Child and Family Service Plan, or CFSP, and annual updates to that plan via the Annual Progress and Service Report, or APSR) to HHS that describes how it intends to carry out its Chafee-funded program. The plan must be submitted on or before June 30 of the calendar year in which it is to begin. States may make amendments to the plan and notify HHS within 30 days of modifying it. HHS is to make the plans available to the public. <4.5. Eligibility> The Chafee program addresses eligibility under the purpose areas and in provisions on the ETV program. The program, including the ETV program, is available to youth in foster care between the ages of 14 and 21; who aged out of foster care and are between the ages of 18 and 21 (or up to age 23 in states that extend foster care to age 21); who left foster care at age 16 or older for kinship guardianship or adoption until they reach age 21 (or up to age 23 in states that extend care to age 21); who had been in foster care between the ages of 14 and 21 and left foster care for some other reason besides aging out of foster care, kinship guardianship, or adoption; and who are likely to remain in foster care until age 18 years (see the purpose area about "regular, ongoing opportunities to engage in age- or developmentally appropriate activities"). The Chafee program requires states to ensure that Chafee-funded services serve children of "various ages" and in "various stages of achieving independence" and use objective criteria for determining eligibility for benefits and services under the program. Former foster youth continue to remain eligible until age 21 (or age 23, if applicable) for services if they move to another state. The state in which the former foster youth resides whether or not the youth was in foster care in that state is responsible for providing independent living services to him/her. The number of youth who receive independent living program assistance from Chafee funds and other sources (state, local, and private) is collected by HHS via states through the National Youth in Transition Database (NYTD, discussed further in " Data Collection "). In FY2017, approximately 111,700 youth received an independent living service. Separately, states reported to HHS that they provided ETV vouchers to 16,400 youth in FY2008; 16,650 youth in FY2009; 17,400 youth in program year (PY) 2010; 17,100 youth in PY2011; 16,554 youth in PY2012; 16,548 youth in PY2013; 15,514 youth in PY2014, and 14,619 youth in PY2015. <4.5.1. American Indian Youth> The Chafee program requires a state to certify that each federally recognized Indian tribe in it has been consulted about the state's Chafee-funded programs and that there have been efforts to coordinate the programs with these tribal entities. In addition, the Chafee program specifies that the "benefits and services under the programs are to be made available to Indian children in the state on the same basis as to other children in the state." "On the same basis" has been interpreted by HHS to mean that the state will provide program services equitably to children in both state custody and tribal custody. <4.5.2. The Role of Youth Participants> The Chafee program requires states to ensure that youth in Chafee-funded programs participate directly in "designing their own program activities that prepare them for independent living" and that they "accept personal responsibility for living up to their part of the program." This language builds on the positive youth development approach to serving young people. Youth advocates that support this approach view youth as assets and promote the idea that they should be engaged in decisions about their lives and communities. States have taken various approaches to involving young people in decisions about the services they receive. Most states have also established formal youth advisory boards to provide a forum for youth to become involved in issues facing those in care and aging out of care. Youth-serving organizations for current and former foster youth, such as Foster Club, provide an outlet for young people to become involved in the larger foster care community and advocate for other children in care. States are not required to utilize life skills assessments or personal responsibility contracts with youth to comply with the youth participation requirement, although some states use these tools to assist youth in making the transition to adulthood. <4.6. Program Administration> States administer their Chafee-funded programs in multiple ways. Some programs are overseen by the state program that addresses older and former foster youth, with an independent living coordinator and other program staff. For example, in Maine the state's independent living coordinator oversees specialized life skills education coordinators assigned to cover all of the state's Department of Health and Human Services district offices. In some states, like California, each county administers its own program with some oversight and support from a statewide program. Other states, including Florida, use contracted service providers to administer their programs. Many jurisdictions have partnered with private organizations to help fund and sometimes administer some aspect of their independent living programs. For example, the Jim Casey Youth Opportunities Initiative has provided funding and technical assistance to multiple cities to provide financial support and training to youth exiting care. <4.6.1. ETV Program Administration> The state with the placement and responsibility for a youth in foster care is to provide the voucher to that youth. The state must also continue to provide a voucher to any youth who is currently receiving one and moves to another state for the sole purpose of attending an institution of higher education. If a youth moves permanently to another state after leaving care and subsequently enrolls in a qualified institution of higher education, the state where he or she resides would provide the voucher. Generally, states administer their ETV program through their program that addresses older and former foster youth. However, some states administer the ETV program through their financial aid office (e.g., California Student Aid Commission) or at the local level (e.g., Florida, where all child welfare programs are administered through community-based agencies). Some states contract with a nonprofit service provider, such as Foster Care to Success. States and counties may use ETV dollars to fund the vouchers and the costs associated with program administration, including for salaries, expenses, and training of staff. States are not permitted to use Title IV-E foster care or adoption assistance program funds for administering the ETV program. However, they may spend additional funds from state sources or other sources to supplement the ETV program or use ETV funds to expand existing postsecondary funding programs. Several states have scholarship programs, tuition waivers, and grants for current and former foster youth that are funded through other sources. <4.7. Funding> Chafee and ETV funds are distributed to each state based on its proportion of the nation's children in foster care. States must provide a 20% match (in-kind or cash) to receive their full federal Chafee and ETV allotment. The Chafee program includes a "hold harmless" clause that precludes any state from receiving less than the amount of general independent living funds it received under the former independent living program in FY1998 or $500,000, whichever is greater. There is no hold harmless provision for ETV funds. States may use Chafee and ETV funds to supplement, and not supplant, any other funds that are available for the types of activities authorized under the Chafee program. Territories with an approved Title IV-E plan may also apply for Chafee funding. Currently, Puerto Rico and the U.S. Virgin Islands have approved plans. An Indian tribe, tribal organization, or tribal consortium may apply to HHS and receive a direct federal allotment of Chafee and/or ETV funds. To be eligible, a tribal entity must be receiving Title IV-E funds to operate a foster care program under a Title IV-E plan approved by HHS or via a cooperative agreement or contract with the state. Successful tribal applicants receive an allotment amount(s) out of the state's allotment for the program(s) based on the share of all children in foster care in the state under tribal custody. Tribal entities must satisfy the Chafee program requirements established for states, as HHS determines appropriate. Four tribes the Prairie Band of Potawatomi (Kansas), Santee Sioux Nation (Nebraska), Confederated Tribe of Warm Springs (Oregon), and Port Gamble S'Klallam Tribe (Washington) receive Chafee and ETV funds. A state must certify that it will negotiate in good faith with any tribal entity that does not receive a direct federal allotment of child welfare funds but would like to enter into an agreement or contract with the state to receive funds for administering, supervising, or overseeing Chafee and ETV programs for eligible Indian children under the tribal entity's authority. Appendix B provides the Chafee and ETV allotments for each state, four tribes, Puerto Rico, and the U.S. Virgin Islands in FY2018 and FY2019. Though not shown in the table, Chafee funds are often combined with state, local, and other funding sources. <4.7.1. Unused Funds> States and tribes have two fiscal years to spend their Chafee and ETV funds. If a jurisdiction does not apply for all of its allotment, the remaining funds may be redistributed among states that need these funds as determined by HHS. Table A-2 shows the percentage and share of funds returned for both programs from FY2005 through FY2014, as well as a list of jurisdictions that have returned these funds. FY2014 is the most recent year available. HHS was recently given authority to reallocate funds that are not spent within the two-year period to states and tribes that apply for the funding. If funds are reallocated, the statute specifies that the funds should be redistributed among the states and tribes that apply for any unused funds, provided HHS determines the state or tribe would use the funds according to the program purposes. Further, HHS is directed to allocate the funds based on the share of children in foster care among the states and tribes that successfully appl y for the unused funds. Any unspent funds can be made available to the applying states or tribes in the second fiscal year following the two-year period in which funds were originally awarded . Any redistributed funds are considered part of the state 's or tribe's allotment for the fiscal year in which the redistribution is made . <4.8. Training and Technical Assistance> Training and technical assistance grants for the Chafee and ETV programs had been awarded competitively every five years, most recently for FY2010 through FY2014. The National Child Welfare Resource Center for Youth Development (NCWRCYD), housed at the University of Oklahoma, provided assistance under the grant. Beginning with FY2015, HHS has operated the Child Welfare Capacity Building Collaborative via a contract with ICF International, a policy management organization, to provide training and technical assistance on a number of child welfare issues, including youth development. <4.9. Data Collection> The Chafee program required that HHS consult with state and local public officials responsible for administering independent living and other child welfare programs, child welfare advocates, Members of Congress, youth service providers, and researchers to "develop outcome measures (including measures of educational attainment, high school diploma, avoidance of dependency, homelessness, non-marital childbirth, incarceration, and high-risk behaviors) that can be used to assess the performance of states in operating independent living programs"; identify the data needed to track the number and characteristics of children receiving services, the type and quantity of services provided, and state performance on the measures; and develop and implement a plan to collect this information beginning with the second fiscal year after the Chafee law was enacted in 1999. In response to these requirements, HHS created the National Youth in Transition Database (NYTD). The final rule establishing NYTD became effective April 28, 2008, and it required states to report data on youth beginning in FY2011. HHS uses NYTD to engage in two data collection and reporting activities. First, states collect demographic data and information about receipt of services on eligible youth who currently receive independent living services. This includes youth regardless of whether they continue to remain in foster care, were in foster care in another state, or received child welfare services through an Indian tribe or privately operated foster care program. Second, states track information on outcomes of foster youth on or about their 17 th birthday, around their 19 th birthday, and around their 21 st birthday. Consistent with the authorizing statute for the Chafee program, HHS is to penalize any state not meeting the data collection procedures for the NYTD from 1% to 5% of its annual Chafee fund allotment, which includes any allotted or re-allotted funds for the general Chafee program only. The penalty amount is to be withheld from the current fiscal year award of the funds. HHS is to evaluate a state's data file against data compliance standards, provided by statute. However, states have the opportunity to submit corrected data. The text box indicates new information that HHS must report to Congress. <4.10. Evaluation of Chafee-Funded Services> The authorizing statute for the Chafee program requires HHS to conduct evaluations of state (or tribal) programs funded by the Chafee program deemed to be "innovative or of national significance." The law reserves 1.5% of total Chafee funding annually for these evaluations, as well as related technical assistance, performance measurement, and data collection. HHS conducted an evaluation of promising independent living programs from approximately 2007 to 2012, and is in the process of identifying new ways of conducting research in this area. <4.10.1. Multi-Site Evaluation of Foster Youth Programs> For the initial evaluation, HHS contracted with the Urban Institute and its partners to conduct what is known as the Multi-Site Evaluation of Foster Youth Programs. The goal of the evaluation was to determine the effects of programs funded by the Chafee authorizing law in achieving key outcomes related to the transition to adulthood. HHS and the evaluation team initially conducted an assessment to identify state and local programs that could be evaluated rigorously, through random assignment to treatment and control groups, as required under the law. Their work is the first to involve random assignment of programs for this population. The evaluation team examined four programs in California and Massachusetts an employment services program in Kern County, CA; a one-on-one intensive, individualized life skills program in Massachusetts; and a classroom-based life skills training program and a tutoring/mentoring program, both in Los Angeles County, CA. The evaluation of the Los Angeles and Kern County programs found no statistically significant impacts as a result of the interventions; however, the life skills program in Massachusetts, known as Outreach, showed impacts for some of the education outcomes that were measured. The Outreach program assists youth who enroll voluntarily in preparing to live independently and in having permanent connections to caring adults upon exiting care. Outreach youth were more likely than their counterparts in the control group to report having ever enrolled in college and staying enrolled. Outreach youth were also more likely to experience outcomes that were not a focus of the evaluation: these youth were more likely to remain in foster care and to report receiving more help in some areas of educational assistance, employment assistance, money management, and financial assistance for housing. In short, the Outreach youth may have been less successful on the educational front if they had not stayed in care. Youth in the program reported similar outcomes as the control group for multiple other measures, including in employment, economic well-being, housing, delinquency, and pregnancy. <4.10.2. Emerging Research> HHS has contracted with the Urban Institute and Chapin Hall for additional research on the Chafee program. Citing the lack of experimental research in child welfare, the research team is examining various models in other policy areas that could be used to better understand promising approaches of working with older youth in care and those transitioning from care. Researchers have identified a conceptual framework that takes into account the many individual characteristics and experiences that influence a youth's ability to transition successfully into adulthood. The research team has also classified the various types of programs that foster youth could access to help in the transition, and the extent to which they are ready to be evaluated. In addition, researchers have published a series of briefs that discuss outcomes and programs for youth in foster care in the areas of education, employment, and financial literacy. The briefs discuss that few programs have impacts for foster youth in these areas. The briefs also address issues to consider when designing and evaluating programs for youth in care. Appendix A. Funding for the John H. Chafee Foster Care (Chafee) Program for Successful Transition to Adulthood and Education and Training Voucher (ETV) Program Appendix B. Other Federal Support for Older Current and Former Foster Youth In addition to the child welfare programs under Title IV-E of the Social Security Act, other federal programs provide assistance to older current and former foster youth. This appendix describes Medicaid pathways for foster youth who emancipated; educational, workforce, and housing supports; and a grant to fund training for child welfare practitioners working with older foster youth and youth emancipating from care. Medicaid The Centers for Medicare and Medicaid Services (CMS) at HHS administers Medicaid, a federal-state health program jointly financed by HHS and the states. Medicaid law provides for mandatory and optional pathways for youth who have aged out of foster care. Mandatory Pathway As of January 1, 2014, certain former foster youth are eligible for Medicaid under a mandatory pathway created for this population in the Affordable Care Act (ACA, P.L. 111-148 ). Former foster youth are eligible if they were "in foster care under the responsibility of the State" upon reaching age 18 (or up to age 21 if the state extends federal foster care to that age); were enrolled in Medicaid while in foster care; and are not eligible or enrolled in other mandatory Medicaid coverage groups. The ACA specifies that income and assets are not considered when determining eligibility for this group. Nonetheless, foster youth with annual incomes above a certain level may be required to share in the costs of their health care. In addition to the law, CMS has provided additional parameters on the new pathway via a final rule promulgated in November 2016 and policy guidance. The final rule specifies that former foster youth are eligible regardless of whether Title IV-E foster care payments were made on their behalf. States may not provide Medicaid to individuals who left foster care before reaching age 18 via this pathway. Further, states may not provide Medicaid coverage to former foster youth who move from another state; however, states could apply to HHS under a waiver to provide such coverage via the research and demonstration waiver authority for the Medicaid program. The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act ( P.L. 115-271 ) amended the Medicaid statute on the former foster youth pathway. It will permit states, as of January 2023, to use state plan authority for providing coverage to former foster youth who move across state lines. The law directs HHS, within one year of the its enactment, to issue guidance to states on best practices for removing barriers and ensuring timely coverage under this pathway, and on conducting related outreach and raising awareness among eligible youth. Consistent with existing regulations, the final rule affirms that states may not terminate Medicaid eligibility for foster youth who reach age 18 without first determining whether they are eligible for other mandatory Medicaid eligibility pathways available to adults (e.g., the coverage pathway for pregnant women). Optional Pathway The pathway for former foster youth appears largely to supersede an optional pathway also provided for this population. The 1999 law ( P.L. 106-169 ) that established the Chafee program also created a new optional Medicaid eligibility pathway for "independent foster care adolescents"; this pathway is often called the "Chafee option." The law further defined these adolescents as individuals under the age of 21 who were in foster care under the responsibility of the state on their 18 th birthday. The law permits states to restrict eligibility based on the youth's income or resources, and whether or not the youth had received Title IV-E funding. As of late 2012, more than half (30) of all states had extended the Chafee option to eligible youth. Of these states, five reported requiring youth to have income less than a certain level of poverty (180% to 400%). Four states permitted youth who were in foster care at age 18 in another state to be eligible under the pathway. States also reported whether the youth is involved in the process for enrolling under the Chafee option. In 15 states, youth are not directly involved in the enrollment process. For example, some states automatically enroll youth. In the other 15 states, youth are involved in enrollment with assistance from their caseworker or they enroll on their own. Most states that have implemented the Chafee option require an annual review to verify that youth continue to be eligible for Medicaid. States generally have a hierarchy to determine under which pathway youth qualify. For example, in most states, youth who qualify for the Chafee option and receive Supplemental Security Income (SSI) would be eligible for Medicaid under the SSI Medicaid pathway. Educational Support Federal funding and other supports for current and former foster youth are in place to help these youth aspire to, pay for, and graduate from college. The Higher Education Act (HEA) authorizes financial aid and support programs that target this and other vulnerable populations. Federal Financial Aid For purposes of applying for federal financial aid, a student's expected family contribution (EFC) is the amount that can be expected to be contributed by a student and the student's family toward his or her cost of education. Certain groups of students are considered "independent," meaning that only the income and assets of the student are counted. Individuals under age 24 who are or were orphans, in foster care, or wards of the court at age 13 or older are eligible to apply for independent student status. The law does not specify the length of time that the youth must have been in foster care or the reason for exiting as factors for independent student status eligibility. However, the federal financial aid form, known as the Free Application for Federal Student Aid (FAFSA), instructs current and former foster youth that the financial aid administrator at their school may require the student to provide proof that they were in foster care. As required by the FY2014 appropriations law (2014, P.L. 113-76 ), the Department of Education (ED) modified the FAFSA form so that it includes a box for applicants to identify whether they are or were in foster care, and to require ED to provide these applicants with information about federal educational resources that may be available to them. Higher Education Support Programs The Higher Education Act provides that youth in foster care, including youth who have left foster care after reaching age 16, and homeless children and youth are eligible for what are collectively called the federal TRIO programs. The programs are known individually as Talent Search, Upward Bound, Student Support Services, Educational Opportunity Centers, and McNair Postbaccalaureate. The TRIO programs are designed to identify potential postsecondary students from disadvantaged backgrounds, prepare these students for higher education, provide certain support services to them while they are in college, and train individuals who provide these services. HEA directs the Department of Education (ED), which administers the programs, to (as appropriate) require applicants seeking TRIO funds to identify and make services available, including mentoring, tutoring, and other services, to these youth. TRIO funds are awarded by ED on a competitive basis. In addition, HEA authorizes services for current and former foster youth (and homeless youth) through TRIO Student Support Services a program intended to improve the retention and graduation rates of disadvantaged college students that include temporary housing during breaks in the academic year. In FY2019, Congress appropriated $1.1 billion to TRIO programs. Separately, HEA allows additional uses of funds through the Fund for the Improvement of Postsecondary Education (FIPSE) to establish demonstration projects that provide comprehensive support services for students who were in foster care (or homeless) at age 13 or older. FIPSE is a grant program that seeks to support the implementation of innovative educational reform ideas and evaluate how well they work. As specified in the law, the projects can provide housing to the youth when housing at an educational institution is closed or unavailable to other students. Congress appropriated $6 million in FY2018 and $5 million in FY2019 for FIPSE. Workforce Support Workforce Innovation and Opportunity Act Programs The Workforce Innovation and Opportunity Act (WIOA) authorizes job training programs to unemployed and underemployed individuals through the Department of Labor (DOL). Two of these programs Youth Activities and Job Corps provide job training and related services to targeted low-income vulnerable populations, including foster youth. The Youth Activities program focuses on preventive strategies to help in-school youth stay in school and receive occupational skills, as well as on providing training and supportive services, such as assistance with child care, for out-of-school youth. Job Corps is an educational and vocational training program that helps students learn a trade, complete their GED, and secure employment. To be eligible, foster youth must meet age and income criteria as defined under the act. Young people currently or formerly in foster care may participate in both programs if they are ages 14 to 24. In FY2018, Congress appropriated $903 million to Youth Activities and $1.7 billion to Job Corps. Housing Support Family Unification Vouchers Program Current and former foster youth may be eligible for housing subsidies provided through programs administered by the Department of Housing and Urban Development's (HUD's) Family Unification Vouchers program (FUP vouchers). The FUP vouchers were initially created in 1990 under P.L. 101-625 for families that qualify for Section 8 tenant-based assistance and for whom the lack of adequate housing is a primary factor in the separation, or threat of imminent separation, of children from their families or in preventing the reunification of the children with their families. Amendments to the program in 2000 under P.L. 106-377 made youth ages 18 to 21 eligible for the vouchers for up to 18 months if they are homeless or are at risk of becoming homeless at age 16 or older. The Housing Opportunity Through Modernization Act ( P.L. 114-201 ), enacted in July 2016, extended the upper age of eligibility for FUP vouchers, from 21 to 24, for youth who emancipated from foster care. It also extended assistance under the program for these youth from 18 to 36 months and allows the voucher assistance to begin 90 days prior to a youth leaving care because they are aging out. It also requires HUD, after consulting with other appropriate federal agencies, to issue guidance to improve coordination between public housing agencies, which administer the vouchers, and child welfare agencies. The guidance must address certain topics, including identifying eligible recipients for FUP vouchers and identifying child welfare resources and supportive families for families and youth (including the Chafee program). As of the date of this report, HUD has not issued such guidance. In correspondence with CRS, HUD explained that it has requested funding for this work, and until those funds can be secured, HUD and HHS staff are studying how youth and families are served by FUP. FUP vouchers were initially awarded from 1992 to 2001. Over that period, approximately 39,000 vouchers were distributed. Each award included five years of funding per voucher and the voucher's use was restricted to voucher-eligible families for those five years. At the end of those five years, public housing authorities (PHAs) were eligible to convert FUP vouchers to regular Section 8 housing vouchers for low-income families. While the five-year use restrictions have expired for all family unification vouchers, some PHAs may have continued to use their original family unification vouchers for FUP-eligible families and some may have chosen to use some regular-purpose vouchers for FUP families (but the extent to which this happened is unknown). Congress appropriated $20 million for new FUP vouchers in each of FY2008 and FY2009; $15 million in FY2010, $10 million in FY2017, and $20 million in FY2018 and FY2019. Congress has specified that amounts made available under Section 8 tenant-based rental assistance and used for the FUP vouchers are to remain available for the program. A 2014 report on the FUP program examined the use of FUP vouchers for foster youth. The study was based on a survey of PHAs, a survey of child welfare agencies that partnered with PHAs that served youth, and site visits to four areas that use FUP to serve youth. The survey of PHAs showed that slightly less than half of PHAs operating FUP had awarded vouchers to former foster youth in the 18 months prior to the survey. PHAs reported that youth were able to obtain a lease within the allotted time, and many kept their leases for the full 18-month period they were eligible for the vouchers. In addition, 14% of total FUP program participants qualified because of their foster care status. According to the study, this relatively small share was due to the fact that less than half of PHAs were serving youth, and these PHAs tended to allocate less than one-third of their vouchers to youth, among other findings. Other Support Older current and former foster youth may be eligible for housing services and related supports through the Runaway and Homeless Youth program, administered by HHS. The program is comprised of three subprograms: the Basic Center program (BCP), which provides short-term housing and counseling to youth up to the age of 18; the Transitional Living program (TLP), which provides longer-term housing and counseling to youth ages 16 through 22; and the Street Outreach program (SOP), which provides outreach and referrals to youth who live on the streets. Youth transitioning out of foster care may also be eligible for select transitional living programs administered by HUD, though the programs do not specifically target these youth. The program was funded at $127 million in FY2019. The Foreclosure Prevention Act of 2008 ( P.L. 110-289 ) was signed into law on July 30, 2008, and enables owners of properties financed in part with Low-Income Housing Tax Credits (LIHTCs) to claim as low-income units those occupied by low-income students who were in foster care. Owners of LIHTC properties are required to maintain a certain percentage of their units for occupancy by low-income households; students (with some exceptions) are not generally considered low-income households for this purpose. The law does not specify the length of time these students must have spent in foster care nor require that youth are eligible only if they emancipated.

While many young people have access to emotional and financial support systems throughout their early adult years, older youth in foster care and those who are emancipated from care often lack such security. This can be an obstacle for them in developing independent living skills and building supports that might ease their transition to adulthood. Older foster youth who return to their parents or guardians may continue to experience poor family dynamics or lack supports, and studies have shown that recently emancipated foster youth fare poorly relative to their counterparts in the general population on measures such as education and employment. The federal government recognizes that older youth in foster care and those who have been emancipated, or aged out, are vulnerable to negative outcomes and may ultimately return to the care of the state as adults through the public welfare, criminal justice, or other systems. The U.S. Department of Health and Human Services (HHS) administers the primary federal programs that are targeted to these youth. These include the federal foster care program and the John H. Chafee Program for Successful Transition to Adulthood program ("Chafee program"), both of which are authorized under Title IV-E of the Social Security Act. Foster care is a temporary living arrangement intended to ensure a child's safety and well-being until a permanent home can be re-established or newly established. Under the Title IV-E foster care program, a public child welfare agency must work to ensure that each child who enters foster care is safely returned to his/her parents, or, if this is determined not to be possible or appropriate (by a court), to find a new permanent home for the child. Jurisdictions (states, territories, and tribes) may seek reimbursement for youth to remain in care up to age 21. Approximately half of all states extend care to that age. In addition, the foster care program has certain protections for older youth. For example, jurisdictions must annually obtain the credit report of each youth in care who is age 14 and older. They must also assist youth with developing a transition plan that is in place 90 days before aging out. The law requires that a youth's caseworker—and as appropriate, other representative(s) of the youth—assist and support him/her in developing the plan. The law requires that the plan be guided by the youth, and should include specific options on housing, health insurance, education, local opportunities for mentors, and other supports. The Chafee program provides supports and services to youth ages 14 to 21 who are or were in foster care (with some exceptions). Youth in states that extend foster care to age 21 can be served under the program until age 23. The program authorizes funds to be used for providing assistance in obtaining a high school diploma, career exploration, training in daily living skills, training in budgeting and financial management skills, and preventive health activities, among other purposes. States must meet certain requirements, including that not more than 30% of Chafee funds are used for room and board expenses. The Chafee Education and Training Voucher (ETV) provides funding for Chafee-eligible youth to attend institutions of higher education. Youth can receive up to $5,000 annually for up to five years (consecutive or nonconsecutive) until they reach age 26. The Chafee law directs HHS to collect outcome and other information for current and former foster youth, and HHS established the National Youth in Transition Database (NYTD) for this purpose. Along with the foster care and Chafee programs, other federal programs are intended to help youth currently and formerly in foster care make the transition to adulthood. Federal law authorizes funding for states and local jurisdictions to provide workforce support and housing to older foster youth and youth emancipating from care. Further, beginning on January 1, 2014, eligible young people who were in foster care at age 18 are covered under a mandatory Medicaid pathway until age 26. Youth in foster care or recently emancipated youth are also specifically eligible for certain educational supports.

crs_R45903

crs_R45903_0

<1. Introduction> Since early 2018, certain foreign nations have targeted U.S. food and agricultural products with retaliatory tariffs (for more on tariffs, see Box 1 ) in response to U.S. Section 232 tariffs on steel and aluminum imports and U.S. Section 301 tariffs levied on imports from China. The first U.S. trade action occurred on March 8, 2018, when President Trump imposed tariffs of 25% on steel and 10% on aluminum imports (with some flexibility on the application of tariffs by country) using presidential powers granted under Section 232 of the Trade Expansion Act of 1962. Section 232 authorizes the President to impose restrictions on certain imports based on an affirmative determination by the Department of Commerce that the targeted import products threaten national security. The targeted exporters, China, Canada, Mexico, the European Union (EU), and Turkey, responded by levying retaliatory tariffs on U.S. food and agricultural products, and other goods. India proposed retaliatory tariffs but did not implement them until June 2019. A second action occurred in July 2018 when the Trump Administration used a Section 301 investigation to impose tariffs of 25% on $34 billion of selected imports from China, citing concerns over China's policies on intellectual property, technology, and innovation. In August 2018, the Administration levied a second round of Section 301 tariffs, also of 25%, on an additional $16 billion of imports from China. In September 2018, additional tariffs of 10% were applied to $200 billion of imports from China and, in May 2019, these were raised to 25%. On August 13, 2019, the Office of U.S. Trade Representative (USTR) published two lists of additional Chinese imports that would face 10% tariffs, effective September 1, 2019, and December 15, 2019. The imposition of the Section 301 tariffs on Chinese goods resulted in retaliatory tariffs by China. Additionally, in August 2019, China asked its state-owned enterprises to halt purchases of U.S. agricultural goods. On August 23, 2019, China further retaliated by levying two additional sets of tariffs: 5% or 10% tariffs on U.S. imports, including 695 different U.S. agricultural tariff lines effective September 1, 2019; and another 5% or 10% tariffs on U.S. imports including 184 different U.S. agricultural tariff lines effective December 15, 2019. During 2018, China, Canada, Mexico, the EU, and Turkey jointly levied retaliatory tariffs on more than 1,000 U.S. food and agricultural tariff lines. India prepared a list of U.S. products targeted for retaliatory tariffs in 2018 but refrained from implementing them. Then in 2019, India implemented retaliatory tariffs on certain U.S. lentils, apples, and tree nuts after the United States removed India from the U.S. Generalized System of Preferences (GSP) program on May 31, 2019. GSP provides duty-free tariff treatment for certain products from designated developing countries. India's removal from GSP is expected to raise duties valued at about $5 billion to $6 billion on goods the United States imports from India or slightly more than 10% of India's total 2018 exports of $54 billion to the United States. In response to U.S. action, India implemented the retaliatory tariffs identified in 2018, with some changes, effective June 16, 2019. On May 17, 2019, the Trump Administration reached an agreement with Canada and Mexico to remove the Section 232 tariffs on steel and aluminum imports from those countries and to remove all retaliatory tariffs imposed on U.S. goods. The Administration reduced tariffs on Turkish steel imports, and Turkey responded on May 21, 2019, by halving its retaliatory tariffs on U.S. imports. <1.1. Report Objectives> This report recaps the chronology and the effect of U.S. Section 232 and Section 301 actions on U.S. food and agricultural imports and the retaliatory tariffs imposed on U.S. agricultural exports by its trading partners during 2018 and the spring of 2019. As China is subjected to the largest set of U.S. tariff increases and has levied the most expansive set of retaliatory tariffs on U.S. agricultural products, this report largely focuses on the effects of Chinese retaliatory tariffs on U.S. agricultural trade. Because almost all U.S. food and agricultural tariff lines are affected by Chinese retaliatory tariffs, the report provides illustrative examples using selected agricultural products. Thus, the report is not a comprehensive review of the effect of Chinese retaliatory tariffs on every U.S. agricultural product exported to China. Retaliatory tariffs have made U.S. products relatively more expensive in China, with the result that Chinese imports from other countries have increased in lieu of U.S. products. This report discusses the short- and long-run economic effects of the changes in trade flows, locally, nationally, and globally. The long-run effects may potentially be more problematic, as China and Russia have increased their agricultural productivity over the past two to three decades, and China has increased investments in other countries to develop potential future sources of imports. Additionally, China has improved market access for imports from other countries while it has increased tariffs on U.S. imports. Finally, the report presents the views of selected U.S. agricultural stakeholders on retaliatory tariffs, and it identifies issues that may be of interest for Congress. <2. Retaliatory Tariffs on U.S. Agricultural Exports> Except for China, which faces both Section 232 and Section 301 tariffs, other countries' retaliatory tariffs respond only to U.S. Section 232 tariffs on U.S. imports of certain steel and aluminum products. Higher retaliatory tariffs represent increases above the World Trade Organization (WTO) Most Favored Nation (MFN) tariff rates or beyond any existing preferential tariff rates. Retaliatory tariffs for Canada and Mexico are increases from the existing North American Free Trade Agreement (NAFTA) rates, most of which, at zero percent, are below the MFN rates. Table 1 summarizes the retaliatory tariff increases on U.S. agricultural products by comparing tariff increases of September 2018 with the retaliatory tariffs in effect in June 2019. A potential reason for observed changes in applied tariffs rates is that some tariffs are levied based on quantity (such as per ton or per kilograms) and, for purposes of analyses, tariffs are converted to percentage of total import value, ad valorem rates (see Box 2 ). When the price of a traded product changes, the ad valorem tariff rate imposed on a product can change. Additionally, it is not always possible to match the U.S. Harmonized Tariff Schedule (HTS) with the retaliatory country's 8- or 10-digit tariff code (see Box 1 ) . Thus, it may be difficult to link the U.S. Census Bureau trade data with the tariff codes of products affected by retaliatory tariffs. Therefore, this report makes use of both U.S. export data and partner country import data as appropriate to provide the most accurate measure of the magnitude of the affected U.S. trade. For U.S. retaliating trade partners, Table 1 provides the minimum, maximum, and simple (not trade-weighted) average retaliatory tariff hike rates. <2.1. Chinese Retaliatory Tariffs18> China is subject to the largest set of U.S. tariff increases both the U.S. Section 232 steel and aluminum tariffs and the Section U.S. 301 tariffs in response to unfair trade practices. As a result, China has countered with an expansive list of retaliatory tariffs. In particular, all U.S. products affected by Chinese retaliatory tariffs in response to the U.S. Section 232 action also faced additional retaliatory tariffs in response to U.S. Section 301 trade action. China first retaliated against U.S. Section 232 action in April 2018, by raising tariffs on certain U.S. imports including agricultural products. During the first round of Chinese retaliatory tariffs, these products included pork, fruit, and tree nuts. In July 2018, China retaliated against U.S. Section 301 tariffs by raising tariffs on an expanded number of products, including most U.S. agricultural products exported to China. Tariffs were also raised on products affected by the earlier April 2018 retaliatory tariffs in response to U.S. Section 301 action, with most subject to an additional tariff of 25%. China levied two more rounds of retaliatory tariff increases (against U.S. Section 301 action) in 2018 in August and September expanding the coverage of the affected products. In September 2018, China imposed 5% and 10% tariff increases on certain products (including agricultural products) which had not been subject to any retaliatory tariffs in response to U.S. Section 301 action. In June 2019, China increased tariffs on some additional products that had not been previously targeted with retaliatory tariffs, as well as some products that had been hit with the 5% or 10% retaliatory tariff in September 2018. As a result, almost all U.S. agricultural products shipped to China face retaliatory tariffs, ranging from 5% to 50% above their MFN tariff rates through August 31, 2019, with a simple average tariff rate increase of 24% across all products as of July 2019. See Table A-1 for information on average Chinese retaliatory tariffs across different food and agricultural product categories. <2.2. Retaliatory Tariffs by Canada and Mexico> In June 2018, Mexico levied a 15% tariff on U.S. sausage imports; a 20% tariff on other pork products, certain cheeses, apples, potatoes, and cranberries; and a 25% tariff increase on whey, blue-veined cheese, and whiskies. Starting in July 2018, Canada imposed a retaliatory tariff of 10% on certain U.S. products including dairy, poultry, and beef products; coffee, chocolate, sugar, and confectionery; prepared food products; condiments; bottled water; and whiskies. To facilitate the ratification of the proposed U.S.-Mexico-Canada Agreement (USMCA) that the leaders of the three countries agreed to on September 30, 2018, the United States removed the Section 232 tariffs on steel and aluminum imports from Canada and Mexico on May 17, 2019, and, in turn, these countries removed their retaliatory tariffs on U.S. imports. <2.3. Retaliatory Tariffs by the EU, Turkey, and India> In June 2018, in response to U.S. Section 232 tariffs, the EU imposed a 25% tariff on imports of U.S. corn, rice, sweetcorn, kidney beans, certain breakfast cereals, peanut butter, orange juice, cranberry juice, whiskies, cigars, and other tobacco products, and a 10% tariff on certain essential oils. In June 2018, Turkey also responded to U.S. Section 232 tariffs on Turkish steel imports by levying retaliatory tariffs on selected U.S. imports. On August 10, 2018, the United States doubled its tariffs on steel imports from Turkey to 50%, stating that the 25% tariffs did not reduce Turkish steel imports as much as anticipated. Turkey responded by doubling tariffs on certain U.S. imports including a 20% retaliatory tariff on U.S. tree nuts and certain prepared food, 25% and 50% tariffs on U.S. rice (depending on whether milled or unmilled), 60% tariff on U.S. tobacco, and 140% tariff on U.S. alcoholic beverages including whiskies. When the United States reduced its tariffs on Turkish steel imports on May 21, 2019, Turkey halved its retaliatory tariffs on U.S. imports. India identified certain U.S. food products for retaliatory tariffs in 2018 but did not levy them until June 16, 2019. Indian tariff hikes above the MFN rate are 10% for imports of U.S. chickpeas, 29% for over-quota shelled almonds (ad valorem rate), and 20% for U.S. walnuts, apples, and lentils. <3. U.S. Agricultural Trade Affected by Tariff Hikes> Foreign nations may target U.S. food and agricultural products with retaliatory tariffs for several reasons. First, the United States is the largest exporter of food and agricultural products, so many countries are able to retaliate against those goods. Second, agricultural commodities are often more easily substituted from among potential suppliers, so curbing imports from one country would not necessarily limit an importing country's access to the commodity. Third, several food and agricultural products are produced primarily in certain regions of the United States, and thus may be targeted with a view to negatively and disproportionately affecting the constituents of specific U.S. lawmakers. The retaliatory tariffs imposed by U.S. trading partners affected many products exported by the United States, including meats, grains, dairy products, specialty and horticultural crops, and alcoholic beverages. As discussed in Box 3 , "Tariffs Increase Import Prices," a number of factors affect trade, including tariffs that tend to increase the price of imported goods. In 2018, total imports of affected U.S. food and agricultural products by all retaliating countries amounted to almost $22 billion, based on customs data from these countries. This represents a 27% decline from the $29.7 billion in 2017 ( Figure 1 ). Based on Chinese customs data, the total value of Chinese agricultural imports from the United States affected by retaliatory tariffs declined from $22.5 billion in 2017 to $14.7 billion in 2018. Canadian customs data show that imports of U.S. agricultural products declined to $2.3 billion in 2018 from $2.4 billion in 2017. Canadian retaliatory tariffs include certain tariff lines covering prepared product categories under beef, poultry, dairy, fruit, vegetables, drinks, coffee and spices, chocolate and confectionary, and whiskey. As noted earlier, Canada removed its retaliatory tariffs on U.S. imports in May 2019, in response to the U.S. removal of Section 232 tariffs on steel and aluminum imports from Canada. A review of Mexican customs data finds that imports of U.S. agricultural products by Mexico also declined from $2.6 billion in 2017 to $2.5 billion in 2018, largely accounted for by sausage and pork products. Mexico's imports of these products declined from $2.3 billion in 2017 to $1.6 billion in 2018. In addition to pork products, Mexico had imposed retaliatory tariffs on cheeses, apples, prepared fruit, vegetables and other food, and whiskey. Mexico also removed its retaliatory tariffs on U.S. imports in May 2019, in response to U.S. removal of Section 232 tariffs on steel and aluminum imports from Mexico. EU customs data show the import value of U.S. food and agricultural products affected by the EU retaliatory tariffs increased to $1.3 billion in 2018 from $1.1 billion in 2017. The EU imposed tariff hikes on certain prepared vegetables, pulses, breakfast cereals, fruit juices, peanut butter, tobacco products, whiskey, and essential oils. A temporary surge in sales in the months prior to the imposition of duties appears to have offset a slump in sales that coincided with the onset of retaliatory duties later in the year ( Figure 2 ). Based on the quarterly import data, by the first quarter of 2019, the total value of EU imports of U.S. products affected by retaliatory tariffs was lower than during the last quarter of 2017 or the first quarter of 2018. Since the second quarter of 2018, EU imports of affected food and agricultural products from the United States declined. As discussed above, beyond the tariff increases, a number of factors may have contributed to this reduction in imports. For instance, when countries first released their proposed lists of products that they targeted for retaliation, some EU importers may have imported larger quantities of the affected products prior to the imposition of the duties, thus boosting EU imports of U.S. agricultural goods in 2018. Similar to the EU, the total value of Turkish imports of U.S. food and agricultural products affected by retaliatory tariffs increased between 2017 ($299 million) and 2018 ($316 million), based on Turkish customs data. Turkey had imposed tariff hikes on certain tree nuts, prepared food, rice, tobacco, whiskey, and other alcoholic beverages. Imports in the months prior to the imposition of duties had increased ( Figure 2 ), which may have offset the decline in imports during the second half of 2018. In the third and fourth quarter of 2018, Turkish imports of affected U.S. food and agricultural products declined. Since May 2019, Turkey halved its retaliatory tariffs on imports from the United States. During 2018, India did not levy any retaliatory tariffs on imports of U.S. food and agricultural products. Starting in June 16, 2019, India implemented retaliatory tariffs on imports of U.S. almonds, walnuts, chickpeas, lentils, and apples. Based on the Indian customs data, the total value of Indian imports of these products was $824 million in 2017 and $859 million in 2018. <3.1. U.S. Agricultural Exports to Retaliating Countries> Table 2 presents U.S. agricultural exports to retaliating and nonretaliating countries, in nominal values, from 2014 to 2018. As discussed in Box 1 , U.S. exports to trading partners and the reported import values in destination countries can differ due to differences in HS classification of goods in different countries. Canada, the EU, Mexico, and Turkey levied retaliatory tariffs in 2018 on selected U.S. agricultural products, while China imposed retaliatory tariffs on almost all U.S. food and agricultural products. During 2018, India did not levy any retaliatory tariffs. Thus, the changes in 2018 U.S. food and agricultural exports, compared to prior years, varied across these countries ( Table 2 ). Despite the retaliatory tariffs, U.S. agricultural exports grew from $138 billion in 2017 to $140 billion in 2018. Greater U.S. exports of products to nonretaliating countries ($76 billion in 2018, up from $66 billion in 2017) offset the value of trade lost to China and Turkey. In addition, increased U.S. exports of products without retaliatory tariffs and products targeted for retaliatory tariffs during the months prior to their implementation (to Canada, Mexico, and the EU) also helped to offset the decline in exports of products with retaliatory tariffs to these countries. <4. U.S. Exports Under Chinese Retaliatory Tariffs45> The Chinese market is important for several U.S. agricultural products. For example, in 2016 and 2017, the United States supplied over a third of China's total soybean imports, almost all of China's distillers' grain imports (primarily used as animal feed), and most of China's sorghum imports. In 2017, the Chinese market accounted for about 57% of global U.S. soybean exports, 17% of global U.S. cotton exports, 80% of global U.S. sorghum exports, 11% of global U.S. dairy product exports, 10% of global U.S. pork exports, 6% of global U.S. wheat exports, and 5% of global U.S. fruit exports. In response to U.S. Section 232 and Section 301 tariffs on U.S. imports of Chinese goods imposed in 2018, China levied retaliatory tariffs on imports of almost all U.S. agricultural products. In 2017, China was the second-leading export market by value for U.S. agricultural products. However, after the imposition of retaliatory tariffs on U.S. imports beginning in April 2018, U.S. agricultural exports to China experienced a 53% decline from $19.5 billion in 2017 to $9.2 billion in 2018 ( Figure 3 ). China thus moved down in rank to become the fourth-largest U.S. agricultural market, after Canada, Mexico, and Japan. Among other goods, China imposed a 25% retaliatory tariff on U.S. soybeans in July 2018. Since 2000, China had been the top export market for U.S. soybeans. In 2017, China imported about $12 billion worth of U.S. soybeans, accounting for 57% of the total value of all U.S. soybean exports that year. With higher tariffs in place, China has been purchasing more soybeans from Brazil and other countries to meet its demand. Consequently, U.S. soybean exports to China in 2018 declined to $3 billion ( Figure 3 ). U.S. Census Bureau trade data indicate China was still the top foreign destination for U.S. soybeans in 2018, followed by Mexico, which imported $1.8 billion of U.S. soybeans. Reduced Chinese import demand in 2018 contributed to declining farm prices for affected commodities and lower U.S. agricultural exports to China for several commodities, including sorghum, soybeans, cotton, and pork. Consequently, U.S. soybean prices reached 10-year lows during July-October 2018 ( Figure 4 ), weighing on prices of other agricultural commodities, such as corn, that compete with soybeans for acreage. Prices recovered some during the last quarter of 2018, coincident with reported commitments by China to purchase a "very substantial amount of U.S. agricultural" goods. However, Chinese purchases failed to materialize and U.S. commodity prices resumed their downward trend through the first quarter of 2019 before stabilizing. As U.S. soybean prices declined in 2018, Brazilian soybean prices started to rise, indicative of a greater demand for Brazilian soybeans from China ( Figure 4 ). Since 2007, Brazilian and U.S. soybean prices had tended to move together. Starting in April 2018, U.S. soybean prices started to fall and Brazilian soybean prices started to rise. China's imposition of a 25% tariff on U.S. soybeans in July 2018 initially precipitated a widening of the gap between the two prices. On October 23, 2018, U.S. soybean Free on Board (FOB) prices were $86 per metric ton lower than Brazilian (Paranagu ) FOB prices. The Brazilian soybean price started to fall in late October in anticipation of a record-high South American soybean harvest. U.S. soybean prices started to climb at the same time, partly due to farmers' willingness to hold stocks and in response to larger exports to non-Chinese destinations. Anticipation of Chinese purchases also contributed to rebounding of U.S. prices. As Chinese purchases did not materialize, Brazilian and U.S. soybean prices started to diverge again in May 2019. Although soybeans have been the agricultural commodity most affected by retaliatory tariffs (largely due to China's dominant role in the global soybean market), nearly all U.S. agricultural exports to China declined in 2018 relative to 2017 (see Table 3 ). <5. Key Competitors for China's Agricultural Market56> With retaliatory tariffs making U.S. agricultural products more expensive for Chinese buyers, exports from other countries to China increased during 2018. Some studies suggest that Brazil could become China's primary soybean supplier. Another study concludes that U.S.-China tariff escalation would make suppliers in the rest of the world more competitive relative to U.S. and Chinese suppliers. Russia also contends that it may become a major U.S. competitor for China's agricultural import market, although market watchers expect Russia will need years to become a major agricultural supplier to China. To explore these assertions, CRS examined Chinese import data to identify foreign sources that may have partially replaced some of the 2018 U.S. agricultural exports to China. Note that various factors can result in data differences between U.S. exports from the U.S. Census Bureau and imports from Chinese customs data ( Box 4 ). <5.1. China's Total Annual Agricultural Imports> According to Chinese customs data, China's imports of agricultural products were $117 billion in 2014 as compared to $127 billion in 2018, in nominal terms ( Figure 5 ). In 2014, the United States was the largest source of Chinese agricultural imports, accounting for nearly a quarter, or $28 billion, of China's total imports. Since 2017, Brazil and several other countries increased their shares of China's total imports, with Brazil overtaking the United States as China's largest agricultural supplier in 2017. Since the imposition of the retaliatory tariffs on U.S. imports in 2018, U.S. agricultural shipments to China declined to $15 billion, compared to $23 billion in 2017, even as overall Chinese imports increased to $127 billion. It is noteworthy that in 2016, when China's total agricultural imports were at the lowest point between 2014 and 2018, at $105 billion, U.S. market share was 21%, compared with 2018, when China's total agricultural imports were at $127 billion but U.S. market share was 12%. During the same period, Brazil's market share grew from 18% in 2016 to 26% in 2018. Additionally, China's imports from other countries increased, as indicated in Figure 5 . Brazil appears to be the primary beneficiary of Chinese retaliatory tariffs on U.S. imports, with increased exports to China in 2018 of soybeans, cotton, tobacco, pork, and oilseeds. Australia also registered growth in import market shares for cotton, sorghum, pulses, fruit and nuts, dairy, and hides and skins. Canada increased its exports to China of feed and fodder products, hides and skins, and wheat. New Zealand's share of China's import market saw gains in dairy, and hides and skins. Thailand increased its export shipments of fruit, nuts and starches, and malt to China, while increased shipments from Indonesia were largely fats and oils. Additionally, Russia has stated that it is ready to step in to fill in the gaps created by reductions in U.S. food and agricultural exports to China, according to various news media reports, although market watchers expect Russia will need years to become a major agricultural supplier to China. In July 2018, Chinese Commerce Minister Zhong Shan agreed with his Russian counterparts to "deepen trade in soybeans and other agricultural products." China's imports of food and agricultural products from Russia increased 61%, from $679 million to nearly $1.1 billion, between 2017 and 2018, with strong import growth in oilseeds, wheat, fats and oils, cocoa and related products, beer, and animal products. Various other countries from Central Asia, South and Southeast Asia, and Africa increased their exports of food and agricultural products to China during 2018 compared with 2017. Notably, China's wheat imports from Kazakhstan grew 34% and corn imports from Ukraine rose 20%. U.S. agricultural interests have reported concerns that the U.S.-China trade war in the form of tariffs and tariff retaliation could escalate further, potentially resulting in widespread, long-term damage, particularly for firms with complex international supply chains. For American farmers, the escalating conflict with China has contributed to declining soybean and related agricultural commodity prices in the short run, but studies indicate that the long-term consequences could be complex and have long-lasting impacts. The following section examines how major U.S. agricultural product market shares fared in the Chinese import market during 2018. It also presents China's imports of selected agricultural commodities on a monthly basis starting in January 2018, through the first trimester of 2019 when the different retaliatory tariffs became effective. <5.1.1. China's Imports of Soybeans> According to Census data, China has been the top export market for U.S. soybeans since 2000. China imported $12 billion worth (32 million metric tons) of U.S. soybeans in 2017, accounting for 57% of the total value and volume of all U.S. soybean exports that year. With higher tariffs on U.S. soybeans, China has been purchasing more soybeans from Brazil and other countries to meet its demand. Consequently, U.S. soybean exports to China declined to $3 billion (8 million metric tons) in 2018. Based on Census trade data, China was still the top destination for U.S. soybeans in 2018, followed by Mexico which imported $1.8 billion worth of U.S. soybeans. According to China's monthly customs data, China's import of U.S. soybeans in January 2018 was $2.5 billion ( Figure 6 ). China's monthly imports of U.S. soybeans started to decline after China announced retaliatory tariffs in response to U.S. Section 232 tariffs in April 2018, which did not include U.S. soybeans. By the time China imposed retaliatory tariffs in response to U.S. Section 301 tariffs (which included U.S. soybeans) in July 2018, China's import of U.S. soybeans had decreased to about $140 million for that month (from $2.5 billion in January 2018). U.S. soybean shipments to China continued to decline until November 2018, when China did not import any U.S. soybeans. In December 2018, the White House announced that China had committed to purchase a "very substantial amount of agricultural" goods. Following this and other announcements, China purchased U.S. soybeans during the first trimester of 2019. The largest of these purchases, worth $700 million, occurred in April 2019. However, China's imports of U.S. soybeans declined in May 2019, coincident with the continued escalation of the U.S.-China trade dispute and the imposition of an increase in the third round of U.S. Section 301 tariffs on Chinese imports in May 2019. During this tariff dispute, China has turned increasingly to Brazil to meet its demand for soybeans. In January 2018 prior to the tariff dispute Chinese imports of Brazilian soybeans totaled less than $900 million, before increasing in May and June of 2018, when shipments of newly harvested soybeans from the Southern Hemisphere to China increased. By July 2018, Brazilian shipments were on the decline when China imposed 25% retaliatory tariffs on U.S. soybeans. Normally, newly harvested U.S. soybean shipments to China would have increased in the fall of 2018, whereas Chinese purchases of U.S. soybeans slowed to almost nil and were outpaced by Brazilian shipments to China. From February to May 2019, China expanded its purchases of U.S. soybeans, while also buying soybeans from Brazil, and increasing its soybean imports from Argentina, Russia, and Central Asian countries. <5.1.2. China's Imports of Cotton> According to Census trade data, U.S. cotton exports to China totaled over $1 billion in 2014. From 2017 to 2018, U.S. cotton exports to China declined 6%, from $978 million to $924 million. Monthly Chinese customs data indicate that China's imports of U.S. cotton have decreased since the imposition of retaliatory tariffs in July 2018 ( Figure 7 ). During January 2018, China's cotton imports from the United States totaled $140 million. Following the announcement of retaliatory tariffs on some U.S. imports (in response to U.S. Section 232 action) in April 2018, China's imports of U.S. cotton shrank to $27 million in October 2018. While Chinese imports from the United States declined, China's imports from other countries have increased. Cotton shipments from Brazil and Australia posted the largest increases, followed by imports from India and Uzbekistan. Additionally China's imports of cotton from other Central Asian and West African countries have risen since June 2018 ( Figure 7 ). On July 26, 2019, China reportedly approved some domestic textile mills to buy 50,000 metric tons of U.S. cotton without being subject to retaliatory tariffs. However, since President Trump's announcement to levy 10% Section 301 tariffs on the remaining Chinese imports that were not subject to Section 301 tariffs, China responded in August 2019 by asking its state-owned enterprises to halt purchases of U.S. agricultural goods. <5.1.3. China's Imports of Wheat> In 2016, the United States supplied 26% of China's wheat imports. This share increased to 40% in 2017, but declined to 14% in 2018. Canadian wheat exports have largely replaced U.S. wheat shipments to the Chinese market, with Canada's share of China's wheat imports rising from 27% in 2016 to 54% in 2018. Kazakhstan and Russia also have increased their wheat exports to China in the wake of 25% Chinese retaliatory tariffs on U.S. wheat imports, which have been in effect since July 2018. From January to June 2018, the United States shipped a total of $113 million of wheat to China ( Figure 8 ), compared with $256 million of U.S. wheat shipped during the same period in 2017. After China levied retaliatory tariffs on U.S. wheat in July 2018, U.S. wheat shipments to China were nil for the rest of the year. China imported $208 million of U.S. wheat in 2016 and $390 million of U.S. wheat in 2017. In March 2019, China imported $12 million of U.S. wheat. According to Chinese customs data, there have been no additional U.S. wheat shipments to China as of May 2019. <5.1.4. China's Imports of Sorghum> The United States accounted for nearly 90% of China's total sorghum imports in 2016 and 2017. The value of U.S. shipments of sorghum declined 24%, from close to $1 billion in 2017 to $726 million in 2018. China's monthly imports of U.S. sorghum have been negligible since China implemented retaliatory tariffs on them in July 2018 ( Figure 9 ). U.S. imports started to decline after May 2018, following China's imposition of retaliatory tariffs on some agricultural products in response to U.S. Section 232 tariffs in April 2018. Later, China imposed a 25% retaliatory tariff on U.S. sorghum in July 2018, leading to declines in U.S. sorghum shipments to China. China's imports of U.S. sorghum declined after retaliatory tariffs were imposed, but China continued to import limited quantities from Australia, Myanmar, and Argentina. However, in the absence of Chinese purchases of U.S. sorghum, China's total sorghum imports since October 2018 have been negligible ( Figure 9 ). Therefore, despite the retaliatory tariffs, U.S. market share in 2018 was about 85% of China's total sorghum imports for the year. On July 26, 2019, China reportedly allowed several domestic companies to buy U.S. sorghum without being subject to retaliatory tariffs. However, since President Trump's announcement to levy 10% Section 301 tariffs on remaining Chinese imports that do not yet have any Section 301 tariffs imposed on them, China responded in August 2019 by asking its state-owned enterprises to halt purchases of U.S. agricultural goods. <5.1.5. China's Imports of Pork and Pork Products> The United States supplied 13% of China's total pork imports in 2016 ($400 million) and 2017 ($286 million). In 2018, U.S. pork shipments to China declined to $130 million and accounted for 6% of China's total pork imports. U.S. pork shipments to China began to decline in April 2018 following China's imposition of 25% retaliatory tariffs on U.S. pork (HS 0203 lines) in response to U.S. Section 232 tariffs on U.S. imports of Chinese steel and aluminum products ( Figure 10 ). In July 2018, these HS lines were subject to an additional 25% retaliatory tariff. This coincided with a further decline in Chinese imports of U.S. pork products from July through December 2018. Unlike the case of sorghum, China has continued to import some U.S. pork products, and import volumes generally increased from January through May 2019. Since the summer of 2018, China has suffered from a serious outbreak of African Swine Fever (ASF). Between September 2018 and May 2019, China reported over 2 million culled hogs. In March 2019, USDA reported that despite the retaliatory tariffs, because of ASF, U.S. pork products are entering China and USDA expects China's imports of U.S. pork to climb in 2019 due to the liquidation of some of China's hogs in an effort to control ASF. However, USDA reported that U.S. pork products still face Chinese retaliatory tariffs, which makes U.S. products relatively more expensive compared with pork from other countries. On July 26, 2019, China reportedly approved requests from several domestic companies to buy U.S. pork products without being subject to retaliatory tariffs. However, since President Trump's August 2019 announcement to levy 10% Section 301 tariffs on remaining Chinese imports that do not yet have any Section 301 tariffs levied on them, China responded by asking its state-owned enterprises to halt purchases of U.S. agricultural goods. On August 23, 2019, China imposed additional 10% tariffs on certain U.S. pork products, effective September 1, 2019, in response to new U.S. Section 301 tariffs on U.S. imports from China. <5.1.6. China's Imports of Dairy Products> Since 2016, the United States has been the third-largest supplier of dairy products to China ($1.3 billion in 2018), among over 140 suppliers, behind New Zealand ($4.2 billion) and the Netherlands ($2 billion). China is a growing market for dairy products. Chinese imports of dairy products increased over 50% from $10 billion in 2016 to $15 billion in 2018. Given the diversity of dairy product tariff lines and the varying rates of Chinese retaliatory tariffs levied on them, the trade effects on the aggregate group are not as clear as they are for other individual commodities. Figure 11 presents China's monthly imports of U.S. dairy products, since the large number of suppliers and differences in market shares across the suppliers are difficult to present in a single chart. China imposed retaliatory tariffs on U.S. dairy products in July 2018. Given the diversity of dairy tariff lines, there is no clear trend in China's monthly imports of U.S. dairy products during the second half of 2018 and early 2019 ( Figure 11 ). Instead, annual U.S. dairy shipments to China increased 15% from $1.2 billion in 2017 to $1.3 billion in 2018. However, in China's growing market, imports from competitor countries grew faster from 2017 to 2018, with New Zealand's shipments increasing 15% from $3.7 billion to $4.2 billion; the Netherlands' shipments increasing 35% from $1.5 billion to $2 billion; and Australia's shipments increasing 32% from $1 billion to $1.3 billion. Although U.S. dairy shipments to China do not show any clear trend since January 2018, the retaliatory tariffs are likely contributing to faster market share growths for U.S. competitors in China than for the U.S. dairy sector, particularly since some dairy products are levied additional 5% retaliatory tariffs effective September 1, 2019. <5.1.7. China's Imports of Hides and Skins> The United States is the largest supplier of hides and skins to China, accounting for about 41% of China's total imports from 2016 to 2018. In 2017, shipments of U.S. hides and skins to China amounted to $918 million. After the imposition of retaliatory tariffs in July 2018, Chinese imports of U.S. hides and skins declined, with China's 2018 U.S. hides and skins imports totaling $664 million. Major U.S. competitors in China's hides and skins import market are Australia, Canada and New Zealand ( Figure 12 ). These countries have not been able to fill the gap created by the decline in U.S. shipments of hides and skins to China. Consequently, China's total hides and skins imports fell 25% in 2018, to $1.6 billion from $2.2 billion in 2017. U.S. shipments of hides and skins to China declined 28% during the same period. Notwithstanding the tariffs on U.S.-origin hides and skins, the decline in U.S. shipments largely mirrored the overall decline in China's imports, with the result that the United States continued to supply about 41% of China's total hides and skins imports in 2018, the same share as in the previous two years. U.S. shipments of hides and skins to China may further drop with the additional 10% retaliatory tariff on U.S. imports that became effective September 1, 2019. <5.1.8. Retaliatory Partner Imports of Other Agricultural Products> Analysis conducted by economists from University of California, Davis (UC Davis) found that Chinese retaliatory tariffs decreased U.S. alfalfa exports to China in 2018 compared to the previous two years. From 2016 to 2018, the United States supplied the largest share of China's alfalfa imports, accounting for about 79% of China's total alfalfa import market share in 2016 ($417 million) and 72% ($534 million) in 2018. In January 2018, China purchased U.S. alfalfa valued at $40 million. Following the imposition of retaliatory tariffs, U.S. monthly shipments of alfalfa to China started to decline in the summer of 2018. In November 2018, China's monthly imports of U.S. alfalfa amounted to $16 million and totaled $17 million in December 2018. Another study from UC Davis indicates that U.S. pistachio exports also declined due to retaliatory tariffs from China and Turkey. A third study from UC Davis estimated a combined short-run export loss for 2018 of $2.64 billion for almonds, apples, pistachios, walnuts, pecans, sweet cherries, oranges, table grapes, raisins, and sour cherries in four major import markets (China including Hong Kong, India, Mexico, and Turkey). It stands to reason that Chinese retaliatory tariffs may have also affected U.S. exports of certain other field crops, livestock and animal products, other specialty crops, and processed food products that are not covered in this report. <6. Economic Impact of Retaliatory Tariffs> U.S. agriculture, as a whole, is subject to intense competition, in both domestic and international markets. As a result, most commodity sectors operate with thin profit margins, making international sales an important component of revenue. Tariffs, by design, raise the cost of imported products (see Box 3 ). In general, an increase in import prices due to higher tariffs leads to a decrease in quantities purchased of the affected products as importers switch to other foreign suppliers or to alternate products within the domestic market. Thus, the trade impact of such a price increase will depend in large part on the number of available alternate foreign suppliers and the availability of substitutes within the domestic market. Furthermore, a decrease in exports will have an economy-wide effect as the supporting infrastructure including farms, marketing cooperatives, warehousing and processing facilities, and transportation networks, for example all lose business and revenues. This loss ripples further through the general economy and can cause decreases in employment and local, state, and federal tax revenues. This section of the report examines the short-term market impacts and selected economic analyses of longer-term impacts of the retaliatory tariffs. <6.1. Short-Run Impacts> In the short run (see Box 5 ), retaliatory tariffs resulted in lower 2018 purchases of U.S. agricultural products by countries implementing these tariffs. The prospects for U.S. agricultural exports to China in 2019 appear to be along the same trajectory. As discussed earlier ( Figure 2 ), U.S. food and agricultural imports by the EU and Turkey during the first quarter of 2019 were below the level of imports during the same period in 2017 and 2018. Similarly, an examination of U.S. monthly exports to China from January to April 2019 demonstrates that the first quarter 2019 agricultural export levels have been below the export levels during the same period in 2017 and 2018 ( Figure 13 ). Generally, fall harvested crops are exported during late fall and early winter months, and export levels decline during the spring. Note that no retaliatory tariffs were in effect during 2017 or the first quarter of 2018. China levied the first round of retaliatory tariffs on U.S. imports in April 2018, in response to U.S. Section 232 tariffs. Other retaliating countries followed China's action with retaliatory tariffs in June 2018. Additionally, China expanded the range of affected U.S. imports and increased tariffs in additional rounds of retaliatory actions during the summer and fall of 2018, in response to U.S. Section 301 tariffs. With the continuation of existing retaliatory tariffs on almost all U.S. agricultural HS lines, China's proclamation that its state-owned enterprises will halt purchases of U.S. agricultural goods, and the 5% or 10% additional increase in retaliatory tariffs effective September and December 2019, U.S. exports of agricultural products affected by retaliatory tariffs could potentially continue to lose some market share in China. In addition to export losses, U.S. agriculture is facing other challenges in 2019. Abundant domestic and international supplies of grains and oilseeds in 2018 contributed to a fourth straight year of relatively weak agricultural commodity prices compared to previous years. U.S. soybean output and stocks were at record highs during 2018, putting downward pressure on soybean prices. Lower soybean prices contributed to lower corn prices during fall of 2018, as markets speculated that farmers would switch soybean acres to corn in 2019 ( Figure 14 ). On December 1, 2018, the White House released a statement saying that China had agreed to purchase "substantial amount of agricultural" goods, among other goods. This statement was followed by press reports at different times stating that China had announced it would buy additional U.S. soybeans. The reported Chinese commitments to purchase U.S. soybeans did not materialize, and soybean prices, which had been on a downward trajectory since early 2018, declined further in early 2019. Soybean farm prices reached a 12-year low point in May 2019 at $8.02 per bushel. This coincided with President Trump's threat to raise Section 301 tariffs, on U.S. imports from China, from 10% to 25% and to impose additional tariffs on all remaining imports from China not currently covered by Sections 301 measures. The tariff increases from 10% to 25% were effective May 10, 2019. The Trump Administration announced its intent to impose additional tariff increases of 10% on all other products currently not covered by Section 301 tariffs. China responded by asking its state-owned enterprises to halt purchases of U.S. agricultural goods, and by levying two additional sets of tariffs: 5% or 10% tariffs on U.S. imports, including 695 different U.S. agricultural tariff lines effective September 1, 2019; and another 5% or 10% tariffs on U.S. imports including 184 different U.S. agricultural tariff lines effective December 15, 2019. In 2018, the U.S. farm sector faced the challenge of declining exports and commodity prices for certain major field crops, in addition to rising operational costs. Various studies predicted that the imposition of U.S. Sector 232 tariffs on steel and aluminum, in tandem with the domestic content provisions of the USMCA, could increase the cost of production for U.S. farmers. A report released by the Association of Equipment Manufacturers states that the Trump Administration's Section 232 and Section 301 tariffs could hurt the U.S. economy by increasing consumer prices, including a 6% increase in the cost of manufacturing agricultural and construction equipment. U.S. agro-chemical manufacturers have also stated that cost increases, resulting from escalating tariffs, "of pesticide products for crop and turf protection products ultimately will be passed on to American growers and businesses." In a sector with relatively thin profit margins, small increases in costs associated with tariffs can sometimes lead to postponed equipment purchases, causing a ripple effect through the farm input sector. In 2019, several agricultural commodity prices remain under pressure from a record soybean and near-record corn harvest in 2018, diminished export prospects due to the ongoing trade dispute with China, and high levels of carryover stocks from the previous year. <6.2. Potential Long-Run Implications> A shift in trade patterns can become permanent if trade disruptions lead to new trade alliances or stimulate production in retaliating domestic markets or other competing foreign regions, thus increasing supplies from new sources. An example of such long-term impact of a disruption in trade on U.S. farm exports is the 1980 U.S. embargo on grain exports to the Soviet Union, which resulted in declines in U.S. commodity prices and export sales. A significant effect of the embargo was that the United States lost market share in sales to the Soviet Union. Additionally, during the early 1970s, the United States imposed a partial embargo on the exports of soybeans, cottonseed, and certain other products as an inflation fighting measure. The U.S. soybean export embargo and high prices during this period reportedly prompted greater Japanese investments in Brazil's soybean industry, which has since become the U.S. soybean industry's major export competitor. As discussed in the section " Key Competitors for China's Agricultural Market ," major agricultural exporters such as Brazil, Canada, Australia, and the EU have recently increased their farm exports to China. Additionally, countries such as Russia, Ukraine, some Central Asian countries, some Southeast Asian countries, and some African countries are seeking to establish and expand footholds in the Chinese market. For the latter group of countries, a prolonged U.S.-China trade war could facilitate their agricultural development and their share of global exports. Assuming the continuation of retaliatory tariffs on U.S. soybeans, a USDA 10-year projection predicts that China's soybean imports would resume growing, but the volume of future soybean trade would be less than previously projected 122.8 million metric tons of Chinese imports from all origins with retaliatory tariffs in 2027 compared with 143 million metric tons of imports without retaliatory tariffs. With U.S. soybeans taxed by retaliatory tariffs, USDA projects that Brazil would likely account for two-thirds of the growth in global soybean exports to China. In comparison, the United States accounted for 35% of China's total soybean imports in 2017 and 18.5% in 2018, while Brazil accounted for 53% of China's total soybean imports in 2017 and 76% in 2018. For U.S. exporters, lower U.S. prices may stimulate additional demand by a number of countries, but these markets are not likely to absorb the entire volume displaced from China. The USDA report concludes that alternative export markets for U.S. soybeans can only absorb a fraction of the soybeans exported to China before trade tensions began, with imports in these countries growing by less than half of the reduction projected for Chinese soybean imports in 2027. China is also investing in agricultural production in U.S. competitor markets and is improving access for products from these countries. Russia has pledged land to Chinese farmers and has made a commitment to increase its exports of agricultural products to China. While these commitments are still speculative, during the last two decades, Russian agriculture has moved toward greater product specialization and strategic investments have been made based on agro-ecological characteristics. As a result, Russian regional agricultural productivity growth has increased between 25% and 75%, with higher productivity growths in parts of southern Russia. According to Chinese import data, Russia made inroads into China's food and agricultural market in 2018, with market share increases compared to 2017 of 14% for soybean oil; 4% for wheat; 1% for corn; 0.3% for soybeans; 2% for oilseeds; and some increases in hay market shares, among others. China's imports of food and agricultural products from Russia increased 61% between 2017 and 2018 ( Figure 15 ). China's imports of Russian cereals increased almost 400% during the same period, while oilseed imports grew 78%, fats and oils 72%, cocoa and related products 181%, beer 109%, and animal products 48%. While Russia's agricultural exports to China increased in 2018, the value of its shipments represented less than 1% of China's total agricultural product imports of $127 billion that year. Market watchers expect Russia will need years to become a major agricultural supplier to China. Globally, a USDA study reports that over 1,300 Chinese enterprises had overseas investments in agriculture, forestry, and fisheries valued at $26 billion in 2016. The investments include crop and livestock farming, fishing, processing, farm machinery, inputs, seeds, and logistics in over 100 countries. Most of China's foreign agricultural projects involve relatively small companies investing in neighboring countries in Southeast Asia, Russia's Far East, and Africa that have unexploited land and are often receptive to Chinese investment. China's agricultural investment decisions are linked to its "One Belt, One Road" initiative. Additionally, Chinese companies seeking sources of dairy, beef, and lamb imports have focused their investments and partnerships with New Zealand and Australia. Since 2018, China has taken additional actions to reduce import-export taxes and duties to facilitate agricultural imports from non-U.S. sources, particularly for non-U.S. oilseeds and products ( Box 6 ). Effective April 2019, value added taxes (VAT) on agricultural products were reduced to 9% from the original 11% or 17%. Starting January 1, 2019, reductions in customs duties, including MFN tariffs and temporary duty rates, were implemented for certain imported goods in order to boost imports and meet domestic demand. The temporary duty rates, which are even lower than the MFN tariffs, are in effect on 706 imported commodities, including some agricultural products. With retaliatory tariffs in place, U.S. agricultural exporters are unable to take full advantage of these improved terms of market access. <6.3. Estimated Economic Impacts> The following section provides examples of estimated economic impacts associated with retaliatory tariffs imposed on U.S. agricultural products by U.S. trading partners. These impacts are estimated at different scales by different studies, or are derived from market data. The examples are illustrative; they are not meant to be comprehensive. <6.3.1. Commodity Level> Various studies have estimated potential economic impacts arising from retaliatory tariffs on specific U.S. commodities (see Box 5 for general assumptions regarding these studies). For example, one study of short-term effects predicted U.S. farm prices would decrease in response to China's retaliatory tariffs, the value of U.S. exports to China would decline and U.S. farmers would reduce acreage planted the following year to soybeans, cotton, sorghum, and would reduce pork production, ultimately resulting in revenue declines for U.S. producers. A similar short-term impact analysis conducted by the Center for North American studies at Texas A&M University examined the impact on U.S. dairy of a 25% retaliatory tariff levied by Mexico on U.S. cheese imports and a 25% retaliatory tariff imposed by China on imports of U.S. dairy products. The study estimated export losses and pointed out that U.S. dairy exports are supported by a large infrastructure, including dairy farms, marketing cooperatives, and warehousing and processing facilities. Thus, the study concluded that any significant change in exports is likely to ripple through the supporting infrastructure and affect the general economy. In the case of Mexican tariffs on U.S. cheese, which Mexico removed in May 2019, the study estimated that U.S. economy-wide economic losses would be $991 million per year with nearly 5,000 lost jobs. In the case of Chinese tariffs on U.S. dairy imports, the study suggested that the economy-wide losses could total $2.8 billion per year and lead to over 13,000 jobs lost. <6.3.2. State Level> In September 2018, the Center for Agricultural and Rural Development (CARD) at Iowa State University estimated the short-run effects of the 2018 trade disruptions on the Iowa economy. This study incorporated the potential offsetting effects from USDA's trade-aid package. The study focused on the impact of foreign retaliatory tariffs on U.S. corn, soybean, hog, and ethanol markets along with labor and government revenue impacts from changes in these markets. It used a number of different modeling approaches that resulted in the following estimates of annual impact. The study estimated that Iowa's soybean industry would lose $159 million to $891 million, with an average revenue loss across all models of $545 million (Iowa soybeans are a $5.2 billion industry). The study estimated that Iowa's corn industry would lose $90 million to $579 million, with an average revenue loss across all models of $333 million (Iowa corn is an $8.5 billion industry). The study estimated that Iowa's pork/hog industry would lose $558 million to $955 million, with an average revenue loss across all models of $776 million (the Iowa pork/hog industry is a $7.1 billion industry). The study estimated that ethanol prices would drop 2%, resulting in approximately $105 million in lost revenues to Iowa ethanol producers (investors in the ethanol industry). The study points out that by mid-August 2018, corn prices retreated nearly 9% and ethanol prices receded by roughly 4%. Over the same period, corn futures for the 2018 crop declined 9% and ethanol futures declined 8%. In the longer term (see Box 5 for definition), according to the Iowa State University study, revenue losses in these industries would translate into additional lost labor income across the state. The study estimates that labor income declines from the impacts to the corn, soybean, and hog industries would range from $366 million to $484 million without federal offsets from the trade-aid package, and $245 million to $364 million with federal offsets. Iowa tax revenue losses (personal income and sales taxes) would range from $111 million to $146 million annually. Federal offsets would reduce tax losses to $75 million to $110 million. The study estimates overall losses in Iowa's gross state product of $1 billion to $2 billion annually (out of a total of $190 billion). Similarly, a study commissioned by the Nebraska Farm Bureau on the short-run economic costs in 2018 for the state from the retaliatory tariffs concluded that Nebraska's general economy would incur costs between $164 million and $242 million in lost labor income, along with the loss of 4,100 to 6,000 jobs. In total, together with the direct agriculture-related costs, Nebraska's overall economic loss in 2018 was estimated at $859 million to $1.2 billion. Retaliatory tariffs in 2018 (on corn, soybeans, and hogs from all retaliating countries) were expected to reduce corn prices by $0.14 to $0.21 per bushel, soybean prices by $0.95 to $1.54 per bushel, and hog prices by $17.81 to $18.80 per head. These estimated price declines would translate into farm revenue losses for each commodity of corn ($257 million to $327 million); soybeans ($384 million to $531 million); and pork ($111 million). The Nebraska Farm Bureau updated its analysis in 2019 and concluded that the ongoing retaliatory tariffs imposed by countries on U.S. agricultural exports would cost Nebraska producers $943 million in lost revenues in 2019. The methodology used for the analysis borrowed USDA's estimates of gross damages that were used in calculating USDA's trade-aid payments. The estimated loss calculation did not take into consideration trade-aid payments that Nebraska farmers may receive in 2019. Economists from University of California, Davis, found the short-run effects of the retaliatory tariffs on the 2018 crop for 10 selected specialty crops in four export markets China, Mexico, Turkey, and India to be $2.64 billion of lost export value and $3.34 billion of combined U.S. revenue losses. The crops considered are almonds, pecans, pistachios, walnuts, apples, oranges, raisins, sour cherries, sweet cherries, and table grapes. Mexico had retaliatory tariffs on apples and prepared fruit in 2018, but removed them in May 2019. India had identified apples, almonds, and walnuts for retaliatory tariffs in 2018 but did not implement these until June 2019. <6.3.3. National-Level Effects of Retaliatory Tariffs> Two studies conducted by researchers at Purdue University, using the Global Trade Analysis Project (GTAP) model (see Box 7 ), examined the potential long-run impacts of retaliatory tariffs on U.S. agriculture and the U.S. economy at the national level. As discussed in the box "Key Economic Terms," the long-run effects are estimated assuming that the shock to the market, such as tariff increases, remains in place for a few years and sufficient time has passed to provide producers the opportunity to make changes in response to this shock. The studies discussed below assume that the retaliatory tariffs remain in place for three to five years. The first study estimated the long-run effects (defined in Box 7 as 3-5 years) of a 25% tariff imposed by China on soybeans and other selected U.S. agricultural products wheat, corn, sorghum, rice, rapeseed, and beef. This study concluded that U.S. soybean market losses in China would, over the years, benefit Brazil. Given the U.S. soybean industry's large share of China's import market prior to the retaliatory tariffs, the study estimated large price declines and export losses for U.S. soybeans. Other commodities in the study appeared less dependent on the Chinese market, and the estimated losses are relatively smaller. The study predicted that overall economic welfare (see Box 8 ) for both the United States and China would decline, while economic welfare for Brazil would increase. The second study examined a scenario in which the USMCA would be implemented but the retaliatory tariffs related to Section 232 steel and aluminum tariffs would also exist. The study looked at two separate cases for retaliatory tariffs: (1) retaliatory tariffs were considered only for Mexico and Canada; and (2) retaliatory tariffs from all countries were considered. This study estimated, in 2014 dollars, a net increase in annual U.S. agricultural exports of $450 million under USMCA, which is equal to about 1% of U.S. agricultural exports under NAFTA $41 billion in 2014. It projected the export losses from the retaliatory tariffs imposed by Canada and Mexico to be $1.8 billion per year (in 2014 dollars), which would more than offset the projected export gain of $450 million from USMCA. When retaliatory tariffs from all countries were considered, export losses were estimated at around $8 billion. Note that both Canada and Mexico have removed their retaliatory tariffs since May 2019. A study conducted by economists at Iowa State University examines the national-level effects of retaliatory tariffs imposed on U.S. pork, soybeans, corn, and wheat by China and Mexico during 2018. Note that Mexico removed the retaliatory tariffs in May 2019. The study simulates multiyear projections over a period of nine years. The study indicates that if the retaliatory tariffs were to continue, U.S. annual exports would decline by 30% for pork and corn, 15% for soybeans, and 1.5% for wheat compared with a baseline scenario that considers the average of the past three-year period. The study estimated that in the short run (which the paper defines as first three years with retaliatory tariffs), trade losses would translate to 26,000 job reductions on average annually in the United States and a decline in labor income of $1.5 billion due to a $5.3 billion reduction in national annual output. In the long run (defined by the paper as year seven through year nine with retaliatory tariffs), the annual impacts were estimated to grow to nearly 60,000 fewer jobs, $3.1 billion less labor income, and a loss of almost $12 billion in national output. <6.3.4. Global-Level Effects> The United Nations Conference on Trade and Development (UNCTAD) performed a global analysis of the U.S. Section 232 and Section 301 tariffs and the resulting retaliatory tariffs, including retaliatory tariffs on U.S. agricultural products. The analysis mainly focused on U.S.-China tariff escalation. Regarding agriculture, the study points out that China accounts for more than half of the global imports of soybeans and that the United States is the world's largest soybean producer. The study states that the Chinese tariffs on U.S. soybeans have substantially disrupted world trade of this commodity and observes that increased Chinese demand has resulted in higher prices for Brazilian soybeans. It cautions that while higher price premiums could be beneficial in the short run to Brazilian producers, they may hamper Brazilian procurers' long-run competitiveness. In a situation where the size and amount of the tariffs and their duration are unclear, Brazilian producers may be reluctant to make investment decisions that may turn unprofitable if tariffs are removed. Moreover, Brazilian firms using soybeans as inputs (e.g., feed for livestock) may lose competitiveness because of higher input prices. A USDA study released in 2019 found that the United States and Brazil are among the lowest-cost producers of soybeans. While land rental costs and labor costs are higher in the United States, poor soils and tropical ecology require Brazil to use higher levels of agrochemicals. Moreover, the United States has a transportation advantage over Brazil in exporting agricultural products to China. Specifically, the study concluded that transporting soybeans by truck from northern Mato Grosso to Brazil's primary soybean export port of Paranagu cost $93 per metric ton (MT) in 2017. During the same period, transporting soybeans from Davenport, Iowa, to the Gulf of Mexico by truck, rail, and barge cost $65 per MT. Shipping soybeans by truck and rail from Sioux Falls, South Dakota, to the U.S. Pacific Northwest cost $68 per MT. The United States, therefore, has lower transportation costs and greater production efficiency (requiring less agrochemicals) compared with Brazil in producing and shipping agricultural products to Asian markets. According to the study, the current trade dispute and retaliatory tariffs may, in the long run, lead to inefficient allocation of resources and exploitation of less-productive lands than those in the United States. <6.3.5. Some Possible Benefits to U.S. Agriculture> Based on economic principles, if the price of an input such as soybeans or feed corn declines, the livestock sector would be expected to benefit. USDA's Economic Research Service's production expenses report states that the cost of livestock feed declined 1% between 2017 and 2018; however, it is expected to increase 4.5% in 2019. Additionally, the U.S. livestock sector is also facing retaliatory tariffs. Similarly, many processed food products that use raw agricultural products as inputs face Chinese retaliatory tariffs. Some sectors may nevertheless benefit from retaliatory tariffs. For example, the Coalition for a Prosperous America (CPA) released a study stating that a permanent across-the-board 25% tariff on all imports from China would stimulate GDP growth and jobs in the U.S. economy. The study uses data from Boston Consulting Group that are not publicly available, and the publicly available working paper does not describe the Regional Economic Models, Inc. (REMI model) or the assumptions underlying the model. Regarding agriculture, the study states that when the USDA trade-aid programs are incorporated "into the model, the additional government spending fully offsets the negative impact of the Chinese retaliation on US GDP." In addition to the CPA study, there have been anecdotal reports in the media that organic and small-holder farmers are benefiting from China's retaliatory tariffs. <7. U.S. Stakeholder Views on Retaliatory Tariffs> In May 2019, American Farm Bureau Federation President Zippy Duvall stated that, "Retaliatory tariffs are a drag on American farmers and ranchers at a time when they are suffering more economic difficulty than many can remember," and urged negotiators to continue their work toward reopening markets with the European Union, China, and Japan. The president of the National Farmers Union (NFU) echoed the same sentiment, stating that the retaliatory tariffs "could not come at a worse time for family farmers and ranchers, who are already coping with depressed commodity prices, environmental disasters, and chronic oversupply." The NFU president further stated that although temporary relief is appreciated, "temporary solutions are not sufficient to address the permanent damage the trade war has inflicted on agricultural export markets." Various U.S. agricultural commodity groups have voiced similar concerns. For example, the American Soybean Association expressed "extreme disappointment" over USTR's escalating tariffs on China that led to retaliatory tariffs on soybeans. The National Pork Producers Council (NPPC) stated that the retaliatory tariffs are "threatening the livelihoods of thousands of U.S. pig farmers." Due to African Swine Fever (ASF), China normally would have turned to the United States to meet its pork demand. With retaliatory tariffs in place, U.S. pork is more expensive than products from other sources in the Chinese market. NPPC Vice President Nick Giordano stated that from a U.S. farmer's perspective, China's increased demand for imported pork resulting from ASF in Chinese hogs would have been "the single greatest sales opportunity in our industry's history." According to a report in the South China Morning Post , Iowa State University economist Dermot Hayes estimates that the trade dispute with China has cost American pig farmers $8 per animal, or $1 billion in total losses. The U.S. Dairy Export Council, in turn, stated in 2018 that the retaliatory tariffs that China and Mexico imposed could result in billions of dollars of lost sales for U.S. dairy producers. A study released by the Association of Equipment Manufacturers states that tariffs on steel and aluminum have increased cost of agricultural production due to rising prices of farm equipment and their parts. In a comment filed with USTR, CropLife America and a specialty chemical trade group, Responsible Industry for a Sound Environment (RISE), state that cost increases, resulting from escalating tariffs, "of pesticide products for crop and turf protection products ultimately will be passed on to American growers and businesses." Dozens of stakeholder panels provided testimony to the USTR during hearings in June 2019 regarding a proposed notice to begin imposing additional tariffs of 25% to virtually all remaining imports from China. Hundreds of U.S. companies and industry groups, including some of the largest companies argued that, "both sides will lose" in a protracted trade war. "Tariffs are taxes paid directly by U.S. companies, including those listed below not China," stated a letter signed by more than 600 companies, including the Association of Equipment Manufacturers, American Bakers Association, Grocery Manufacturers Association, Juice Products Association, Distilled Spirits Council of the United States, and many other food retailers and associations related to the food industry. On June 21, 2019, hundreds of domestic producers and four manufacturing and labor groups sent a letter to President Trump urging him to maintain his hardline approach to China. The letter was signed by the Coalition for a Prosperous America, which includes mainly nonagricultural manufacturing companies and some food- and agriculture-related small companies like the Platt Cattle Company of Arizona and Johanna Foods of New Jersey. To help alleviate the losses from the retaliatory tariffs, USDA announced a second round of trade aid in 2019. Most industry groups welcomed this package but indicated their preference for trade rather than aid. American Farm Bureau Federation President Zippy Duvall stated, "It is critically important to restore agricultural markets and mutually beneficial relationships with our trading partners around the world." Similar sentiments were expressed by a number of other major agricultural trade associations, such as the National Council of Farmer Cooperatives, the American Soybean Association, the National Cotton Council, the National Milk Producers Federation, and the National Pork Producers Council. For its part, the National Association of Wheat Growers stated that the trade-aid package "is a Band-Aid when we really need a long-term fix." <8. Issues for Congress> In May 2019, President Trump proposed levying additional tariff increases on imports from China, but they were held in abeyance following a meeting between President Trump and Chinese President Xi Jinping at the G-20 summit in June 2019. However, President Trump stated on August 2019 that he would impose a tariff hike increase on all other Chinese products currently not covered by Section 301 tariffs. China responded by asking its state-owned enterprises to halt purchases of U.S. agricultural goods. On August 13, 2019, USTR released the remaining list of Chinese products that would be levied a 10% Section 301 tariff effective September 1, 2019, and another list of products that would be levied 10% Section 301 tariffs effective December 15, 2019. China in turn has retaliated by levying additional two sets of tariffs: 5% or 10% tariffs on U.S. imports, including 695 different U.S. agricultural tariff lines effective September 1, 2019; and another 5% or 10% tariffs on U.S. imports including 184 different U.S. agricultural tariff lines effective December 15, 2019. Given the length of the trade dispute over Section 232 and Section 301 actions and the expanding list of U.S. exports affected by the retaliatory tariffs, the list of affected sectors is also expanding. A June 2019 USTR hearing for Section 301 tariffs included a diversity of witnesses across 55 panels over a seven-day period. As such, an issue for congressional consideration may be whether compensation for the losses arising from the various trade disputes should extend beyond those producers of agricultural commodities identified in the Administration's trade-aid initiative. USDA, using its authority under the CCC, is administering this assistance. Retaliatory tariffs have arguably affected businesses beyond the farm gate, including agricultural exporters, input suppliers, agricultural shippers, and others, potentially raising the question of whether these industries merit government compensation for tariff-related losses. Separately, some agricultural stakeholders have questioned the equity of the distribution of the 2018 trade aid payments. Once the formula became public, several commodity groups questioned the rationale for determining payments based on "trade damage" rather than the broader "market loss" measure. Similar questions have emerged about the 2019 trade-aid package. These questions concern the methodology used to calculate the payment rates, commodity coverage of the direct payments, and the equity of payments across regions and commodity sectors. The provision of trade aid has also raised questions regarding U.S. commitments under the WTO and other international agreements. Several WTO members, including the EU, Canada, Australia, New Zealand, India, and Ukraine, have asked for more details regarding USDA's trade-aid package to ascertain whether it could be considered market-distorting under U.S. WTO commitments. Given the growth of investments directed to increase agricultural productivity in many countries including Russia, and the recent gains that Russia, Brazil, and other countries have made in China's import market for agricultural products, it may be of interest to Congress to consider whether current policies are sufficient for U.S. agriculture to continue to expand its overseas markets. As other countries expand their agricultural production to meet China's import demand, studies by environmental groups caution that this agricultural expansion may occur at the expense of tropical forest and fragile habitats that are essential to maintain global biodiversity. The United States is one of the most efficient and lowest-cost producers of food and agricultural products. Congress may want to consider whether the current trade dispute could have long-term environmental costs as less productive or more environmentally vulnerable areas are cultivated for agricultural production in lieu of more efficient and less environmentally sensitive U.S. production. <8.1. Appendix.>

Certain foreign nations have targeted U.S. food and agricultural products with retaliatory tariffs since early 2018 in response to U.S. Section 232 tariffs on steel and aluminum imports and Section 301 tariffs levied on U.S. imports from China. Retaliatory tariffs have made imports of U.S. agricultural products relatively more expensive compared to similar products from competitor nations. In the short run, U.S. shipments of products to countries with retaliatory tariffs have declined, reducing overall global demand for affected U.S. agricultural products and driving down the prices of U.S. agricultural commodities. Depending on the length and depth of the tariffs and the range of products affected, some experts caution that the long-run trade impacts could inflict further harm as U.S. competitor countries have an incentive to expand their agricultural production. In response to U.S. Section 232 and Section 301 actions, China levied retaliatory tariffs on almost all U.S. agricultural products, ranging from 5% to 50%. In response to U.S. Section 232 tariffs, Canada, Mexico, the European Union (EU), and Turkey retaliated with tariffs during the summer of 2018 on U.S. fruit, nuts, prepared vegetables and meats, pork, cheese, breakfast cereal, fruit juices, and whiskey. India implemented retaliatory tariffs on certain U.S. products after a Presidential Proclamation removed India from the U.S. Generalized System of Preferences program in May 2019. Canada and Mexico levied retaliatory tariffs in mid-2018, but these tariffs were removed in May 2019 after the Trump Administration announced an agreement with Canada and Mexico to remove the Section 232 tariffs on imports from both countries to facilitate ratification of the U.S.-Mexico-Canada Agreement—a proposed regional free trade agreement that is meant to supersede the North American Free Trade Agreement (NAFTA). The total value of exports of U.S. food and agricultural products levied retaliatory tariffs in 2018 was $22 billion, down 27% from $30 billion in 2017. China accounted for about 80% of the total affected trade in both years. Despite the retaliatory tariffs, U.S. agricultural exports rose in 2018 to $140 billion from $138 billion in 2017, partly due to higher imports during the months leading up to the retaliatory tariffs and increased exports to other nonretaliating countries. With the continuation of retaliatory tariffs, U.S. Department of Agriculture (USDA) projects U.S. agricultural exports to decline about 4% in 2019. In the short run, retaliatory tariffs contributed to declining prices for certain U.S. agricultural commodities and reduced exports, particularly for soybeans. Declining prices and exports sales combined with rising input and farm machinery costs contributed to a 16% decrease in U.S. net farm income in 2018, compared with 2017. China's soybean imports are expected to resume growing over the next decade, but a USDA study expects the volume traded to be less than previously anticipated. Because of the retaliatory tariffs on U.S. soybeans, USDA projects that Brazil will account for two-thirds of the global growth in soybean exports to China. The United States accounted for 40% of China's total soybean imports in 2016 and 35% in 2017, compared with Brazil's 46% in 2016 and 53% in 2017. In 2018, the U.S. share of China's soybean import market dropped to 19% and Brazil's share was up at 76%. To help alleviate the financial loss incurred by U.S. farmers due to retaliatory tariffs, USDA announced $12 billion in financial assistance in 2018—referred to as a trade aid package—for certain U.S. agricultural commodities using Section 5 of the Commodity Credit Corporation (CCC) Charter Act (15 U.S.C. 714c). In 2019, USDA announced a second trade-aid package of $16 billion. Increased trade aid to U.S. farmers has generated questions from some World Trade Organization (WTO) members about whether the trade-aid package may violate U.S. WTO commitments. While trade-aid packages may provide short-term financial assistance, some studies and critics of the President's actions caution that the long-term consequences of the retaliatory tariffs may present more challenges. Even as China has raised tariffs on U.S. imports, it has improved access to its markets for other exporting countries. Brazil, Russia, and other countries are expanding their agricultural production to meet China's import demand. For example, Russia's investments during the past two decades have resulted in agricultural productivity growth ranging from 25% to 75%, with higher productivity growth along its southern region. Although still at relatively modest levels, China's total food and agricultural imports from Russia increased 61% between 2017 and 2018. The continuation of trade disputes and retaliatory tariffs may be of interest to Congress for the following reasons. Trade disputes have disrupted global markets and increased uncertainty in the farm input and output sectors. They may add to production costs, and they have dampened exports, impacted farm income, and triggered additional federal assistance for the farm sector. In the short run, there could be some transient benefits associated with various aspects of the agricultural sector. In the long run, other countries may expand agricultural production, potentially displacing U.S. agricultural exports to become larger food and agricultural suppliers to China.

crs_R45753

crs_R45753_0

<1. Introduction> The United States has more nuclear power reactors than any country worldwide. The 98 operable nuclear generating units provide approximately 20% of the electrical generation in the United States. Uranium is the fundamental element used to fuel nuclear power production. The front-end of the nuclear fuel cycle comprises the industrial stages starting with uranium extraction from the earth and ending with power production in a nuclear reactor. Congressional interest in the front-end of the nuclear fuel cycle is associated with many factors, including (1) domestic uranium production and supply, (2) concerns about increasing reliance on uranium imports, and (3) the economic viability of U.S. nuclear power reactors. Historically, the U.S. Atomic Energy Commission (AEC), a predecessor federal agency to the Department of Energy (DOE) and the Nuclear Regulatory Commission (NRC), promoted uranium production in the United States through federal procurement contracts between 1947 and 1971. The majority of domestic uranium concentrate production prior to 1971 supported the development of nuclear weapons and naval propulsion reactors. After 1971, uranium mill operators produced uranium concentrate primarily for use in commercial nuclear power reactors. By the late 1980s, nuclear utilities and reactor operators in the United States purchased more uranium from foreign suppliers than domestic producers. By 2017, 93% of the uranium purchased by U.S. nuclear utilities and reactor operators originated in a foreign country. Nuclear utilities and reactor operators diversify uranium supplies among multiple domestic and foreign sources, intending to minimize fuel costs. For example, a nuclear utility in the United States may purchase uranium concentrate that has been mined and milled in Australia, converted in France, enriched in Germany, and fabricated into fuel in the United States. Examination of the current status of the front-end of the nuclear fuel cycle highlights broad policy questions about the federal government's role in sustaining or promoting nuclear fuel production in the United States. This report describes the front-end of the nuclear fuel cycle and the global uranium marketplace, analyzes domestic sources and imports of various types of uranium materials involved in the fuel cycle, and provides a discussion about the current issues. The back-end of the nuclear fuel cycle comprises the storage of spent nuclear fuel (SNF) after it is discharged from a nuclear reactor; however, issues associated with SNF storage and disposal are not discussed in this report. This report does not discuss potential environmental, public health, and proliferation issues associated with the front-end of the nuclear fuel cycle. <2. Front-End of the Nuclear Fuel Cycle> The front-end of the nuclear fuel cycle is composed of four stages: Uranium mining and milling is the process of removing uranium ore from the earth and physically and chemically processing the ore to develop "yellowcake" uranium concentrate. Uranium conversion produces uranium hexafluoride (UF 6 ), a gaseous form of uranium, from solid uranium concentrate. Uranium enrichment separates and concentrates the fissile isotope U-235 in the gaseous UF 6 form to produce enriched uranium capable of sustaining a nuclear chain reaction in a commercial nuclear power reactor. Uranium fuel f abrication involves producing uranium oxide pellets, which are subsequently loaded into reactor-specific fuel rods and assemblies, which in turn are loaded into a nuclear power reactor. <2.1. Primary Supply> The nuclear fuel produced from processing newly mined uranium ore through fuel fabrication is referred to as primary supply . The stages from uranium mining through uranium fuel fabrication are described in the following sections. <2.1.1. Stage 1: Mining and Milling Production of Uranium Concentrate> The front-end of the nuclear fuel cycle begins with mining uranium ore from the earth, through conventional (surface mining, open pits, underground) or nonconventional, in-situ recovery (ISR) methods. The type of extraction method employed depends on geology, ore body concentration, and economics. The majority of uranium resources in the United States are located in geological deposits in the Colorado plateau, Texas gulf coast region, and Wyoming basins. The United States has a relatively low quality and quantity of uranium reserves compared to the leading uranium-producing countries. For example, the Nuclear Energy Agency and the International Atomic Energy Agency rank the United States' reasonably assured uranium resources as 12 th worldwide. Uranium milling involves physical and chemical processing of uranium ore to generate uranium concentrate (U 3 O 8 ), commonly called "yellowcake" uranium. Uranium milling operations crush and grind the mined ore, which is chemically dissolved with acid or alkaline solutions and subsequently concentrated. Milling operations produce a large quantity of waste material, termed tailings , relative to the amount of uranium concentrate produced. NRC estimates 2.4 pounds of yellowcake uranium oxide is produced from 2,000 pounds of uranium ore. The tailings, or waste material, generated by uranium milling operations prior to the 1970s were largely abandoned, exposing radioactive sand-like particles to be dispersed into the air, surface, and groundwater by natural erosion and human disturbances. The enactment of the Uranium Mill Tailings Radiation Control Act (UMTRCA; P.L. 95-604 ) authorized a remedial action program for cleanup of abandoned mill tailings prior to 1978 and authorized a regulatory framework to manage tailings generated at sites operating after 1978. In the United States, ISR methods have replaced conventional mining and milling by pumping acid or alkaline solutions through an underground ore body. After uranium in the ore is dissolved in solution, it is pumped to the surface and processed to produce uranium concentrate. In the first quarter of 2019, five ISR facilities are operating in the United States all in Wyoming with approximately 11.2 million pounds of annual production capacity, and one conventional uranium mill, located in Utah, in operation with an annual capacity of 6 million pounds of ore per day. Additionally, there are 13 million pounds of annual production capacity at 11 ISR operations permitted and licensed, partially permitted and licensed, developing, or on standby. <2.1.2. Stage 2: Conversion Production of Uranium Hexafluoride> Uranium concentrate is shipped to a uranium conversion facility where UF 6 is chemically produced. At room temperature, UF 6 is a solid, and it transforms to a gas at higher temperatures. UF 6 is described as "natural," as the isotopic composition has not been altered relative to the composition that exists in nature. According to the World Nuclear Association, there are six uranium conversion plants worldwide. The Honeywell plant in Metropolis, IL, is the only uranium conversion facility in the United States. It has not produced UF 6 since November 2017. <2.1.3. Stage 3: Enrichment Production of Enriched Uranium> After uranium conversion, the UF 6 is feed material for uranium enrichment . Natural uranium has an isotopic composition of approximately 0.71% U-235, the fissile isotope of uranium. Civilian nuclear power fuel is generally enriched to 3%-5% U-235. Uranium enrichment in the United States was largely performed using a gaseous diffusion technology until 2013. Currently, one uranium enrichment plant, which employs gas centrifuge technology, operates in the United States. The gas centrifuge technology is described below. Inflow UF 6 gas referred to as the feed enters a gas centrifuge. The centrifuge spins at high speeds and centrifugal forces drive the slightly more massive U-238 isotopes outward, while less massive U-235 isotopes concentrate near the center of the centrifuge. The process repeats many times in a cascade of centrifuges, gradually increasing the isotopic composition of U-235 from 0.71% to 3%-5%. During this process, the chemical composition remains as UF 6 , while the isotopic composition of UF 6 has been modified. The product stream is enriched uranium hexafluoride (enUF 6 ) and the waste stream called the tails is depleted uranium (DU). The greater the difference in the isotopic composition of U-235 in the product and tails, the greater the energy requirements. Separative work units (SWUs) describe the energy required to enrich a given feed quantity to a given assay. Uranium enrichment yields a relatively higher mass of depleted uranium as the enriched uranium product. <2.1.4. Stage 4: Fabrication Production of Uranium Oxide, Fuel Rods, and Assemblies> The final step in producing usable nuclear fuel involves fuel fabrication . At fabrication plants, enriched uranium is converted to uranium oxide (UO 2 ) powder and subsequently formed into small ceramic pellets. The pellets are loaded into cylindrical fuel rods and then combined to form fuel assemblies specific to a particular reactor. The fuel assemblies are loaded into the nuclear reactor for power production. The precise enrichment level and types of fuel rods and assemblies are specific to each reactor. <2.2. Secondary Supply> Secondary supplies describe uranium materials which may not have been directly processed through the front-end of the nuclear fuel cycle. Secondary supply may describe excess uranium from underfeeding during commercial enrichment, uranium materials held in commercial inventories, uranium held in the federal government's excess uranium inventory, and from the downblending of higher enriched uranium. According to DOE, secondary sources of uranium produced from reenrichment of depleted uranium and underfeeding represent the two largest sources of secondary supply in the market. A uranium market analyst estimated that all secondary supplies account for more than a quarter of total annual world uranium supply (48 million pounds U 3 O 8 equivalent) as of December 2018. The relative contribution of secondary uranium supplies may vary from year-to-year. <2.2.1. Underfeeding> Uranium enrichment inherently involves a trade-off between energy requirements and quantity of product and tails produced. Enrichment operators aim to balance these requirements as the optimal tails assay. Under certain conditions, enrichment operators elect to underfeed , which generates tails with a lower assay relative to the optimal tails assay. Underfeeding allows the enrichment operator to supply the enriched uranium product at the assay desired, produce lower quantities of tails for storage and disposal, and use relatively less feed material. The trade-off is the higher energy requirement per enriched product. The excess feed material not enriched as a result of underfeeding is considered a secondary supply. <2.2.2. Traders and Brokers> Uranium traders and brokers buy, sell, and store various types of uranium materials and have no direct operational role in producing or consuming nuclear fuel cycle material. The decision to buy, hold, and sell uranium materials is dependent on market conditions. For example, in 2014 the Senate Committee on Homeland Security and Governmental Affairs examined the activities of banks and bank holding companies in physical markets for commodities, including an examination of Goldman Sachs' involvement with buying and selling physical uranium products. Goldman Sachs described its activities in the uranium market as "buying uranium from mining companies, storing it, and providing the uranium to utilities when they wanted to process more fuel for their nuclear power plants." Goldman's physical uranium inventory valuation peaked in 2013 at $242 million, and the company planned on exiting the market by 2018 when their contracts with utilities had ended. The current status of Goldman's holdings is not publicly known, as uranium sales contracts are privately negotiated. EIA provides a list of uranium sellers to owners and operators of U.S. civilian nuclear power reactors, which may include companies involved with uranium operations at various stages of the front-end of the nuclear fuel cycle. <2.2.3. Commercial Inventories> Nuclear utilities and reactor operators stockpile inventories of various types of uranium materials. The primary reasons to maintain stockpiles are economic considerations and to insulate their operations from potential supply chain disruptions. According to the U.S. Energy Information Administration (EIA), total uranium inventories for owners and operators of U.S. civilian nuclear power reactors more than doubled from 2002 to 2016 ( Figure 2 ). EIA tracked inventory quantities of specific uranium materials from 2007 to 2016. During that time, owners and operators of U.S. civilian nuclear power reactors increased inventories of uranium concentrate and enriched UF 6 by the largest relative margin. As of 2016, EIA reported the total uranium inventory for U.S. utilities was 128 million pounds U 3 O 8 (eq). <2.2.4. Excess Federal Uranium Inventory> DOE maintains inventories of uranium both essential to, and excess to, national security missions. DOE maintains excess inventories of various types of uranium materials, which are sold on commercial markets to support cleanup services for former federal uranium enrichment facilities. Some have expressed concern that DOE's uranium transfers are depressing uranium prices by introducing federal uranium materials into an already oversupplied market. In 2015, the House Oversight and Government Reform Subcommittee on the Interior examined the impact of the sales of DOE's excess uranium inventory. The Government Accountability Office (GAO) raised concerns about the transparency of methodology used to determine uranium transfer quantities, and expressed legal concerns with some DOE uranium transfers from 2012 through 2013. The Secretary of Energy determines whether transfers of uranium will adversely affect the domestic production uranium industry. In FY2017, Secretary of Energy Rick Perry determined natural uranium hexafluoride transfer of up to 1,200 metric tons of uranium (MTU) per year would not cause adverse material impact on domestic uranium producers. Explanatory language in the conference report accompanying the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019 ( P.L. 115-244 , H.Rept. 115-929 ) directs DOE to end the uranium transfers and explains that $60 million above the budget request is appropriated in lieu of anticipated profits from those transfers. The DOE FY2020 budget request decreased funding requests for the Portsmouth cleanup by approximately $52 million, indicating DOE intends to resume uranium transfers in FY2020. <3. Global Uranium Market and Fuel Supply Chains> The uranium market operates with multiple industries exchanging uranium products and services through separate, nondirect, and interrelated markets. Producers, suppliers, and utilities buy, sell, store, and transfer uranium materials. For example, a contract may be established between a nuclear utility and a uranium producer for a given amount of uranium concentrate production over a certain number of years. The uranium producer generates uranium concentrate, which is shipped to a conversion facility. The utility contracts with a conversion facility to convert uranium concentrate to UF 6 . Finally, the utility may arrange a contract for uranium enrichment services. Uranium transactions occur through bilateral contractual agreements between buyers, sellers, and traders. Civilian nuclear power utilities purchase uranium through long-term multiyear contracts or through the spot market as a one-time purchase and delivery. For uranium materials delivered in 2018, roughly 84% were purchased through long-term contracts and about 16% through spot market purchases. In the United States, utilities may simultaneously arrange contracts with multiple uranium producers or suppliers for a given number of years. For example, a U.S. nuclear power utility may decide to engage with a uranium producer in Canada, a uranium conversion facility in the United States, a uranium enrichment facility in Germany, and a uranium fuel fabricator in the United States ( Figure 3 ). That same utility may arrange another contract for uranium concentrate from Australia, uranium conversion in France, uranium enrichment in the Netherlands, and uranium fuel fabrication in the United States. At the same time, the utility may also decide to acquire uranium materials from a secondary supply source or through a trader or broker. Traders or brokers may not produce uranium products or services, but they buy, sell, and store materials to utilities and other suppliers. In this way, nuclear utilities and reactor operators may seek to diversify nuclear fuel sources between primary and secondary suppliers to avoid supply disruptions. <3.1. Uranium Imports and Exports> The U.S. International Trade Commission (ITC) categorizes imports and exports by the Harmonized Tariff Schedule (HTS). ITC reports uranium imports relevant to the nuclear fuel cycle in different HTS categories and subcategories (see Table 1 ). For this report, CRS provides data from only the top five importing or exporting countries from 1992 through January 2019. Other countries may have contributed lesser amounts of uranium imports or exports over that time period, but those data were not included in this report. <4. Analysis of Uranium Supply to U.S. Nuclear Power Reactors> Since the late 1980s, U.S. nuclear utilities and reactor operators have purchased increasingly more foreign-origin uranium for reactor fuel than domestically produced uranium. Historically, the AEC, a predecessor federal agency to DOE and NRC, promoted uranium production through federal procurement contracts between 1947 and 1971. After 1971, uranium mill operators produced uranium concentrate primarily for the production of civilian nuclear energy. In 1987, about half of uranium used in domestic nuclear reactors was foreign origin; by 2018, EIA reported 93% of uranium used in domestic nuclear reactors was foreign origin. The DOE recognizes the term domestic as physical facilities operating within the United States, regardless of a foreign corporation ownership. Several domestic uranium producers, suppliers, enrichers, and utilities operating in the United States have foreign ownership or are subsidiaries of foreign corporations. On the other hand, DOE does not consider brokers and traders of already milled, converted, or enriched uranium as part of the domestic industry, as they are not associated with physical production of those materials. The term foreign is used to describe any non-U.S. based facility or material origin. The following sections describe domestic uranium sources and foreign imports associated with the front-end of the nuclear fuel cycle by year and country. Uranium materials sourced from various countries may be associated with that country's natural resources, operational fuel cycle facilities, and trade agreements with the United States. For example, Australia, one of the largest exporters of uranium concentrate to the United States, has the largest reasonably assured uranium resources worldwide, but it does not have a commercial nuclear power plant in operation. On the other hand, some overseas producers may not have the geologic resources to mine and mill uranium concentrate, but they may operate conversion or enrichment operations. <4.1. Uranium Ores and Concentrates> Uranium extraction worldwide has shifted away from conventional (underground or surface mining) to unconventional (ISR) methods. In 2016, ISR facilities produced about half of the annual global uranium concentrate. ISR methods are less capital-intensive operations relative to conventional mining methods, yet the uranium ore must be hosted within a geological formation suitable for extraction by ISR. Preliminary data for domestic uranium concentrate production in the United States in 2018 totaled approximately 1.5 million pounds, the lowest domestic uranium concentrate production since the early 1950s. Domestic uranium concentrate production outlook remains low for 2019. EIA estimated the first-quarter domestic production of uranium concentrate was 58,000 pounds, approximately four times lower than any reported quarter since 1996. Uranium ore and concentrates are imported into the United States from countries with considerable uranium production programs. According to the World Nuclear Association, the largest uranium-producing countries in the world in 2017 were, in order of uranium concentrate production: Kazakhstan, Canada, Australia, Namibia, Niger, Russia, Uzbekistan, China, the United States, and Ukraine. Uranium concentrate imports are presented in Table 2 and Table 3 . As a practical matter, CRS combines "uranium ore and concentrates" ( Table 2 ) and "natural uranium oxide" ( Table 3 ) as similar materials produced from uranium mining and milling. In 2018, the United States imported the largest quantities of uranium concentrate from Canada and Australia at 4.2 million kg (11 million pounds U 3 O 8 (eq)) and 1.1 million kg (2.9 million pounds U 3 O 8 (eq)), respectively. The United States does not currently have an operational uranium conversion facility to convert uranium concentrate to UF 6 . Consequently, uranium concentrate imported into the United States must be exported to a foreign country capable of conversion and enrichment services or stored in inventories. <4.2. Uranium Hexafluoride> The production of UF 6 is the second stage of the front-end of the nuclear fuel cycle. The United States currently has one commercial conversion facility, the Honeywell International, Inc. plant in Metropolis, IL. The facility suspended operations in 2018 due to "a worldwide oversupply of uranium hexafluoride" and is currently being maintained at a "ready-idle" status. With the Honeywell facility on standby, the United States does not have a domestic uranium conversion facility in operation. The Honeywell facility in Metropolis continues to be operated by ConverDyn Corporation as a warehouse and international trading platform for UF 6 and uranium concentrate. According to ConverDyn, 62 million pounds of UF 6 are stored at the facility as of 2018. According to the World Nuclear Association, the majority of commercial uranium conversion capacity is located in Canada, China, France, Russia, and the United States. Since 1992, the United States' largest import source of UF 6 was from Canada (137 million kg). The next highest country providing UF 6 imports to the United States over that time period was the United Kingdom (5.6 million kg) ( Table 4 ). The export trade data for UF 6 provide additional insight into the international flow of UF 6 , which is feed material for commercial uranium enrichment. The ITC has two types of export classifications, Domestic Exports and Foreign Exports . These definitions are not the same as the definitions for these terms as interpreted by DOE and described previously. Domestic exports are "goods that are grown, produced, or manufactured in the United States and commodities of foreign origin that have been changed in the United States, including changes made in a U.S. Foreign Trade Zone, from the form in which they were imported, or which have been enhanced in value by further processing or manufacturing in the United States." ( Table 5 ) Foreign Exports "(re-exports) consist of commodities of foreign origin that have previously been admitted to U.S. Foreign Trade Zones or entered the United States for consumption, including entry into a CBP [U.S. Customs and Border Protection] bonded warehouse, and which, at the time of exportation, are in substantially the same condition as when imported." ( Table 6 ) The incidence of domestic ex ports may demonstrate domestic uranium concentrate that has undergone uranium conversion in the United States prior to export. Another explanation is that the incidence of domestic ex ports may indicate foreign mined and milled uranium concentrate imported into the United States that was converted and exported. The incidence of foreign ex ports may indicate UF 6 imported into the United States that was reexported for enrichment services in a foreign country. This interpretation is consistent with the comments provided by ConverDyn, which stated that Honeywell operates as a "global trading warehouse." Since 2010, UF 6 foreign exports have totaled roughly 32 million kg to four countries: Russia, Germany, Netherlands, and the United Kingdom. <4.3. Enriched Uranium> Historically, the federal government operated gaseous diffusion uranium enrichment facilities at Oak Ridge, TN, Paducah, KY, and Portsmouth, OH, which supplied enriched uranium for defense purposes during World War II and the Cold War. The federal government used uranium enrichment services at these sites to produce enriched uranium for private contracts to commercial nuclear power plants after 1967. As of 2019, these enrichment sites have ceased operations and are undergoing decontamination and decommissioning managed by DOE's Office of Environmental Management. DOE's estimated program life-cycle costs for decontamination and decommissioning collectively for the three sites range from $70.8 billion to $78.3 billion. As of 2019, the Urenco gas centrifuge uranium enrichment facility near Eunice, NM, is the only operational uranium enrichment facility in the United States. The Urenco facility has the capacity to supply approximately one-third of the annual requirements for U.S. reactors. Several other domestic uranium enrichment facilities began NRC licensing, though no enrichment facilities are proceeding with construction. According to the World Nuclear Association, the majority of commercial uranium enrichment services are performed in China, France, Germany, the Netherlands, Russia, the United Kingdom, and the United States. Smaller-capacity uranium enrichment plants are located in several other countries. Urenco operates uranium enrichment facilities in the United Kingdom, Germany, and the Netherlands. According to the ITC trade data, the top five countries exporting enriched UF 6 to the United States in 2018 were the Netherlands (785,046 kg), Germany (591,108 kg), Russia (547,768 kg), and the United Kingdom (461,187 kg) ( Table 7 ). Between 1993 and 2013, downblended Russian HEU supplied approximately half of the enriched uranium used in U.S. domestic reactors under the Russian HEU agreement, known as the Megatons to Megawatts program. This U.S.-Russian agreement provides for the purchase of 500 MT of downblended HEU from dismantled Russian nuclear weapons and excess stockpiles for commercial nuclear fuel in the United States. After the Megatons to Megawatts program expired in 2013, imports of enriched uranium from Russia decreased by approximately 50% ( Table 7 ). Today, the enriched uranium from Russia imported into the United States comes from mined and milled uranium concentrate, not from downblended uranium from weapons. The enriched uranium which is imported from Russia, or any other country, may have been mined and processed in various other countries, including material exported from the United States. <4.4. Fuel Fabrication> Three fuel fabrication facilities are located in the United States: (1) Global Nuclear Fuel Americas plant in Wilmington, NC, (2) Westinghouse Columbia Fuel Fabrication Facility in Columbia, SC, and (3) Framatome facility in Richland, WA. Fuel fabrication facilities are located in multiple countries, and may offer various services (conversion, pelletizing, rod/assembly) and capacity of those services. <4.5. Uranium Purchases vs. Uranium Imports> ITC data separates uranium material by the type and quantity that physically entered or exited the United States. ITC data does not estimate the amount of uranium materials purchased by utilities for a given year. ITC data does not infer the quantities of uranium materials used, stored, or processed by a nuclear utility and reactor operator. ITC data differs from the EIA data reporting, which may combine purchases by country for uranium concentrate, uranium hexafluoride, and enriched uranium as equivalents of U 3 O 8 . The EIA data indicates the country of origin of uranium purchased by U.S. nuclear utilities and reactor operators. EIA data does not necessarily indicate that those materials were directly imported into the United States as a given uranium material from that country. Comparing ITC and EIA data for the country of Kazakhstan provides some insight into the flow of uranium materials through the global nuclear fuel cycle. According to the World Nuclear Association, Kazakhstan has been the world's leading producer of uranium concentrate since 2009 and produced 21,700 tons of uranium in 2018. Between 2013 and 2017, uranium concentrate imports from Kazakhstan into the United States were 18% to 54% of the uranium purchases by U.S. nuclear utilities and reactor operators ( Figure 4 ). The difference between the uranium purchased by utilities and the uranium concentrate imported into the United States may represent some portion of the origin material which was converted, enriched, and/or stockpiled in other countries prior to being imported into the United States, in the same form or as a different uranium material. For example, a portion of Kazakhstan uranium purchased by U.S. utilities may have been produced as uranium concentrate in Kazakhstan and subsequently transported to conversion facilities in France for the production of UF 6 . After conversion, the UF 6 may have been then transported to an enrichment facility in the Netherlands for the production of enriched UF 6 . Finally, the enriched UF 6 may have been imported into the United States for fuel fabrication and ultimately used in a U.S. nuclear reactor. This comparison of the reported EIA and ITC data with uranium purchases and imports from Kazakhstan illustrates how enriched UF 6 is imported from countries such as Germany, the United Kingdom, and the Netherlands, whereas U.S. nuclear utilities and reactor operators reportedly purchased no uranium originating from those countries. Uranium purchases and imports may vary from year to year. <5. Current Issues> On January 16, 2018, two U.S. domestic uranium mining companies petitioned the U.S. Department of Commerce (DOC) to investigate whether uranium imports from foreign state-owned enterprises, such as those in Russia, China, and Kazakhstan, pose a threat to national security. The investigation into uranium import restrictions sparked a debate between uranium producers; uranium mine and mill operators; and nuclear utilities, reactor operators, and suppliers. Uranium producers asserted that a heavy reliance on foreign uranium constitutes a national security risk and threatens the viability of domestic uranium production. Conversely, nuclear utilities and reactor operators contended that increased fuel costs from trade restrictions would place additional financial burdens on nuclear utilities, potentially causing the premature shutdown of economically marginal nuclear power plants. Stakeholders on both sides of the debate generally agreed that the proposed quotas would increase fuel costs for nuclear utilities and increase revenues for domestic uranium mining. For example, a report sponsored by the Nuclear Energy Institute (NEI) concluded that a 25% quota could increase fuel costs by $500 million to $800 million annually and potentially higher in the years immediately following implementation. An economic study funded by the petitioners estimated uranium mining revenues from a 25% quota would increase by $551 million to $690 million per year and would increase fuel costs by $0.41 per megawatt-hour (MWh). Another study estimated that the $0.41 per MWh increase in fuel costs for nuclear generators would translate to approximately $317 million per year. The uranium Section 232 investigation also raised policy questions about Congress's role under Section 232. Under current federal law, trade actions imposed by the President under Section 232 do not require congressional approval apart from actions related to petroleum imports. <5.1. Section 232 Investigation Uranium Imports> Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862) provides the President with the ability to impose restrictions on certain imports based on an affirmative determination by DOC that the product under investigation "is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security." The industry petition called for the President to enact a quota, pursuant to Section 232, on uranium imports such that "25% of the average historical consumption will be reserved for newly produced U.S. uranium." On July 18, 2018, DOC began an investigation into uranium imports under Section 232. The Department of Commerce's Bureau of Industry and Security (BIS) accepted public comments until September 10, 2018. The statute establishes a process and timelines for a Section 232 investigation, but does not provide a clear definition of "national security," allowing the executive branch to use a broad interpretation, and the potential scope of any investigation can be expansive. DOC submitted a report to the President on April 14, 2019. The report has not been made public. <5.2. Presidential Determination> According to a presidential memorandum released by the Trump Administration on July 12, 2019, DOC determined "uranium is being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States as defined under section 232 of the Act." The President did not concur with DOC findings that "uranium imports threaten to impair the national security of the United States as defined under section 232 of the Act." However, the President expressed significant concerns regarding national security, calling for a "fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain...." The memorandum established a Nuclear Fuel Working Group, cochaired by the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy, which will also include representatives from other executive branch agencies. The working group will "examine the current state of domestic nuclear fuel production to reinvigorate the entire nuclear fuel supply chain," and provide a report to the President within 90 days of the memorandum. The Department of Commerce conducted a Section 232 investigation for uranium imports in 1988. The investigation was initiated at a time when U.S. utilities imported 37.5% of the actual or projected domestic uranium requirements from foreign sources for two consecutive years. No trade actions were imposed as a result of that investigation. <5.2.1. Concerns of Uranium Producers and Local Communities> Trade restrictions on uranium imports were generally supported by domestic uranium producers, national and state mining associations, and other companies associated with uranium production. Some elected officials, including the U.S. Senators from Wyoming, one of the largest uranium-producing states, supported trade actions on uranium imports. The Section 232 petition asserts that the long-term viability of the domestic uranium production industry is threatened by unfair market practices by foreign state-owned enterprises. Supporters of the petition anticipate trade quotas would provide domestic uranium producers relief by increasing the price of uranium, and subsequently increasing domestic uranium production. According to advocates of this approach, increased uranium prices and production may offer direct and indirect employment opportunities and economic stimulus to local economies. The Wyoming Mining Association (WMA) offered support to uranium import actions in its comment letter: WMA believes the petition sets forth a compelling case that the current state of the domestic uranium mining industry is not simply a result of foreign competition legitimately underpricing domestic producers. It now is clear that foreign, state-mandated and state-supported uranium production is thwarting our domestic industry's ability to compete in an oversupplied and underpriced market. One of the domestic uranium producers who submitted the Section 232 petition to DOC expressed concern with the President's determination to not take actions on uranium imports. An Energy Fuels statement also suggests that the petition "has been very successful." The company further stated, "We are very pleased to have gained the attention and action of the Administration to address the energy and national security issues raised in the petition and Department of Commerce investigation." Another U.S. uranium producer, Cameco, agreed with the President's determination to not take actions on uranium imports under Section 232. Cameco has uranium assets in the United States, Canada, and Kazakhstan. Cameco operates the largest operational uranium recovery capacity in the United States, the Smith Ranch-Highland ISR operation in Wyoming. <5.2.2. Concerns of Nuclear Utilities and Reactor Operators and Suppliers> Representatives from nuclear utilities and reactor operators, industry trade groups, think tanks, converters, enrichers, and foreign governments opposed the trade actions on uranium imports proposed by the petitioners. Nuclear utilities and reactor operators asserted that quotas on uranium imports may increase fuel costs, causing financially vulnerable nuclear reactors to shut down earlier than currently planned. The Ad Hoc Utilities Group (AHUG), collectively representing U.S. nuclear generators, asserted, "Imports assure the security of nuclear fuel supply and the reliability of the electric grid. Nuclear generators source from a diverse set of suppliers at all stages of the nuclear fuel cycle with the majority of supply coming from the U.S. and our allies in Canada, Australia, and Western Europe." Operators of U.S. conversion and enrichment facilities in the United States publicly expressed concern with uranium import quotas. Malcolm Critchley, the marketing agent for ConverDyn, stated that quotas "would undoubtedly cause suppliers to divert uranium [from Honeywell].... to other locations outside of the United States if the supplier did not have a known domestic customer at the time of import." U.S. uranium enrichers shared these concerns. Melissa Mann, the president of Urenco USA the only uranium enrichment operation in the United States noted that with the ceased operations at Honeywell and the Department of Energy termination of its barter program, "there is currently no source of natural UF 6 in the United States." Urenco receives deliveries of UF 6 from Cameco's Port Hope facility in Canada and Orano's Comhurex II in France. She cautioned, "Should remedies in the uranium Section 232 investigation be imposed that disrupt deliveries of UF 6 to [New Mexico], operation of the facility and the $5 billion investment in the plant could be jeopardized," and "the lack of feed material to enrich would also jeopardize delivery of low enriched uranium to fuel fabricators, putting at risk utility reactor reload schedules and reactor operations." Some utilities have dismissed claims about the dependence on foreign-sourced uranium and vulnerability to supply chain disruptions. For example, Dominion Energy noted that concerns with foreign supply disruptions were exaggerated because "in the past five years, our only delays or interruptions in nuclear fuel component deliveries have been from U.S. based fuel cycle suppliers." <5.3. Legislation and Congressional Oversight> In March 2018, the Trump Administration imposed tariffs on foreign imports of steel and aluminum pursuant to Section 232. This was the first implementation of trade actions under Section 232 since 1986. Some Members of Congress have questioned whether the Administration's use of Section 232 on steel and aluminum imports is an appropriate use of the trade statute and relies upon broad interpretations of the definition of national security. Bills have been introduced in both chambers ( H.R. 1008 and S. 365 ) in the 116 th Congress that would amend Section 232 to provide for congressional disapproval of certain trade actions with the enactment of a disapproval resolution. The uranium Section 232 investigation was discussed in a September 6, 2018, hearing by the Senate Appropriations Committee, Subcommittee on Commerce, Justice, Science, and Related Agencies. At that hearing, Richard Ashooh, Commerce Assistant Secretary for Export Administration at BIS, suggested that the uranium investigation had prompted the agency to consider "creative ideas" outside of using import restrictions. On February 5, 2019, the House Committee on Natural Resources requested from the uranium producers that had submitted the petition to the Department of Commerce, "All documents and communications ... relating to the Department of Commerce Section 232 Investigation on uranium." <6. Policy Considerations> As a broad policy matter, Congress may consider the federal role in issues associated with the front-end of the nuclear fuel cycle. The uranium materials and service industry delivers fuel for commercial nuclear power reactors, which is largely traded and purchased under private contracts in a global marketplace. Similar to other energy markets, uranium supply is an issue on which Congress may or may not elect to intervene. As discussed previously, the United States ceased production of HEU for weapons in 1964, due to the determination of sufficient stockpiles. Fuel for nuclear naval propulsion is supplied by government HEU stockpiles, and the production of HEU for naval propulsion ended by 1992. Questions about the sufficiency of the defense uranium stockpile and future uranium requirements for defense and other purposes are beyond the scope of this report. <6.1. Domestic Uranium Production Viability> The financial viability in the short term and long term for domestic uranium producers uranium miners and millers in the United States remains uncertain. Domestic uranium production experienced a sharp decline during the early 1980s, and has remained at comparatively low levels over the past 25 years. Recently, global demand for uranium has been depressed due to a number of factors, including the continued shutdown of most Japanese nuclear power reactors following the Fukushima Daiichi accident. In 2018, domestic uranium concentrate production was 1.5 million pounds, down approximately 40% from 2017, and at the lowest annual production levels since 1950. U.S. uranium producers have dealt with poor market conditions by decreasing production and imposing employment layoffs. Domestic uranium producers have reportedly engaged in purchasing uranium concentrate on the market at lower spot market prices to fill delivery obligations at relatively higher contract prices. States have proposed legislation intended to provide some financial relief for domestic uranium producers. <6.2. Nuclear Power Viability> U.S. nuclear power plants face economic issues and a general uncertainty over their long-term economic viability. Of the 98 operating nuclear reactors, 12 are scheduled to shut down, prior to license expiration, by 2025. The Plant Vogtle nuclear expansion project in Georgia, currently the only new construction of nuclear power reactors in the United States, is reportedly billions of dollars over budget and years behind schedule. A 2018 report by the Union of Concerned Scientists asserts that roughly one-third of nuclear power plants are unprofitable and modest changes in costs may have profound impacts on other nuclear power plants' economic viability. <6.3. Tribes and Environmental Considerations> Some Native American tribes and public interest groups in the United States opposed trade actions on uranium imports due to concerns that uranium import restrictions would promote increased domestic uranium mining and milling operations. These groups suggested the health and environmental issues associated with historical uranium mining and milling have not been adequately addressed. Persistent soil, surface and groundwater contamination associated with historical uranium mining and milling remains a concern for some communities. For example, federal, state, and tribal agencies manage environment impacts associated with historical uranium mining and milling operations that occurred on Navajo Nation lands. Given environmental impacts associated with historical domestic uranium mining and milling operations, Congress may consider examining potential long-term environmental or public health consequences of expanding domestic uranium production and the adequacy of bonding and long-term financial assurance requirements for current or future uranium production operations undergoing site reclamation and decommissioning.

Nuclear power contributes roughly 20% of the electrical generation in the United States. Uranium is the fundamental element in fuel used for nuclear power production. The nuclear fuel cycle is the cradle-to-grave life cycle from extracting uranium ore from the earth through power production in a nuclear reactor to permanent disposal of the resulting spent nuclear fuel. The front-end of the nuclear fuel cycle considers the portion of the nuclear fuel cycle leading up to electrical power production in a nuclear reactor. The front-end of the nuclear fuel cycle has four stages: mining and milling, conversion, enrichment, and fabrication. Mining and milling is the process of removing uranium ore from the earth, and physically and chemically processing the ore to develop "yellow-cake" uranium concentrate. Uranium conversion produces uranium hexafluoride, a gaseous form of uranium, from uranium concentrate. Uranium enrichment physically separates and concentrates the fissile isotope U-235. The enriched uranium used in nuclear power reactors is approximately 3%-5% U-235, while weapons-grade enriched uranium is greater than 90% U-235. Nuclear fuel fabrication involves manufacturing enriched uranium fuel rods and assemblies highly specific to a nuclear power reactor. Historically, the Atomic Energy Commission (AEC), a predecessor federal agency to the Department of Energy (DOE) and the Nuclear Regulatory Commission (NRC), promoted uranium production through federal procurement contracts between 1947 and 1971. Since the late 1980s, U.S. nuclear utilities and reactor operators have purchased increasingly more foreign-origin uranium for reactor fuel than domestically produced uranium. In 1987, about half of uranium used in domestic nuclear reactors was foreign origin. By 2018, however, 93% of uranium used in U.S. nuclear reactors was foreign origin. No uranium conversion facilities currently operate in the United States. There is one operational U.S. commercial uranium enrichment facility, which has the capacity to enrich approximately one-third of the country's annual reactor requirements. In addition to newly mined uranium, U.S. nuclear power reactors also rely on secondary sources of uranium materials. These sources include federal and commercial stockpiles, reenrichment of depleted uranium, excess feed from underfeeding during commercial enrichment, and downblending of higher enriched uranium. The global uranium market operates with multiple industries exchanging uranium products and services through separate, nondirect, and interrelated markets. Producers, suppliers, and utilities buy, sell, store, and transfer uranium materials. Nuclear utilities and reactor operators diversify fuel sources among primary and secondary supply, and may acquire uranium from multiple domestic and foreign suppliers and servicers. For example, a nuclear power utility in the United States may purchase uranium concentrate that has been mined and milled in Australia, converted in France, enriched in Germany, and fabricated into fuel in the United States. On January 16, 2018, two domestic uranium producers—representatives from the uranium mining/milling industry—petitioned the U.S. Department of Commerce to conduct a Section 232 investigation pursuant to the Trade Expansion Act of 1962 (19 U.S.C. §1862) to examine whether U.S. uranium imports pose a threat to national security. The department found that uranium imports into the United States posed a threat to national security as defined under Section 232. In a July 12, 2019, memorandum, President Trump announced he did not concur with the Department of Commerce's "finding that uranium imports threaten to impair the national security of the United States as defined under section 232 of the Act." The Section 232 uranium investigation into uranium imports has increased the discussion about the nuclear fuel supply chain and potential future U.S. uranium needs. Included in the July 12, 2019, memorandum, the Trump Administration established a Nuclear Fuel Working Group, to assess the challenges facing the domestic uranium industry and to consider options to "revive and expand the nuclear energy sector." Given uncertainties regarding the long-term viability of the domestic uranium production and commercial nuclear power sectors, continued issues associated with the front-end of the nuclear fuel cycle may persist.

crs_R46095

crs_R46095_0

<1. Introduction> Congress is currently considering legislation for a long-term reauthorization of the National Flood Insurance Program (NFIP). The last long-term reauthorization of the NFIP was by the Biggert-Waters Flood Insurance Reform Act of 2012 (hereinafter BW-12), from July 6, 2012, to September 30, 2017. Congress amended elements of BW-12, but did not extend the NFIP's authorization further, in the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). Since the end of FY2017, 15 short-term NFIP reauthorizations have been enacted. The NFIP is currently authorized until September 30, 2020. The NFIP is managed by the Federal Emergency Management Agency (FEMA). The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk and to reduce flood risk through the adoption of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP is discussed in more detail in CRS Report R44593, Introduction to the National Flood Insurance Program (NFIP) , by Diane P. Horn and Baird Webel. The NFIP is the primary source of flood insurance coverage for residential properties in the United States. As of December 2019, the NFIP had more than 5 million flood insurance policies providing over $1.3 trillion in coverage. The program collects about $4.6 billion in annual revenue from policyholders' premiums, fees, and surcharges. Over 22,000 communities in 56 states and jurisdictions participate in the NFIP. According to FEMA, the program saves the nation an estimated $1.87 billion annually in flood losses avoided because of the NFIP's building and floodplain management regulations. Floods are the most common natural disaster in the United States. All 50 states, plus the District of Columbia (DC), Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and the Northern Mariana Islands have experienced flood events since May 2018. Total U.S. flood losses in 2016 were about $28 billion. 2017 was the most costly year for U.S. flood losses on record, with total losses estimated at $276.3 billion. The total for the 2017 hurricanes significantly exceeded the previous record of $214.8 billion (CPI-adjusted), from the 2005 hurricane season. Total U.S. flood losses for 2018 are estimated at $49.4 billion. All of these losses are greater than the $20.3 billion annual average flood losses estimated by the Congressional Budget Office in April 2019. <2. Expiration of Certain NFIP Authorities> The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key components of the program. Unless reauthorized or amended by Congress, the following will occur after September 30, 2020: The authority to provide new flood insurance contracts will expire. Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. Other activities of the program would technically remain authorized following September 30, 2020, such as the issuance of Flood Mitigation Assistance (FMA) grants. However, the expiration of the key authorities described above would have varied, generally serious effects on these remaining NFIP activities. <3. Legislative Action in the 116th Congress> The House Financial Services Committee amended and ordered reported a bill for the long-term reauthorization of the NFIP, the National Flood Insurance Program Reauthorization Act of 2019 ( H.R. 3167 ), on June 11, 2019. H.R. 3167 was reported, as amended, on October 28, 2019 ( H.Rept. 116-262 , Part 1). H.R. 3167 would reauthorize the NFIP until September 30, 2024. One bill has been introduced in the Senate, on July 18, 2019, to reauthorize the expiring provisions of the NFIP, the National Flood Insurance Program Reauthorization and Reform Act of 2019 ( S. 2187 ), with a companion bill in the House, H.R. 3872 . These bills have not yet been considered by the committees of jurisdiction. S. 2187 and H.R. 3872 would also reauthorize the NFIP until September 30, 2024. The remainder of this report will summarize relevant background information and proposed changes to selected areas of the NFIP in H.R. 3167 and S. 2187 . The report does not examine every provision in detail, but focuses on selected provisions that would introduce significant changes to the NFIP, particularly those related to the issues identified by the Government Accountability Office (GAO) described below. The provisions in H.R. 3167 and S. 2187 are listed in Table 1 at the end of the report. <4. Selected Issues for Consideration by the 116th Congress> In a 2017 report, GAO examined actions which Congress and FEMA could take to reduce federal fiscal exposure and improve national resilience to floods, and recommended that Congress should consider comprehensive reform covering six areas: (1) outstanding debt; (2) premium rates; (3) affordability; (4) consumer participation; (5) barriers to private sector involvement; and (6) NFIP flood resilience efforts. As a public insurance program, the goals of the NFIP were originally designed differently from the goals of private-sector companies. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to property owners who otherwise would not be able to obtain it, and reduce government's cost after floods. The NFIP also engages in many "non-insurance" activities in the public interest: it disseminates flood risk information through flood maps, requires communities to adopt land use and building code standards in order to participate in the program, potentially reduces the need for other post-flood disaster aid, contributes to community resilience by providing a mechanism to fund rebuilding after a flood, and may protect lending institutions against mortgage defaults due to uninsured losses. The benefits of such tasks are not directly measured in the NFIP's financial results from underwriting flood insurance. From the inception of the NFIP, the program has been expected to achieve multiple objectives, some of which may conflict with one another: To ensure reasonable insurance premiums for all; To have risk-based premiums that would make people aware of and bear the cost of their floodplain location choices; To secure widespread community participation in the NFIP and substantial numbers of insurance policy purchases by property owners; and To earn premium and fee income that, over time, covers claims paid and program expenses. <4.1. NFIP Lapse in Authorization> On December 21, 2018, Congress passed a stand-alone reauthorization bill, the National Flood Insurance Program Extension Act, to ensure that NFIP did not lapse during the funding gap that led to a partial government shutdown from December 21, 2018, to January 25, 2019. However, on December 26, 2018, FEMA announced changes to the operation of the NFIP in response to the shutdown, advising Write-Your-Own (WYO) companies to suspend sales operations, including the sale of new policies and the renewal of existing policies. FEMA's reason for suspending sales operations, despite the reauthorization of the NFIP, was that the WYO companies were entitled to a fee from the sale or renewal of flood insurance policies and that such a fee may be considered an impermissible funding obligation during a lapse in annual appropriations. Following protests from a number of congressional offices, the insurance industry, and the real estate industry, on December 28, 2018, FEMA rescinded the guidance and directed all NFIP insurers to resume normal operations immediately, advising that the NFIP would be considered operational since December 21, 2018, without interruption. Both H.R. 3167 and S. 2187 include a provision to reduce the impact of a future government shutdown on NFIP operations. <4.1.1. Provisions Related to NFIP Reauthorization in H.R. 3167> Section 101 would allow for a retroactive effective date in the event of a lapse in appropriations of the NFIP. <4.1.2. Provisions Related to NFIP Reauthorization in S. 2187> Section 101 would allow for continuous operation during any lapse in appropriations, with a provision that amounts in the Reserve Fund may be credited to the National Flood Insurance Fund (NFIF) to enter into and renew contracts for flood insurance. <4.2. NFIP Debt and Solvency of the Program> GAO noted that competing aspects of the NFIP, notably the desire to keep flood insurance affordable while making the program fiscally solvent, have made it challenging to reform the program. Promoting participation in the program, while at the same time attempting to fund claims payments with the premiums paid by NFIP policyholders, provides a particular challenge. Throughout its history, the NFIP has been asked to set premiums that are simultaneously "risk-based" and "reasonable." Different Administrations and Congresses have placed varied emphases and priorities on those goals for premium setting. GAO has reported in several studies that NFIP's premium rates do not reflect the full risk of loss because of various legislative requirements, which exacerbates the program's fiscal exposure. GAO also noted in several reports that while Congress has directed FEMA to provide subsidized premium rates for policyholders meeting certain requirements, it has not provided FEMA with funds to offset these subsidies and discounts, which has contributed to FEMA's need to borrow from the U.S. Treasury to pay NFIP claims. The Congressional Budget Office analysis of H.R. 3167 estimated that enacting the changes that are not related to extending the program would increase direct spending by $678 million over the 2020-2029 period. <4.2.1. NFIP Premiums, Fees, and Surcharges> As of June 2019, the written premium on just over 5 million policies in force was $3.5 billion, with an additional $1.09 billion from fees and surcharges. The maximum coverage for single-family dwellings (which also includes single-family residential units within a 2-4 family building) is $100,000 for contents and up to $250,000 for buildings coverage. The maximum available coverage limit for other residential buildings is $500,000 for building coverage and $100,000 for contents coverage, and the maximum coverage limit for non-residential business buildings is $500,000 for building coverage and $500,000 for contents coverage. Included within NFIP premiums are several fees and surcharges mandated by law on flood insurance policies. First, the Federal Policy Fee (FPF) was authorized by Congress in 1990 and helps pay for the administrative expenses of the program, including floodplain mapping and some of the insurance operations. The amount of the Federal Policy Fee is set by FEMA and can increase or decrease year to year. Since October 2017, the FPF has been $50 for Standard Flood Insurance Policies (SFIPs), $25 for Preferred Risk Policies (PRPs), and $25 for contents-only policies. Second, a reserve fund assessment was authorized by Congress in BW-12 to establish and maintain a reserve fund to cover future claim and debt expenses, especially those from catastrophic disasters. By law, FEMA is required to maintain a reserve ratio of 1% of the total loss exposure through the reserve fund assessment. As of June 2019, the amount required for the reserve fund ratio was approximately $13.16 billion. However, FEMA is allowed to phase in the reserve fund assessment to obtain the ratio over time, with an intended target of not less than 7.5% of the 1% reserve fund ratio in each fiscal year (so, using June 2019 figures, not less than approximately $986.8 million each year). The reserve fund assessment has increased from its original status, in October 2013, of 5% on all SFIPs and 0% on PRPs. Since April 2016, FEMA has charged every NFIP policy a reserve fund assessment equal to 15% of the premium. However, FEMA has stated that as long as the NFIP maintains outstanding debt, it would expect that the reserve fund will not reach the required balance, as amounts collected may be periodically transferred to Treasury to reduce the NFIP's debt. In addition to the reserve fund assessment, all NFIP policies are also assessed a surcharge following the passage of HFIAA. The amount of the surcharge is dependent on the type of property being insured. For primary residences, the charge is $25; for all other properties, the charge is $250. Revenues from the surcharge are deposited into the reserve fund. The HFIAA surcharge is not considered a premium and is currently not included by FEMA when calculating limits on insurance rate increases. In April 2019, FEMA began charging a 5% premium on all severe repetitive loss properties. One additional surcharge may be levied if a community is on probation from the NFIP. All policyholders in that community will be charged a probation surcharge of $50 for a full one-year period, even if the community brings its program into compliance and is removed from probation. <4.2.2. Premium Subsidies and Cross-Subsidies> Except for certain subsidies, flood insurance rates in the NFIP are directed to be "based on consideration of the risk involved and accepted actuarial principles," meaning that the rate is reflective of the true flood risk to the property. However, Congress has directed FEMA not to charge actuarial rates for certain categories of properties and to offer discounts to other classes of properties in order to achieve the program's objective that owners of existing properties in flood zones could afford flood insurance. There are three main categories of properties which pay less than full risk-based rates. <4.2.2.1. Pre-FIRM Subsidy> Pre-FIRM properties are those which were built or substantially improved before December 31, 1974, or before FEMA published the first Flood Insurance Rate Map (FIRM) for their community, whichever was later. By statute, pre-FIRM structures are allowed to have lower premiums than what would be expected to cover predicted claims. The availability of this pre-FIRM subsidy was intended to allow preexisting floodplain properties to contribute in some measure to pre-funding their recovery from a flood disaster instead of relying solely on federal disaster assistance. In essence, the flood insurance could distribute some of the financial burden among those protected by flood insurance and the public. As of September 2018, approximately 13% of NFIP policies received a pre-FIRM subsidy. Historically, the total number of pre-FIRM policies is relatively stable, but the percentage of those policies as a share of the total policy base has decreased. BW-12 phased out almost all subsidized insurance premiums, requiring FEMA to increase rates on certain subsidized properties at 25% per year until full-risk rates were reached: these included secondary residences, businesses, severe repetitive loss properties, and properties with substantial cumulative damage. Subsidies were eliminated immediately for properties where the owner let the policy lapse, any prospective insured who refused to accept offers for mitigation assistance, and properties purchased after or not insured by NFIP as of July 6, 2012. All properties with subsidies not being phased out at higher rates, or already eliminated, were required to begin paying actuarial rates following a five-year period, phased in at 20% per year, after a revised or updated FIRM was issued for the area containing the property. Thus the subsidies on pre-FIRM properties would have been eliminated within five years following the issuance of a new FIRM to a community. As BW-12 went into effect, constituents from multiple communities expressed concerns about the elimination of lower rate classes, arguing that it created a financial burden on policyholders, risked depressing home values, and could lead to a reduction in the number of NFIP policies purchased. Concerns over the rate increases created by BW-12 led to the passage of HFIAA, which reinstated certain premium discounts and slowed down some of the BW-12 premium rate increases. HFIAA repealed the property-sale trigger for an automatic full-risk rate and slowed the rate of phaseout of the pre-FIRM subsidy for most primary residences, allowing for a minimum and maximum increase in the amount for the phaseout of pre-FIRM subsidies for all primary residences of 5%-18% annually. HFIAA retained the 25% annual phaseout of the subsidy from BW-12 for all other categories of properties. <4.2.2.2. Newly Mapped Subsidy> HFIAA established a new subsidy for properties that are newly mapped into a Special Flood Hazard Area (SFHA) on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date. Certain properties may be excluded based on their loss history. The rate for eligible newly mapped properties is equal to the PRP rate, but with a higher Federal Policy Fee, for the first 12 months following the map revision. After the first year, the newly mapped rate begins to transition to a full-risk rate, with annual increases to newly mapped policy premiums calculated using a multiplier that varies by the year of the map change. As of September 2018, about 4% of NFIP policies receive a newly mapped subsidy. <4.2.2.3. Grandfathering> Using the authority to set rate classes for the NFIP and to offer lower than actuarial premiums, FEMA allows owners of properties that were built in compliance with the FIRM in effect at the time of construction to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. This practice is colloquially referred to as "grandfathering," "administrative grandfathering," or the "grandfather rule," and is separate and distinct from the pre-FIRM subsidy. FEMA does not consider the practice of grandfathering to be a subsidy for the NFIP, per se, because the discount provided to an individual policyholder is cross-subsidized by other policyholders in the NFIP. Thus, while grandfathering does intentionally allow policyholders to pay premiums that are less than their actuarial rate, the discount is offset by others in the same rate class as the grandfathered policyholder. Congress implicitly eliminated the practice of offering grandfathering to policyholders after new maps were issued in BW-12, but then subsequently reinstated the practice in HFIAA, which repealed the BW-12 provision that terminated grandfathering and allowed grandfathered status to be passed on to the new owners when a property is sold. As of September 2018, about 9% of NFIP policies were grandfathered. <4.2.3. Risk Rating 2.0> FEMA is planning to introduce the biggest change to the way the NFIP calculates flood insurance premiums since its inception, known as Risk Rating 2.0 . The new rates are scheduled to go into effect on October 1, 202 1, for all NFIP policies. The NFIP's current rating structure follows general insurance practices in place at the time that the NFIP was established and has not fundamentally been changed since the 1970s . FEMA uses a nationwide rating system that combines flood zones across many geographic areas, and individual policies do not necessarily reflect topographical features that affect flood risk. FEMA models expected losses for groups of structures that are similar in flood risk and key structural aspects, and assigns the same rate to all policies in a group. For example, two properties that are rated as the same NFIP risk (i.e., both are one-story, single-family homes with no basement and are elevated the same number of feet above the Base Flood Elevation ( BFE )) are charged the same rate per $100 of insurance, although they may be located in different states with differing flood histories or rest on different topography, such as a shallow floodplain versus a steep river valley. In addition, two properties in the same flood zone are charged the same rate, regardless of their location within the zone. To calculate the premium, the current rating system considers the flood zone , the building occupancy type , the foundation type, whether the property is pre-FIRM or post-FIRM, whether or not the property is a primary residence , and the property elevation relative to the BFE for properties in an SFHA. The amount and type of coverage and the deductible will also affect the premium. NFIP premiums calculated under Risk Rating 2.0 are to reflect an individual property's flood risk, in contrast to the current rating system in which properties with the same NFIP flood risk are charged the same rates. This will involve the use of a larger range of variables than in the current rating system. The current rating system uses two sources of flooding, coastal and fluvial (river). In contrast, Risk Rating 2.0 is to incorporate a broader range of flood frequencies and sources, including pluvial flooding (flooding due to heavy rainfall) , urban flooding , and coastal erosion outside the V-zone (the coastal high - hazard area) . Geographical variables to be used in Risk Rating 2.0 are to include the distance to the water and the type of water (i.e., river, stream, coast), the elevation of the property relative to the flooding source, and the stream order , which is a measure of the relative size of streams and rivers. The structural variables which have been identified by FEMA for use in Risk Rating 2.0 include the foundation type of the structure, the height of the lowest floor of the structure relative to BFE, and the replacement cost value of the structure. The use of distance to water as a variable may mean that premiums for properties at the landward boundary of a SFHA could go down, while premiums for a property at the water boundary could go up. <4.2.3.1. Replacement Cost Value> Under the current rating system, NFIP premium rates are based on the amount of insurance purchased for a structure, not the replacement cost for that structure. For example, for most actuarially rated structures in the A zone, the NFIP currently classifies the first $60,000 of building coverage for single-family residences ($175,000 for businesses) and $25,000 of contents coverage as the basic limit. It charges higher rates for coverage under this amount, because losses are more likely to occur in this range. Rates for additional coverage above the basic limit are lower. The basic and additional rates are loaded to account for the average tendency to buy less insurance than the replacement value. For example, a post-FIRM single-family property in the A-zone , with $250,000 of buildings coverage and a deductible of $3,000, would currently pay a rate of 3% on the first $60,000 and a rate of 2% on the additional $190,000 (plus the Increased Cost of Compliance (ICC) premium and the reserve fund assessment). The two-tiered rating structure was used in the industry for two reasons. First, it ensured that the premium collected is sufficient to cover the typical claim even if a policy is under-insured; according to FEMA, most NFIP claims are below $60,000. By charging a high rate for coverage up to $60,000, a policyholder's premium is likely to be sufficient to cover a typical claim. Secondly, it encouraged policyholders to fully insure their structure. By charging a low additional rate, policyholders are encouraged not just to insure a typical claim, but to insure against the unlikely but possible higher claim. For much of the NFIP's existence, the two-tiered rating structure operated with minimal inequity. However, as the range of replacement values widened, particularly through the 2000s, the potential for inequity caused by rating based on coverage instead of structure value grew. Two groups are most subject to inequity. First, structures whose value is closer to the $60,000 basic limit pay more than they would if their rate was based on their structure value because most of their rate is comprised of the lower additional rate. Second, structures whose value is above the $250,000 cap pay less than they would if their rate was based on structure value, because their rate is based on an average structure value that is much less than their actual structure value. In addition, high-valued structures can produce much higher claims than lower-valued structures with the same intensity of damage. If replacement cost value were to be used in setting NFIP premium rates, it is anticipated that those structures with higher replacement costs than current local or national averages would begin paying more for their NFIP coverage than those structures that are below the average, which would pay less. How much more, or how much less, is uncertain. <4.2.3.2. Premium Increases Under Risk Rating 2.0> The limitations on annual premium increases are set in statute and Risk Rating 2.0 will not be able to increase rates beyond these caps. Rate increases for primary residences are restricted to 5%-18% per year. Individual property increases of up to 18% are allowed, but rate class increases are limited to 15% per year. Other categories of properties are required to have their premium increased by 25% per year until they reach full risk-based rates: this includes non-primary residences , nonresidential properties , business properties , properties with severe repetitive loss , properties with substantial cumulative damage , and properties with substantial damage or substantial improvement after July 6, 2012. However, FEMA does not consider everything that policyholders pay to the NFIP to be part of the premium and therefore subject to these caps. When premium rates are calculated for compliance with the statutory caps, FEMA only includes the building and contents coverage , the ICC coverage, and the reserve fund assessment . Other fees and surcharges are not considered premium and, therefore, are not subject to the premium cap limitations, including the FPF, the HFIAA surcharge and, if applicable, the 5% Severe Repetitive Loss premium and/or probation surcharge . <4.2.3.3. Summary> The current categories of properties which pay less than the full risk-based rate are determined by the date when the structure was built relative to the date of adoption of the FIRM, rather than the flood risk or the ability of the policyholder to pay. This will not change fully with the introduction of Risk Rating 2.0; although premiums for individual properties will be tied to their actual flood risk, the rate at which the subsidies will be phased out will not change. The move towards actuarially sound rates could place the NFIP on a more financially sustainable path; risk-based price signals could give policyholders a clearer understanding of their true flood risk; and a reformed rate structure could encourage more private insurers to enter the market. However, charging actuarially sound premiums may mean that insurance for some properties is considered unaffordable, or that premiums increase at a rate which may be considered to be politically unacceptable. <4.2.4. Provisions Related to NFIP Premiums, Fees, and Surcharges in H.R. 3167> Section 103 would repeal the HFIAA surcharge, which is $25 for primary residences and $250 for all other properties. This provision would decrease the amount that policyholders pay for flood insurance, but would benefit primary residences less than other categories of property. FEMA does not include the HFIAA surcharge in their calculation of premium rate increases, so this change would not have any impact on the rate at which premiums might increase with Risk Rating 2.0. Section 104 would authorize monthly installment payments of NFIP premiums rather than the current annual payment of premiums. The fee for making monthly payments during the first year of implementation could not exceed $25 per year. Section 304 would allow an owner of a share of a cooperative building to purchase flood insurance coverage under the NFIP on the same terms as a condominium owner. Section 402 would authorize FEMA to offer one umbrella policy to owners of multiple structures on the same property. This would apply to both commercial properties and residential properties, including agricultural structures and multi-family rental properties. This could have the effect of making flood insurance easier to buy for the relevant properties. <4.2.5. Provisions Related to NFIP Premiums, Fees, and Surcharges in S. 2187> Section 102 would prohibit FEMA from increasing the amount of covered costs above 9% per year on any policyholder during the five-year period beginning on the date of enactment. Covered costs include premiums, surcharges (including the surcharge for ICC coverage and the HFIAA surcharge), and the Federal Policy Fee. This would limit the rate of increase of covered costs for all categories of policies, not just policies for primary residences, and would be particularly significant for those policies where the pre-FIRM subsidy is currently being phased out at 25% per year. This cap on premium increases could potentially limit FEMA's ability to implement rate increases under Risk Rating 2.0. Section 102 would also amend the basis on which premiums are determined so that the calculation of an average historical loss year would exclude catastrophic loss years. This would probably lower premiums for all policyholders. Section 104 would authorize monthly installment payments of NFIP premiums rather than the current annual payment of premiums. The fee for making monthly payments during the first year of implementation could not exceed $15 per year. Section 106 would allow an owner of a share of a cooperative building to purchase flood insurance coverage under the NFIP on the same terms as a condominium owner. Section 107 would establish a baseline amount, defined as the maximum original principal obligation of a standard mortgage that may be purchased by the Federal National Mortgage Association (Fannie Mae) in the area where the property is located. The baseline amount would track the Fannie Mae maximum loan limits for single-family dwellings. This section would set the contents coverage limits at 50% of the baseline amount. The coverage limit for single-family dwellings would be set at the baseline amount and the coverage limit for other residential and non-residential properties at 200% of the baseline amount. This provision would increase coverage limits for both buildings and contents insurance, with a larger increase in high-cost areas. Section 306 would increase premiums by 25% each year on any property for which a policyholder refuses a bona fide offer of mitigation assistance until the policyholder accepts the bona fide offer of assistance or the chargeable risk premium is actuarially sound. <4.2.6. NFIP Borrowing from Treasury> The funding for the NFIP is primarily maintained in an authorized account called the National Flood Insurance Fund (NFIF). Generally, the NFIP has been funded through three methods: receipts from the premiums of flood insurance policies, including fees and surcharges; direct annual appropriations for specific costs of the NFIP; and borrowing from the U.S. Treasury when the balance of the NFIF has been insufficient to pay the NFIP's obligations (e.g., insurance claims). As provided for in law, all premiums from the sale of NFIP insurance are transferred to FEMA and deposited in the NFIF. Congress then authorizes FEMA to withdraw funds from the NFIF, and use those funds for specified purposes needed to operate the NFIP. In addition to premiums, Congress also provides annual appropriations to supplement floodplain mapping activities. In addition to the mix of discretionary and mandatory funding which are set in appropriations legislation, fluctuating levels of mandatory spending occur in the NFIP in order to pay and adjust claims on affected NFIP policies. The NFIP was not designed to retain funding to cover claims for truly extreme events; instead, the National Flood Insurance Act of 1968 allows the program to borrow money from the Treasury for such events. For most of the NFIP's history, the program has generally been able to cover its costs, borrowing relatively small amounts from the Treasury to pay claims, and then repaying the loans with interest. Currently, Congress has authorized FEMA to borrow no more than $30.425 billion from the U.S. Treasury in order to operate the NFIP. The NFIP's debt to the U.S. Treasury cannot be tied directly to any single incident, as any insurance claim paid by the NFIP is in some way responsible for the existing debt of the NFIP (i.e., a dollar paid in claims, and therefore expended by the NFIP, following a minor flooding incident is no different than a dollar paid following a major hurricane). However, the NFIP was forced to borrow heavily to pay claims in the aftermath of three catastrophic flood seasons, the 2005 hurricane season (particularly Hurricanes Katrina, Rita, and Wilma), Hurricane Sandy in 2012, and the 2017 hurricane season (Hurricanes Harvey, Irma, and Maria). The 2017 hurricane season brought the NFIP up to the $30.425 billion borrowing limit for the first time. At the start of the 2017 hurricane season, the NFIP owed $24.6 billion. On September 22, 2017, the NFIP borrowed the remaining $5.825 billion from the Treasury to cover claims from Hurricane Harvey, Hurricane Irma, and Hurricane Maria, reaching the NFIP's authorized borrowing limit of $30.425 billion. On October 26, 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to continue to pay claims for Hurricanes Harvey, Irma, and Maria. FEMA borrowed another $6.1 billion on November 9, 2017, to fund estimated 2017 losses, including those incurred by Hurricanes Harvey, Irma, and Maria, and anticipated programmatic activities, bringing the debt up to $20.525 billion. The NFIP currently has $9.9 billion of remaining borrowing authority, and did not need to borrow to pay claims for the 2018 hurricane season or other floods in 2018. Only current and future participants in the NFIP are responsible for repaying NFIP debt, as the insurance program itself owes the debt to the Treasury and pays for accruing interest on that debt through the premium revenues of policyholders. For example, from FY2006 to FY2016 (i.e., since the NFIP borrowed funds following Hurricane Katrina), the NFIP has paid $2.82 billion in principal repayments and $4.4 billion in interest to service the debt through the premiums collected on insurance policies. The NFIP is currently paying $375-$400 million a year in interest. In a report on NFIP solvency, GAO noted that charging current policyholders to pay for debt incurred in past years is contrary to actuarial principles and insurers' pricing practices. According to actuarial principles, a premium rate is based on the risk of future losses and does not include past costs. GAO also argued that this creates a potential inequality because policyholders are charged not only for the flood losses that they are expected to incur, but also for losses incurred by past policyholders. The cancellation of $16 billion of NFIP debt in October 2017 represents the first time that NFIP debt has been cancelled, although Congress appropriated funds between 1980 and 1985 to repay NFIP debt. Earlier in 2017, GAO had considered the option of eliminating FEMA's debt to the Treasury, suggesting that if the debt were eliminated, FEMA could reallocate funds used for debt repayment for other purposes such as building a reserve fund and program operations, and arguing that this would also be more equitable for current policyholders and consistent with actuarial principles. Eliminating the entire NFIP debt would require Congress to cancel debt outright, to appropriate funds for FEMA to repay the debt, or to change the law to eliminate the requirement that FEMA repay the accumulated debt. Under its current authorization, the only means the NFIP has to pay off the debt is through the accrual of premium revenues in excess of outgoing claims, and from payments made out of the Reserve Fund. As required by law, FEMA submitted a report to Congress in May 2018 on how the borrowed amount from the U.S. Treasury could be repaid within a 10-year period. The key conclusion of this and past reports is that it is unlikely that the NFIP will be able to repay its current debt fully. If interest rates were to rise, debt payments would increase significantly and FEMA might not be able to retire any of its debt, even in low-loss years. No projections of the NFIP debt have yet been made that take account of the cancellation of $16 billion of NFIP debt or the $10.83 billion in claims from the 2017 hurricane season. However, since 2005 the program has devoted more resources to interest payments than to repaying the debt, and it seems unlikely that this would be different in the future without congressional action. <4.2.7. Provisions Related to NFIP Debt in S. 2187> Section 301 would freeze interest accrual on the NFIP's debt to the Treasury for five years after enactment and provides that interest that would have accrued during this period would not have to be repaid in future. This section would also require FEMA to deposit the amount equal to the interest that would have accrued on the borrowed amounts during the five-year period into the National Flood Mitigation Fund and use this funding to carry out the Flood Mitigation Assistance Grant Program. <4.3. Increasing Participation in the NFIP> <4.3.1. The Mandatory Purchase Requirement> A long-standing objective of the NFIP has been to increase purchases of flood insurance policies, and this objective of widespread NFIP purchase was one motivation for keeping NFIP premiums reasonable. It was also a motivation for introducing the requirement, in the Flood Disaster Protection Act of 1973, to purchase flood insurance as a condition of receiving a federally backed mortgage for properties in a SFHA, commonly referred to as the mandatory purchase requirement. In a community that participates or has participated in the NFIP, owners of properties in the mapped SFHA are required to purchase flood insurance as a condition of receiving a federally backed mortgage. Federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSE) must require these property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. However, there are no official statistics available from the federal mortgage regulators responsible for compliance with the mandate, and no up-to-date data on national compliance rates with the mandatory purchase requirement. A 2006 study commissioned by FEMA found that compliance with this mandatory purchase requirement may be as low as 43% in some areas of the country (the Midwest), and as high as 88% in others (the West). A more recent study of flood insurance in New York City found that compliance with the mandatory purchase requirement by properties in the SFHA with mortgages increased from 61% in 2012 to 73% in 2016. The escrowing of insurance premiums, which began in January 2016, may increase compliance with the mandatory purchase requirement, but no data on this are available. <4.3.2. Provisions Related to the Mandatory Purchase Requirement in H.R. 3167> Section 103 would increase the minimum loan amount that triggers the mandatory purchase requirement to $25,000. Currently, loans with an outstanding balance less than $5,000 or a repayment term less than one year are exempted from the mandatory purchase requirement. This provision would potentially allow homeowners and businesses to drop their flood insurance earlier than is currently possible. Section 408 would require GAO to determine the percentages of properties with federally backed mortgages located in SFHAs that satisfy the mandatory purchase requirement, and the percentage of properties with federally backed mortgages located in the 500-year floodplain that would satisfy the mandatory purchase requirement if the mandatory purchase requirement applied to such properties. <4.3.3. Provisions Related to the Mandatory Purchase Requirement in S. 2187> Section 108 would require GAO to determine the percentages of properties with federally backed mortgages located in SFHAs that satisfy the mandatory purchase requirement, and the percentage of properties with federally backed mortgages located in the 500-year floodplain that would satisfy the mandatory purchase requirement if the mandatory purchase requirement applied to such properties. <4.3.4. NFIP Participation Rates> Both the GAO report and the NFIP report to Congress on options for privatizing the NFIP suggested that the mandatory purchase requirement could potentially be expanded to more (or all) mortgage loans made by federally regulated lending institutions for properties in communities participating in the NFIP. This would increase the consumer participation rate in the NFIP and potentially balance the NFIP portfolio with an increased number of lower-risk properties. According to GAO, some private insurers have indicated that such a federal mandate could help achieve the level of consumer participation necessary to make the private sector comfortable with providing flood insurance coverage by increasing the number of policyholders, which would allow private insurers to diversify and manage the risk of their flood insurance portfolio and address concerns about adverse selection. The Association of State Floodplain Managers also suggested that all properties within the SFHA should be required to have flood insurance, not just those with federally backed mortgages. NFIP policies are not distributed evenly around the country; about 37% of the policies are in Florida, with 11% in Texas and 9% in Louisiana, followed by California with 5% and New Jersey with 4%. These five states account for approximately 66% of all of the policies in the NFIP. NFIP participation rates are higher in coastal locations than in inland locations, and are highest in the most risky areas due to mandatory purchase requirements. The NFIP could potentially be financially improved with a more geographically diverse policy base and, in particular, through finding ways to increase coverage in areas perceived to be at lower risk of flooding than those in the SFHA. FEMA has identified the need to increase flood insurance coverage across the nation as a major priority for the current reauthorization and beyond, and has set a goal of doubling flood insurance coverage by 2023, through the increased sale of both NFIP and private policies. Closing the insurance gap is one of the key objectives of FEMA's 2018-2022 strategic plan. <4.3.5. Provisions Related to Increasing Participation in H.R. 3167> Section 408 would require GAO to conduct a study to address how to increase participation rates through programmatic and regulatory changes, and report to Congress no later than 18 months after enactment. <4.3.6. Provisions Related to Increasing Participation in S. 2187> Section 108 would require GAO to conduct a study to address how to increase participation rates through programmatic and regulatory changes, and report to Congress no later than 18 months after enactment. <4.4. Affordability of Flood Insurance> Some stakeholders have expressed concern related to the perceived affordability of flood insurance premiums and the balance between actuarial soundness and other goals of the NFIP. Particularly following the increase in premiums associated with BW-12 and HFIAA, concerns were raised that risk-based premiums could be unaffordable for some households. Section 100236 of BW-12 called for an affordability study by FEMA and also a study by the National Research Council of the National Academy of Sciences (NRC) regarding participation in the NFIP and the affordability of premiums, which was published in 2015. The NRC report was published in two parts. The first NRC report considered the many ways in which to define affordability and identify which households need financial assistance with premiums. They noted that there are no objective definitions of affordability for flood insurance, nor is there an objective threshold that separates affordable premiums from unaffordable premiums and thus defines affordability either for an individual property owner or renter, or for any group of property owners or renters. They suggested that if affordability were to be addressed through some form of government assistance, a number of questions would need to be answered by Congress or FEMA: (1) Who will receive assistance? (2) What assistance will be provided? (3) How will assistance be provided? (4) How much assistance will be provided? (5) Who will pay for the assistance? (6) How will assistance be administered? The NRC report suggested that eligibility for assistance could be based on (1) being cost-burdened by flood insurance, (2) the loss of pre-FIRM subsidies or grandfathered cross-subsidies, (3) the requirement to purchase flood insurance, (4) housing tenure, (5) household income, (6) mitigation, or (7) community characteristics. The first NRC report identified potential policy measures that might reduce the burden of premium payments, or that might direct mitigation assistance towards households that qualify for assistance. These included means-tested mitigation grants, mitigation loans, means-tested vouchers, federal tax deductions and credits, disaster savings account, expanding the variety of individual mitigation measures that reduce premiums, encouraging the selection of higher premium deductibles, reducing NFIP administrative cost loadings in premiums, eliminating the mandatory purchase requirement, or relying on the Treasury to help pay claims in catastrophic loss years. The report concluded that policymakers will need to decide whether they want to define cost burden with reference to income, housing costs in relation to income, premium paid in relation to property value, or some other measure. GAO also considered the issue of affordability, suggesting that an affordability program that addresses the goals of encouraging consumer participation and promoting resilience would provide means-tested assistance through appropriations rather than through discounted premiums, and prioritize it to mitigate risk. They argued that providing premium assistance through appropriations rather than discounted premiums would address the policy goal of making the fiscal exposure more transparent because any affordability discounts on premium rates would be explicitly recognized in the budget each year. GAO suggested that linking subsidies to ability to pay rather than the existing approach to subsidies would make premium assistance more transparent and thus more open to oversight by Congress and the public. They also argued that means-testing premium assistance would help ensure that only those who could not afford full-risk rates would receive assistance, which could lower the number of policyholders receiving a subsidy and thus increase the amount that the NFIP receives in premiums and reduce the program's federal fiscal exposure. GAO estimated that 47%-74% of policyholders could be eligible for subsidy if income eligibility was set at 80% or 140% of area median income (AMI), respectively. GAO also suggested that instead of premium assistance, it would be preferable to address affordability by providing assistance for mitigation measures that would reduce the flood risk of the property, thus enhancing resilience, and ultimately result in a lower premium rate. Reducing flood risk through mitigation could also reduce the need for federal disaster assistance, further decreasing federal fiscal exposure. In HFIAA Section 9, Congress also required FEMA to develop a Draft Affordability Framework "that proposes to address, via programmatic and regulatory changes, the issues of affordability of flood insurance sold under the National Flood Insurance Program, including issues identified in the affordability study ." FEMA published its Affordability Framework on April 17, 2018. FEMA started the development of the affordability framework by consulting other federal agencies on how to define affordability, noting that neither BW-12 nor HFIAA provided a definition of flood insurance affordability. Based on the guidance of other agencies, they chose to define the concept of affordability from a cost burden or ability to pay perspective. They analyzed the 2015 NFIP portfolio of 4.8 million policies (4.5 million residential policies, of which 90% were single-family homes). In particular, they used American Community Survey (ACS) data to analyze how ACS respondents intersect with the SFHA, using the National Flood Hazard Layer (NFHL) to determine whether there were differences in income between those who live inside and outside the SFHA. They also looked at the difference between NFIP policyholders and potential policyholders, differentiating between flood risk, income, and mortgage status. They used the AMI to identify low-income policyholders. FEMA also classified flood risk in SFHAs as coastal or noncoastal in order to determine whether incomes are higher in areas subject to coastal flooding for the matched NFIP and census data. They found that generally incomes are higher outside the SFHA than they are inside the SFHA. Median income is higher for policyholders and non-policyholders exposed to coastal risk for both homeowners and renters. However, the income differences by source of flood risk were not found to be sizable compared to the differences in income between mortgage holders, outright homeowners, and renters. The data supported FEMA's extensive anecdotal evidence that there is a significant population in the SFHA of lower-income families who have either inherited their homes or are retirees, who are particularly sensitive to the financial burden of flood insurance. FEMA does not currently have the authority to implement an affordability program, nor does FEMA's current rate structure provide the funding required to support an affordability program. If an affordability program were to be funded from NFIP funds, this would require either raising flood insurance rates for NFIP policyholders or diverting resources from another existing use. Alternatively, an affordability program could be funded fully or partially by congressional appropriations. <4.4.1. Provisions Related to Affordability in H.R. 3167> Section 102 would create a five-year affordability demonstration program to determine the effectiveness of providing means-tested discounted rates for NFIP policies, with the authority to provide discounted premium rates terminating on May 31, 2024. The discounted premium rates would only be available to owner-occupants of residences with no more than four units, with the further requirement that the property is the primary residence of a household whose income does not exceed 80% of the area median income (AMI). The chargeable premium rate made available under this section would be an amount that does not exceed 2% of the annual AMI for the area in which the property is located. FEMA would be required to provide all participants in this program with a written statement detailing the full actuarial premium rate for the coverage. Within 12 months of enactment, FEMA would be required to issue guidance for the establishment of the affordability demonstration program, and not later than five years after the start of the implementation of the program, FEMA would be required to submit a report to Congress evaluating the effectiveness of the program. This report would include a statement of the number of households participating in the program and the rates of participation by communities participating in the NFIP, including whether such rates of participation have changed by year, and an estimate of the cost of the program to the NFIP. This affordability program could have the potential to benefit areas with low median incomes more than those with high median incomes. In particular, households in an area where 2% of the AMI is more than the average flood insurance premium may not benefit from this provision. For example, The AMI for Washington, DC, in 2017 dollars, is $77,649. Two percent of the AMI is $1,552.98; anyone paying more than this amount would receive a discount so that they would pay no more than $1,552.98. However, the average NFIP premium in Washington, DC is $720.68, so a household with a low income paying this average flood insurance premium of $720.68 in Washington, DC, would not have any chargeable premium rate in excess of 2% of the annual area median income, and thus would not receive a discount. The AMI for Detroit in 2017 dollars is $27,838, and 2% of the AMI is $556.76. The average premium for Detroit is $633.69, so a household with a low income paying the average flood insurance premium would receive a discount of $76.93. Section 106 would authorize FEMA, where appropriate, to consider the impact of the inclusion of replacement cost value of a structure in setting the NFIP premium rate in determining the affordability of flood insurance premiums. <4.4.2. Provisions Related to Affordability in S. 2187> Section 103 would require FEMA to establish an Affordability Assistance Fund which would be separate from other NFIP funds and available without fiscal year limitation. This Affordability Assistance Fund would be credited with the amounts saved as a direct result of the limitation on the operating costs of Write-Your-Own companies. This section would require FEMA to provide financial assistance in the form of a voucher, grant, or premium credit to an eligible household, defined as one where (1) housing costs exceed 30% of the household's adjusted gross income for the year and the total assets owned by the household are not greater than 22% of the median income of the state in which the household is located; or (2) if the total household income is less than 120% of the AMI, the amount of the premiums, surcharges, and fees for an annual flood insurance policy exceeds 1% of the coverage limit of that policy. The voucher, grant or premium credit would provide an amount equal to the lesser of the difference between either the annual housing expenses or 30% of the annual adjusted gross income of the household and the costs of NFIP premiums. The amount of the assistance would be reduced by 1% for each percent that the income of the eligible household exceeds 120% of the state median income. <4.5. The Role of Private Insurance in U.S. Flood Coverage> One of the reasons that the NFIP was originally created was because private flood insurance was widely unavailable in the United States. Until recently the role of the private market in primary residential flood insurance has been relatively limited. The main role of private insurance companies has been in the operational aspect of the NFIP. FEMA provides the overarching management and oversight of the NFIP, and retains the actual financial risk of paying claims for the policy. However, the bulk of the day-to-day operation of the NFIP, including the marketing, sale, writing, and claims management of policies, is handled by private companies. This occurs primarily through the Write-Your-Own (WYO) Program, where private insurance companies are paid to write and service the policies themselves. Roughly 86% of NFIP policies are sold by the private insurance companies participating in the WYO Program. Companies participating in the WYO program are compensated through a variety of methods. Some have argued that the levels of WYO compensation are too generous, while others have argued that reimbursement levels are insufficient to cover all expenses associated with servicing flood policies under the procedures set by FEMA. In BW-12, Congress required FEMA to issue a rulemaking on a "methodology for determining the appropriate amounts that property and casualty insurance companies participating in the Write Your Own program should be reimbursed for selling, writing, and servicing flood insurance policies and adjusting flood insurance claims on behalf of the National Flood Insurance Program." This rulemaking was required within a year of enactment of BW-12. FEMA published an Advanced Notice of Proposed Rulemaking on revisions to the methodology for payments to WYO companies on July 8, 2019. A small private flood insurance market exists, which most commonly provides commercial coverage, coverage above the NFIP maximums, or coverage in the lender-placed market. At the moment relatively few private insurers compete with the NFIP in the primary voluntary flood insurance market. Some suggest that this lack of competition has partly developed because the "non-compete clause" a contractual restriction placed on WYO carriers against offering standalone private flood products that compete with the NFIP has in the past curtailed the potential involvement of the WYO companies. In FY2019, however, FEMA removed restrictions on WYO companies choosing to offer private flood insurance, while maintaining requirements that such private insurance lines remain entirely separate from a WYO company's NFIP insurance business. <4.5.1. Barriers to Private Sector Involvement> Private insurer interest in providing flood coverage has increased in recent years. Advances in the analytics and data used to quantify flood risk mean that a number of private insurance companies and insurance industry organizations have expressed interest in private insurers offering primary flood insurance in competition with the NFIP. Private insurance is seen by many as a way of transferring flood risk from the federal government to the private sector. FEMA's subsidized rates are often seen as the primary barrier to private sector involvement in flood insurance. Even without the subsidies mandated by law, the NFIP's definition of full-risk rates differs from that of private insurers. Whereas the NFIP's full-risk rates must incorporate expected losses and operating costs, a private insurer's full-risk rates must also incorporate a return on capital. As a result, even those NFIP policies which are considered to be actuarially sound from the perspective of the NFIP may still be underpriced from the perspective of private insurers. FEMA's new rating system, Risk Rating 2.0, which aims to more closely align premiums and an individual property's flood risk, could affect the competitive balance between the NFIP and private insurers. The rules on the acceptance of private insurance for the mandatory purchase requirement have had a significant impact on the market potential for private insurers. In BW-12, Congress explicitly provided for the acceptance of private flood insurance to fulfill the mandatory purchase mortgage requirement as long as the private flood insurance "provides flood insurance coverage which is at least as broad as the coverage" of the NFIP, among other conditions. A final rule implementing this requirement was announced in February 2019 and took effect on July 1, 2019. Press reports described it as generally welcomed by the banking industry, but it is unclear to what extent this new rule will encourage private flood insurance or whether additional legislative changes might be needed if Congress seeks to further encourage development of the private flood insurance market. Another barrier to the growth of the private insurance market has been FEMA's policy on continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. Many insurers also view the lack of access to NFIP data on flood losses and claims as a barrier to more private companies offering flood insurance. It is argued that increasing access to past NFIP claims data would allow private insurance companies to better estimate future losses and price flood insurance premiums, and ultimately to determine which properties they might be willing to insure. However, FEMA's view is that the agency would need to address privacy concerns in order to provide property level information to insurers, because the Privacy Act of 1974 prohibits FEMA from releasing policy and claims data which contains Personally Identifiable Information. <4.5.2. Reinsurance> In HFIAA, Congress revised the authority of FEMA to secure reinsurance for the NFIP from the private reinsurance and capital markets. FEMA began larger-scale purchases of reinsurance in 2017. The specifics of each reinsurance purchase has varied, but in general, the reinsurance has been designed to pay a certain percentage of the losses from a single, large-scale event, with a higher percentage if losses are higher. Coverage has typically started after $4 billion in losses, a loss level that has only been reached by the NFIP in three events Hurricane Katrina, Hurricane Sandy, and Hurricane Harvey. As of December 2019, the reinsurance purchases have been a net fiscal positive for the NFIP with a total of $655 million in premiums paid and $1.042 billion received from claims. This is due to the extremely high losses experienced after Hurricane Harvey, which resulted in over $9 billion paid by the NFIP to policyholders. Unless another large-scale flooding event occurs, the balance of premiums versus claims is likely to turn negative in the next two to three years if FEMA continues similar reinsurance purchases. The purchase of private market reinsurance reduces the likelihood of FEMA needing to borrow from the Treasury to pay claims. Because reinsurers understandably charge FEMA premiums to compensate for the risk they assume, the primary benefit of reinsurance is to transfer and manage risk rather than to reduce the NFIP's long-term fiscal exposure. <4.5.3. Provisions Related to Private Insurance in H.R. 3167> Section 107 would direct FEMA, if an NFIP policyholder switches to private flood insurance but has already paid the NFIP premiums for the whole year up front, to provide a prorated refund of the NFIP premium. This section would also direct that Increased Cost of Compliance (ICC) premiums would not be refunded if measures had been implemented using ICC coverage, and that premiums would not be refunded if a claim has been paid or is pending under the policy term for which the refund is sought. Section 401 would direct FEMA to consider private flood insurance that satisfies the mandatory purchase requirement as also satisfying the continuous coverage requirement to keep NFIP premium subsidies in place. Section 404 would allow FEMA to provide current and historical property-specific information on flood insurance program coverage, flood damage assessments, and payment of claims to private insurers, on the condition that private insurers provide the same information to FEMA, homeowners and home buyers. Section 404 could potentially create conflicts with the Privacy Act of 1974, which prohibits federal agencies from releasing data which contains Personally Identifiable Information. In addition, although these data could be used to better inform the participation of private insurers in offering private flood insurance, the availability of NFIP data could make it easier for private insurers to identify the NFIP policies that are "overpriced" due to explicit cross-subsidization or imprecise flood insurance rate structures, and adversely select these properties, while the government would likely retain those policies that benefit from those subsidies and imprecisions, potentially increasing the deficit of the NFIP. Section 406 would require FEMA annually to evaluate ceding a portion of the risk of the NFIP to the private reinsurance or capital markets. Section 407 would give FEMA the authority to terminate any WYO arrangement in its entirety upon 30 days written notice for (1) fraud or misrepresentation; (2) nonpayment to FEMA of any amount due; or (3) material failure to comply with the requirements of the arrangement or with the written standards, procedures, or guidance by FEMA. <4.5.4. Provisions Related to Private Insurance in S. 2187> Section 302 would establish that the total amount of reimbursement paid to WYO companies could not be greater than 22.46% of the aggregate amount of premiums charged by the company. It would also require FEMA to ensure that the commission paid by a WYO company to agents of the company would not be less than 15%. Section 304 would require FEMA, within 12 months of enactment, to develop a schedule to determine the actual costs of WYO companies and reimburse the WYO companies only for the actual costs of the service or products. It would require that all reimbursements made to WYO companies be made public, including a description of the product or service provided to which the reimbursement pertains. Section 305 would require FEMA to report on the feasibility of selling or licensing the use of historical structure-specific NFIP claims data to non-governmental entities, while reasonably protecting policyholder privacy. Section 405 would require FEMA to establish penalties for underpayment of claims by WYO companies that are not less than the penalty for overpayment of a claim. Section 408 would give FEMA the authority to direct a WYO company, on 14 days' notice, to terminate a contract or other agreement with any covered entity that provides services to the WYO company, if FEMA determines that the covered entity has engaged in conduct that is detrimental to the NFIP. Section 415 would authorize FEMA to create a pilot program under which WYO companies and NFIP direct servicers would be required to investigate pre-existing structural conditions that might result in the denial of an NFIP claim, at the request of a policyholder or potential policyholder, before providing or renewing flood insurance coverage. <4.6. Flood Mapping> In the debate about the future of the NFIP, the fact that flood insurance is only one of the functions of the NFIP's key responsibilities is sometimes overlooked; the NFIP has always been more than just an insurance program. The main non-insurance policy goal of the NFIP is to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. To do this, FEMA develops, in coordination with participating communities, flood maps called Flood Insurance Rate Maps (FIRMs) that depict the community's floodplain and flood risk zones. Currently FIRMs provide the basis for setting insurance rates, although this is to change with Risk Rating 2.0, and identifying properties whose owners are required to purchase flood insurance. The FIRMs also provide the basis for establishing floodplain management standards that communities must adopt and enforce as part of their participation in the NFIP. Flood maps adopted across the country vary considerably in age and in quality, and there is no consistent, definitive timetable for when a particular community will have its maps revised and updated. By law, once every five years, FEMA is required to assess the need to revise and update all floodplain areas and flood-risk zones defined, delineated, or established by the mapping program, based on an analysis of all natural hazards affecting flood risks. This requirement does not dictate, however, that the FIRMs actually be updated once every five years. Generally, flood maps may require updating when there have been significant new building developments in or near the flood zone, changes to flood protection systems (e.g., levees, sea walls, sand dunes), or environmental changes in the community. The FEMA mapping process, and some NFIP flood maps, have been criticized for being out of date, using poor quality data or methods, or not taking account of changed conditions. In addition, the procedure to update maps is time consuming, in large part due to the lengthy statutory consultation and appeals process. In BW-12, Congress reestablished and reauthorized a body called the Technical Mapping Advisory Council (TMAC). The TMAC is a federal advisory committee established to review and make recommendations to FEMA on matters related to the national flood mapping program. The TMAC is broadly authorized to review and recommend improvements to how FEMA produces and disseminates flood hazard, flood risk, and flood map information. The TMAC is required to submit an annual report to the FEMA Administrator summarizing its activities, its evaluation of FIRMs and FEMA's mapping activities, and its recommendations for improving elements of the mapping program. Within a year of passage of BW-12, the TMAC was also required to submit to the FEMA Administrator a one-time report with recommendations on how to ensure that FIRMs incorporate the best available climate science to assess flood risks and ensure that FEMA uses the best available methodology to consider the impact of sea level rise and future development on flood risk. This report, the Future Conditions report, was submitted in final form in February 2016. FEMA is legally required to "incorporate any future risk assessment" by the TMAC in the Future Conditions report into any revision or update of the NFIP's FIRMs. Further, among the information FEMA is required to include in the updating of FIRMs, is "any other relevant information as may be recommended by the [TMAC]." The statute does not provide guidance on how or when the Administrator should act on the TMAC recommendations. However, on an annual basis, BW-12 required FEMA to report to the authorizing committees of jurisdiction in Congress and the Office of Management and Budget (OMB) on the recommendations from the TMAC and how FEMA is addressing TMAC recommendations to improve flood insurance rate maps and flood risk data. If FEMA does not act or defers to act on certain TMAC recommendations, FEMA is also required to explain that decision in the BW-12 mandated annual report. In addition to the Future Conditions report and the 2016 National Flood Mapping Program Review , TMAC has produced three annual reports, for 2015, 2016, and 2017, and a summary of the 2018 annual report. <4.6.1. Funding for Floodplain Mapping> NFIP flood mapping is currently funded in two ways, through (1) annual discretionary appropriations and (2) discretionary spending authority from offsetting money collected from the Federal Policy Fee (FPF). In FY2015, $100 million was appropriated for flood hazard mapping and risk analysis; in FY2016, $190 million was appropriated; in FY2017, $175.5 million; in FY2018, $262.6 million; and in FY2019, $262.5 million. The FPF is paid to FEMA and deposited in the National Flood Insurance Fund (NFIF). FEMA has the authority to set the amount charged for the FPF, but Congress retains the authority to determine how much to spend, and on what, from the fees collected. The monies available in the NFIF, other than those used to pay claims, are available only to the extent approved in appropriation acts as offsetting collections. In recent years, Congress has generally followed the budget request from FEMA with relation to the authorized offsetting collections appearing in appropriations bills that are funded using the FPF revenue. In addition, Congress generally directs in appropriations law that FPF revenue in excess of the authorized offsetting collection amounts should be spent on floodplain management and mapping. In FY2017, FEMA received $195 million from the FPF and $188.2 million in FY2018. About 66% of the resources from the FPF are allocated to flood mapping, with floodplain management receiving about 19% of the overall income from the FPF. To the extent that the private flood insurance market grows and policies move from the NFIP to private insurers, FEMA will no longer collect the FPF on those policies and less money will be available for floodplain mapping and management. Concerns have been raised about maintaining the activities funded by the FPF, with some stakeholders arguing that a form of FPF equivalency, or some form of user fee, should be applied to private flood insurance. The section below describes selected provisions in H.R. 3167 and S. 2187 related to flood mapping. Additional provisions not described here relate to appeals and publication of projected Special Flood Hazard Areas, communication and outreach regarding map changes, adoption of partial flood maps, and membership of the TMAC. (See Table 1 ). <4.6.2. Provisions Related to Flood Mapping in H.R. 3167> Section 201 would reauthorize the National Flood Mapping Program at $500 million annually for each of fiscal years 2019 to 2023. Section 202 would require FEMA, when updating maps, to include cadastral features with the associated parcel identification data and, where practicable, the address of such features. This section would also require FEMA to coordinate with the U.S. Geological Survey for the sharing of data from stream flow networks, and make a national geospatial data repository available to the public on the FEMA website. This data repository would be required to provide access to the raw data used to include the cadastral features and parcel identification data in FIRMs. Section 202 would also require FEMA, at least every five years, to verify that each FIRM contains data that is current and credible. This last provision would place additional responsibility on FEMA in relation to map updates. Currently FEMA is only required, once every five years or more often as the Administrator determines necessary, to assess the need to revise and update all floodplain areas and flood-risk zones defined, delineated, or established by the mapping process, based on an analysis of all natural hazards affecting flood risks. FEMA could also incur additional costs associated with the acquisition of parcel identification. Section 202 could also create conflicts with the Privacy Act of 1974, which prohibits federal agencies from releasing data which contains Personally Identifiable Information. Section 203 would authorize FEMA to carry out a pilot program to make grants to units of local government to enhance the mapping of urban flooding and associated property damage and the availability of such mapped data to homeowners, businesses, and units of local government to enable them to minimize the risk of such flooding. Section 203 would also require FEMA to submit biennial progress reports to Congress and a final report to include recommendations for implementing strategies, practices, and technologies to mitigate the effects of urban flooding. This section would authorize to be appropriated $1.2 million for FY2020 and $4.3 million for FY2021, to remain available through 2023. This program would provide new information on urban flood risk, which is currently not addressed in NFIP flood models. Section 204 would expand mapping to all areas of the United States and would require FEMA, as soon as practicable, to (1) modernize the flood mapping inventory for communities for which FIRMs have not been modernized; (2) use the most current and most appropriate remote sensing or other geospatial mapping technology; (3) establish a digital display environment and building-specific flood hazard and risk information, not later than five years after enactment; and (4) use this digital display environment to produce, store, and disseminate flood hazard data, models, and maps. Section 204 also prohibits FEMA from disseminating the data collected for the digital display environment to the public or to a private company in a manner that violates the Privacy Act of 1974. This section would also require FEMA, with TMAC, to submit an annual report regarding progress achieved under this section and provide financial and technical assistance to communities to incorporate future flood hazard conditions as an informational layer on their FIRMs. Section 205 would create a new appeal process if FEMA denies a request to update a flood map based on new information regarding flood elevations or other flood mitigation factors. The initial appeal would be through a FEMA administrative process, with the possibility of a further appeal to the Scientific Resolution Panel. Certain expenses would also be refunded or reimbursed under this provision. Section 209 would require FEMA to develop a new flood zone designation for areas behind non-accredited levees, and make flood insurance available to properties located within those levee-impacted areas. Until FEMA develops rates for this new flood zone, a structure located behind a non-accredited levee would be eligible for rates associated with areas of moderate flood hazards. <4.6.3. Provisions Related to Flood Mapping in S. 2187> Section 208 would continue existing authorization of the National Flood Mapping Program at $400 million annually for each of fiscal years 2020 through 2025. This section would also require the TMAC to establish a set of standards for states and local governments and organizations to use in mapping risk and developing alternative maps to NFIP Flood Insurance Rate Maps (FIRMs) within one year after enactment. This section would also require TMAC to develop a procedure for certification of such maps by FEMA within 90 days of submission in the case of any area covered by a FIRM that has not been updated or reissued during the preceding three-year period. Upon certification, the map would be considered the FIRM in effect for all purposes for the NFIP and would not be able to be revised, updated, or replaced before the expiration of the three-year period beginning on the date of submission to FEMA. Section 208 would also authorize partnerships with other federal agencies and private entities to facilitate mapping and require FEMA to use the most up-to-date remote sensing and mapping technology. Section 208 would require FEMA to establish a digital display environment incorporating building-specific flood hazard and risk information, not later than five years after enactment. FEMA would not be allowed to disseminate this database to any person other than the owner or leaseholder of a property contained in the database. Section 208 also would offer an NFIP policyholder a one-time premium credit of not more than $500 to be used for either the purchase of an elevation certificate or for appealing the chargeable premium rate for the property. This section would create a new appeal process if FEMA denies a request to update a flood map based on new information regarding flood elevations or other flood mitigation factors. Certain expenses also would be refunded or reimbursed under this provision. Section 209 would require FEMA to develop a new flood zone designation for areas behind non-accredited levees, and make flood insurance available to properties located within those levee-impacted areas at actuarial rates based upon the risks appropriate for the level of protection that the levee affords. Until FEMA develops rates for this new flood zone, a structure located behind a non-accredited levee would be eligible for rates associated with areas of moderate flood hazards. Section 303 would require FEMA to develop a fee schedule based on recovering the actual costs of providing FIRMs and charge any private entity an appropriate fee for use of such maps. This requirement could provide a mechanism by which private insurance companies could contribute to the costs of floodplain mapping in lieu of paying the FPF. <4.7. Flood Mitigation> Flood insurance does not prevent flooding; it merely makes it possible to recover more rapidly financially after a flood. It is better to avoid being flooded than to receive funding for flood recovery after a disaster. Flood mitigation creates safer communities and can save money for individuals and taxpayers. The importance of FEMA's mitigation program is illustrated by research findings that for every $1 invested by FEMA in flood mitigation between 1993 and 2003, society as a whole saved $7 due to reduced future flood losses. The NFIP encourages communities to adopt and enforce floodplain management regulations such as zoning codes, subdivision ordinances, building codes, and rebuilding restrictions. Internal FEMA studies have found that structures built to FEMA standards experience 73% less damage than structures not built to those standards. For example, FEMA conducted a "losses avoided" study which reviewed 2,240 of the 6,000 mitigated properties in North Carolina and estimated that those mitigation activities avoided losses of $206 million to $234 million. Mitigation activities, however, form only a small part of the NFIP activities and are funded entirely by premiums and fees paid by NFIP policyholders. The NFIP offers three programs which encourage communities to reduce flood risk: the Community Rating System (CRS), the FMA Grant Program, and ICC coverage. A greater linkage between insurance risk transfer and physical risk reduction measures could help to address concerns about increasing flood risk. By rewarding behavior that reduces risks through pricing, insurance has the potential to incentivize or even require policyholders and communities to address the underlying flood risk. Insurance provisions could also provide incentives to limit flood damage by rewarding well-designed buildings with lower premiums, lower deductibles, or higher coverage limits. However, a recent study of residential flood insurance markets in 25 countries found little evidence of either governments or insurance companies actively encouraging risk reduction by linking the cost of insurance to mitigation activities, with the sole exception of the NFIP through the CRS. The CRS is a program offered by FEMA to incentivize the reduction of flood and erosion risk, as well as the adoption of more effective measures to protect natural and beneficial floodplain functions. As of June 2017, FEMA estimated that only 5% of eligible NFIP communities participated in the CRS program. However, these communities have a large number of flood policies, so more than 69% of all flood policies are written in CRS-participating NFIP communities. Although the CRS discounts reduce flood insurance premiums for individual communities, CRS discounts are cross-subsidized into the NFIP program, such that the discount for one community ends up being offset by increased premium rates in all communities across the NFIP. For example, the average 11.4% discount for CRS communities is cross-subsidized and shared across NFIP communities through a cost (or load) increase of 13.3% to overall premiums. To reduce comprehensive flood risk, FEMA also operates an FMA Grant Program that is funded through revenue collected by the NFIP, with the goal of mitigating flood-damaged properties to reduce or eliminate NFIP claims. The FMA Program awards grants for a number of purposes, including state and local mitigation planning; the elevation, relocation, demolition, or flood proofing of structures; the acquisition of properties; and other activities. In FY2019, the FMA Program was authorized to use $175 million of NFIP revenue, with $160 million available for FMA grants. States, tribal governments, territories, and local communities can apply for FMA grants. Generally, federal funding is available for up to 75% of eligible costs. However, FEMA may contribute up to 90% for repetitive loss properties and up to 100% for severe repetitive loss properties. An area of controversy involves NFIP coverage of properties that have suffered multiple flood losses, which are at greater risk than the average property insured by the NFIP. One concern is the cost to the program; another is whether the NFIP should continue to insure properties that are likely to have further losses. The NFIP currently uses more than one definition of repetitive loss. The statutory definition of a repetitive loss structure is used for applications for FMA grants. A slightly different definition is used for ICC coverage. A third definition is used for internal tracking of insurance data, with a slightly different definition used for the CRS. The definition of severe repetitive loss property is consistent across program elements in the NFIP, using the statutory definition. <4.7.1. Provisions Related to Flood Mitigation in H.R. 3167> Section 105 would authorize FEMA to enter into agreements with eligible states and insular areas to provide capitalization grants for the eligible state to establish a state revolving fund for flood mitigation. These state revolving funds would be used to assist homeowners, businesses, certain non-profit organizations, and communities to reduce flood risk in order to decrease the loss of life and property, the cost of flood insurance, and federal disaster payments. A participating state would not be able to receive more than 15% of the total fund in a given fiscal year, with any remainder above this limit to be reallocated to the non-capped states. FEMA would be required to reserve at least 5% of the amount made available in a given fiscal year for tribal governments and insular areas. All participating states would be required to provide matching funds from nonfederal sources in an amount equal to 15% of the amount that the state receives for the revolving fund. States would be required to give priority, to the maximum amount practicable, to projects that (1) address severe repetitive loss and repetitive loss structures; (2) assist low-income homeowners and low-income geographical areas; and (3) address flood risk for pre-FIRM buildings. States would be authorized to provide additional subsidization to recipients from low-income households or geographical areas, including forgiveness of the principal of a loan. Finally, section 105 would authorize to be appropriated $50 million for each of fiscal years 2020 through 2024. Although state revolving funds have a long history related to clean water and drinking water, this would be the first time that such a fund has been set up at the national level to fund flood mitigation. Section 210 would allow state or local zoning authorities to grant local variances for agricultural structures in SFHAs if they determine that (1) elevation or flood-proofing of such a structure is not practicable; (2) the repair or improvement of the structure would not result in any increase in base flood levels during the base flood discharge, threats to public safety, or extraordinary public expense; and (3) not more than one NFIP claim payment exceeding $1,000 has been made for the structure within the 10 years prior to the granting of the variance. Section 302 would define a new "multiple-loss property" category, which would include three types of properties: (1) a revised definition of repetitive loss property; (2) a severe repetitive loss property, with the same definition as the existing statutory definition; and (3) a new category of extreme repetitive loss property. The new definition of a repetitive loss property would be a structure that has incurred flood damage for which two or more separate claims of any amount in excess of the loss-deductible have been made. The new definition of an extreme repetitive loss property would be a structure which has incurred flood damage for which at least two separate claims have been made with the cumulative amount of such claims payments exceeding 150% of the maximum coverage available for the structure. Section 302 would also allow FEMA to consider the extent to which a community is working to remedy problems with addressing repeatedly flooded areas in making determinations regarding financial assistance. This section would establish a broader definition of repetitive loss properties than the current definition, which would bring more properties into the multiple-loss categories. Section 303 would require FEMA to offer policyholders a reduction of the risk premium rate, as determined by the Administrator, for the use of approved actions that mitigate the flood risk of their property, including mitigation techniques for buildings in dense urban environments, methods that can be deployed on a block or neighborhood scale, and the elevation of mechanical or other critical systems. This would expand on existing statutory authority by specifically requiring FEMA to provide the premium reduction for approved mitigation methods. Section 305 would require FEMA to create a voluntary community-based flood insurance pilot project to make available, for purchase by participating communities, a single community-wide flood insurance policy. This community policy would cover all residential and non-residential properties in the community and would satisfy the mandatory purchase requirement. A community flood insurance policy would have to include a method of preventing redundant claims payments (in the case of an individual property owner who is covered by both a community flood insurance policy and an individual NFIP policy). FEMA would be required to establish the pilot program within 180 days of enactment, and the program would terminate on September 30, 2022. There is no mention of how the pilot program would treat residents of a community with a community-wide NFIP policy who are also covered by private flood insurance. Section 306 would authorize to be appropriated $200 million per year for each of the first five fiscal years after enactment to carry out the Flood Mitigation Grant Assistance Program (FMA); this is an increase compared to the authorization of $160 million in FY2019. Section 307 would require FEMA to provide Community Rating System (CRS) credits for measures that protect natural and beneficial floodplain functions, and would also require FEMA to provide CRS credits to the maximum number of communities practicable. It would also require FEMA to carry out a program to make grants to consortia of states and communities for the cost of employing or retaining an individual or individuals to coordinate and carry out responsibilities related to participation in the CRS. This section would authorize $7 million per fiscal year for five fiscal years to be appropriated for these grants. Section 308 would require FEMA to develop a community assistance program to increase the capacity of states, tribes, and communities to manage flood risk effectively and participate in the NFIP. This section would authorize to be appropriated $20 million per year for each of fiscal years 2019 through 2024. Section 308 also authorizes FEMA to set aside such amounts as the Administrator considers appropriate for additional assistance to states that exceed the criteria for awarding these grants. <4.7.2. Provisions Related to Flood Mitigation in S. 2187> Section 201 would require the President to set aside from the Disaster Relief Fund (DRF) an amount equal to 10% of the average amount appropriated to the DRF during the previous 10 fiscal years to provide assistance for mitigation activities for severe repetitive loss structures and properties insured under the NFIP with the largest increase in actuarial risk for the property compared to the actuarial risk for the previous fiscal year as a result of Risk Rating 2.0, as in effect on October 1, 2020. This would represent the first time in which the NFIP would receive any funding from the DRF. Section 203 would give priority under the FMA program to grants for carrying out mitigation activities that reduce flood damage to (1) repetitive-loss properties; (2) properties for which FEMA determines the premium rates are unaffordable or will soon become unaffordable as a result of a risk adjustment under Risk Rating 2.0; and (3) properties for which aggregate losses exceed the replacement value of the properties. In this context, unaffordable is defined as premium rates that are in such an amount that they cause housing costs to exceed 30% of the household's adjusted gross income for the year. This section would also authorize to be appropriated $1 billion for each of the first five full fiscal years after the date of enactment to provide mitigation assistance under this section; this is an increase compared to the authorization of $160 million in FY2019. Section 204 would require FEMA to offer policyholders a reduction of the risk premium rate that is not less than 10% of that rate for the use of approved actions that mitigate the flood risk of their property, including innovative mitigation techniques for buildings in dense urban environments and the elevation of mechanical systems. This would expand on existing statutory authority by specifically requiring FEMA to provide the premium reduction for approved mitigation methods. Section 205 would require FEMA to appoint a regional coordinator in each region served by a FEMA Regional Office to provide technical assistance to small communities to enable those communities to effectively participate in and benefit from the CRS program, and would authorize to be appropriated such sums as may be necessary to carry this out. Because FEMA only has 10 regions, this provision would allow for a smaller number of CRS coordinators than could potentially be appointed under Section 307 of H.R. 3167 , as described above. Section 206 would authorize FEMA to create a low-interest mitigation loan program for NFIP policyholders to be used to undertake mitigation measures with respect to the insured property that cost less than the overall reduction in the risk of the property over 50 years. These loans would be available to all types of residences. Section 207 would authorize FEMA to enter into agreements with eligible states and insular areas to provide capitalization grants for the eligible state to establish a state revolving fund for flood mitigation. The provisions in this section are the same as those in Section 105 of H.R. 3167 , except that Section 207 authorizes to be appropriated such sums as may be necessary to carry out this section for fiscal years 2020 through 2029. Section 207 would also require FEMA to consider activities funded through amounts for a state loan fund in setting NFIP premium rates. This would be the first time that a state revolving fund has been set up at the national level to fund flood mitigation. Section 210 would require FEMA to give priority to flood mitigation activities that provide benefits to an entire floodplain or community, or to a portion of such a community. <4.8. Increased Cost of Compliance (ICC) Coverage> The NFIP requires most policyholders to purchase ICC coverage, which is in effect a separate insurance policy to offset the expense of complying with more rigorous building code standards when local ordinances require them to do so. This ICC coverage is authorized in law, with rates for the coverage as well as how much can be paid out for claims, set by FEMA. The amount that can be charged for ICC coverage is capped in law at $75 per year; currently, ICC premiums vary between $4 and $70. ICC coverage provides an amount up to $30,000 in payments for certain eligible expenses. For example, ICC claims payments may be used toward the costs of elevating, demolishing, relocating, or flood-proofing non-residential buildings, or any combination of these actions. FEMA's current policy is that the payment on the building claim plus the ICC claim cannot exceed the statutory maximum payment of $250,000 for residential structures or $500,000 for non-residential structures. According to ICC data, elevation is the most common form of mitigation. Approximately 61% of all ICC claims closed with payment are single family residential claims involving compensation for elevation of a structure to or above the Base Flood Elevation (BFE). Although the cost of elevating a structure depends on the type of building and elevation requirement, the average cost of elevating an existing property has been estimated at $33,239 to $91,732, and suggestions have been made for years that the amount of ICC coverage should be raised. <4.8.1. Provisions Related to Increased Cost of Compliance Coverage in H.R. 3167> Section 301 would increase the amount of ICC coverage to $60,000, and would exempt the ICC payment amount from the maximum payout of an NFIP policy. This section would also make ICC coverage available to properties identified by FEMA as priorities for mitigation activities before the occurrence of damage. This may allow policyholders to claim ICC coverage in certain circumstances to mitigate their property before a flood, rather than waiting until after they had been flooded. Section 301 would also allow policyholders to use ICC coverage for alternative mitigation methods to reduce flood risk for residential buildings that cannot be elevated due to their structural characteristics, for pre-disaster mitigation projects, and for costs associated with the purchase, clearing, and stabilization of property that is part of an acquisition or relocation program that complies with the provisions set out in Section 301. <4.8.2. Provisions Related to Increased Cost of Compliance Coverage in S. 2187> Section 202 would increase ICC coverage to $60,000 and would exempt ICC payment amounts from the maximum payout of an NFIP policy. This section would also make ICC coverage available to properties identified by FEMA as priorities for mitigation activities before the occurrence of damage, which may allow policyholders to claim ICC coverage in certain circumstances to mitigate their property before a flood, rather than waiting until after they had been flooded. Section 202 would also allow policyholders to use ICC coverage for alternative mitigation methods to reduce flood risk for residential buildings that cannot be elevated due to their structural characteristics, for pre-disaster mitigation projects, and for costs associated with the purchase, clearing, and stabilization of property that is part of an acquisition or relocation program that complies with the provisions set out in this section. Section 202 would make ICC coverage available to all NFIP policyholders, in and out of SFHAs, if the community has established land use and control measures for the area in which the property is located. <4.9. NFIP Modernization and Administrative Reform> Only the disclosure requirements and requirements for studies of the NFIP will be discussed in this report. Table 1 identifies all of the provisions in H.R. 3167 and S. 2187 which are related to administrative reform. Although some individual states require real estate transactions to be accompanied by a disclosure of information pertaining to flood or other hazards, there is currently no federal requirement for sellers to disclose flood risk and flood history. Property owners may not have knowledge of the entire past flood history of their property. Under the mandatory purchase requirement, lenders are only required to inform buyers of flood hazards before closing on the loan. The primary purpose of this disclosure is to notify properties located within a SFHA that flood insurance is required as a condition of the loan. This disclosure, late in the process of buying a property, may mean that the buyer has put down money or otherwise committed to purchasing the property. Lenders are not necessarily required to disclose the full flood history of a property, but only the requirement to purchase flood insurance based on its location in a SFHA. <4.9.1. Provisions Related to Disclosure in H.R. 3167> Section 404 would require FEMA to provide information on flood insurance program coverage, flood damage assessments, and payment of claims on a property to homeowners, with an additional requirement to provide information on whether the property owner may be required to purchase flood insurance due to a previous receipt of federal disaster assistance. This section would also require FEMA to provide information on the number and dollar value of flood insurance claims filed for a property over the life of the property, and other available information to characterize the true flood risk of the property, within 14 days of a request for such information by a buyer under contract for purchase of a property. This disclosure requirement may affect properties with a flood history during real estate transactions by reducing the likelihood of the sale of the property or reducing its value. <4.9.2. Provisions Related to Disclosure in S. 2187> Section 417 would require that no new flood insurance coverage may be provided after September 30, 2022, unless the relevant public body has imposed, by statute or regulation, a duty on any seller or lessor of improved real estate to provide to any purchaser or lessee a property flood hazard disclosure. The same requirements would apply to lessors of a rental property with a lease of 30 days or longer. This disclosure requirement may affect properties with a flood history during real estate transactions by reducing the likelihood of the sale of the property or reducing its value, or causing prospective lessors to reject the lease. However, this provision could also encourage a higher take-up of contents coverage by renters. <4.9.3. Provisions Related to Studies of the NFIP in H.R. 3167232> Section 403would require FEMA to provide for an independent actuarial study of the financial position of the NFIP to be conducted annually and submit a report to Congress describing the results of the study. <4.9.4. Provisions Related to Studies of the NFIP in S. 2187233> Section 105 would require FEMA to conduct a study by September 30 of the second full fiscal year after enactment on the benefits and feasibility of offering coverage for business interruption losses caused by floods in NFIP policies. Section 402 would require FEMA to conduct a study within one year of enactment on the consequences of street-raising on flood insurance coverage for affected properties, including the cost implications for the property owner. The findings of this study would be particularly relevant for policyholders with ground floor residential and business properties which could become basement properties if the adjacent street were to be raised. Section 405 would require GAO to submit a report not later than two years after enactment on any fines or other penalties imposed by FEMA for the underpayment of claims by WYO companies. <4.10. Future Flood Losses> In the future, and in the context of land development, improved flood mapping, and climate change, an increased number of properties are likely to be identified as at risk of flooding. A 2013 report on the impact of climate change and population growth on the NFIP concluded that by 2100, the 1% annual-chance fluvial floodplain area is projected to grow nationally by about 45%. The study found that no significant decreases in floodplain depth or area are anticipated for any region of the nation at the median estimates; median flows may increase even in areas that are expected to become drier on average. In the populated areas of most interest to the NFIP, about 30% of these increases may be attributed to increased runoff caused by the increase in impermeable land surfaces caused by population growth and development, while the remaining 70% represents the influence of climate change. The implication of this is that, on a national basis, approximately 13.5% of the growth in the fluvial SFHA is likely to be due to population growth and would occur even without any climate change. NFIP models currently do not include pluvial flood risk, but are to include such risks in premium rates with the introduction of Risk Rating 2.0. The National Academies of Science has warned that a warming climate will likely increase the risk of pluvial flooding, as a warmer atmosphere holds more moisture, increasing the frequency and/or intensity of heavy rainfall events. The number and intensity of heavy precipitation events, as well as precipitation totals, have increased across most of the United States since 1950. The largest increases in heavy precipitation events have occurred in the Midwest and Northeast, and such events are predicted to increase in those areas by 40% by 2100. For the coastal environment, the typical increase in the coastal SFHA is projected to be about 55% by 2100, with model results indicating increased variability in expected total losses in any given year, which may be greater than the NFIP's current funding borrowing structure accommodates. Increased flooding is not only a concern for the future; many areas are already experiencing 'nuisance flooding' or 'sunny day flooding' from minor tidal flooding or rainstorms. The frequency and duration of minor tidal flooding has increased significantly in recent decades along many U.S. coasts. While not catastrophic, such flooding can significantly disrupt normal commerce and activity, and the seemingly minor inconveniences and local economic losses from each event can have a cumulative effect that results in considerable hidden costs to residents and businesses. Flood costs can be considerable even in years without a named storm or event. For example, storms like the South Carolina floods in 2015 and the Louisiana floods in 2016 have demonstrated the scale of losses possible from heavy rainfall. In addition, Hurricanes Harvey (2017) and Florence (2018) showed that losses from pluvial flooding can rival or exceed coastal flood losses in a hurricane. <4.10.1. Flooding Outside the SFHA> Currently the NFIP distinguishes between the SFHA (1%-annual-chance-floodplain) and the area beyond the SFHA, yet approximately 33% of NFIP claims are for properties outside SFHAs. Recent floods have significantly affected properties which were not mapped in SFHAs. The SFHA boundary can create a false belief that flood risk changes abruptly at the line, and that properties outside the SFHA are safe. In reality, flood risk varies both inside and outside the SFHA. Although the introduction of Risk Rating 2.0 will eliminate the "in/out" line for premium rates, the SHFA boundary will continue to be used for the mandatory purchase requirement. Future flood maps may also need to find a way to communicate temporal variation in flood risk. Under Risk Rating 2.0, FIRMs will continue to be used for floodplain management; however, FIRMs represent a 'snapshot' of the flood risk at the time of mapping. They are not an indication of the flood risk decades into the future and thus are not necessarily the best guide for future land-use decisions. For example, New York City and FEMA have developed a new map product to be used for planning and building purposes to better account for future flood risk due to climate change and sea level rise. This map will not be used to price flood insurance premiums. <4.10.2. Future Catastrophic Events> Floodplains and coastal areas across the United States will likely continue to be inhabited and sustain damages from floods, some of which may be catastrophic. Flooding is different from many other risks in that the distribution of potential losses is skewed in a way that certain low-frequency, high-magnitude events may have the potential to exceed the aggregate capacity of private insurers and render the market insolvent. A large pool of flood risk does not result in a normally distributed portfolio of risks over the long run. Flood risks are highly correlated: when a large flood occurs, many geographically adjacent properties are affected. FEMA's report to Congress on privatization of the NFIP concluded that it is difficult to imagine a practical system of flood insurance in which there is not some level of government involvement in the flood risk financing chain. They argued that when low-frequency, high-magnitude events occur with a portfolio of highly correlated risks, the government will ultimately play a role in paying for the economic costs associated with a catastrophic flood, whether or not it chooses to underwrite the risk. Although the NFIP has always had borrowing authority from Congress, a robust approach has not been developed by which the NFIP can repay catastrophic flood losses, although the program has taken steps in this direction with the reserve fund assessment, the HFIAA surcharge, and the purchase of reinsurance. The National Research Council affordability report considered the option of forgiving all or part of the NFIP debt within a larger affordability context. In this report, the NRC suggested that after forgiving all or part of the NFIP debt, Congress could designate the Treasury as reinsurer for the NFIP as was the case in the original legislation. The NRC suggested that Congress could, for example, explicitly state that when the total annual losses in the NFIP exceeded some designated threshold (for example, $2 billion to $6 billion, perhaps on the basis of the average of non-catastrophic historical claims years), the Treasury could provide funds for the NFIP to honor all of the claims. The funds could be provided through the Disaster Relief Fund, and, if needed, by an emergency supplemental appropriation. Taken together, the NRC argued, those two actions could result in lower NFIP premiums, enhance affordability, and in turn lead to less spending on disaster assistance. Congress would incur occasional costs by designating the Treasury as the source of funds for payment of claims above the defined threshold in high-loss years but would not need to draw on the Treasury each year to provide assistance to policyholders who face unaffordable premiums. The American Academy of Actuaries (AAA) argued that neither private insurers nor government entities can fully absorb any level of catastrophic loss and continue to operate. It noted that private insurance systems have a trigger for socializing risk of extreme events, such as a solvency standard based on a particular event (for example, the 200-year flood), beyond which mechanisms like guaranty funds pay losses. In the case of the NFIP, the premiums charged to policyholders would require a volatility loading large enough to service and eventually repay any debt generated by catastrophic debts over a multi-decadal time horizon. The AAA report suggested that prospectively addressing this requires recognition that there is a maximum amount of short-term loss that can be fully funded by NFIP revenue. One approach would be to establish a sufficiency standard for the loss level that the NFIP revenue would be expected to fund fully. For example, this could be expressed as a maximum loss amount per catastrophic event, determined on the basis of an acceptable annual probability, or a maximum aggregate amount of annual loss. Any losses exceeding the defined sufficiency standard incurred by the NFIP could be agreed to be funded publicly. The AAA report argued that private insurers are held to an analogous standard, after which state guarantee funds reimburse policyholders for claims from insolvent private insurers using funds from assessments paid by solvent insurers. It concluded that adopting an explicit standard of this type for the NFIP would provide clarity as to what its funding sources should be and give taxpayers an understanding of when public contributions to NFIP finances are appropriate. The NFIP currently has no financial structure in place, other than borrowing from the Treasury, to guarantee it can pay claims from a catastrophic loss year. To ensure the future financial solvency of the NFIP after catastrophic events, FEMA has suggested that a systematic analysis may consider the costs and benefits of using the reserve fund, borrowing authority, reinsurance, other forms of risk transfer, and perhaps a Treasury backstop at some catastrophic loss level. It may also include a metric for communicating the resiliency of the system to different levels of catastrophic events, in order to define the scenarios that the system can sustain and those it cannot. <5. Concluding Comments> GAO concluded that the sequence of actions taken by Congress in NFIP reform is important; for example, requiring full-risk rates for all policyholders and expanding the mandatory purchase requirement would create affordability concerns which would warrant having an affordability assistance program already in place. According to GAO, when addressing barriers to private sector involvement, it would be important to protect NFIP's flood resilience activities at the same time; and addressing the outstanding debt would be best accompanied by premium rate reform to help reduce the likelihood of a recurrence of another unpayable debt buildup. As Congress considers a long-term reauthorization of the NFIP, a central question may be who should bear the costs of floodplain occupancy in the future. The NRC study on affordability concluded that the costs of floods can be borne in three possible ways, or in some combination of them. The first scenario is that individual policyholders (whether NFIP or private) bear location cost in the form of insurance premiums paid and damages falling within policy deductible amounts. The second possibility is that the federal taxpayers bear floodplain location costs in several possible ways: if the federal government develops a premium assistance program, or makes up for NFIP premium revenue shortfalls, or pays for pre-flood mitigation, or makes post-flood disaster assistance payments to individual households. In the third scenario, property owners and other floodplain or coastal zone inhabitants bear the costs for losses that are uninsured or otherwise uncompensated. While there are many ways to finance flood risk, the majority of the cost will likely ultimately be allocated across these three stakeholder groups: policyholders (the insured), taxpayers, and the uninsured, requiring potentially difficult policy choices by Congress.

The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA; 42 U.S.C. §4001 et seq.), and was most recently reauthorized until September 30, 2020 ( P.L. 116-93 ). The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP also engages in many "non-insurance" activities in the public interest: it disseminates flood risk information through flood maps, requires community land use and building code standards, and offers grants and incentive programs for household- and community-level investments in flood risk reduction. Unless reauthorized or amended by Congress, the following will occur on September 30, 2020: (1) the authority to provide new flood insurance contracts will expire and (2) the authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. Issues that Congress may consider in the context of reauthorization include (1) NFIP solvency and debt; (2) premium rates and surcharges; (3) affordability of flood insurance; (4) increasing participation in the NFIP; (5) the role of private insurance and barriers to private sector involvement; (6) non-insurance functions of the NFIP such as floodplain mapping and flood mitigation; and (7) future flood risks, including future catastrophic events. The Federal Emergency Management Agency (FEMA) has identified the need to increase flood insurance coverage across the nation as a major priority for the current reauthorization and beyond, with a goal of doubling flood insurance coverage by 2023 through the increased sale of both NFIP and private policies. The NFIP's premium rates do not reflect the full risk of loss because of various legislative requirements, which may exacerbate the program's fiscal exposure. The categories of properties which pay less than the full risk-based rate are determined by the date when the structure was built relative to the date of adoption of a Flood Insurance Rate Map, rather than the flood risk or the ability of the policyholder to pay. A reformed NFIP rate structure could have the effect of encouraging more private insurers to enter the primary flood market; however, full risk-based premiums could be unaffordable for some households. Although the NFIP has always had borrowing authority from Congress, an approach has not been developed by which the NFIP can repay catastrophic flood losses. To ensure the future financial solvency of the NFIP after catastrophic events, FEMA has suggested that a systematic analysis may consider the costs and benefits of using the reserve fund, borrowing authority, reinsurance, other forms of risk transfer, and perhaps a Treasury backstop at some catastrophic loss level. The House Financial Services Committee reported a bill for the long-term reauthorization of the NFIP, the National Flood Insurance Program Reauthorization Act of 2019 ( H.R. 3167 ), on October 28, 2019. One bill has been introduced in the Senate, on July 18, 2019, to reauthorize the expiring provisions of the NFIP: the National Flood Insurance Program Reauthorization and Reform Act of 2019 ( S. 2187 ), with a House companion bill ( H.R. 3872 ) introduced on July 22, 2019. This report identifies issues for congressional consideration as part of the possible reauthorization of the NFIP and outlines selected provisions that relate to the issues listed above in the bills to reauthorize the NFIP in the 116 th Congress ( H.R. 3167 and S. 2187 ).

crs_R46204

crs_R46204_0

<1. Introduction> Multiple decades of scientific studies find that human activities induce global climate change by emitting greenhouse gases (GHGs) from fuel combustion, certain industries, deforestation, and other activities. Scientists researched and assessed the science of GHG-induced climate change for more than 150 years before government policymakers around the world agreed to cooperate to consider how to address its risks to humans and ecosystems. Following several international scientific meetings in 1985-1987, governments decided to establish the Intergovernmental Panel on Climate Change (IPCC), under the auspices of the United Nations Environment Programme and the World Meteorological Organization, to provide them with assessments of climate change science, projected social and economic impacts, and potential response strategies. In 1989, the U.N. General Assembly provided a mandate to negotiate what became, in 1992, the U.N. Framework Convention on Climate Change (UNFCCC). The UNFCCC has been the primary multilateral vehicle since 1992 for international cooperation among national governments to address GHG-induced climate change. While the UNFCCC is a focal point for national governments, its periphery is one forum, among others, for information sharing, collaboration, and activism also for subnational governments, financial institutions, the private sector, and nongovernmental organizations. This report is not describing these other, increasingly important aspects of international cooperation on climate change. This report summaries the content of the UNFCCC and its two subsidiary international treaties: the 1997 Kyoto Protocol (KP) and the 2015 Paris Agreement (PA). It also describes the existing guidelines to implement the PA, known as the 2018 Katowice Climate Package. The report highlights information relevant to the 2019 climate change conference, known as COP25. This report is not comprehensive. A number of other CRS reports provide greater detail and nuance on these and other aspects of the international climate change negotiations and cooperation. Some are listed at the end of this report. <2. The U.N. Framework Convention on Climate Change> The UNFCCC has been the primary multilateral vehicle since 1992 for international cooperation to address GHG-induced climate change. As of January 1, 2020, there are 197 Parties to the UNFCCC that have ratified, accepted, or acceded to the international treaty, including the United States. There is broad agreement that participation of all countries would be necessary to achieve the objective of the UNFCCC, which is stated as follows: to stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system, in a time frame which allows ecosystems to adapt naturally and enables sustainable development. Achieving the objective would require both abatement of GHG emissions and facilitation of adaptation to adverse impacts of climate change in order to enable sustainable development. Stabilizing GHG concentrations in the atmosphere requires that net GHG emissions the balance of "gross" emissions of GHG to the atmosphere and removals of GHG from the atmosphere reach "net zero" or "carbon neutrality." Removals and sequestration can occur by photosynthesis (vegetation, sea algae) or through advanced technologies. Some increased level of removals, or "sinks," could allow for some amount of human-related GHG emissions to continue. The United States and other Parties to the UNFCCC agreed to this objective when they ratified the treaty. As a framework convention, this international 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 for any Party. The UNFCCC was adopted in 1992 and entered into force in 1994. The UNFCCC's governing body, the Conference of the Parties (COP), met in its 25 th session (COP25) from December 2 to 13, 2019, in Madrid, Spain. Initially, Chilean President Sebasti n Pi era stepped forward to host COP25 in place of Brazil following the election of President Jair Bolsonaro. Pi era sought to underscore his efforts to address climate change but ultimately decided that the summit should take place elsewhere due to mass protests in Chile. All Parties to the UNFCCC, including the United States, have a set of common obligations under the treaty: to inventory, report, and mitigate their human-related GHG emissions, including emissions and removals from land uses; to cooperate in preparing to adapt to climate change; and to assess and review, through the COP, the effective implementation of the UNFCCC, including the commitments therein. Certain obligations are additional or more specific for the countries that had higher incomes in 1992, and those countries are listed in Annex I of the Agreement. They are commonly referred to as Annex I Parties. All others are non-Annex I Parties. These additional or more specific obligations included more frequent reporting and providing financing and technology transfers, among others. The bifurcation of Parties and commitments has been a major point of contention and, some would argue, delay in negotiation and implementation of the climate change agreements (see text box). The UNFCCC and its subsidiary agreements do not define the terms developing country or developed country . In the 1990s, the Annex I Parties anticipated that developing country Parties would "graduate" into specific commitments and become donor countries as their incomes and emissions grew. As discussed later, related disagreements directly contributed to U.S. nonparticipation in the KP, the collapse of negotiations in Copenhagen in 2009, and the withdrawal or decision of some Parties not to adopt GHG abatement targets in the second period of the KP from 2013 to 2020. <2.1. The Copenhagen Accord> In Copenhagen at COP15 in 2009, the COP was unable to adopt an agreement among all Parties as Bolivia, Cuba, Peru, and Venezuela opposed the text. The decision of the COP included a nonbinding political statement, the Copenhagen Accord, which began a turn toward more explicit commitments by non-Annex I Parties to GHG mitigation under the UNFCCC. The Copenhagen Accord specified that the Annex I Parties would implement quantified economy-wide GHG targets for 2020 in an agreed reporting format. Non-Annex I Parties to the UNFCCC would commit to implement mitigation actions to be submitted in an alternative agreed format. At least 43 Annex I Parties (15 Parties, including the United States, plus the EU-28 jointly submitting a pledge) and 47 non-Annex I Parties had submitted nonbinding pledges. While most countries participated, the pledges remained bifurcated by both the type of action and the reporting requirements. Among other differences, Annex I Parties were to submit quantified economy-wide GHG emissions targets for 2020 relative to a baseyear, while non-Annex I Parties were to submit "nationally appropriate mitigation actions" with no associated dates. The submissions would be compiled separately by the Secretariat of the UNFCCC. <3. The Kyoto Protocol (KP)> The first subsidiary agreement to the UNFCCC was the 1997 KP, which entered into force in 2005. The United States signed but did not ratify the KP and so is not a Party to it. The KP established legally binding targets for 37 high-income countries and the European Union (EU) to reduce their GHG emissions on average by 5% below 1990 levels during 2009-2012. It precluded GHG mitigation obligations for developing countries. All Parties with the Quantified Emissions Limitation and Reduction Obligations (QELROS) under the KP (i.e., GHG targets) were judged in compliance after the end of the first commitment period of 2009-2012. The domestic GHG emissions of some Parties were higher than their targets, but as envisioned under the KP, Parties could fulfil their obligations by acquiring emission reduction credits through the three market mechanisms of the treaty: the Clean Development Mechanism, Joint Implementation, and emissions trading. Most of the high-income Parties mostly the EU members and other European nations took on further GHG reduction targets for 2013-2020. The Secretariat's assessment of the emissions of the KP Parties with QELROS, as of November 2018, found: Annex I Parties are progressing towards their 2020 targets but gaps remain. Individual Parties have made varying progress towards their 2020 targets: most Parties' emission levels are already below their 2020 targets; some Parties must make further efforts to meet their targets by strengthening implementation of their existing [policies and measures]; and using units from MBMs [market-based mechanisms], if needed, and the contribution from LULUCF [land use, land use change, and forestry], if applicable; other Parties' emissions remained above their base-year level, owing mainly to inadequacy of domestic [policies and measures], high marginal mitigation costs or energy system constraints they indicated that the use of units from MBMs and, if applicable, the contribution from LULUCF are expected to make a sizable contribution towards achieving their targets. The United States did not join the KP, and Canada withdrew before the end of the first commitment period. At least in part, their reasons for disengaging from the KP included the non-Annex I Parties' objections to acceding to quantified GHG reduction commitments. While negotiating the second KP commitment period, Australia, Japan, and other Parties also decided to seek an agreement that included commitments on the same terms from all Parties. This led to a mandate, negotiated at the 2011 COP17 in Durban, South Africa, to develop a protocol, another legal instrument, or an agreed outcome with legal force under the UNFCCC applicable to all Parties no later than 2015. The Durban Mandate resulted in the 2015 PA, discussed below. <4. The Paris Agreement (PA)> The PA is the second major subsidiary agreement under the UNFCCC. The PA is to eventually replace the KP as the primary subsidiary vehicle for process and actions under the UNFCCC. Obama Administration officials stated that the PA is not a treaty requiring Senate advice and consent to ratification. The U.N. Climate Conference in Madrid included COP25 and the second session of the "Conference of the Parties serving as the meeting of the Parties to the Paris Agreement" (CMA2), along with meetings of other related bodies. Though the United States has given notice of withdrawal from the PA, its withdrawal is to take effect no earlier than November 4, 2020. Until then, the United States may participate as a Party. After withdrawal takes effect, the United States may participate in a more limited way as an Observer State. The PA was intended to be legally binding on its Parties, though not all provisions in it are mandatory. The PA requires that Parties submit nonbinding pledges, in NDCs, to mitigate their GHG emissions and enhance removals. NDCs may also articulate goals to adapt to climate change and cooperate toward these ends, including mobilization of financial and other support. Some provisions are binding, such as those regarding reporting and review, while others are recommendations or collective commitments to which it would be difficult to hold an individual Party accountable. Key aspects of the agreement include: Temperature goal. The PA defines a collective, long-term objective to hold the GHG-induced increase in temperature to well below 2 o Celsius (C) and to pursue efforts to limit the temperature increase to 1.5 o C above the pre-industrial level. As discussed below, a periodic "Global Stocktake" is to assess progress toward the goals. Single GHG mitigation framework. The PA establishes a process, with a ratchet mechanism in five-year increments, for all countries to set and achieve GHG emission mitigation pledges until the long-term goal is met. For the first time under the UNFCCC, all Parties participate in a common framework with common guidance, though some Parties are allowed flexibility in line with their capacities. Accountability framework. To promote compliance, the PA balances accountability to build and maintain trust (if not certainty) with the potential for public and international pressure ("name-and-shame"). Also, the PA establishes a compliance mechanism designed to use expert-based and facilitative review and response rather than punitive measures. Many Parties and observers are to closely monitor the effectiveness of this strategy. Adaptation. The PA also requires "as appropriate" that Parties prepare and communicate their plans to adapt to climate change. Parties agreed that adaptation communications would be recorded in a public registry. Collective financial obligation. The PA reiterates the collective obligation in the UNFCCC for developed country Parties to provide financial resources public and private to assist developing country Parties with mitigation and adaptation efforts. It urges scaling up from past financing. The Parties agreed to set, prior to their 2025 meeting, a new collective quantified goal for mobilizing financial resources of not less than $100 billion annually to assist developing country Parties. <4.1. The Katowice Package> At COP24/CMA1 in Katowice, Poland, in 2018, the PA Parties agreed to many of the guidelines and processes so that Parties may implement the PA as intended. Despite these agreements, Parties did not resolve several issues of significance. Negotiations on these issues will likely continue at COP26/CMA3 in Glasgow, Scotland, in November 2020. The Katowice Package, as it is often called, clarified some ambiguities in the PA that were considered important to U.S. interests, including guidelines for Parties to report their NDCs, and the Enhanced Transparency Framework (ETF) with guidelines and formats to allow a Party's NDC to be clearly understood. The Katowice Package thereby supports the effectiveness of the consultative compliance mechanism of the PA (discussed below). Below are brief summaries of key aspects of the Katowice Package. <4.1.1. NDC Guidelines> The Parties to the PA agreed to new guidelines on how to report NDCs. NDCs are to be updated every five years and "will" represent a progress in ambition to abate GHG emissions beyond the previous NDC. While Parties agreed that they "should" use a prescribed format for communicating NDCs, the details are still to be worked out. There is not agreement yet on "common timeframes" for NDCs whether NDCs should look five or 10 years into the future. Those Parties that submitted NDCs with time frames up to 2025 (including the United States) must communicate "new" NDCs by 2020. Those Parties with NDCs with time frames up to 2030 must communicate or update their NDC in 2020. Were the United States to remain in the PA, it would be required to submit a new NDC in 2020. The content of NDCs continues to be nationally determined and nonbinding, but it should reflect what a Party intends to achieve. The guidelines apply to NDCs submitted in 2025, but Parties are invited to use an agreed format in updating their NDCs in 2020. The guidelines also address how to report adaptation measures for Parties that wish to include them in their NDCs. <4.1.2. Voluntary Cooperation and Market Mechanisms> The PA provides in Article 6 for Parties to choose voluntary cooperation with other Parties to implement their NDCs. The purpose is to allow "higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity" (Article 6.1). This article, in other words, allows the use of market mechanisms to achieve GHG mitigation at the lowest possible cost and in concert with sustainable development. This, in theory, can induce Parties to take on stronger GHG mitigation commitments while ensuring that the GHG mitigation constitutes real emission reductions. The debate about the purpose for voluntary cooperation and market mechanisms and the rules by which they are put into operation was a major area of work undecided in Katowice. <4.1.3. Adaptation Reporting> Parties agreed to provide information on adaptation priorities, needs, plans, and actions in new "adaptation communications," as well as through the NDCs. Parties agreed in Katowice that the Adaptation Fund, originally established under the 1997 Kyoto Protocol, will serve the PA. It will be one of the operating entities to the financial mechanism of the PA in addition to the Global Environment Facility and the Green Climate Fund, discussed below <4.1.4. Global Stocktake> As prescribed by the PA, a Global Stocktake is to be held every five years. Parties agreed that the Global Stocktake will consider progress toward the UNFCCC's objective and the PA's aims overall. It will use best available science and will cover mitigation, adaptation, financial flows, equity, and means of implementation and support. It will not examine the situations of individual Parties. Parties decided that the next Global Stocktake would be held in 2023. A number of decisions were reached regarding the Global Stocktake, including the information it is expected to receive from the ETF (discussed below) and other sources from PA processes. Input may also come from nonstate actors, including non-Parties, localities and subnational governments, the business community, and all parts of civil society. <4.1.5. The Enhanced Technology Framework (ETF)> Setting strong requirements for the transparency of each Party's efforts has been a priority of the United States since the negotiation of the UNFCCC. ETF guidelines specify the information that Parties must report with their NDCs. That information is expected to support a "facilitative multilateral consideration of progress," along with biennial transparency reports. Methods for GHG emission estimation and other technical issues will continue to rely on the IPCC's technical advice. According to the U.N. Climate Change Secretariat, all Parties must provide information on the following, as applicable to their NDCs: Quantifiable information on the reference point for GHG mitigation actions or targets; Time frame and/or periods (i.e., the start and end dates) for implementation; Scope and coverage of the NDC (i.e., the quantitative target, which sources and gases are covered); National planning processes for developing the NDC and, if available, implementation plans taking into account national circumstances; All assumptions and methodological approaches; How the Party determines that its NDC is fair and ambitious; and How the NDC contributes toward achieving the objective of the UNFCCC. The guidelines are to facilitate review and, under the committee (below), consultation intended to encourage compliance with commitments. Whether a Party supplies a timely NDC and reports its NDC according to the guidelines is subject to review by a technical group of experts. The adequacy and appropriateness of Parties' NDCs are not subject to review under the ETF. Flexibility in reporting under the PA is afforded only for those provisions in the modalities, procedures, and guidelines that are specified to allow flexibility. These provisions include (1) the frequency and level of details of reporting, (2) the modalities of the review, and (3) the modalities of the facilitative multilateral consideration of progress. A Party may determine whether to make use of flexibilities. That said, using the flexibilities is not without checks in the review processes. A developing country that claims inadequate capacity to meet the guidelines and elects to apply a flexibility must make clear in its Biennial Transparency Report that it has applied a flexibility. It must explain the capacity constraint, how it intends to address the constraint, and its intended time frame to make improvements to the constraint(s). The technical review teams may not review these flexibilities. <4.1.6. Committee> The Parties established a 12-member committee to "facilitate implementation" of the PA. The committee is intended to support Parties' efforts to meet their obligations under the PA as a soft, pro-compliance mechanism. The PA's compliance processes are consultative, not punitive. The committee may initiate a "consideration" should a Party not submit or update its NDC as required or provide mandatory communications. <4.2. Financing> In 2009 and 2010, developed countries pledged collectively to mobilize US$100 billion per year by 2020, from public and private sources, to support mitigation and adaptation activities in low-income countries. COP decision 1/CP.21 to adopt the PA (not the PA itself) stated that developed countries intend to continue their existing collective mobilization goal through 2025. Prior to 2025, the Parties shall set a new collective quantified goal for financial resources from a floor of US$100 billion per year. The goal should take into account the needs and priorities of developing countries. Parties may take into consideration the information from the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts. The financial pledges are not an enforceable commitment by developed country Parties. Many stakeholders argue, nonetheless, that the resources are essential to help low-income countries contribute to GHG abatement and adaptation in the context of sustainable development. The financial flows are also important politically in part to build confidence in the functionality of the UNFCCC and PA and to build trust between the lower and higher income economies. At COP24 and since then, some countries made pledges toward this goal. Some developing country Parties submitted NDCs with GHG mitigation targets they would achieve unconditionally and more ambitious targets that they would achieve with adequate financial and technical support. The Green Climate Fund (GCF) was proposed, during the 2009 COP in Copenhagen to be a new international financial institution connected to the UNFCCC. The fund and its design was agreed during the 2011 COP in Durban, South Africa. The GCF was made operational in 2014. The GCF aims to assist lower-income countries in their efforts to combat climate change through the provision of grants and other concessional financing for mitigation and adaptation projects, programs, policies, and activities. The GCF is capitalized by contributions from donor countries and other sources, potentially including innovative mechanisms and the private sector. The GCF officially opened for capitalization at the U.N. Climate Summit in September 2014. The GCF's initial resource mobilization lasted from 2015 to 2018. As of the most recent published reporting (April 30, 2019), the GCF had raised over $10.2 billion in signed pledges from 48 countries/regions/cities during the resource mobilization period. The GCF board recently approved 10 new projects, increasing the GCF portfolio to 111 projects and increasing the level of related GCF funding to over $5.2 billion in 99 developing countries. On October 25, 2019, during the Pledging Conference for GCF's First Replenishment in Paris, 27 countries made pledges totaling $9.8 billion to cover the next four years of the fund. Parties agreed in Katowice that the Adaptation Fund, which was established under the KP, will serve the PA, in addition to the Global Environmental Facility and the GCF. Thus far, the Adaptation Fund has been financed by a share of the proceeds of the emissions trading mechanisms under the KP, as well as by voluntary contributions. With a transition from the KP to the PA, arrangements for the flow of funds are not completely agreed upon. Parties agreed that a share of the proceeds from one of the new cooperative mechanisms will continue to provide a share of its proceeds to the Adaptation Fund. A number of Parties oppose proposals particularly from Parties that are relatively small and perceived to be especially vulnerable to climate change to use the other two market mechanisms under Article 6 to finance the Adaptation Fund. Beginning in 2020, developed countries are to submit biennial communications on expected levels of climate finance. The communications are to contain both quantitative and qualitative information. The biennial communications and Secretariat synthesis of the information therein is to inform the Global Stocktakes. Starting in 2020, the Standing Committee on Finance is to report on the determination of support needs of developing countries to implement the UNFCCC and the PA. The committee is also to consider financial needs consistent with long-term low-emissions and sustainable development pathways. <4.3. Technology> The Technology Framework of the PA is to provide overall guidance to the Technology Mechanism that was established under the UNFCCC. The purpose of both is to foster sharing of information and cooperation to develop new, low-emission technologies and technologies to increase resilience to climate change. Supporters viewed the technology mechanisms as important in transforming the set of technologies available, and the economies that use them, as a means to meet the objective of the UNFCCC. The Technology Framework is to have five focus areas: (1) innovation, (2) implementation, (3) enabling environments and capacity-building, (4) collaboration and stakeholder engagement, and (5) support. The Parties intend that the framework should facilitate the active participation of all relevant stakeholders and take into account sustainable development, gender, the special circumstances of the least developed countries and small island developing states, and the enhancement of capacities of indigenous people and "endogenous technologies." The Executive Committee of the Technology Framework is expected to report on the progress and challenges of its work in joint annual reports with the Climate Technology Centre established under the UNFCCC. <5. Related CRS Products> CRS Report R44609, Climate Change: Frequently Asked Questions About the 2015 Paris Agreement , by Jane A. Leggett and Richard K. Lattanzio CRS In Focus IF10239, President Obama Pledges Greenhouse Gas Reduction Targets as Contribution to 2015 Global Climate Change Deal , by Jane A. Leggett CRS Report R44092, Greenhouse Gas Pledges by Parties to the United Nations Framework Convention on Climate Change , by Jane A. Leggett CRS In Focus IF10668, Potential Implications of U.S. Withdrawal from the Paris Agreement on Climate Change , by Jane A. Leggett CRS Report R44761, Withdrawal from International Agreements: Legal Framework, the Paris Agreement, and the Iran Nuclear Agreement , by Stephen P. Mulligan CRS Legal Sidebar WSLG1836, Constitutional Limits on States' Efforts to "Uphold" the Paris Agreement , by Stephen P. Mulligan CRS Report R41889, International Climate Change Financing: The Green Climate Fund (GCF) , by Richard K. Lattanzio CRS Report R41845, The Global Climate Change Initiative (GCCI): Budget Authority and Request, FY2010-FY2016 , by Richard K. Lattanzio CRS In Focus IF10248, China's "Intended Nationally Determined Contribution" to Addressing Climate Change in 2020 and Beyond , by Jane A. Leggett CRS In Focus IF10296, New Climate Change Joint Announcement by China and the United States , by Jane A. Leggett CRS Report R40001, A U.S.-Centric Chronology of the United Nations Framework Convention on Climate Change , by Jane A. Leggett CRS In Focus IF10904, Potential Hydrofluorocarbon Phase Down: Issues for Congress , by Jane A. Leggett

The United Nations Framework Convention on Climate Change (UNFCCC) has been the principle forum for cooperation among nations on greenhouse gas (GHG)-induced climate change since its adoption in 1992. Its objective is "to stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system, in a time frame which allows ecosystems to adapt naturally and enables sustainable development." Stabilizing GHG concentrations in the atmosphere requires that the balance of "gross" emissions of GHG minus the removals of GHG from the atmosphere reach "net zero." Two principles agreed in the UNFCCC are that (1) Parties should act "on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities" and (2) developed country Parties should take the lead in combating climate change. The bifurcation of responsibilities among Parties into developed (Annex I) and developing countries has been a major point of contention. Annex I Parties, including the United States, had stronger obligations, such as more rigorous reporting and reviews. A subset listed in Annex II, including the United States, committed to provide agreed financial resources and technology transfers. The commitments are qualitative and collective, not binding on individual Parties. The first subsidiary agreement to the UNFCCC was the 1997 Kyoto Protocol (KP), which entered into force in 2005. The United States signed but did not ratify the KP and so is not a Party. The developed Parties agreed to reduce GHG emissions by 5% below their 1990 levels, with different targets for each Party. In 2009, a political declaration, the Copenhagen Accord, led to explicit pledges from many Parties to mitigate GHG, though they remained bifurcated as Annex I and non-Annex I (i.e., developing countries) by both the type of action and the frequency and format of the reporting requirements. In 2010, the Cancun agreements took note of a Copenhagen pledge by developed country Parties to jointly mobilize $100 billion per year by 2020. Funds provided "may come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources." The Paris Agreement (PA) is the second major subsidiary agreement under the UNFCCC. The PA defines a collective, long-term objective to hold the GHG-induced increase in temperature to well below 2 o Celsius (C) and to pursue efforts to limit the temperature increase to 1.5 o C above the pre-industrial level. In the PA, for the first time under the UNFCCC, all Parties participate in a common framework with common guidance, though some Parties are allowed limited flexibility. The negotiators intended the PA to be legally binding on its Parties, though not all provisions are mandatory. All Parties must submit "Nationally Determined Contributions" (NDCs) containing nonbinding pledges to mitigate GHG emissions. The Parties are to update or submit new NDCs by 2020 and every five years thereafter. Each successive NDC of a Party "will represent a progression" and "reflect its highest possible ambition, reflecting its common but differentiated responsibilities and respective capabilities, in light of different national circumstances." The PA reiterates the obligation in the UNFCCC for developed country Parties to seek to mobilize financial support to assist developing country Parties with climate change mitigation and adaptation efforts, encouraging all Parties to provide financial support voluntarily. The decision to carry out the PA calls for continuing the Cancun collective mobilization through 2025. The Parties agree to set, prior to their 2025 meeting, a new collective, quantified goal of not less than $100 billion annually to assist developing country Parties. President Trump announced his intention in 2017 to withdraw the United States from the PA as soon as it was eligible. The U.S. Department of State notified the United Nations of U.S. withdrawal on November 4, 2019. The withdrawal takes effect on November 4, 2020, unless the U.S. government postpones or rescinds the withdrawal. A Party may reenter the PA 30 days after depositing notice that it has ratified, accepted, or acceded to the PA.

crs_R46176

crs_R46176_0

<1. Introduction and Legislative Context> The Higher Education Act of 1965 (HEA; P.L. 89-329, as amended) authorizes programs and activities to provide support to individuals who are pursuing postsecondary education and to institutions of higher education (IHEs). The HEA was last comprehensively reauthorized by the Higher Education Opportunity Act of 2008 (HEOA; P.L. 110-315 ). The HEOA extended the authorization of appropriation of funds for most HEA programs through FY2014, while the General Education Provisions Act (GEPA) provided an extension of that authority for an additional year (through FY2015). Many HEA programs have continued beyond FY2015 with funding provided under a variety of appropriations measures and continuing resolutions. During the 116 th Congress, the House Committee on Education and Labor marked up and ordered to be reported the College Affordability Act (CAA; H.R. 4674 ). The bill would provide for the comprehensive reauthorization of most HEA programs, create a number of new postsecondary education programs, and address certain issues related to higher education but separate from the HEA. In general, for programs with discretionary funding H.R. 4674 would authorize the appropriation of funds in specific, as opposed to indefinite, amounts for each year in which funding would be authorized to be provided. The Congressional Budget Office (CBO) estimates that the enactment of H.R. 4674 would increase mandatory spending outlays by approximately $161 billion in the 5-year period from FY2020 to FY2024 and by about $332 billion in the 10-year period from FY2020 to FY2029 period. In the 10-year estimate, about half the mandatory spending increase would result from changes to the federal student loans programs and about a quarter of the increase would result from changes to the Pell Grant program. CBO further estimates that the enactment of H.R. 4674 would increase discretionary spending outlays by about $149 billion in the 5-year period from FY2020 to FY2024. This largely reflects the extension of periods of authorized appropriations for existing programs. CBO did not make a 10-year estimate for discretionary spending. This report focuses on the key themes in H.R. 4674 and describes major changes proposed in the bill that are representative of those themes. It aims to provide a general understanding of the primary proposals of H.R. 4674 . The report does not aim to provide a comprehensive analysis of the bill nor of technical changes that would be made by it. <2. Key Themes in H.R. 4674, as Ordered Reported with Amendments> H.R. 4674 , as ordered to be reported on October 31, 2019, would provide for the comprehensive reauthorization of the HEA, amending numerous programs and activities that make up a large portion of the federal effort to support postsecondary education. Taken collectively, the changes that would be made by H.R. 4674 reflect several key themes: (1) expanding the availability of financial aid to postsecondary students; (2) implementing borrower-focused student loan reforms; (3) modifying institutional accountability requirements for receipt of federal funds; (4) revising public accountability, transparency, and consumer information requirements; (5) expanding student services for specific populations; (6) expanding federal assistance to provide support to IHEs; and (7) creating new grant programs for states and institutions to reduce students' postsecondary costs. Each of these themes is discussed in the text that follows. <3. Expanding the Availability of Financial Aid to Postsecondary Students> Title IV of the HEA authorizes a group of federal student aid programs that provide aid to eligible individual students through grant and loan programs and work-study assistance. H.R. 4674 would expand aid availability in a number of ways, with considerable emphasis placed on increasing funding made available through grant programs. Some provisions in H.R. 4674 would increase aid availability by expanding eligibility. <3.1. Expansion of Pell Grants> HEA Title IV, Part A authorizes Pell Grants financial need-based grants that are available to eligible undergraduate students. Student Pell Grant eligibility is determined on a sliding scale, based on a student's expected family contribution (EFC). The Pell Grant program is the largest grant program authorized in Title IV in terms of both the number of grants (about 7.1 million in award year [AY] 2017-2018) and the total awards (about $28.7 billion in AY2017-2018). The Pell Grant program is often referred to as a quasi-entitlement program, through which all eligible applicants receive grants. Generally, the maximum Pell Grant a full-time, full-academic-year student can receive is the difference between the total maximum Pell Grant ($6,345 in AY2020-2021) and the student's EFC. A full-time, full-academic-year student who has an EFC of zero would be eligible for the total maximum grant. For a student who enrolls on a less-than-full-time basis, his or her maximum scheduled award is ratably reduced. To receive a Pell Grant, a student must be enrolled in an eligible program at an eligible IHE. H.R. 4674 would increase the total maximum Pell Grant and would expand the population of eligible students and the types of eligible educational programs. The bill would also permanently authorize discretionary appropriations for the Pell Grant program. <3.1.1. Increase of Total Maximum Pell Grant> The total maximum Pell Grant is the sum of a mandatory add-on award amount and a discretionary award amount. The mandatory add-on award is an amount established by the HEA and funded by a permanent, indefinite mandatory appropriation. The discretionary award amount is specified in annual appropriations laws. Under current law, in the upcoming award year (AY2020-2021) the total maximum Pell Grant will be $6,345. H.R. 4674 would, on the whole, increase the mandatory add-on award levels in AY2021-2022 and in each award year thereafter. For AY2021-2022, the mandatory add-on award would be $1,685, an increase of $625 from $1,060 in AY2020-2021; thus, the total maximum grant amount would be $6,970 assuming the discretionary award level were the same as provided under current law in AY2020-2021. H.R. 4674 would further increase the total maximum grant by the rate of inflation in each year following AY2021-2022, assuming the discretionary award levels were not lower than the preceeding year. The increased award amounts would be funded by corresponding increases in mandatory appropriations. There are two primary effects of an increase to the total maximum Pell Grant: 1. Currently eligible students would be eligible for a larger Pell Grant. Most full-time, full-year recipients would be eligible for a Pell Grant that is up to $625 higher in AY2021-2022 compared to AY2020-2021. Students who are not full-time, full-year would qualify for smaller increases. 2. A portion of students whose EFCs would have been too high to qualify for a Pell Grant may become newly Pell-eligible. <3.1.2. Pell Eligibility Expansions> H.R. 4674 would expand the availability of Pell Grants in several other ways, including the following: Increase of period of eligibility (lifetime eligibility limit). Under current law, eligible students may receive Pell Grants for up to 12 full-time semesters (or the equivalent). H.R. 4674 would increase this limit to 14 full-time semesters (or the equivalent). Pell Grants to incarcerated students. H.R. 4674 would eliminate the provision in current law that prohibits persons incarcerated in federal and state facilities from receiving a Pell Grant, creating Pell eligibility for incarcerated and civilly committed persons. H.R. 4674 would restrict such persons from receiving Pell Grants while attending proprietary IHEs. Pell Grants to graduate students. Under current law, Pell Grants are limited to undergraduate students and students in some postbaccalaureate teacher education programs. H.R. 4674 would, in some cases, permit graduate students who received Pell Grants as undergraduates and have not exhausted their lifetime Pell Grant eligibility to receive Pell Grants at public and nonprofit IHEs. <3.1.3. Job Training Pell Grants> Under current law, Pell Grants are typically limited to programs of at least 600 clock hours, 16 semester or trimester hours, or 24 quarter hours offered over a minimum of at least 15 weeks. H.R. 4674 would create a new category of "Job Training Federal Pell Grants" that could be applied to shorter programs of between 150 and 600 hours and between 8 and 15 weeks. To qualify for the new grants, a training program would need to meet the following criteria: Demonstrate alignment with "high-skill, high-wage, or in-demand" sectors or occupations, and meet the hiring requirements of employers in those sectors or occupations. Prepare students to pursue related certificate or degree programs at an IHE by providing academic credit toward a certificate or degree program. Be provided by a public or private nonprofit IHE that is an eligible provider under the Workforce Innovation and Opportunity Act (WIOA) and that fulfills additional institutional eligibility requirements related to Secretarial approval, gainful employment, accreditation, and reporting. In many cases, the shorter term nature of the job training programs may result in a Pell Grant that is for a lesser amount than the total maximum award for a full-year, full-time student. For example, assuming a total maximum Pell Grant of $6,195 (maximum award for the current 2019-2020 award year), a student with a zero EFC pursuing a 150 clock hour program over 8 weeks would qualify for a Pell Grant of no more than $1,035, or approximately 17% of the total maximum Pell Grant award, depending on the cost of the program. <3.2. Creation of Direct Perkins Loan Program> HEA, Title IV, Part E establishes the operation of the Federal Perkins Loan program. Authorization to make new Perkins Loans to students expired on September 30, 2017. Borrowers of loans previously made through the Perkins Loan program remain responsible for making payments on those loans. H.R. 4674 would authorize a new Direct Perkins Loan program, which, although it would share a name and have some similarities with the curtailed Perkins Loan program (which was administered by IHEs as a campus-based program), would be significantly different. The newly created program would be a direct loan program , under which the federal government lends directly to students using federal capital and is responsible for loan servicing and collections work (which is performed primarily by contractors). Under the Direct Perkins Loan program, loans with many of the same terms and conditions as Direct Unsubsidized Loans would be made available to students, with award priority given to students demonstrating exceptional financial need. Undergraduate students would be eligible to borrow up to $5,500 annually and $27,500 in the aggregate; graduate and professional students would be eligible to borrow up to $8,000 annually and $60,000 in the aggregate through the Direct Perkins Loan Program. Annual and aggregate Direct Perkins Loan limits would be independent of annual and aggregate limits under the Direct Loan program, but aggregate limits would include loans previously made to students under the curtailed Perkins Loan program. Interest rates on Direct Perkins Loans would be fixed at 5% per year. In general, annual authority to make Direct Perkins Loans to students would be allocated to IHEs via a formula that would consider unmet student need and Pell Grant funds awarded at the IHE. However, H.R. 4674 would authorize a base guarantee for loan authority, equal to the average of an IHE's total principal amount of loans made in academic years 2012-2013 through 2016-2017 under the previously authorized Perkins Loan program. H.R. 4674 would provide mandatory appropriations for the program, not to exceed $2.4 billion in "annual loan authority" for AY2021-2022 and for each succeeding fiscal year. <3.3. Modifications to Campus-Based Grant Programs> The HEA authorizes two campus-based grant programs that provide federal funds to IHEs that administer the programs and provide institutional funds to match a portion of the federal funds they receive. The institutions then distribute these funds to students using some discretion but operating within statutorily specified parameters. H.R. 4674 would make substantial but similar changes to the formulas that are used to distribute federal funds under each of the two campus-based grant programs and would increase the authorized appropriations level for each program. <3.3.1. Federal Supplemental Educational Opportunity Grant (FSEOG) Program> HEA, Title IV, Part A authorizes the FSEOG program, which provides funds to IHEs for grants to undergraduate students who demonstrate exceptional financial need. Most IHEs are required to provide matching funds so that the federal share of FSEOG is no more than 75%. In FY2019, FSEOG appropriations totaled $840 million. Under current law, FSEOG funds are distributed to IHEs using a formula that first distributes funds on the basis of what the IHEs received in past years (their base guarantee ), with the strongest base protection provided for schools that have participated in the program since at least FY1999. The remaining funds are distributed on the basis of the IHEs' proportional shares of eligible undergraduate student need (their fair share ). Beginning in FY2021, H.R. 4674 would replace the existing formula with a modified version of the fair share formula that considers unmet student need and Pell Grant funds awarded at the IHE. In FY2021, IHEs would receive the higher of their grant under the new formula or 90% of their FY2020 grant. The percentage would decline in subsequent years, and in FY2026 FSEOG allotments for all IHEs would be based entirely on the new formula. H.R. 4674 would also establish new institutional eligibility criteria that would take into account the proportion of Pell Grant recipients enrolled at an IHE. H.R. 4674 would increase the authorization of discretionary appropriations to $1.15 billion in FY2021. The authorization level would then increase by $150 million per year until reaching $1.75 billion in FY2025. The authorization level would remain at the FY2025 level for each succeeding fiscal year. <3.3.1.1. Emergency Grant Program> H.R. 4674 would create an emergency grant program for FSEOG-participating IHEs. The program would be funded through a $12.5 million set-aside from the FSEOG appropriation for FY2021 through FY2026. Most participating IHEs would be required to provide a 50% match to participate in the program. Priority would be given to IHEs at which at least 30% of enrolled students are Pell Grant-eligible. To participate in the program, each IHE would be required, among other things, to provide assurance that emergency grant funds would be used to address "financial challenges that would directly impact the ability of an eligible student to continue and complete [his or her] course of study." <3.3.2. Federal Work-Study (FWS) Programs> HEA, Title IV, Part C of the HEA authorizes the FWS programs, which provide grants to IHEs to support part-time employment for qualified undergraduate, graduate, and professional students. FWS employment may consist of work at the IHE a student attends; a private nonprofit organization; a federal, state, or local public agency; or a private for-profit organization. In FY2019, FWS appropriations were $1.13 billion. Under current law, FWS funds are distributed to IHEs using a formula similar to the current-law FSEOG formula, allocating funds on the basis of the base guarantee and fair share factors. Under H.R. 4674 , the FWS formula would be the same as the FSEOG formula. Funds would be distributed based on a modified version of the fair share formula that considers unmet student need and Pell Grant funds awarded at the IHE. In FY2021, IHEs would receive the higher of their grant under the new formula or 90% of their FY2020 grant. The percentage would decline in subsequent years, and in FY2026 FWS allotments for all IHEs would be based entirely on the new formula. H.R. 4674 would also establish new institutional eligibility criteria that would take into account the proportion of an IHE's undergraduate student population that are Pell Grant recipients and the proportion of an IHE's graduate population who have a zero EFC. H.R. 4674 would increase the authorization of discretionary appropriations to $1.5 billion in FY2021. The authorization level would increase by $250 million per year until reaching $2.5 billion in FY2025. The appropriation level would remain at the FY2025 level for each succeeding fiscal year. <3.3.2.1. Grants for Improved Institutions> H.R. 4674 would reserve a portion of the FWS appropriation for a new grant program for "improved institutions" on the basis of the share and performance of Pell Grant recipients at the institutions. The amount reserved for this program would be the lesser of (1) 20% of the FWS appropriation in excess of $700 million or (2) $150 million. These provisions would take effect two years after enactment of H.R. 4674 . <3.4. Modifications to Need Assessment and the Free Application for Federal Student Aid (FAFSA) Process> Individual eligibility for many student aid programs is contingent on student need. A key factor in determining need is assessing and establishing the ability of a student's family to pay postsecondary education costs. HEA, Title IV, Part F establishes a series of formulas that calculate a student's expected family contribution (EFC). The EFC formulas consider financial and personal characteristics of a student's family that are reported on the FAFSA. Students with lower EFCs typically qualify for more need-based aid, and students with a zero EFC qualify for the maximum amount of need-based aid. H.R. 4674 would make changes to the HEA that could reduce EFC levels and correspondingly increase aid eligibility, particularly for lower-income students. Some provisions in the bill would reduce the amount of information that some students would have to provide when completing the FAFSA. Specific changes include the following: Expansion of automatic zero EFC. Under current law, some FAFSA applicants may qualify for an automatic zero EFC if they report an adjusted gross income (AGI) level below $26,000 and meet other criteria. H.R. 4674 would increase the AGI threshold to $37,000, newly extend automatic zero eligibility to independent students without dependents, and expand the automatic zero EFC to any applicant who received a qualified means-tested benefit in the 24 months prior to application. Creation of FAFSA pathways. H.R. 4674 would create a system of three pathways in which the amount of financial information a FAFSA filer would be required to provide would be based on the filer's income and the complexity of his or her tax return. Applicants who received a means-tested benefit in the previous 24 months would not be required to provide any additional financial information beyond benefit receipt. One-time FAFSA option. Under current law, students must file a FAFSA each year that they seek aid. H.R. 4674 would create an option for students who are Pell-eligible in their first year of postsecondary education to decline to file the FAFSA in succeeding years and have their first year's EFC apply. The one-time FAFSA option would apply to the period required for the completion of a student's first undergraduate baccalaureate course of study. Streamline d procedures for foster care and homeless youth. Under current law, foster care youth and homeless youth qualify as independent students and do not have to report parental income on the FAFSA. H.R. 4674 would expand and streamline the procedures by which qualified youth can establish and verify their status. <3.5. Expansion of Federal Student Aid to Certain Noncitizen Students> Under current law, federal student aid is limited to U.S. citizens, lawful permanent residents, and certain eligible noncitizens. Unauthorized immigrants are not eligible for federal student aid. H.R. 4674 would extend eligibility for HEA Title IV student aid to unauthorized individuals who entered the United States when they were younger than age 16 and either earned a high school diploma (or equivalent) or served in the uniformed services for at least four years. The bill would also extend eligibility to individuals who have temporary protected status and to certain unauthorized individuals who have a son or daughter who is a United States citizen or lawful permanent resident. <4. Instituting Borrower-Focused Student Loan Reforms> Title IV of the HEA specifies provisions for the operation of three federal student loan programs: the William D. Ford Federal Direct Loan (Direct Loan) program, the Federal Family Education Loan (FFEL) program, and the Federal Perkins Loan program. Currently, however, new loans are authorized to be made only through the Direct Loan program. The authority to make new loans through the FFEL program expired June 30, 2010, and the authority to make new loans through the Federal Perkins Loan program expired September 30, 2017. While H.R. 4674 would make a variety of student loan reforms that apply to both the FFEL and Direct Loan programs, the discussion herein will focus on the Direct Loan program, as it is the primary federal student loan program currently in operation, is the only program currently making new loans to students and their families, and would be the primary student loan program in operation under the HEA as amended by the CAA. The Direct Loan program is authorized under HEA, Title IV, Part D, and is the largest federal program that makes available financial assistance to support students' postsecondary educational pursuits. The Direct Loan program is a federal credit program for which permanent indefinite mandatory appropriations are provided for loan subsidy costs, and annual discretionary appropriations are provided for administrative costs. Direct Loans are made to students and their families using funds borrowed by the Department of Education (ED) from the U.S. Treasury. The IHE a student attends originates and disburses Direct Loans, while federal contractors hired by ED perform loan servicing and collection functions. Several types of loans are made available through the program: Direct Subsidized Loans to undergraduate students, Direct Unsubsidized Loans to undergraduate students and graduate students, Direct PLUS Loans to graduate and professional students and the parents of undergraduate dependent students, and Direct Consolidation Loans, which enable individuals who have previously borrowed federal student loans to combine them into a single new loan. Loan terms and conditions (e.g., interest rates, borrowing limits) are specified in statute and may vary depending on the type of loan borrowed. ED estimates that in FY2020, 15.9 million new loans totaling $100.2 billion will be made through the Direct Loan program. In addition, ED estimates that 755,000 Direct Consolidation Loans totaling $46.4 billion will be made to existing borrowers of federal student loans. As of the end of the third quarter of FY2019, $1.2 trillion in principal and interest on Direct Loan program loans, borrowed by or on behalf of 34.3 million individuals, remained outstanding. H.R. 4674 would make a variety of borrower-focused reforms to the Direct Loan program. In general, many of these reforms are aimed at easing a borrower's student loan burden by amending loan terms and conditions (including loan repayment and forgiveness options) to be more generous once an individual has entered repayment on his or her loan, modifying and streamlining student loan administrative procedures, and expanding the availability of student loan refinancing options. <4.1. Provision of More Generous Loan Repayment Terms and Conditions> Currently, upon entering repayment on a Direct Loan a number of terms and conditions are available to borrowers. Many of these are intended to help borrowers manage their student loan debt, but some could be detrimental in some circumstances. H.R. 4674 would make a variety of changes aimed at making student loan repayment easier and more affordable for borrowers. <4.1.1. Elimination of Loan Origination Fees> Currently, loan origination fees are charged to borrowers of Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. These fees help offset federal loan subsidy costs by passing along some of the costs to borrowers. Loan origination fees are calculated as a proportion of the loan principal borrowed and are deducted proportionately from the proceeds of each loan disbursement to the borrower. Loan origination fees for Direct Subsidized Loans and Direct Unsubsidized Loans made on or after July 1, 2010, equal 1%. Loan origination fees for Direct PLUS Loans equal 4%. H.R. 4674 would eliminate loan origination fees. <4.1.2. Streamlining Loan Repayment Plans> Borrowers may currently choose from among numerous loan repayment plan options, which include five broad categories: standard repayment plans, extended repayment plans, graduated repayment plans, income-driven repayment (IDR) plans, and alternative repayment plans. Several repayment plan variations exist within each of these broad categories. Under the IDR plans, in general, borrowers make monthly payments equal to one-twelfth of 10% or 15% (depending on the specific plan) of their adjusted gross income (AGI) that exceeds 150% of the federal poverty guideline applicable to their family size. Basing monthly payments on only the portion of a borrower's AGI that is above 150% of the federal poverty guidelines essentially serves as an income protection for borrowers. Under some of the IDR plans, borrowers' monthly payments are capped at the monthly amount they would have paid according to a standard 10-year repayment period, regardless of whether the calculated monthly payment based on their income would have been greater. Borrowers who make payments according to these plans may have any remaining loan balance forgiven after 20 or 25 years (depending on the specific plan) of repayment. The particular repayment plans available to an individual borrower may depend on the type of loan borrowed, the date of becoming a new borrower, or the date of entering repayment status. In general, negative amortization is permitted in the IDR plans but not other plans. H.R. 4674 would establish two new loan repayment plans a fixed repayment plan and an income-based repayment (IBR) plan. Borrowers of Direct Loans made on or after July 1, 2021, would be required to repay their loans according to only these plans, and certain borrowers of Direct Loans made on or before June 30, 2021, would be permitted to repay according to these plans. The fixed repayment plan proposed under H.R. 4674 would be similar to some of the standard plans currently offered in the Direct Loan program (e.g., providing for fixed monthly payments with loan repayment periods equaling 10 to 25 years, depending on the loan balance). Compared to existing IDR plans, the proposed IBR plan would take a more generous approach toward protecting income from consideration when establishing monthly loan payments for many, but not all, borrowers. Under the proposed IBR plan, a borrower's monthly payments would equal one-twelfth of 10% of the amount (if any) of their adjusted gross (AGI) that exceeds a statutorily specified income protection that is indexed to the federal poverty guidelines. For borrowers with AGIs of $80,000 or less (or $160,000 or less for married borrowers), the income protection would equal 250% of the federal poverty guidelines applicable to the borrower's family size. For borrowers with AGIs that exceed $80,000 (or $160,000 for married borrowers), the income protection would decrease as his or her AGI increases and would be phased out entirely when the borrower's AGI equals or exceeds $105,000 (or $210,000 for married borrowers). For example, a single borrower with an AGI of $79,000 would pay 10% of his or her AGI that exceeds 250% of the federal poverty guidelines, whereas a single borrower with an AGI of $81,000 would pay 10% of his or her AGI that exceeds 240% of the federal poverty guidelines. No monthly payment cap would be available under the proposed IBR plan. Under this IBR plan, negative amortization would be permitted and borrowers who make payments for 20 years would be eligible to have any balance that remains forgiven. <4.1.3. Reducing Interest Accrual and Capitalization> Under a limited set of circumstances, the federal government subsidizes (i.e., a borrower is relieved from paying) some or all of the interest that would otherwise accrue on loans made through the Direct Loan program. In general, interest subsidies are largely available for need-based Direct Subsidized Loans (and for the subsidized component of Direct Consolidation Loans), which are currently only being made to undergraduate students. Periods in which interest is subsidized on these loans include in-school periods while a borrower is enrolled in an eligible program on at least a half-time basis, during a six-month grace period following enrollment on at least a half-time basis, and during periods of authorized deferment. For borrowers who may be having trouble making monthly loan payments, periods of deferment and forbearance offer temporary relief from the obligation to make such payments. In general, any interest that accrues during a period of deferment or forbearance is later capitalized (i.e., becomes part of the outstanding principal balance of the loan), which increases the total amount a borrower is required to repay on his or her loan. H.R. 4674 would make Direct Subsidized Loans available to graduate and professional students enrolled at public and private, nonprofit IHEs for any period of instruction beginning on or after July 1, 2021. The interest rate on Direct Subsidized Loans to graduate students would be the same as the interest rate on Direct Unsubsidized Loans for graduate and professional students. The bill would also amend the HEA to provide that interest that accrues on any type of Direct Loan during most periods of deferment or forbearance shall not be capitalized. That is, the interest would accrue and borrowers would be required pay it, but the accrued unpaid interest would not be added to the principal balance of a loan. <4.1.4. Expansion of Loan Discharge and Loan Forgiveness Benefits> The HEA currently makes various loan discharge or forgiveness options available to borrowers under a variety of circumstances. In general, loan discharge is provided in cases of borrower hardship, while loan forgiveness is provided for public service or following IDR plan repayment for an extended time period. H.R. 4674 would expand borrower eligibility for various loan discharge and loan forgiveness options, two of which are described below. <4.1.4.1. Borrower Defense to Repayment> Among other discharge provisions, the HEA provides that ED shall specify in regulations the "acts or omissions" of an IHE a borrower may assert as a borrower defense to repayment (BDR). Regulations that are currently in effect specify the standards and procedures for determining whether a borrower is eligible for a BDR discharge, and newly promulgated regulations scheduled to become effective July 1, 2020, amend those standards and procedures for loans disbursed on or after July 1, 2020. Both those regulations currently in effect and those effective July 1, 2020, provide that a borrower may have his or her loan discharged in whole or in part, depending on the circumstances. The regulations that are effective July 1, 2020, are viewed by some as being less beneficial to borrowers than current regulations. H.R. 4674 would amend the HEA to more explicitly define the standards under which a borrower would be determined eligible for a BDR discharge; some, but not all, of the BDR standards applicable to loans made prior to July 1, 2020, would be applicable to Direct Loans. It would also specify that in general, BDR discharge-eligible borrowers would be entitled to have the full balance of their loan discharged, but that ED may provide partial discharge in certain circumstances. Finally, H.R. 4674 would require ED to establish procedures for the fair and timely resolution of BDR claims and would specify elements to be included in such processes, some of which are currently available to pre-July 1, 2020, borrowers, but not to post-July 1, 2020, borrowers. <4.1.4.2. Public Service Loan Forgiveness> Among other loan forgiveness provisions, the Public Service Loan Forgiveness (PSLF) program provides Direct Loan borrowers who, on or after October 1, 2007, are employed full-time in certain public service jobs for 10 years while making 120 qualifying monthly payments on their Direct Loans with the opportunity to have any remaining balance of the principal and interest on their loans forgiven. H.R. 4674 would expand PSLF eligibility to new types of employees; specify that otherwise qualifying payments made on loans prior to consolidation into a Direct Consolidation Loan and payments made on federal loans refinanced under a newly created Refinanced Direct Loan program (discussed later in this report) would count towards the required 120 qualifying payments; and require ED to develop tools aimed at enabling borrowers to more easily determine whether they qualify for PSLF. <4.2. Modification to Student Loan Administrative Processes> To administer the Direct Loan program, ED has developed a variety of processes and procedures that in many instances are carried out by ED-contracted loan servicers and collection agencies. These administrative functions often focus on ensuring that borrowers qualify for and receive Direct Loan terms, conditions, and benefits (e.g., repayment under an IDR plan, loan discharge following total and permanent disability). H.R. 4674 would make a variety of changes aimed at streamlining or enhancing administrative processes for borrowers. Currently, borrowers must actively enroll in or apply for certain loan benefits, such as an IDR plan, or must apply for and provide income documentation to qualify for total and permanent disability discharge. H.R. 4674 would authorize ED to automatically take steps to make such loan benefits available to borrowers, without action from the borrower. For example, the bill would authorize ED to place certain borrowers who are at least 120 days delinquent on their loans, or who are rehabilitating their loan out of default, into the newly created IBR plan and to obtain such income and family size information as is reasonably necessary to calculate such borrowers' monthly payments under the plan. H.R. 4674 would also require ED to establish procedures to automatically recertify and recalculate a borrower's monthly repayments under the IDR plan in which he or she is enrolled, and procedures to automatically monitor a borrower's income for purposes of qualifying for a permanent and total disability loan discharge. Finally, H.R. 4674 would require ED to develop a manual of standardized administrative procedures and policies to be used by ED-contracted loan servicers and collection agencies. <4.3. Expansion of Loan Refinancing> Currently, Direct Consolidation Loans allow individuals who have borrowed at least one loan through either the Direct Loan or FFEL program to refinance their eligible federal student loan debt by borrowing a new loan and using the proceeds to pay off their existing federal student loan obligations. Direct Consolidation Loans have fixed interest rates that are determined by calculating the weighted average of the interest rates on the loans that are consolidated, rounded up to the next higher one-eighth of a percentage point. Upon an individual obtaining a Direct Consolidation Loan, a new repayment period begins, which may be for a longer term than applied to the loans originally borrowed. Private education loans are not eligible to be refinanced into a Direct Consolidation Loan. H.R. 4674 would require ED to establish two new loan refinancing options. One option would permit qualified borrowers to refinance Direct Loan and FFEL program loans into a refinanced Direct Loan. In general, refinanced Direct Loans would have the same terms and conditions as the original loans that were refinanced; however, the refinanced Direct Loans would have a fixed interest rate pegged to specified Direct Loan program interest rates that are in effect for new loans made during the period from July 1, 2019, through June 30, 2020. Such an option could be viewed as more favorable for borrowers who have existing loans with higher interest rates. The interest rates that would be applicable to refinanced Direct Loans are as follows: where the loan being refinanced is a FFEL or Direct Loan program Subsidized Loan or Unsubsidized Loan issued to an undergraduate student, 4.53%; where the loan being refinanced is a FFEL or Direct Loan program Subsidized Loan or Unsubsidized Loan issued to a graduate or professional student, 6.08%; where the loan being refinanced is a FFEL or Direct Loan program PLUS Loan issued to a graduate/professional student or a parent of a dependent undergraduate student, 7.08%; and where the loan being refinanced is a FFEL or Direct Loan program Consolidation Loan, the weighted average of the lesser of (1) the interest rates described above, as would be applicable to the original loans ( component loans ) discharged due to consolidation or (2) the original interest rate of the component loan. Obtaining a refinanced Direct Loan would not result in the start of a new repayment period. The second option would permit qualified borrowers to refinance private education loans into a Federal Direct Refinanced Private Loan. In general, a Federal Direct Refinanced Private Loan would have the same terms and conditions as a Federal Direct Unsubsidized Loan; however, certain student loan forgiveness benefits available for Direct Loan borrowers (e.g., PSLF) would not be included. Federal Direct Refinanced Private Loans would have a fixed interest rate pegged to specified Direct Loan program interest rates that are in effect for new loans made during the period from July 1, 2019, through June 30, 2020. The interest rates that would be applicable to Federal Direct Refinanced Private Loans are as follows: where the loan being refinanced was borrowed for undergraduate study, 4.53%; where the loan being refinanced was borrowed for graduate or professional study, 6.08%; and where the loan being refinanced was for both undergraduate study and graduate or professional study, 7.08%. A Federal Direct Refinanced Private Loan would not count against a borrower's annual or aggregate Direct Loan limits. <5. Modifying Institutional Accountability Requirements for Receipt of Federal Funds> Currently, the HEA provides for institutional accountability measures through many of its provisions. Some measures address educational accountability, which relates to institutions providing a quality education (e.g., accreditation requirements). Other measures address fiscal accountability, which relates to institutional financial health and whether institutions are good stewards of federal student aid funds. In addition, some laws outside of the HEA seek to hold institutions accountable in other areas. These include, but are not limited to, Title IX of the Education Amendments of 1972 (Title IX), which conditions receipt of federal funds on an institution (or other entity) ensuring it does not discriminate on the basis of sex in educational programs or activities. H.R. 4674 would address educational and fiscal accountability requirements, as well as Title IX requirements. The changes discussed below, along with other provisions of H.R. 4674 , signal a congressional interest in strengthening accountability requirements across all types of IHEs and their educational programs, in general, while focusing on greater accountability in the Title IV programs, and for proprietary IHEs in particular. <5.1. Educational Accountability> Educational accountability relates to attempts to ensure IHEs are providing a quality educational program, and it may be assessed in a variety of ways. H.R. 4674 would address educational accountability in several ways, which largely relate to the Title IV student aid programs. <5.1.1. Accreditation> To participate in the Title IV student aid programs, IHEs must be accredited by an agency that is recognized by ED as a reliable authority regarding the quality of education offered at the IHE. The HEA currently specifies the recognition criteria to be used by ED. In accordance with statute, an accreditation agency's institutional quality evaluation standards must assess, among other items, "student achievement in relation to [an] institution's mission." Such evaluation standards may but are not required to include, as applicable, course completion, passage of state licensing exams, and job placement rates. While accrediting agencies' evaluation standards are guided, in part, by such federal requirements, specific standards are adopted by individual agencies and vary among them. Accreditation agencies may also have varying procedures as well. For instance, agencies may have varying definitions for actions taken against IHEs (e.g., warning, probation) and differing policies regarding the information they publicly disclose about the IHEs they accredit. H.R. 4674 would partially standardize practices among agencies and bring additional transparency to accrediting agency and ED practices in this realm. The bill would newly require accrediting agencies to evaluate specified student educational outcomes (i.e., completion, progress toward completion, and workforce participation), but would permit agencies to establish different measures of such outcomes for different institutions. For example, an agency would be required to evaluate an IHE's "workforce participation" outcomes, but could measure an IHE's performance under that outcome by measuring rates of licensure or job placement. H.R. 4674 would also require ED to establish standardized definitions for the various actions accrediting agencies may take and for public notice and disclosure requirements with respect to the actions taken. Finally, the bill would make some changes to the processes ED uses to recognize accrediting agencies, including adding a requirement to make accrediting agencies' applications for recognition publicly available, and requirements to submit to Congress information relating to ED's accrediting agency recognition decisions. <5.1.2. Establishment and Revision of Accountability Metrics> H.R. 4674 would establish new Title IV institutional participation accountability metrics. One would measure on-time repayment rates the extent to which students who borrowed Title IV loans to attend an IHE are able to make payments on their loans in a timely manner (i.e., the percentage of borrowers who have paid at least 90% of their monthly payments during a three-year period). Another would measure instructional spending an IHE's instructional expenditures relative to revenues derived from tuition and fees (i.e., determining if instructional expenditures equal at least one-third of the amount of revenue derived from tuition and fees for each of the three most recent institutional fiscal years). It appears that a presumption behind these measures would be that if an IHE is of sufficient quality, then individuals who borrow to attend it should be able to earn adequate wages to make timely payments on their loans and that the IHE would be spending a reasonable amount of tuition and fees revenues on instruction rather than other items, such as marketing. Under the bill, the current institutional cohort default rate (CDR) metric, which is applicable to IHEs participating in federal student loan programs and measures the number of an IHE's federal student loan recipients who enter repayment and subsequently default within a certain period of time, would be phased out. Under current law, an IHE is subject to loss of Direct Loan program eligibility if its CDR is 40% or greater for one year, and is subject to loss of Direct Loan program and Pell Grant program eligibility if its CDR is 30% or greater for three consecutive years. The CDR metric would be replaced with a new adjusted cohort default rate , which would be similar to the current CDR metric, but would also take into account the relative risk an IHE may pose to students and taxpayers by multiplying the CDR by the percentage of students enrolled at the IHE who borrowed Title IV loans. IHEs would be subject to loss of Title IV eligibility if they met one of three separate thresholds: (1) an adjusted CDR that is greater than 20% for each of the three most recent years, (2) an adjusted CDR that is greater than 15% for each of the six most recent fiscal years, or (3) an adjusted CDR that is greater than 10% for each of the eight most recent fiscal years. This structure would penalize IHEs with adjusted CDRs that remain consistently too high over long periods. Finally, H.R. 4674 would specify that borrowers in forbearance for three or more years would be considered in default for purposes of calculating the adjusted CDR. The bill would additionally require ED to establish metrics that would assess the extent to which certain types of sub-baccalaureate educational programs at public and nonprofit IHEs and most educational programs (including degree programs) at proprietary IHEs prepare students for gainful employment in a recognized occupation. In creating the metrics, ED would be required to establish a debt-to-earnings rate meeting specified general criteria to measure gainful employment program enrollees' educational debt relative to their earnings. <5.2. Fiscal Accountability> Fiscal accountability requirements relate to institutional financial health and whether IHEs are good stewards of federal student aid funds. H.R. 4674 would make several changes to current fiscal accountability requirements. IHEs are required to be financially responsible to participate in the Title IV programs. IHEs that fail to meet certain financial responsibility standards may continue to participate in the Title IV programs only if they meet additional requirements, including posting a letter of credit (a financial guarantee) to ED. H.R. 4674 would revise the conditions under which IHEs are considered financially responsible. It would expand on the instances in which an IHE may be required to post a letter of credit to ED for continued participation in the Title IV programs. The bill would specify that ED may not consider a private nonprofit or proprietary IHE financially responsible if it is required to submit a teach-out plan to its accreditor or is subject to a specified amount of pending or approved borrower defense to repayment claims. Additional circumstances under which ED would be prohibited from considering a proprietary IHE financially responsible would also be stipulated. H.R. 4674 would additionally specify the circumstances under which ED would be required to redetermine whether an IHE is financially responsible. Such circumstances would apply to both private nonprofit and proprietary IHEs. They would include instances in which an IHE is required to pay a material debt or liability arising from a judicial, administrative, or judicial proceeding and in which an IHE is involved in a lawsuit for financial relief related to the making of Direct Loans. H.R. 4674 would also specify circumstances under which ED would be permitted to redetermine whether an IHE is financially responsible, which would be applicable to all types of institutions, including public IHEs. Such circumstances would include a determination that ED will be likely to receive a significant number of borrower defense to repayment claims, a citation by a state authorizing agency for failure to meet state requirements, and high annual dropout rates. H.R. 4674 would amend the 90/10 Rule, under which proprietary IHEs currently must derive at least 10% of their revenues from non-Title IV sources or lose Title IV eligibility after failure to do so for two consecutive years. The bill would specify that proprietary IHEs must derive at least 15% of their revenues from sources other than federal education assistance funds, which would include, but not be limited to, Title IV funds and Post-9/11 GI Bill funds. It would further establish that failure to meet the requirement in a single year would result in an automatic loss of Title IV eligibility. In addition, the bill would limit marketing, recruitment, advertising, and lobbying expenditures for IHEs that are determined to have spent less than an amount equal to one-third of their tuition and fees revenues on instruction. IHEs that do not limit such spending for two consecutive fiscal years would lose Title IV eligibility. <5.3. Title IX of the Education Amendments of 1972> Title IX prohibits discrimination on the basis of sex in education programs and activities receiving federal financial assistance. On November 29, 2018, ED proposed to amend the regulations that implement Title IX to clarify and modify requirements of elementary, secondary, and postsecondary schools regarding incident response, remedies, and other issues. H.R. 4674 would prohibit ED from implementing or enforcing the proposed Title IX regulations, or proposing or issuing regulations that are substantially similar to the November 2018 proposed regulations. <6. Revising Public Accountability, Transparency, and Consumer Information Requirements> The HEA establishes a set of measures related to public accountability, transparency, and consumer information. In general, these provisions are intended to provide information to consumers to enable them to make informed college-going and financial decisions. Currently, the HEA addresses issues related to college affordability and the collection and dissemination of consumer information to students and the public by requiring ED, among other things, to administer the College Navigator website, through which certain consumer information about IHEs is made publicly available, and by requiring IHEs to make Net Price Calculators, a primary consumer information tool authorized under the HEA, available on their websites. Net Price Calculators allow prospective students to obtain individual estimates of the net price of an IHE, taking into account the financial aid they might be likely to receive. The HEA currently prohibits the creation of a new postsecondary student unit record system (SURS), which could be used to track individual students' financing of their schooling, participation in and completion of academic programs, and post-program outcomes over time. The SURS ban was established in the interest of protecting student privacy and limits the granularity and quality of data available on the outcomes of IHEs' students. In addition, the HEA currently requires that certain Direct Loan borrowers undergo loan entrance counseling prior to loan disbursement, and that certain borrowers undergo exit counseling after dropping below half-time enrollment. Both of these requirements are intended to help ensure that borrowers are aware of their loan terms and conditions and of the potential consequences of borrowing a student loan. H.R. 4674 would amend the HEA to take a more expansive approach to public accountability, transparency, and consumer information requirements. Many of these changes represent congressional interest in providing consumers with additional and more-nuanced information, potentially helping them make more-informed college-going and student loan borrowing decisions. Perhaps most notably, H.R. 4674 would repeal the current prohibition on the creation of a new SURS and require ED to develop a postsecondary student-level data system to use in evaluating a variety of metrics such as student enrollment, progression, completion, and post-collegiate outcomes (e.g., earnings, employment rates, and loan repayment rates). Summary aggregate information from this system would be made publicly available. H.R. 4674 would also amend provisions relating to Net Price Calculators by requiring IHEs to provide more-detailed information regarding their costs of attendance and estimated aid that may be available to individual students. The bill would make changes to the information IHEs are required to provide to individuals before and after receipt of federal student aid. For instance, H.R. 4674 would require ED to develop a standardized financial aid offer letter to be used by IHEs, which would enable students to compare financial aid offers from multiple IHEs. It would also require all borrowers to receive counseling in each year that they receive a Title IV student loan to assist them in understanding the terms and conditions of the loan and the potential consequences of accepting such aid. <7. Expanding Student Services for Specific Populations> In addition to federal student aid, which provides direct financial assistance to individual students that can be applied toward their cost of attendance, the HEA provides additional academic and personal supports to certain student populations. These supports are typically administered through grants to IHEs or other qualified entities. H.R. 4674 would create a number of new programs to support students, and would extend a number of existing programs. <7.1. Creation of New Programs> H.R. 4674 would create the following programs: Student Success Fund . This would be a new program of grants to states or Indian tribes to carry out plans "to implement promising and evidence-based institutional reforms and innovative practices to improve student outcomes" including transfer and completion. States and some tribes would be required to match a portion of the federal grant, with the nonfederal amount increasing to 100% of the federal amount by the ninth year. H.R. 4674 would authorize $500 million in mandatory appropriations per year for FY2021 and each succeeding fiscal year. Pell Bonus Program . This would be a new grant program providing support to qualified public and nonprofit IHEs with qualified shares of Pell Grant recipients. IHEs could use the funds for "financial aid and student support services." Funds would be allotted to institutions based on their relative share of bachelor's degrees awarded to all Pell Grant recipients. H.R. 4674 would authorize mandatory appropriations of $500 million per year for FY2021 and each succeeding fiscal year. Remedial Education Grants . This would make funds available to IHEs or applicable partnerships to "improve remedial education in higher education." Grantees would employ models specified in the legislation and be evaluated on the basis of their programs' effectiveness in increasing course and degree completion. H.R. 4674 would authorize $162.5 million in discretionary appropriations per year for FY2021 through FY2026. Grants for Improving Access to and Success in Higher Education for Foster Youth and Homeless Youth . This would be a new formula grant program to states to (1) develop a statewide initiative to support foster and homeless youth transitioning into postsecondary education and (2) offer subgrants to public and private nonprofit IHEs to improve postsecondary persistence and completion by such students. H.R. 4674 would authorize discretionary appropriations of $150 million for FY2021 and authorize an inflation-adjusted amount for each year through FY2026. Jumpstart to College . This would be a new grant program providing funds to states and public and private nonprofit IHEs to establish and support early college or dual and concurrent enrollment programs. H.R. 4674 would authorize $250 million in discretionary appropriations per year for FY2021 through FY2026. <7.2. Extensions of Existing Programs> H.R. 4674 would extend the authorization of a number of existing student support programs. In most, but not all, cases the authorization of appropriations in H.R. 4674 would be above the current law levels. In terms of the authorized funding level, one of the most substantial extensions is to the TRIO programs, a group of programs that provide grants to IHEs and other organizations to furnish academic support services to disadvantaged students. H.R. 4674 would authorize discretionary appropriations of $1.12 billion for FY2021 and the authorization level would be adjusted for inflation in each of the five succeeding fiscal years. In FY2019, TRIO appropriations were $1.06 billion. In terms of increases to authorization levels relative to the most recent funding level, one of the largest increases would be to the Child Care Access Means Parents in School (CCAMPIS) program, which provides grants to IHEs to promote the participation of low-income parents in postsecondary education through the availability of child care services. H.R. 4674 would authorize $200 million per year for FY2021 and each of the five succeeding fiscal years. In FY2019, appropriations for this program were $50 million. <8. Expanding Federal Assistance to Support to IHEs> The HEA authorizes programs intended to provide grants and other financial support to IHEs that serve high concentrations of minority and/or needy students to help strengthen the IHEs' academic, administrative, and financial capabilities. Typically, these institutions are called minority serving institutions (MSIs). Among the MSI programs, the HEA authorizes separate grant programs for distinct types of MSIs, including the following: American Indian Tribally Controlled Colleges and Universities, Alaska Native and Native-Hawaiian-serving Institutions, Predominantly Black Institutions, Native American-serving, Nontribal Institutions, Predominantly Black Institutions, Asian American and Native American Pacific Islander-serving Institutions, Historically Black Colleges and Universities, and Hispanic Serving Institutions. Many of these MSI programs have been funded through annual discretionary and mandatory appropriations. As of when H.R. 4674 was ordered to be reported, mandatory appropriations, authorized under HEA Section 371, for several of these programs had expired at the end of FY2019. In FY2019, these mandatory appropriations totaled $239 million. H.R. 4674 would permanently authorize mandatory appropriations under HEA Section 371 at a total of $300 million annually. It would also extend and increase the authorization of discretionary appropriations for each of the MSI programs through FY2026. In addition, H.R. 4674 would reauthorize discretionary and mandatory appropriations for several MSI programs that have not received appropriations in several years, such as the Endowment Challenge Grant program, and would create several new grant programs to support MSIs, each supported with discretionary appropriations. H.R. 4674 would also amend and reauthorize through FY2026 a statute outside of the HEA the Tribally Controlled Colleges and Universities Assistance Act of 1978 which authorizes discretionary appropriations for grants to Tribally Controlled Colleges and Universities. <9. Creating New Grants to States and Institutions to Reduce Students' Postsecondary Costs (America's College Promise)> H.R. 4674 would create a new HEA, Title IV, Part J. The programs authorized in this part would provide grants to states, Indian tribes, and IHEs, with the primary focus of eliminating or reducing tuition and fees at community colleges and other postsecondary institutions. <9.1. Grants to Support Tuition-Free Community College> H.R. 4674 would authorize new grants to states to support community colleges in waiving tuition and fees for eligible students. Qualified Indian tribes would also be eligible. The program would define an eligible student as a student who attends a community college on a not less than half-time basis, either qualifies for in-state resident community college tuition or would qualify for in-state community college tuition but for his or her immigration status, and meets certain other criteria. A student would not need to meet financial criteria to qualify as an eligible student. <9.1.1. Funding, Allotments, and Nonfederal Share> H.R. 4674 would provide permanent mandatory appropriations beginning in FY2021. The funding level would incrementally increase from $1,569,700,000 in FY2021 to $16,296,080,000 in FY2030. Mandatory appropriations would be provided at the FY2030 level in succeeding years. Funds would be allocated to states via a formula. The bill would direct ED to develop a formula based on each participating state's share of eligible students and other factors. Each participating state would be eligible to receive, on a per eligible student basis, an amount equal to at least 75% of the national average resident community college tuition and fees. States would be required to provide, on a per eligible student basis, a nonfederal share equal to 25% of the national average resident community college tuition and fees. <9.1.2. Requirements for Participating States> As a condition of receiving a grant under this program, a state would be required to waive tuition and fees for eligible students attending community colleges within the state. An eligible student would be allowed to use other financial aid for which he or she qualifies, such as Pell Grants, for other components of the cost of attendance, such as housing and transportation. To prevent state and local disinvestment in community colleges, H.R. 4674 would require that funds under this grant supplement and not supplant other federal, state, and local funds. The program would include maintenance of effort requirements that would require participating states to provide financial support equal to or greater than the average amount provided in the three preceding years for public higher education; operational expenses for public, four-year colleges; and need-based financial aid. <9.2. Grants for Historically Black Colleges and Universities, Tribally Controlled Colleges and Universities, and Minority-Serving Institutions to Reduce or Waive Tuition> H.R. 4674 would create three new programs that would provide grants to each of (1) Historically Black Colleges and Universities (HBCUs), (2) Tribally Controlled Colleges and Universities (TCCUs), and (3) Minority-Serving Institutions (MSIs) to "waive or significantly reduce tuition and fees for eligible students for not more than the first 60 credits an eligible student enrolls at the participating institution." Grants would be available to four-year institutions of each type and would not require a nonfederal match. An institution's grant would equal the actual cost of tuition and fees at the institution (not to exceed the national average tuition and fees at a public four-year IHE), multiplied by the number of eligible students enrolled at the institution. Eligible institutions would be HBCUs, TCCUs, and MSIs that have a student body of at least 35% low-income students and meet other criteria related to student services and supports. Eligible students would include new enrollees or transfers from a community college. H.R. 4674 would provide permanent mandatory funding beginning in FY2021. The funding level would incrementally increase from $63,250,000 in FY2021 to $1,626,040,000 in FY2030. Mandatory appropriations would be provided at the FY2030 level in succeeding years. <9.3. Additional Grants> H.R. 4674 would authorize discretionary appropriations for such sums as necessary in FY2021 and each succeeding fiscal year to support additional new grant programs. First, the bill would create a new series of formula grants to states to provide grants to individual students with unmet financial need. These grants would initially be available to Pell Grant recipients at public IHEs. Once all eligible Pell Grant recipients received grants, the aid would be extended to other students at public IHEs. ED would also be authorized, under certain circumstances, to carry out a similar grant program for students at private nonprofit IHEs. The bill would authorize another grant program for states to award grants to participating four-year IHEs to waive resident tuition and fees in cases where all eligible students have received the above grants for unmet need. Both sets of programs would generally have a federal share of 75% and a nonfederal share of 25%.

The Higher Education Act of 1965 (HEA; P.L. 89-329, as amended) authorizes programs and activities to provide support to individuals who are pursuing a postsecondary education and to institutions of higher education (IHEs). During the 116 th Congress, the House Committee on Education and Labor marked up and ordered to be reported the College Affordability Act ( H.R. 4674 ), which would provide for the comprehensive reauthorization of most HEA programs. This report organizes the changes proposed by H.R. 4674 into seven themes: Expanding the availability of financial aid to postsecondary students . This would primarily be accomplished by increasing funding available through grant programs and by expanding student aid eligibility criteria. This includes increasing the total maximum Pell Grant award and expanding Pell Grant eligibility to new subsets of students, increasing funding for existing student aid programs, creating a new Direct Perkins Loans program, and modifying the need assessment and Free Application for Federal Student Aid filing process. I nstitutin g borrower-focused student loan reforms . This set of proposed changes aims to ease a borrower's student loan burden. It includes amending loan terms and conditions to be more generous once an individual has entered repayment on his or her loan, modifying and making efforts to streamline student loan administrative procedures, and expanding the availability of student loan refinancing options. Modifying educational, financial, and other institutional accountability requirements for receipt of federal funds. With respect to requirements IHEs must meet to participate in the Title IV federal student aid programs, these proposed changes include revising accreditation requirements, adjusting current participation metrics, and creating new participation metrics. They also include addressing regulatory requirements of Title IX of the Education Amendments of 1972, which prohibits discrimination on the basis of sex in educational programs or activities receiving federal funds. Revising public accountability, transparency, and consumer information requirements . This would primarily be accomplished by providing consumers with additional and more nuanced information to make more informed college-going and student loan borrowing decisions. Proposed changes include repealing the student unit record system ban and requiring annual student loan counseling. Expanding academic and personal supports to specific student populations. Proposed changes include creating several new programs and reauthorizing and increasing the authorization of appropriations for several existing programs, such as TRIO and Child Care Access Means Parents in School. Increasing financial support to IHEs , focusing on minority-serving institutions. These proposals involve reauthorizing and increasing the authorization of appropriations for numerous institutional support programs. Creating new grant programs for states and IHEs to reduce students' postsecondary costs . This would be accomplished by authorizing grants to support a federal-state partnership to provide tuition-free community college.

crs_R45971

crs_R45971_0

<1. Introduction> The federal individual income tax is structured so that the poor owe little or no income tax (although they may pay other federal taxes, like payroll taxes as well as state and local taxes). In addition, the federal income tax increases the disposable income of many poor families via refundable tax credits. These tax credits primarily the earned income tax credit (EITC) and the refundable portion of the child tax credit, called the additional child tax credit (ACTC) increase the disposable income of many low-income taxpayers who work and have children, and have been shown to reduce poverty. P.L. 115-97 , commonly referred to as the Tax Cuts and Jobs Act (TCJA), made numerous temporary changes to the federal income tax system, including many that affect individuals and families. Preliminary analyses of the TCJA found that the law provides larger benefits to higher-income individuals and families. This report's analyses find that overall the law had a relatively small impact on poverty compared to the pre-TCJA federal individual income tax. Recent tax legislation considered in the 116 th Congress including the Economic Mobility Act of 2019 ( H.R. 3300 ) ordered reported by the House Ways and Means Committee on June 20, 2019 would target additional tax benefits to lower-income families. H.R. 3300 would temporarily increase the amount of the EITC for "childless" workers, allow all eligible taxpayers to receive the full amount of the ACTC, irrespective of a taxpayer's earned income, and make the child and dependent care tax credit refundable. To provide context for the consideration of new tax legislation, this report examines the relationship between the federal individual income tax and poverty. Given some policymakers' continued interest in using the tax system to reduce poverty and boost the incomes of low-income working families with children, understanding the impact of the income tax in reducing poverty pre- and post-TCJA may help inform future policy debates and legislative proposals. This report is structured to first provide a brief overview of the major federal income tax provisions that affect lower-income individuals and families, including a comparison of how these provisions changed under the TCJA. The report then provides an analysis of how the pre-TCJA federal income tax affected poverty, followed by a comparison of how the post-TCJA federal income tax affected poverty. The report concludes with some observations on the benefits and limitations of the federal income tax system and refundable tax credits in reducing poverty. <1.1. Key Concepts, Conventions, and Terms Used in this Report> Several major concepts, conventions, and terms used throughout this report are briefly described below. The information in this report provides some insights into how the federal income tax affects families' poverty status, specifically the immediate, short-term impact of the TCJA on poverty. The report does not estimate how the impacts of the TCJA will change over time or how people may change their behavior (e.g., choices between working and not working) in response to the TCJA. The family is the unit of analysis. While federal income tax provisions affect taxpayers, the impact of these provisions is analyzed in terms of families. A taxpayer is generally composed of all individuals listed on a federal income tax return (IRS Form 1040) and includes an individual, his or her spouse (if married), and any dependents. Descriptions of the tax system pre- and post- TCJA will generally refer to how these changes applied to taxpayers (i.e., the below section titled, " How Major Federal Income Tax Provisions Apply to the Poor "). In contrast, poverty analysis is done at the family level since families can share many resources and expenses. Hence, in this report analyses of the impact of the income tax , pre- and post-TCJA, are generally done at the family level . In this report, a family is composed of people living together related by blood or marriage (the family), cohabiting partners, and foster children. In some cases, like multigenerational families, a family is composed of multiple taxpayers. In these cases, tax liabilities and/or benefits for all taxpayers are aggregated to determine the impact of the income tax on the family's resources. If a family is determined to be poor, all members of that family are counted as poor. The Supplemental Poverty Measure (SPM) is used to measure the poverty impact of the federal income tax. This report examines the impact of the pre- and post-TCJA federal income tax on poverty, using the federal government's Supplemental Poverty Measure (SPM). Unlike the official poverty measure, the SPM was developed in part to help assess the effects of tax and government benefit policies on the economic well-being of low-income individuals. For more information on the SPM, see Appendix A and CRS Report R45031, The Supplemental Poverty Measure: Its Core Concepts, Development, and Use . The impact s of the federal income tax (pre- and post-TCJA) are estimated using the TRIM3 model and are modeled as if they were in effect in 2016. To estimate the impact of the federal income tax on poverty in both the pre- and post-TCJA cases income taxes owed (or the net benefit from refundable credits received) are subtracted from (or added to) the family's other resources, which are then assessed against an SPM poverty threshold. Other taxes that a family may pay including payroll and excise taxes are unchanged in these analyses. All poverty estimates in this report are calculated using a computer simulation model called the Transfer Income Model, version 3 (TRIM3). TRIM3 uses data from the 2017 Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS), representing income received and tax liabilities or benefits accrued during calendar year 2016. As such, the poverty estimates under the old and new income tax systems are estimated as if they were in effect in 2016 . Hence, for ease of reading, the estimates in this report are described in the past tense. Details on this methodology, including how the TCJA was modeled in TRIM3, can be found in Appendix A . <2. How Major Federal Income Tax Provisions Apply to the Poor> The federal income tax can increase or decrease a taxpayer's disposable income, which may affect a family's poverty status. Broadly, when a taxpayer receives refundable tax credits greater than the income taxes they owe, they have a negative tax liability , and an increase in disposable income, all else being equal. Conversely, if a taxpayer owes federal income tax, they have a positive tax liability , and reduced disposable income, all else being equal. (If a taxpayer has zero tax liability , their disposable income is unchanged by the income tax.) Unless otherwise mentioned, the term tax liability will refer to federal income tax liability in this report. In order to understand how the individual income tax can affect tax liabilities, it can be helpful to broadly understand how income taxes are calculated, and in particular, how major components of the income tax affect poor taxpayers. Importantly, the description below summarizes only the major aspects of the federal income tax calculation that are particularly relevant for poor families. For a more detailed overview of the federal income tax calculation, see CRS Report R45145, Overview of the Federal Tax System in 2018 ; and CRS Infographic IG10014, The U.S. Individual Income Tax System, 2019 . For a more detailed description of the tax provisions summarized below, how they affect income tax liability, and how they were modified by the TCJA, see CRS Report R45092, The 2017 Tax Revision (P.L. 115-97): Comparison to 2017 Tax Law . The TCJA substantially modified the federal tax code, including changing many provisions that affect individuals. Most of these changes are temporary, and are scheduled to expire ("sunset") at the end of 2025. The major changes made by the TCJA that are likely to affect many low-income taxpayers are highlighted below. <2.1. Calculating Income Tax Liability> The first step for taxpayers in calculating their income tax liability is to add up their income from various sources to calculate their gross income. <2.1.1. Exclusion of Public Assistance> The income tax code excludes certain types of income received by lower-income individuals from gross income. For example, public assistance payments (cash assistance from the Supplemental Security Income program or the Temporary Assistance for Needy Families [TANF] Block Grant) and the value of certain noncash benefits (food benefits from the Supplemental Nutrition Assistance Program [SNAP] or the subsidy value of housing benefits) are excluded from gross income under the income tax system, and hence are not taxable. The TCJA did not make any changes to the exclusion of public assistance. The taxpayer then subtracts from gross income various deductions and exemptions to calculate the amount of income that is taxable their taxable income . Most low-income taxpayers will subtract from their gross income the standard deduction (and before 2018, personal exemptions) to calculate their taxable income. <2.1.2. The Standard Deduction and Personal Exemptions> The standard deduction is a fixed dollar amount all taxpayers may deduct from their income, with the amount varying by the taxpayer's tax filing status. In 2018, before enactment of the TCJA, the standard deduction would have ranged from $6,500 to $13,000, depending on the taxpayer's filing status. The TCJA almost doubled the standard deduction. The personal exemption is a per-person subtraction from gross income for the taxpayer and, if applicable, his or her spouse and dependents. Before enactment of the TCJA, the personal exemption would have equaled $4,150 per person in 2018. The TCJA effectively eliminated the personal exemption (reduced the amount to $0). When combined, the personal exemptions and the standard deduction represent an amount of income that is not subject to income taxation. As a result of these provisions, many low-income taxpayers have little or no taxable income and hence have little or no income tax liability. (Taxable income cannot be reduced below zero.) After taxpayers have calculated their taxable income, they then apply marginal tax rates to calculate their tax liability before credits. <2.1.3. Marginal Tax Rates> A marginal tax rate is the tax incurred on each additional dollar of taxable income. Marginal tax rates in the individual income tax code are graduated, meaning the rate increases over successive ranges of taxable income. Many low-income taxpayers who do have taxable income pay taxes at the lowest marginal rate of 10%. The ranges of taxable income and their associated rate are often referred to as tax brackets . Taxpayers determine their tax liability before credits by applying marginal tax rates to their taxable income. Then taxpayers can subtract tax credits to determine their final tax liability. The 10% tax bracket (the lowest tax bracket) was unchanged by the TCJA. In general, marginal tax rates above the 10% rate were reduced under the TCJA. See Table C-2 . <2.1.4. Refundable Tax Credits> Tax credits reduce the amount a taxpayer owes dollar-for-dollar the value of the credit. Credits can be nonrefundable or refundable. Nonrefundable credits cannot exceed tax liability, and therefore can only reduce tax liability to zero. In other words, "the maximum value of a nonrefundable credit is capped at a taxpayer's tax liability." For example, if a taxpayer owes $1,000 in income taxes and is eligible to receive $4,000 in nonrefundable tax credits, the taxpayer will receive only $1,000 in nonrefundable tax credits, reducing their income tax liability to zero. By contrast, refundable credits are not limited by how much a taxpayer owes in income taxes, meaning those with little to no tax liability, including may poor taxpayers, can receive the full value of the credit. A refundable tax credit provides a net benefit to a taxpayer (i.e., after-tax income is greater than before-tax income) when the amount of the credit is greater than the taxpayer's income tax liability. For example, if a taxpayer owes $1,000 in income taxes but receives $4,000 in refundable tax credits, the taxpayer has a net benefit (and negative tax liability) of $3,000. The two major refundable tax credits claimed by low-income working taxpayers are the EITC and the additional child tax credit (the ACTC, which is the refundable portion of the child tax credit). The amount of the EITC is based on a taxpayer's earned income, marital status, and number of qualifying children. In 2018, before the TCJA, the maximum amount of the credit would have ranged from $520 to $6,444, depending on the number of qualifying children. The TCJA did not alter the EITC itself, though it did change the rules for adjusting it for inflation, which resulted in a slightly smaller EITC under the TCJA than under prior law (a difference of $1 to $13 in 2018, depending on the number of qualifying children claimed by a taxpayer). Before the TCJA the child tax credit equaled a maximum $1,000 per child, and up to the full amount ($1,000 per child) could be received as the ACTC. The ACTC was calculated as 15% of earned income over $3,000, not to exceed $1,000 per child. The TCJA increased the maximum child tax credit from $1,000 to $2,000 per child and increased the maximum amount of credit that could be claimed as the ACTC from $1,000 to $1,400 per child. The formula for calculating the ACTC was also modestly changed. Post-TCJA, the ACTC formula now equals 15% of earned income above $2,500, not to exceed $1,400 per child. While many low-income taxpayers did receive a larger benefit as a result of these changes, the poorest taxpayers received a more modest increase of up to $75 (see Figure C-1 and Figure C-2 ). <2.1.4.1. Impact of the TCJA on a Taxpayer's Tax Liability> The ultimate impact of the TCJA on a particular taxpayer's tax liability depends on how the taxpayer's individual circumstances interact with all of these provisions, not just one of them. For example, as a result of all the changes made by the TCJA, a taxpayer may have greater taxable income, but that income may be subject to lower marginal tax rates, and the taxpayer may also be eligible for a larger child credit. Hence, even though on average the TCJA lowered tax liabilities, individual taxpayers' tax liabilities may have been unchanged, increased, or decreased as a result of the law. <3. The Pre-TCJA Income Tax and Poverty> Under the pre-TCJA income tax, many poor families did not owe federal income taxes, and a significant proportion received a net benefit from refundable credits. As previously discussed, the combination of personal exemptions and the standard deduction subtracted from gross income to determine income subject to the tax generally reduced most poor families' taxable income to zero. Additionally, some poor families with little or no income tax liability particularly those with children and earned income received refundable tax credits that resulted in their after-tax income being greater than their before-tax income. (CRS estimates that before the income tax was subtracted from [or added to, in the case of negative tax liabilities] a family's resources, there were approximately 21.4 million families equaling an estimated 46.5 million individuals in poverty. For more information, see Appendix B .) <3.1. Poor Families with Positive, Negative, and Zero Tax Liabilities Under the Pre-TCJA Income Tax> Figure 1 illustrates the estimated share of families who owed income taxes (positive tax liability), owed no income taxes (zero tax liability), or owed no income taxes and received a net benefit from refundable tax credits (negative tax liability) by family poverty status. Under the pre-TCJA income tax, the majority of nonpoor families (75.7%) owed income taxes. In contrast, the majority of poor families (62.7%) owed no income taxes, and approximately a quarter (24.3%) owed no income taxes and received a net benefit from refundable tax credits. Figure 2 shows the estimated share of poor families with positive, zero, and negative tax liabilities by the presence of children or aged family members. Nearly 6 in 10 poor families with children (57.5%) had a negative tax liability under the pre-TCJA income tax. In comparison, nearly 2 in 10 poor families without children or aged adults (19.5%) had a negative tax liability. <3.2. The Impact of Pre-TCJA Income Tax on Poverty Rates> Comparing poverty rates before and after a policy change is one way to assess a policy's impact on poverty. To calculate poverty rates under the pre-TCJA income tax, a family's poverty status must be determined before and after tax. A family's before-tax poverty status is based on the family's available financial resources before federal income tax liabilities are subtracted from (or added to, in the case of negative tax liabilities) their disposable income. In contrast, a family's after-tax poverty status is based on the family's financial resources after the federal income tax is subtracted from (or added to, in the case of negative tax liabilities) disposable income. If the income tax boosts income sufficiently to push a poor family above the poverty threshold, they are then counted as nonpoor as a result of the pre-TCJA income tax. As previously discussed, if a family is determined to be poor, all members of that family are counted as poor. Poverty rates are then calculated based on the number of individuals who are poor before and after the pre-TCJA income tax is applied. Figure 3 shows the effect of the pre-TCJA income tax system on the poverty rates of individuals based on the types of families in which individuals lived. Overall, the pre-TCJA income tax reduced poverty: the before-tax poverty rate was 14.5%, while the after-tax poverty rate was 12.5%, a net reduction of two percentage points. Figure 3 also indicates that the poverty reduction impact of the income tax was concentrated among individuals who lived in families with children. Specifically, the pre-TCJA income tax reduced child poverty by nearly 30% (from 17.5% in poverty to 12.3% in poverty) and reduced poverty among nonaged (i.e., nonelderly) adults in families with children by a quarter (from 14.5% in poverty to 10.8% in poverty). In contrast, the post-tax poverty rate for nonaged adults in families with no children was higher than the pre-tax poverty rate for this group (the poverty rate for individuals in this group rose from 12.8% to 13.1%). Further examination of the impact of the pre-TCJA income tax on poverty rates indicates that all of the antipoverty effect of the federal income tax went to those individuals who lived in families with workers. As illustrated in Table 1 , CRS estimates that among the subset of families who had no workers, poverty rates, including the poverty rates of children and nonaged adults who lived with children, were unchanged by the pre-TCJA income tax. In contrast, among those who lived with a worker, poverty fell by over 20% (from 10.8% in poverty to 8.3% in poverty), with larger reductions for children and nonaged adults who lived in families with children. In other words, the poverty reduction of the pre-TCJA income tax was concentrated among individuals who lived with workers and children. <3.3. The Impact of Pre-TCJA Income Tax on the Poverty Gap> The poverty gap is another metric that can be used to understand poverty and to examine the impact of a policy on poverty. The poverty gap is the difference between the poverty threshold (an amount of money below which a family is counted as poor) and a family's disposable income. (The poverty gap for a nonpoor family is $0.) Unlike the poverty rate, which is based on whether a family is below the poverty threshold, the poverty gap provides a way of examining the degree to which a family is below that threshold. For example, assume there are two poor families who have the same poverty threshold of $25,000. The first family has $20,000 of disposable income, hence their poverty gap is $5,000. The second family has $10,000 of disposable income they are poorer than the first family and their poverty gap is $15,000. Hence the larger the poverty gap, the poorer the family. For this analysis, poverty gaps are summed together across all poor families to determine the aggregate poverty gap. The aggregate poverty gap is calculated both before and after taxes (or refundable credits) are subtracted (or added) to disposable income as calculated under the pre-TCJA income tax. Changes to the aggregate poverty gap from the pre-TCJA income tax measure the degree to which the federal income tax reduced financial hardship among poor families. Table 2 provides estimates of the aggregate poverty gap before and after the pre-TCJA income tax. The aggregate poverty gap before the pre-TCJA income tax was $150.8 billion. The poverty gap after the pre-TCJA income tax was $138.1 billion. Thus, the pre-TCJA income tax reduced the aggregate poverty gap by $12.7 billion, all of which went to families with children and at least one worker. For families without children (i.e., families with aged adults and families without children or aged adults), the aggregate poverty gap increased slightly as a result of the pre-TCJA income tax. <4. The Post-TCJA Income Tax and Poverty> Under the post-TCJA income tax similar to the pre-TCJA income tax many poor families did not owe federal income taxes (i.e., had zero tax liability), and a significant proportion owed no income tax and received a net benefit from refundable credits (i.e., had a negative tax liability). The impact of the post-TCJA income tax system on poverty rates and the poverty gap suggests the TCJA provided relatively small benefits to poor families. (CRS estimates that before the income tax was subtracted from [or added to, in the case of negative tax liabilities] a family's resources, there were approximately 21.4 million families equaling 46.5 million individuals in poverty. For more information, see Appendix B .) <4.1. Poor Families with Positive, Negative, and Zero Tax Liabilities Under the Post-TCJA Income Tax> As illustrated in Figure 4 , CRS analysis indicates that the shares of poor and nonpoor families with positive, negative, and zero income tax liabilities were similar pre- and post-TCJA. For both poor and nonpoor families, there is a relatively small decrease (less than 2 percentage points) in the number of families with a positive tax liability. For both poor and nonpoor families, there is a relatively small increase in the share of families with zero tax liability. The share of poor families with a negative tax liability is effectively unchanged, while the share of nonpoor families with a negative tax liability increased by a relatively small amount. Figure 5 compares the estimated share of poor families with positive, zero, and negative income tax liabilities under the pre-TCJA and post-TCJA income tax by family type. This analysis indicates that across all poor family types, the share of poor families that owed taxes (i.e., had positive tax liability) modestly fell as a result of the TCJA. Among poor families with children, CRS analysis indicates that share of these families who did not owe income taxes (i.e., had zero tax liability) increased as a result of the TCJA. In contrast, the share of poor families with children who received an increase in their disposable income from refundable tax credits (i.e., had a negative income tax liability) fell as a result of the TCJA. <4.2. The Impact of the Post-TCJA Income Tax on Poverty Rates> Figure 6 compares estimated after-tax poverty rates between the pre- and post-TCJA income tax. The difference in these poverty rates reflects the impact of the TCJA on poverty. These estimates indicate that the TCJA had a relatively small effect on poverty rates. CRS estimates that the TCJA reduced overall poverty by 1.6% (from 12.5% in poverty under the pre-TCJA income tax to 12.3% in poverty under the post-TCJA income tax). The impact of these changes was concentrated among individuals who lived in families with children. Specifically, the TCJA reduced poverty among children and nonaged adults living in families with children by about 2.4% and 1.9%, respectively (from 12.3% to 12.0% in poverty among children and from 10.8% to 10.6% in poverty among nonaged adults living in families with children). As with the pre-TCJA income tax, the impact of the post-TCJA income tax on poverty rates was concentrated among those who lived in a family with workers. As illustrated in Table 3 , CRS estimates that among the subset of families who had no workers, the poverty rates of children and nonaged adults who lived with children were unchanged by the post-TCJA income tax. In contrast, among those who lived with a worker, poverty fell by nearly 25% (from 10.8% in poverty to 8.1% in poverty), with larger reductions for children and nonaged adults who lived in families with children. As with the pre-TCJA income tax, these estimates suggest that virtually all of the benefits of post-TCJA income tax go to individuals who live with workers and children. <4.3. The Impact of the Post-TCJA Income Tax on the Poverty Gap> The post-TCJA income tax reduced the aggregate poverty gap from $150.8 billion to $136.9 billion. The pre-TCJA income tax reduced the aggregate poverty gap to $138.1 billion. Hence, CRS estimates that the changes made by the TCJA reduced the aggregate poverty gap by an additional $1.2 billion compared to the pre-TCJA income tax. Table 4 breaks down this $1.2 billion reduction by family type and indicates that the majority of the additional reduction in the poverty gap approximately $800 million of the $1.2 billion occurred among families with children. Almost all of that $800 million went to families with children and workers. <4.4. A Comparison of the Impact of the Post-TCJA Income Tax and Selected Low-Income Assistance Programs on Poverty Rates and the Poverty Gap> A comparison of estimated antipoverty effects of the post-TCJA income tax and other low-income assistance programs indicates that while the income tax substantially reduced the poverty rate , it had more limited effects on the aggregate poverty gap . Figure 7 shows the estimated percentage-point reduction in the poverty rate attributable to the post-TCJA income tax and several low-income assistance programs: the Supplemental Nutrition Assistance Program (SNAP); Supplemental Security Income (SSI); assisted housing programs (Section 8 vouchers and public housing); and Temporary Assistance for Needy Families (TANF) block grant cash assistance. Only SNAP resulted in a comparable reduction in the overall poverty rate compared to the post-TCJA income tax. Estimates of the reduction in the aggregate poverty gap from the post-TCJA income tax compared to selected low-income assistance programs highlight some of the limitations of the income tax in helping the poorest families. As illustrated in Figure 8 , three of the four low-income assistance programs reduced the poverty gap by greater amounts than the income tax. This may occur for several reasons. First, these nontax programs tend to aid the very poor, and even though their benefits are not large enough to lift a family above the poverty threshold, they do provide significant financial assistance. Second, the majority of the income tax's antipoverty provisions including the EITC and the ACTC are available only to families with earned income. Poor families who receive the EITC and the ACTC tend to be "less poor" than other families who receive SNAP, SSI, and housing assistance. <5. Conclusion> The income tax provides significant monetary benefits to many low-income families. These benefits reduce the overall poverty rate. The analysis in this report suggests, however, that the income tax is less effective, in comparison to many needs-tested programs, in helping the poorest families move out of poverty, as measured by its impact in reducing the aggregate poverty gap. Overall, the impact of the income tax on poverty was marginally changed by the TCJA. Specifically CRS estimates that before taxes, the poverty rate was 14.5%. After the pre-TCJA income tax, the poverty rate fell to 12.5%, while after the post-TCJA income tax it fell to 12.3%. CRS estimates that before taxes, the aggregate poverty gap was $150.8 billion. After the pre-TCJA income tax it fell to $138.1 billion, while after the post-TCJA income tax it fell to $136.9 billion. These benefits went almost exclusively to individuals who lived in families with workers and children. This analysis highlights both the importance of the tax system in reducing poverty, and also some of its limitations. As discussed in this report, the main mechanism by which the income tax reduces poverty is through refundable tax credits, primarily the EITC and the refundable portion of the child tax credit, the ACTC. These credits are available only to families who include a worker (and who generally have children) since their value is based in part on a taxpayer's earned income. Hence these credits provide little if any benefit to those who do not or cannot work, and who are more likely to be poor. There are other limitations to using refundable tax credits to reduce poverty that are not discussed in this report. Notably, the EITC and child tax credit are received once a year as part of a taxpayer's refund after they file their federal income tax return, and are not paid out on a more periodic basis (i.e., monthly) to help families meet their basic needs. Addressing this limitation, the National Academy of Sciences, in its most recent report on reducing child poverty, proposed converting the child tax credit into a monthly child allowance. However, the Internal Revenue Service (IRS) may be ill-equipped to accurately and efficiently pay out tax benefits like the EITC and the child tax credit on a more periodic basis. Even on an annual basis, as they are currently paid out, these credits can be difficult for the IRS to administer and for taxpayers to comply with. The complexity of these tax credits is often cited as the main factor driving their high rate of erroneous claims. Despite these limitations, and the limitations highlighted in this report, the income tax remains a popular (and near-universal) mechanism to provide aid to the working poor, especially those with children. Recent legislative proposals, including the Economic Mobility Act of 2019 ( H.R. 3300 ), would expand refundable tax credits, increasing the size of the EITC for workers without custodial children (the "childless EITC"), and increasing the ACTC to $2,000 ($3,000 for young children) for all low-income taxpayers irrespective of earned income. The stated purpose of this legislation is to help working families with children. And yet, by eliminating the phase-in for the ACTC, H.R. 3300 (and the American Family Act of 2019; S. 690 / H.R. 1560 ) also represents a shift in the target population of refundable tax credits, expanding eligibility to poor families with children that do not include a worker. Similarly, the proposed increase in the EITC for taxpayers without custodial children also reflects a shift from providing benefits only to workers with children (although childless EITC recipients may live in families with other children and/or have noncustodial children who do not live with them). Insofar as eligibility and the amount of refundable tax credits are expanded, the antipoverty effects of the income tax may increase. Appendix A. Methodology and Data Sources To examine how the federal individual income tax affects poverty, this report uses estimates from the Transfer Income Model, version 3 (TRIM3) and data from the Census Bureau's Annual Social and Economic Supplement (ASEC) to the Current Population Survey. TRIM3 is a static microsimulation model that estimates federal and state taxes and certain benefit transfer programs. TRIM3 is primarily funded by the U.S. Department of Health and Human Services and maintained by the Urban Institute. The measure of poverty used is the Census Bureau's Supplemental Poverty Measure (SPM). The Annual Social and Economic (ASEC) Supplement to the Current Population Survey The ASEC is a household survey of the noninstitutionalized population conducted by the Census Bureau in March of each year. There are approximately 94,000 households in the ASEC. The ASEC includes questions related to household members' demographic characteristics and family living arrangement at the time of the survey, and work experience and income in the prior year. This report's estimates are based on the 2017 ASEC, which captures information on work experience and income in the prior year 2016. The ASEC is used by the U.S. Census Bureau to estimate both the official poverty measure and SPM poverty in its reports. The sample of the ASEC is large enough to make reliable estimates for the nation as a whole and, sometimes, for some of the larger states. However, the sample is not large enough to make state-level estimates for all states. Estimates discussed in this report were weighted from the sample information to make the ASEC representative of the population of U.S. households. Since the estimates in this report come from a sample, they are subject to sampling error. Additionally, the information on the ASEC is based on respondents' answers to the survey questions, and nonresponse or incorrect responses can result in nonsampling error. The ASEC itself does not ask survey respondents about taxes paid or refundable credits received in the prior year. That information important for determining a family's or an individual's SPM poverty status must be estimated. This report uses estimates from the TRIM microsimulation model for these estimates. The Census Bureau uses a different microsimulation model in its reports on SPM poverty. The TRIM3 Microsimulation Model Microsimulation models of tax and transfer programs are composed of computer code that mimics the rules of the tax code and benefit programs. The models determine whether an individual, family, or other unit is eligible to be subject to a tax or eligible for a benefit and then estimates the amount of the tax (or benefit). TRIM assumes that all taxpayers fully comply with the requirements and rules of the tax code. Federal Income Tax Module for 2016 TRIM3 applies policy rules in effect during the year to the population for that year. The estimates in this report use information from the TRIM3 federal income tax module for 2016. The 2016 federal income tax module makes "baseline estimates" of the tax code as it existed for 2016. The model uses data from the ASEC's information on family structure at the time of the survey to place individuals into federal tax filing units (e.g., taxpayer and, for those married filing jointly, the spouse). It also identifies "extended" tax filing units, which include dependents, and identifies "qualifying children" for the purpose of the EITC and the child tax credit. TRIM3 creates tax units not only for tax filers, but also for all potential filers. The model then uses information on the earnings and other income sources reported on the ASEC for 2016 to determine a tax filing unit's federal income tax liability. Additionally, expense and income items not available on the ASEC but required to compute federal income taxes were obtained through a statistical match with the IRS Statistics of Income Public Use File, which is based on a sample of tax returns. TRIM3 estimates of the elderly and disabled tax credit and the child and dependent care tax credit are aligned to target amounts based on IRS data. In terms of estimating federal income taxes, there are a number of caveats and limitations of the TRIM3 estimates. These limitations are not idiosyncratic to TRIM3 estimates. They generally result from limitations on the underlying ASEC data and are also present in estimates from the Census Bureau. These limitations include the following: Estimates are not reliable for very - high - income taxpayers . The estimates of federal income tax liability are not likely to be reliable for very-high-income taxpayers because the ASEC oversamples lower-income populations, rather than higher-income populations. Thus, TRIM3/ASEC estimates are most often used in reports (such as this report) that focus on lower-income populations. Amounts of refundable tax credits tend to be underestimated . The estimates from TRIM3 (as well as the Census Bureau's microsimulation model) underestimate refundable tax credits. For example, the TRIM3 estimate of the EITC for 2016 (pre-TCJA) was $39.2 billion. The total amount of the EITC claimed in 2016 according to the IRS was $66.7 billion. This discrepancy has long been known by researchers, but has yet to be fully explained. Potential reasons for the discrepancy include the information on the ASEC family structure perhaps not adequately representing that used for filing tax returns; the underreporting of certain forms of earnings (such as self-employment earnings); and the high rates of error made by taxpayers claiming the EITC. A Revised Federal Income Tax Module for Estimating Rules under the TCJA The Urban Institute, in partnership with the Congressional Research Service (CRS), modified TRIM3's federal income tax module to account for the major provisions of the TCJA affecting individual taxpayers. Thus, the information in the model was revised to reflect the new tax brackets and marginal tax rates that apply to them, the suspension of the personal exemption and the increases in the standard deduction, limitations on itemized deductions, including the limitation on the deductibility of state and local taxes (SALT), revised rules for the child tax credit, and other changes to the federal individual income tax code. TCJA Changes Not Modeled A number of changes to the federal income tax were not modeled. These include changes to the treatment of alimony, the mortgage interest deduction, and elimination of the individual mandate for health insurance. The treatment of alimony was not modeled because the changes will apply only to new or revised orders and will not affect many cases in the near term. Limits on interest qualifying for the mortgage interest deduction were not modeled since there are no data to inform the impact of these changes. Additionally, certain smaller changes are not present in the simulation, such as the elimination of the deduction for bicycle commuting. Inflation Adjustment The post-TCJA tax code parameters were deflated to 2016 dollars to answer the question, "What if the 2018 TCJA parameters were in place in 2016 and 2016 was the first year of their enactment?" The adjustment was done using the chained Consumer Price Index for All Urban Consumers (C-CPI-U), since the TCJA requires the use of that price index rather than the CPI-U for future price adjustments. Specifically, the 2018 amounts were adjusted to 2016 dollars using the chained CPI; see. Hence the estimates in this report reflect the impact of the post-TCJA tax code as if the first year of its enactment were 2016 (it actually went into effect in 2018). The Supplemental Poverty Measure The SPM was created to address some of the limitations of the official poverty measure. Particularly relevant for this analysis, the official poverty measure does not take into account taxes (and tax benefits, like refundable credits) and their impact on disposable income. It also does not take into account certain noncash government benefits, such as food benefits from SNAP or the value of housing benefits. The measure of total income in this analysis is computed similarly to the way the U.S. Census Bureau computes total financial resources, though there are a few differences. This analysis uses the TRIM3 estimates for TANF, SSI, and SNAP, rather than amounts reported on the ASEC, to address the underreporting of these income sources on the ASEC. Additionally, the measure of child care deducted as a work expense for the SPM differs. This analysis uses TRIM3's estimate of child care expenses, which includes estimated copayments for families receiving child care subsidies from the Child Care and Development Block Grant (CCDBG). The Census Bureau also caps child care expenses at the earnings of the lower-earning parent when determining net financial resources. This analysis deducts all child care expenses as a work-related expense of the family. Appendix B. Estimated Number of Individuals and Families in Poverty Before the Income Tax, 2016 Below are estimates of the number of individuals in poverty before the federal income taxes are subtracted from (or added to) financial resources using the TRIM3 microsimulation model. The individual types used in this table are also found in Table 1 and Table 3 of this report. Below are estimates of the number of families in poverty before federal income taxes are subtracted from (or added to) financial resources, estimated using the TRIM3 microsimulation model. The family types used in this table are also found in Table 2 and Table 4 of this report. Appendix C. How the Major Federal Income Tax Provisions That Affect Low-Income Taxpayers Were Modified by the TCJA Below are descriptions of how the major federal income tax provisions that affect low-income taxpayers deductions, exemptions, tax rates, and refundable credits were changed by the TCJA. Stylized examples included at the end of each section help illustrate the impact of these changes for a hypothetical family. Standard Deduction and Personal Exemptions The standard deduction and personal exemption, when combined, represent the minimum amount of income of a tax unit that is not taxed under the federal income tax. The standard deduction is a fixed dollar amount that taxpayers can subtract from their income when determining the amount of their income subject to taxation (e.g., "taxable income"). The TCJA nearly doubled the standard deduction. Specifically, in 2018 the standard deduction for unmarried single filers, head of household filers, and married joint filers increased from $6,500, $9,550, and $13,000 to $12,000, $18,000, and $24,000, respectively. The TCJA suspended the personal exemption, effectively reducing it from $4,150 per person in 2018 to $0. These changes are in effect from 2018 through the end of 2025. The combination of the standard deduction and personal exemption is sometimes referred to as the 0% bracket since that income is not taxed. It is also referred to as the tax entry point since every dollar above this amount is generally taxable (and hence considered taxable income). The increase of the standard deduction combined with the effective elimination of the personal exemption result in a similar or higher tax entry point for some families (unmarried individuals with no children, unmarried individuals with one child, and married couples with no children, as illustrated in Table C-1 ), while larger families, including many with children, will have a lower tax entry point under the new tax law. For these families, more of their income will potentially be subject to the federal income tax. Stylized Example For example, as illustrated in Table C-1 , a married couple with two children would have had a tax entry point in 2018 pre-TCJA of $29,600. If this family had $36,000 of income, only the amount above $29,600 $6,400 would have been taxable. Post-TCJA this tax entry point is now $24,000 for this same family. Hence, of their $36,000 of income, $12,000 would now be taxable income. Marginal Tax Rates/Tax Brackets A marginal tax rate is the percentage that a taxpayer pays on an additional dollar of taxable income. The federal individual income tax code has seven marginal tax rates ranging from 10% to 37%. The income ranges over which these marginal rates apply, often referred to as tax brackets , differ based on the taxpayer's filing status. The federal income tax is considered a progressive tax by economists because as taxable income increases, income above a given bracket threshold is taxed at a higher marginal rate. Once a tax unit has determined how much if any of their income is taxable (i.e., after subtracting the standard deduction from their income post-TCJA), they then apply marginal tax rates to this amount. If poor families have any taxable income, most if not all of it is subject to the lowest marginal tax rate, although some of their income may be subject to the second-lowest bracket (the second-lowest bracket was the 15% bracket pre-TCJA, and is now 12% under the TCJA). The lowest marginal tax rate 10% was unchanged by the TCJA. Changes to marginal tax rates are presented in Table C-2 . These changes are in effect from 2018 through the end of 2025. Stylized Example For example, for a married couple with two children and $36,000 in income, their taxable income pre-TCJA would have been $6,400 in 2018. That income would have been subject to a 10% marginal rate, for a tax liability before accounting for tax credits of $640. Post-TCJA, this same family would have had $12,000 of taxable income, all subject to the 10% marginal rate, which would result in $1,200 of income tax liability before subtracting any tax credits. The Child Tax Credit After taxpayers calculate their income tax liability before credits, they can subtract the value of any tax credits for which they may be eligible. Taxpayers with little or no tax liability which includes most of the poor can still receive the refundable credits, including the refundable portion of the child tax credit (the ACTC). The ACTC is calculated as a percentage of earnings (the refundability rate) above the refundability threshold up to the maximum amount of the refundable portion of the credit. The ACTC plus the amount of the credit that offsets any income tax liability cannot be greater than the maximum credit per child. (Low-income families who do have a positive tax liability will first reduce their income tax liability by the nonrefundable portion of the child tax credit, and then claim the ACTC.) TCJA made several changes to the child tax credit and ACTC, as outlined in Table C-3 . In addition to modifying the credit formula, TCJA also enacted a new ID requirement for the credit. Prior to TCJA, taxpayers could provide the taxpayer identification number for the child in order to claim the credit. The most common taxpayer ID is a Social Security number (SSN), but other taxpayer identification IDs included individual taxpayer identification numbers (ITINs). Post-TCJA, taxpayers will now need to provide the SSN for the child in order to claim the credit. These changes are in effect from 2018 through the end of 2025. How much a taxpayer's child tax credit changed following the TCJA depends on their income level. As a result of the changes made in the TCJA, the child tax credit doubled for many middle-income families. With the higher income phaseout thresholds, middle- and higher-income families became child tax credit eligible, as illustrated in Figure C-1 . However, many low-income families received a smaller increase, as illustrated in Figure C-2 . Stylized Example For example, for a married couple with two children and $25,000 of income, their child credit as a result of the TCJA would increase from $2,000 to $2,900 ($800 of the increase from the refundable portion and $100 from the nonrefundable portion). For this family, once income was $36,000, their child tax credit would increase from $2,000 to $4,000 (with $800 of that increase from the refundable portion and $1,200 from the nonrefundable portion). Other Changes The law did not directly change the largest antipoverty program in the tax code, the EITC. However, the law did change the measure of inflation used to adjust numerous provisions in the tax code, including the EITC, beginning in 2018. This new inflation index, the C-CPI-U price index, is projected to grow more slowly than the previous inflation index, the CPI-U. Hence, over time the EITC will grow more slowly. In 2018, the differences in the EITC from the adoption of this new measure will be relatively small, reducing the maximum amount of the credit by $1 for recipients with no children, $7 for recipients with one child, $12 for those with two children, and $13 for those with three or more children. However, as the effects of the slower inflation adjustment compound over time, these changes will grow larger. In addition, the income cutoff points of marginal tax rates will grow more slowly. Over time, if wages grow faster than C-CPI-U, some of the income of low-income taxpayers currently subject to the 10% marginal tax rate may become subject to higher marginal rates.

The federal individual income tax is structured so that the poor owe little or no income tax. In addition, the federal individual income tax (hereinafter referred to simply as the income tax) increases the disposable income of many poor families via refundable tax credits—primarily the earned income tax credit (EITC) and the refundable portion of the child tax credit, referred to as the additional child tax credit, or ACTC. These credits are explicitly designed to benefit low-income families with workers and children and can significantly boost families' disposable income, lifting many of these families above the poverty line. Using the federal government's Supplemental Poverty Measure (SPM), CRS estimates that under current law, the income tax reduced total poverty by 15% (from 14.5% in poverty to 12.3% in poverty). The impact of the income tax on the overall poverty rate was larger than the impact of many needs-tested benefits programs targeted toward the poor. In contrast, the income tax's ability to lift the poorest Americans out of poverty—to reduce the "poverty gap"—was limited in comparison to many needs-tested programs. (The poverty gap is the difference between the poverty threshold and a family's disposable income, aggregated over all poor families, and is a measure of the degree of poverty.) CRS estimates that under current law, the income tax reduced the poverty gap by about $13.9 billion annually (from $150.8 billion to $136.9 billion), approximately half the effect of other needs-tested programs. Virtually all of the poverty reduction from the income tax—both in terms of reducing poverty rates and the poverty gap—was concentrated among families with children and workers. For example, CRS estimates that poverty among children who lived in families with workers fell by almost 40% (from 14.7% in poverty to 8.9% in poverty) as a result of the income tax. For nonaged (i.e., nonelderly) adults in families with children and workers, poverty fell by almost a third (from 12.3% in poverty to 8.3% in poverty). (In contrast, CRS estimates that the poverty rates among individuals who lived in families with no workers were unchanged by the income tax.) Similarly, all of the estimated $13.9 billion in poverty gap reduction from the current income tax occurred among families with children and workers. The current income tax includes the effects of legislative changes made by P.L. 115-97 , commonly referred to as the Tax Cuts and Jobs Act (TCJA). The TCJA made numerous changes to the federal income tax system, including many that affect individuals and families. A comparison of the effect of the current income tax (i.e., the post-TCJA income tax) and the pre-TCJA income tax on poverty rates and the poverty gap (assuming all else unchanged) provides one measure of the law's impact on poverty. CRS estimates suggest that the TCJA marginally reduced poverty rates and the poverty gap, with the impact of the post-TCJA income tax similar to the impact of the pre-TCJA income tax. This suggests the law provided relatively small benefits to poor families. Insofar as policymakers are interested in expanding the antipoverty impact of the income tax, they could expand or modify the EITC or ACTC, or create new refundable tax credits targeted toward the poor. However, refundable tax credits are subject to several limitations as a poverty reduction policy: the current credits primarily benefit those who work (and have children), limiting their ability to reduce poverty among those who do not or cannot work; they are received only once a year when income tax returns are filed, limiting their ability to help the poor meet ongoing basic needs; and they are difficult for the IRS to administer, subjecting the credits and their recipients to additional scrutiny.

crs_R46194

crs_R46194_0

<1. Introduction> Social Security provides insured workers and their eligible family members with a measure of protection against the loss of income due to the worker's retirement, disability, or death. The amount of the monthly benefit payable to workers and their family members is based on the worker's career-average earnings from jobs covered by Social Security (i.e., jobs in which the worker's earnings were subject to the Social Security payroll tax). Although participation in Social Security is compulsory for most workers, about 6% of all workers in paid employment or self-employment are not covered by Social Security. Most noncovered workers are state and local government employees who are covered by alternative staff-retirement systems or permanent civilian federal employees hired before January 1, 1984, most of whom are covered by the Civil Service Retirement System (CSRS) or other alternative retirement plans. Social Security benefits are designed to replace a certain percentage of a worker's career-average earnings (referred to as the replacement rate ) for those who remain in covered employment throughout their careers. The benefit formula is weighted to replace a greater share of career-average earnings (i.e., provide a higher replacement rate) for low-paid workers than for high-paid workers. However, providing an appropriate replacement rate for beneficiaries whose careers are split between covered and noncovered employment (referred to hereinafter as split-career beneficiaries ) is challenging because years of noncovered earnings are marked as zeros in Social Security earnings records, so split-career beneficiaries appear to have low career-average earnings. Therefore, without adjusting for noncovered earnings, split-career beneficiaries would receive a higher replacement rate than beneficiaries with the same earnings who spent their entire careers in Social Security-covered employment. The windfall elimination provision (WEP) is a modified benefit formula that reduces Social Security benefits for certain retired or disabled workers who have earnings not covered by Social Security and are entitled to pension benefits based on those noncovered earnings (including certain foreign pensions). Its purpose is to remove an unintended advantage or windfall that these workers would otherwise receive as a result of the interaction between the regular Social Security benefit formula and the workers' relatively short careers in Social Security-covered employment. In December 2018, nearly 1.9 million people (or about 3% of all Social Security beneficiaries) were affected by the WEP. Some argue that the current-law WEP formula generally fails to provide the correct benefit adjustment (reduction) to affected beneficiaries. It overadjusts the benefit for some affected workers by producing a relatively large benefit reduction that gives them a lower replacement rate than similar workers whose entire careers were covered by Social Security; in contrast, it underadjusts the benefit for some other affected beneficiaries by producing a relatively small benefit reduction, giving them a higher replacement rate than similar workers whose entire careers were covered by Social Security. Legislative proposals have been introduced to substitute the current WEP with a proportional formula that would provide the same replacement rate to split-career beneficiaries and beneficiaries whose entire careers are covered. This report explains how the proportional formula would work and how it differs from the current-law WEP formula. It also discusses how Social Security benefits would change under the proportional formula for workers with different levels of earnings, years of noncovered earnings, and timing of those noncovered earnings (i.e., early career, midcareer, or late career). Lastly, this report concludes with historical and recent legislative proposals that are based on the proportional formula. <2. The Current-Law WEP> <2.1. How Does the Current-Law WEP Work?> Among other requirements, a worker generally needs 40 earnings credits (10 years of Social Security-covered employment) to be eligible for a Social Security retired-worker benefit. The Social Security regular benefit formula applies three replacement factors 90%, 32%, and 15% to three different brackets of a worker's average indexed monthly earnings (AIME), which is the monthly average of the 35 highest years of indexed covered earnings. The result is the primary insurance amount (PIA), which is the worker's basic benefit before any adjustments are made for factors such as cost-of-living adjustments (COLAs), early retirement, delayed retirement, or noncovered earnings. For workers who become eligible for benefits in 2020, the PIA is based on the formula in Table 1 . The dollar amounts in the table, known as bend points , are adjusted annually for average earnings growth. Under current law, the WEP reduction is based on years of coverage (YOCs) the larger the number of YOCs, the lower the WEP reduction. For people with 20 or fewer YOCs who become eligible for benefits in 2020, the WEP reduces the first replacement factor from 90% to 40% (referred to as the WEP replacement factor in this report), resulting in a maximum benefit reduction of $480 (90% of $960 minus 40% of $960). A worker with an AIME of $1,500 who becomes eligible for Social Security benefits in 2020 would receive an unadjusted monthly benefit of $1,036.80 if all earnings are covered by Social Security, compared to a WEP-reduced monthly benefit of $556.80 if he or she has 20 or fewer YOCs (see Table 1 ). For each YOC in excess of 20, the WEP replacement factor increases by 5%. For example, the WEP factor is 45% for those with 21 YOCs and 50% for those with 22 YOCs. The WEP factor reaches 90% for those with 30 or more YOCs, and at that point it is phased out (see Figure 1 ). The amount of substantial covered earnings needed for a YOC is $25,575 in 2020; the amount is adjusted annually by average wage growth. Workers with annual covered earnings below the level of substantial earnings do not receive a YOC. For example, a worker who earns $5,640 in 2020 (covered earnings) will receive four earnings credits for the purpose of Social Security eligibility, but will not qualify for a YOC for the WEP purpose. In December 2018, of the nearly 1.9 million beneficiaries affected by the WEP, nearly 1.6 million (84%) had 20 YOCs or fewer, and the remaining 0.3 million (16%) had 21-29 YOCs (see Figure 1 ). Two groups of beneficiaries with noncovered employment are exempt from the WEP: (1) those with 30 or more YOCs; and (2) those not receiving a pension based on those noncovered earnings. SSA's Office of the Chief Actuary estimated that roughly 18 million Social Security worker beneficiaries with some noncovered earnings were exempt from the current WEP in 2018. Among them, about 9.4 million (52%) had 30 or more YOCs. Additionally, a guarantee provision in the WEP ensures that the WEP reduction cannot exceed one-half of the pension based on the worker's noncovered employment. <2.2. Benefit Adjustments Under the Current-Law WEP> The regular Social Security benefit formula is progressive, replacing a greater share of career-average earnings for low-paid workers than for high-paid workers. For example, Table 2 displays five types of scaled workers with hypothetical lifetime earnings from low to high, whose earnings patterns are based on actual Social Security-insured workers' career earnings. The replacement rate the percentage of AIME replaced by the PIA ranges from 83.3% for a very low-earning worker whose entire career is covered to 60.5% for a low-earning worker, 44.8% for a medium-earning working, 37.2% for a high-earning worker, and 29.4% for a worker who earns the taxable maximum every year. If a person has earnings not covered by Social Security, those noncovered earnings are shown as zeros in their Social Security earnings records, thus resulting in relatively lower career-average earnings. The regular formula cannot distinguish between workers who have low career-average earnings because they worked for many years at low earnings in covered employment and workers who appear to have low career-average earnings because they worked for many years in jobs not covered by Social Security. Therefore, without a PIA reduction for noncovered earnings, a worker who split his or her career between covered and noncovered employment might receive a higher replacement rate than a worker with the same level of earnings who spent an entire career in covered employment. For example, a low-scaled worker is estimated to have annual career-average earnings of $22,588. If all career earnings were covered, the worker would receive a 60.5% replacement rate in Social Security benefits. However, if the second half of the low-scaled worker's career was in noncovered employment, the worker would receive a replacement rate of 90.0% based on the regular benefit formula before adjusting for noncovered earnings (see Table 2 ). The WEP PIA addresses this problem by reducing the replacement rate for certain workers who have noncovered earnings. For example, the replacement rate would be adjusted from 90.0% to 40.0% for a low-scaled worker if the second half of his career was not covered by Social Security. The WEP's original intent was to ensure that Social Security beneficiaries with some earnings from noncovered employment received the same replacement rate as workers who spent their entire careers in covered employment. However, the current-law WEP formula can only approximately achieve that goal. The current-law WEP formula over adjust s benefits for certain affected beneficiaries by producing a relatively large benefit reduction, resulting in a lower replacement rate than a similar worker whose entire career was covered by Social Security would receive. For example, a very low-scaled worker who spent the second half of his or her career in noncovered employment would receive a replacement rate of 40.0% using the WEP formula, which is substantially lower than the replacement rate a very low-scaled worker whose entire career was covered by Social Security (83.3%) would receive. The magnitude of such benefit overadjustment is smaller for affected beneficiaries with relatively higher lifetime earnings. For example, if the second half of a high-scaled worker's career was not covered by Social Security, the worker would receive a WEP benefit replacing 34.4% of covered AIME, which is slightly lower than the replacement rate for high-scaled workers whose entire careers are covered by Social Security (37.2%). In addition, the current-law WEP formula under adjust s Social Security benefits for some other beneficiaries by producing a relatively small benefit reduction, resulting in a higher replacement rate than a similar worker whose entire career is covered would receive. Such underadjustment usually applies to workers with significantly high lifetime earnings and some earnings not covered by Social Security. For example, a taxable-maximum worker who earned the taxable-maximum amount each year of work history is estimated to have career-average earnings of $123,232. If the second half of the taxable-maximum worker's career was not covered by Social Security, the worker would receive a 33.2% replacement rate in Social Security benefits under the WEP, compared to 29.4% if the entire career had been covered by Social Security (see Table 2 ). <3. The Proportional Formula for the WEP> <3.1. How Would the Proportional Formula Work?> The proportional formula for the WEP would apply the regular Social Security benefit formula to all past earnings up to the taxable maximum from both covered and noncovered employment. The resulting benefit would then be multiplied by the ratio of career-average earnings (AIME) from covered employment only to career-average earnings (AIME) from both covered and noncovered employment. By concept, the PIA under the proportional formula (i.e., proportional PIA) would be as follows: Proportional PIA=PIA for all Earnings AIME for Covered EarningsAIME for all Earnings In other words, a Social Security benefit would be calculated based on a worker's combined covered and noncovered earnings, but only the portion based on covered earnings would be payable as a Social Security benefit. <3.2. Benefit Adjustments Under the Proportional Formula> Under the proportional formula, Social Security beneficiaries with some earnings from noncovered employment would receive the same replacement rate (ratio of PIA to AIME) for covered earnings as similarly situated workers who spent their entire careers in covered employment, regardless of earnings levels, years of covered earnings, or the timing of those covered earnings. Figure 3 illustrates this, showing that a medium-scaled worker would receive a 44.8% replacement rate under the proportional formula whether the worker's entire career or only half of the worker's career was covered by Social Security. This 44.8% replacement rate for the split-career worker would be lower than the windfall replacement rate under the regular PIA without any adjustment for noncovered earnings (60.2%), but higher than the rate under the current WEP PIA (35.9%), which overadjusts the benefit reduction for noncovered earnings. The proportional formula would provide a higher benefit than the WEP for workers whose Social Security benefits are currently overadjusted, such as the very low-, low-, medium-, and high-scaled workers shown in Table 3 . Because scaled workers with relatively lower lifetime earnings receive a larger overadjustment under the current WEP, those workers would receive a larger monthly benefit increase under the proportional formula. For example, the monthly benefit increase under the proportional formula relative to the current WEP would be $213.90 for very low-scaled workers if their careers' second halves were not covered by Social Security, compared to $182.20 for low-scaled workers, $176.50 for medium-scaled workers, and $87.10 for high-scaled workers. In contrast, workers whose Social Security benefits are underadjusted by the current WEP, such as taxable-maximum workers, would receive a lower benefit under the proportional formula. <4. Comparing the Proportional Formula with Current Law> The proportional formula discussed above would differ from the current-law WEP formula in terms of monthly benefit amounts, improper payments, and notification to beneficiaries. <4.1. Differences in Monthly Benefits> Given the current-law WEP formula's design, the proportional formula would increase Social Security benefits for some beneficiaries with noncovered employment and decrease benefits for others. Beneficiaries who would receive a lower benefit under the proportional formula than under current law include beneficiaries with noncovered earnings who are exempt from the current-law WEP, such as those with 30 or more YOCs or those not receiving a noncovered pension; and beneficiaries whose benefits are underadjusted using the current WEP PIA, such as those who have relatively high lifetime earnings, are close to 30 YOCs, or are affected by the current-law guarantee provision. If the proportional formula had applied to current beneficiaries in 2018, SSA's Office of the Chief Actuary (OCACT) estimates that about 1.1 million beneficiaries affected by the current WEP (or 69%) would have received a higher benefit and about 0.5 million beneficiaries affected by the current WEP (or 31%) would have received a lower benefit. In addition, 13.5 million beneficiaries with some noncovered earnings who were exempted from the current WEP in 2018 would have received a lower benefit under the proportional formula. <4.1.1. Exemptions and the Guarantee Provision Under Current Law> Beneficiaries who are eligible for either of the two exemptions to the current-law WEP would receive a lower benefit under the proportional formula. Beneficiaries with 30 or more YOCs are exempted from the current WEP, but under the proportional formula, workers with 30 or more YOCs and very few years of noncovered employment (even less than a year) would probably receive proportional reductions in their Social Security benefits. For example, a medium scaled-worker who earned 30 YOCs in his earlier career would not be affected by the current WEP even if he took a noncovered position afterward and was entitled to a noncovered pension (see case [1] in Table 4 ). In this case, the worker would receive an unreduced Social Security benefit of $1,707.30, which would be higher than the proportional PIA ($1,612.00) based on earnings from noncovered employment. SSA's OCACT estimates that, in 2018, roughly 9.4 million Social Security retired-worker and disabled-worker beneficiaries with some noncovered earnings were exempt from the current WEP because they had 30 or more YOCs. Because those beneficiaries have relatively few years of noncovered earnings, their benefit reductions under the proportional formula would be relatively small. The other exemption applies to beneficiaries with noncovered earnings who do not receive a pension based on those noncovered earnings. Those beneficiaries could receive a lower benefit under the proportional formula because their earnings from noncovered employment could reduce the proportion of overall career-average earnings from covered jobs. For example, under current law, a medium-scaled worker who worked in a noncovered position from age 55 to age 61 but received no noncovered pension benefits would be exempt from the WEP and receive a Social Security benefit equal to $1,551.10 (see case [2] in Table 4 ). This amount would be higher than the benefit computed by the proportional formula ($1,432.80) because those seven years of noncovered employment would proportionally reduce the Social Security benefit. Estimates from OCACT find that about 8.6 million Social Security retired-worker and disabled-worker beneficiaries with some noncovered earnings and less than 30 YOCs were exempt from the current WEP in 2018 because they had no pension based on those noncovered earnings. In addition, the guarantee provision under current law limits benefit reductions by ensuring that the WEP reduction cannot exceed one-half of the noncovered pension benefit. This provision typically leads to small benefit reductions for beneficiaries who receive small pension benefits based on relatively short careers in noncovered employment. The proportional formula would not limit reductions in this way, so those workers' benefits would be lower under the proportional formula than under the WEP. For example, a low-scaled worker who worked in a noncovered position from age 52 to age 61 and received a monthly benefit from a noncovered pension equal to $100 would receive a WEP reduction of no more than $50 under current law (see case [3] in Table 4 ). Therefore, this worker would receive $896.10 under the current WEP, but $770.90 under the proportional formula with no guarantee provision. <4.1.2. Years of Coverage> In addition to the exemptions and the guarantee provision, whether a worker with noncovered earnings would receive a lower Social Security benefit under the proportional formula relative to current law also depends on YOCs based on substantial earnings. The number of YOCs determines the WEP replacement factor under current law (see Figure 1 ). In general, the larger the number of YOCs, the higher the WEP replacement factor. Workers who have employment not covered by Social Security also need to earn the substantial covered amount ($25,575 in 2020) to receive one YOC, which is much higher than the earnings required for Social Security eligibility ($5,640 in 2020). Because of the WEP's higher YOC earnings threshold, workers with relatively lower covered earnings who are affected by the WEP may be entitled to Social Security benefits based on earnings credits but not qualify for a YOC for WEP purposes. Although YOCs are a critical factor for determining the PIA under the current-law WEP, they are not relevant for the proportional formula. To compare monthly benefits based on the two formulas by YOCs, Figure 4 shows a medium-scaled worker's monthly benefit amounts under the current WEP PIA and the proportional PIA. If the medium-scaled worker took a job covered by Social Security in the earlier part of her career and the number of YOCs was relatively small (less than 27 for a medium-scaled worker), the proportional formula would provide a higher benefit than the current WEP. However, if the number of YOCs were relatively large (more than 27 for a medium-scaled worker), the proportional formula would provide a lower benefit than the current law WEP. Two reasons may explain why the proportional formula would provide a lower benefit than the current-law WEP at the higher level of YOCs. First, current law exempts beneficiaries from the WEP if they have 30 or more YOCs, resulting in a higher benefit amount than under the proportional formula. Second, when YOCs are close to 30, the current-law WEP replacement factor is relatively large, such as 85% for 29 YOCs (see Figure 1 ), so the current-law WEP PIA underadjusts and produces a higher benefit than the proportional formula. The monthly benefit difference between the proportional formula and the current-law WEP formula also depends on earning levels. For example, the very low- and low-scaled workers in Figure 5 had fewer than 20 YOCs because their annual earnings were typically less than the substantial earnings required for a YOC. They would receive a current-law WEP PIA based on the lowest WEP replacement factor (40%). Therefore, the proportional PIA for these workers would generally be higher than the WEP PIA, because the 40% WEP replacement factor overreduces their Social Security benefits for noncovered earnings. The proportional PIA would also be higher than the WEP PIA for medium- and high-scaled workers with relatively fewer YOCs, such as Figure 5 's medium-scaled workers with fewer than 29 years of covered earnings and high-scaled workers with YOCs between 11 and 22. However, as YOCs increase, the WEP replacement factor goes up, so the WEP PIA is higher than the proportional PIA for medium- and high-scaled workers with more YOCs. For workers with substantially high earnings, such as taxable maximum workers, the proportional PIA would generally be lower than the WEP PIA. <4.1.3. Timing of Noncovered Employment> The size of the monthly benefit difference between the proportional PIA and the WEP PIA also depends on the timing of covered and noncovered employment. Figure 6 compares three medium-scaled workers with 20 years of covered employment in early career, midcareer, and late career, respectively. Because early-career earnings are relatively lower than earnings in later years, a medium-scaled worker whose early career is covered by Social Security would tend to have a lower WEP PIA, a lower proportional PIA, and a lower monthly benefit difference between the two formulas than a medium-scaled worker with covered earnings at midcareer or late career. This example indicates that the WEP PIA and proportional PIA amounts depend on the timing of noncovered employment, as well as earning levels from both covered and noncovered employment. <4.2. Administration and Improper Payments> The current-law WEP and the proportional formula differ not only in benefit calculation, but also in administration and associated costs. SSA's ability to administer the current WEP depends in large part on the type of noncovered employment on which a beneficiary's pension is based. For most federal retirees and survivors, SSA relies primarily on noncovered pension data matched from the Office of Personnel Management (OPM). However, for state or local retirees and certain retirees with foreign pensions, SSA relies primarily on beneficiaries to self-report noncovered pension amounts. Based on the information matched and provided, SSA determines whether and to what extent to apply the WEP. Unreported state and local government pensions lead to improper payments. According to SSA, WEP has been a leading cause of computational errors related to overpayments. For FY2013 through FY2017, WEP accounted for 63% of reported computation overpayment errors, and average overpayments related to WEP totaled approximately $520 million annually. In contrast, the proportional formula is applied based on covered and noncovered earnings records, which are reported to SSA on Internal Revenue Service (IRS) Form W-2. Without other provisions, benefits based solely on the proportional formula would likely have fewer errors compared to benefits computed with the current-law WEP formula. <4.3. Notification to Beneficiaries> The annual Social Security statements that SSA makes available to all eligible workers provide benefit estimates based only on covered employment, with no estimates of the WEP adjustment because SSA is not provided with information on receipt of noncovered pensions until an individual self-reports this benefit when applying for Social Security. Because of this limitation, beneficiaries have argued that they were not given sufficient notice of how much their benefits would be reduced due to the WEP. To address this issue, the Social Security Protection Act of 2004 ( P.L. 108-203 ) requires state and local government employers to disclose the WEP's effect to affected employees hired on or after January 1, 2005. SSA also responded to those communication issues by inserting a description of the WEP into the statement beginning in 2007. However, communication challenges remain. The statement provides no estimates of the current WEP adjustment. The WEP adjustment is difficult to estimate without information on noncovered pensions, which is generally not available until the worker is entitled to such pension at a later date. Compared to the current WEP, the estimate of noncovered earnings used in the proportional formula and the corresponding proportional PIA would be relatively easier to include in the statement. The proportional PIA estimate would have to be based on certain assumptions regarding future employment type, but it would not require noncovered pension information. <5. Legislative Proposals Based on the Proportional Formula> <5.1. Proposals in the 1980s> <5.1.1. 1981> In 1981, proposals to address Social Security benefits for individuals receiving pensions from noncovered employment were discussed as part of broad reform efforts to address Social Security's financing issues, which were a major concern at the time. Some of the proposals called for worker PIA computations to use both covered and noncovered earnings, and for the PIA based on combined earnings to then be reduced by the ratio of noncovered earnings to combined earnings. This method is commonly referred to as the proportional formula , as discussed earlier in this report. This proposal was recommended by the National Commission on Social Security and included in Section 301 of H.R. 3207 , the Social Security Amendments of 1981 as introduced in the 97 th Congress. Other proposals called for a modified benefit formula that would change the first replacement factor in the regular benefit formula for workers with pensions based on noncovered work, which is similar to current law. For example, a May 1981 Reagan Administration proposal would have substituted the 90% replacement factor in the regular benefit formula with a 32% replacement factor for affected beneficiaries. The proposal would have guaranteed that the Social Security benefit reduction could not exceed one-half of the noncovered pension. <5.1.2. 1983> In January 1983, the National Commission on Social Security Reform (NCSSR, better known as the Greenspan Commission) recommended eliminating the windfall portion of benefits for individuals who received a pension based on noncovered employment. The two methods discussed above were suggested: (1) the proportional formula based on covered and noncovered earnings, and (2) the modified benefit formula, substituting the 90% replacement factor with 32%. In the same year, SSA offered comments on the two methods. The agency indicated that the proportional formula would be the most conceptually appropriate, but would require SSA to maintain detailed records on workers' noncovered earnings in a manner comparable to the current covered earnings record operations, which would have required extensive data reporting, maintenance, and correction processes, and could likely not have been done with limited cost at that time. In contrast, SSA indicated the modified benefit formula based on the replacement factor would achieve the proportional formula's approximate results and be vastly easier to administer. SSA also recommended lowering the 90% replacement factor to 61% (the midpoint between the 90% factor and the 32% factor), as the 32% replacement factor would overadjust for the windfall. In March 1983, Congress incorporated the NCSSR's recommendations (with some modifications), along with additional provisions to resolve the remaining long-range deficit, into the Social Security Amendments of 1983 ( P.L. 98-21 ). The conference agreed that the 90% replacement factor in the regular benefit formula would be substituted with a 40% replacement factor (phased in over five years), as in current law. <5.2. Proposals from 2004 to Present> Since 2004, various bills have been introduced to replace the current WEP formula with the proportional formula based on both covered and noncovered earnings. Partly because all covered and noncovered earnings have been reported to SSA on Form W-2 since 1978, sufficient earnings records are now available to apply the proportional formula. Thus, a previous major area of concern for administering a proportional formula has been alleviated. Legislative proposals based on the proportional formula usually address two essential questions: (1) whether the proportional formula would be applied to beneficiaries affected by the current WEP; and (2) how to treat beneficiaries who would receive a lower benefit under the proportional formula compared to current law. For the first question, proposals either apply the proportional formula to all current and future affected beneficiaries, or apply the proportional formula only to certain future beneficiaries and provide an additional monthly benefit (usually referred to as a rebate ) to those affected by the current WEP. For the second question, some proposals include a no-benefit-cut provision such that the beneficiary would receive a benefit based on the higher of the current WEP formula and the proportional formula. For example, S. 113 and H.R. 2797 in the 112 th Congress would have applied the proportional formula to all beneficiaries (both current and future beneficiaries) after 1985 and provided a no-benefit-cut or hold harmless provision to beneficiaries who had worked in noncovered positions prior to one year after the bill's enactment. In a somewhat different approach, H.R. 3934 and H.R. 4540 in the 116 th Congress would apply the proportional formula to beneficiaries becoming eligible after a certain date, such as December 31, 2021; provide a rebate to beneficiaries affected by the current-law WEP; and mandate a no-benefit-cut provision for some or all future beneficiaries. The above two bills introduced in the 116 th Congress also include provisions to require SSA to show noncovered as well as covered earnings records on Social Security statements and to require studies on ways to facilitate data exchanges between SSA and state and local governments to improve current-law WEP administration.

Social Security is a work-based federal insurance program that provides income support to workers and their eligible family members in the event of a worker's retirement, disability, or death. About 6% of workers in paid employment or self-employment in 2019 were not covered by Social Security. A quarter of state and local government employees and most permanent civilian federal employees hired before January 1, 1984, were not covered, and these groups constituted the majority of noncovered workers. For workers whose entire careers are covered by Social Security, the Social Security benefit formula is weighted to replace a greater share of career-average earnings (referred to as the replacement rate ) for low-paid workers than for high-paid workers. However, providing an appropriate replacement rate for beneficiaries whose careers are split between covered and noncovered employment (referred to hereinafter as split-career beneficiaries ) is challenging because years of noncovered earnings are marked as zeros in Social Security earnings records, so split-career beneficiaries appear to have low career-average earnings. Therefore, if there were no adjustment for noncovered earnings, split-career beneficiaries would receive a higher replacement rate than beneficiaries with the same earnings who spent their entire careers in covered employment. The windfall elimination provision (WEP) is a modified benefit formula that reduces certain retired or disabled workers' Social Security benefits if they also have earnings not covered by Social Security and are entitled to pension benefits based on those noncovered earnings. The WEP aims to provide split-career beneficiaries with approximately the same replacement rate as similar workers whose entire careers were covered by Social Security. Some have argued, however, that the current-law WEP formula generally fails to accurately adjust affected workers' benefits. They say it overadjusts some affected workers' benefits (i.e., it reduces them by too much), giving them a lower replacement rate than similar workers whose entire careers were covered by Social Security. In contrast, they argue it underadjusts some other affected workers' benefits, giving them a higher replacement rate than similar workers whose entire careers were covered. Estimates in 2018 showed the current-law WEP overadjusted 69% of affected beneficiaries' benefits and underadjusted for the remaining 31%. Legislative proposals have been introduced to substitute the WEP with a proportional formula that would calculate Social Security benefits based on earnings from both covered and noncovered employment. The proportional formula's supporters have argued it is a more accurate method to treat noncovered employment, because it would provide the same replacement rate for split-career beneficiaries and beneficiaries whose entire careers are covered by Social Security. Compared with current law, a proportional formula would increase Social Security benefits for beneficiaries whose current-law WEP benefits are overadjusted and decrease benefits for those whose benefits are underadjusted. It would also decrease benefits for many beneficiaries with earnings from noncovered employment who are exempt from the current WEP reduction because they (1) have 30 or more years of substantial covered earnings, or (2) do not receive a pension based on noncovered earnings. Proposals to establish a proportional formula have been discussed since the 1980s. However, applying the proportional formula requires a complete record of earnings from covered and noncovered employment, which were not readily available at that time. To obtain the complete earnings record, the Social Security Administration (SSA) would have needed a massive new operation system requiring extensive data reporting, maintenance, and correction processes, which could not have been accomplished quickly with limited costs. Therefore, the current-law WEP was enacted in 1983 as an approximate approach to adjust Social Security benefits for certain beneficiaries who had earnings in jobs not covered by Social Security. Today, SSA has 35 years of data on earnings from both covered and noncovered employment, implying that the proportional formula is now an option for Congress to consider. In 2019 (the 116 th Congress), H.R. 3934 and H.R. 4540 would replace the current-law WEP approach with a proportional formula for certain individuals who would become eligible for Social Security benefits in 2022 or later.

crs_R46067

crs_R46067_0

<1. Overview> The Chief Financial Officers Act of 1990 (CFO Act) requires annual financial audits of federal agencies' financial statements to "assure the issuance of reliable financial information ... deter fraud, waste and abuse of Government resources ... [and assist] the executive branch ... and Congress in the financing, management, and evaluation of Federal programs." Agency inspectors general (IGs) are responsible for the audits and may contract with one or more external auditors. The Department of Defense (DOD) completed its first agency-wide financial audit in FY2018 and recently completed its FY2019 audit. Comprehensive data for the FY2019 audit are not currently available. Therefore, this report focuses on DOD's FY2018 audit. Congressional interest in DOD's audits is particularly acute because DOD accounts for about half of federal discretionary expenditures and 15% of total federal expenditures. The Department of Defense Inspector General (DOD IG) contracted with nine Independent Public Accounting firms (IPAs) to conduct the FY2018 and FY2019 audit. The IPAs conducted 24 separate audits within DOD (see Table 1 for each of the component-level audit opinions). In both FY2018 and FY2019 audits, the DOD IG issued the overall agency-wide opinion of disclaimer of o pinion meaning auditors could not express an opinion on the financial statements because the financial information was not sufficiently reliable. DOD components that received a disclaimer of opinion represent approximately 56% of the reported DOD assets and 90% of the reported DOD budgetary resources. DOD expected to receive a disclaimer of opinion for FY2018 and FY2019. The department has stated it could take a decade to receive an u nmodified (clean) audit opinion. The federal government as a whole is unable to receive a clean opinion on its financial report because agencies with significant assets and budgetary costs, such as DOD, the Department of Housing and Urban Development, and the Railroad Retirement Board, have each received a disclaimer of opinion in recent years. The federal government as a whole potentially could receive a clean audit opinion without all government agencies receiving a clean audit opinion; however, the size of the DOD budget $708 billion in FY2019 prevents an overall clean opinion without DOD receiving a clean audit opinion. DOD employs 2.9 million military and civilian employees at approximately 4,800 DOD sites in 160 countries. DOD IG personnel and auditors from IPAs visited over 600 sites, sent over 40,000 requests for documentation, and tested over 90,000 sample items. DOD spent $413 million to conduct the FY2018 audit: $192 million on audit fees for the IPAs and $221 million on government costs to support the audit. DOD spent an additional $406 million on audit remediation and $153 million on financial system fixes. <2. What Is a Financial Audit?> Financial statements are the primary way for an entity to communicate its financial performance to its stakeholders. How each line item on a financial statement (e.g., property) should be valued and reported is based on Generally Accepted Accounting Principles (GAAP), an agreement among practitioners (i.e., accountants, auditors, and regulators). In a financial audit, a private or public entity hires an independent auditor to provide reasonable assurance to all stakeholders that its financial statements are free of material misstatement, whether caused by error or fraud. Auditors form opinions by examining the types of risks an organization might face and the controls in place to mitigate those risks. Auditors give unbiased professional opinions on whether financial statements and related disclosures are fairly stated in all material respects for a given period of time in accordance with GAAP. As mentioned previously, the CFO Act requires federal agencies' financial statements to be audited annually. The CFO Act assigns responsibility for audits to agency inspectors general (IGs), but an IG may contract with one or more external auditors to perform an audit. The annual audit can inform Congress and the agency about its business processes and areas for improvement. An audit of DOD can provide benefits, such as (1) effective and efficient internal operations that can lead to reducing costs and improving operational readiness; (2) improved allocation of assets and financial resources that can enhance DOD's decisionmaking and ability to support the Armed Forces; and (3) improved compliance with statutes and financial regulations. For each line item on a financial statement and notes to the financial statement, an auditor will examine a sample of the underlying economic events to determine the reported information's accuracy. The Federal Accounting Standards Advisory Board (FASAB) promulgates financial reporting and accounting standards for federal government entities, and GAO establishes federal auditing standards, including for federal grant recipients in state and local governments. GAO issues the Generally Accepted Government Auditing Standards (GAGAS), also commonly known as the Yellow Book , to provide a framework for conducting federal government audits. The Yellow Book requires auditors to consider the visibility and sensitivity of government programs in determining the materiality threshold. Similar to requirements in the private sector, GAGAS requires federal financial reporting to disclose compliance with laws, regulations, contracts, and grant agreements that have a material effect on financial statements. Before auditors examine an entity's financial statement, they first evaluate its Enterprise Resource Planning (ERP) systems' (information technology systems') access control and reliability, as well as internal controls. ERP refers to an enterprise-wide information system used to manage and coordinate all of an entity's resources, information, and functions from shared data stores, including financial information. Auditing ERP systems is a critical aspect of evaluating an entity's internal controls. <2.1. Internal Control in the Federal Government> Internal control is a series of integrated actions that management uses to guide an entity's operations. Under GAO standards, effective internal controls should require management to use dynamic, integrated, and responsive judgment rather than rigidly adhering to past policies and procedures. The success or failure of an entity's internal controls depends on its personnel. Management is responsible for designing effective internal controls, but implementation depends on all personnel understanding, implementing, and operating an effective internal control system. Federal agencies have been required to report to Congress on internal controls since the Federal Managers' Financial Integrity Act of 1982. In addition, the Federal Financial Management Improvement Act of 1996 requires agencies to report to Congress on the effectiveness of internal control over financial management systems. GAO's Standards for Internal Control in the Federal Government (also known as the Green Book ) provides the overall framework for designing, implementing, and operating an effective internal control system. An audit of an entity's internal controls includes computer systems at the entity-wide, system, and application levels. GAGAS recommends using specific frameworks for internal control policies and procedures, including certain evaluation tools created specifically for federal government entities. Office of Management and Budget (OMB) Circular No. A123, Management's Responsibility for Enterprise Risk Management and Internal Control , provides additional guidance. The federal government's internal control framework is based on the framework created by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), which is widely used in the private sector. The COSO framework is dedicated to improving organizational performance and governance through effective internal control, enterprise risk management, and fraud deterrence. The COSO framework, depicted in Figure 1 , was created to help practitioners assess internal controls not as an isolated issue, but rather as an integrated framework for how internal controls work together across an organization to help achieve objectives as determined by management. It represents the integrated perspective recommended by COSO for practitioners who are creating and assessing internal controls. The cube may be best understood by examining each set of components separately: Categories of objectives. Operations, Reporting, and Compliance are represented by the columns. The objectives are designed to help an organization focus on different aspects of internal controls to help management achieve its objectives. Components of internal control. Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities are represented by the rows. The components represent what is required to achieve the three objectives. Levels of organizational structure. Entity-Level, Division, Operating Unit, and Function are represented by the third dimension. For an organization to achieve its objectives, according to COSO, internal control must be effective and integrated across all organizational levels. <2.2. Internal Control at DOD> Internal controls can help DOD leadership achieve desired financial results through effective stewardship of public resources. Effective internal controls can increase the likelihood that DOD achieves its financial objectives, including getting a clean (i.e., unmodified) audit opinion. Properly designed internal controls can help reduce the amount of detail an auditor will examine, including the number of samples examined. Good internal controls could reduce the amount of time required to conduct an audit, thus reducing its cost. At DOD, auditors identified 20 agency-wide internal control material weaknesses and 129 DOD component-level material weaknesses that range from issues with financial management systems to inventory management. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting that results in a reasonable possibility that management will not prevent, or detect and correct, a material misstatement in the financial statements in a timely manner. Many of these material weaknesses are discussed later in this report under " Issues for Congress ." Properly designed internal controls can also serve as the first line of defense in safeguarding assets. Internal controls help private and public entities achieve objectives, such as enterprise risk management, fraud deterrence, and sustained and improved performance, by designing processes that control risk. The DOD IG identified multiple DOD components that do not have sufficient entity-level internal controls . The lack of entity-level internal controls directly contributed to an increased risk of material misstatements on the components' financial statements and the agency-wide financial statements. Until DOD resolves the many issues surrounding internal controls and establishes a better record-keeping system, it might be difficult for auditors to identify other material weaknesses that could prevent DOD from receiving a clean audit opinion. When the current set of internal control issues is resolved, and auditors are better able to analyze DOD records, they might discover additional issues, including new material weaknesses, that need to be resolved a cascading effect before DOD receives a clean audit opinion. This cycle might repeat a few times. <3. FY2018 Audit Results> The DOD auditors issued 2,377 notices of findings and recommendations (NFRs) that resulted in 20 agency-wide material weaknesses and 129 DOD component-level material weaknesses. Appendix A provides an overview of the 20 agency-wide material weaknesses. An auditor creates an NFR to capture issues that require corrective action. DOD then creates a corrective action plan (CAP) to address one or more NFRs. The NFR is later retested, and if the CAP sufficiently addresses the NFR, the auditor is to validate that the issue has been resolved. As of June 2019, the majority of NFRs were related to three critical areas: approximately 48% were related to financial management systems and information technology; 30% were related to financial reporting and DOD's fund balance with Treasury; and 16% were related to property. Although the overall number of NFRs increased slightly between December 2018 and June 2019, the number has decreased significantly in certain categories (see Table 2 , Other column). The increase in NFRs in certain categories is an expected result of the audit process. As auditors learn more about DOD and how it functions, they may continue to identify new NFRs, while DOD continues to address some of the previously identified NFRs. The Office of the Under Secretary of Defense (Comptroller) has established an audit NFR database. DOD uses the database to consolidate and track the status of all auditor-issued NFRs and prioritize and link them to CAPs. The NFR and CAP component-based metrics are reported and reviewed monthly in the National Defense Strategy meeting with the Deputy Secretary of Defense and Military Service financial management leadership teams. The military service branches Army, Navy, Marine Corps, and Air Force account for over 60% of NFRs identified in the FY2018 audit (see Table 3 ). For DOD to receive a clean audit opinion, civilian leadership and uniformed Armed Forces personnel may need to improve collaboration. According to DOD, it is prioritizing CAPs that align with the National Defense Strategy and provide the greatest potential value to DOD operations and the warfighter. DOD has established actionable financial statement audit priorities at many levels within the department, including at the command level. Those FY2019 priorities include the following: Real Property; Government Property in the Possession of Contractors; Inventory, and Operating Materials and supplies; and Access Controls for IT Systems. Given the complexity of DOD operations, auditors began their work for the FY2019 financial audit in late 2018. Comprehensive data for the FY2019 audit are not currently available. However, the auditors issued an overall agency-wide disclaimer of opinion for FY2019. Most financial statement audits stop as soon as the auditor determines the reporting entity is not auditable. DOD, however, has asked the auditors to continue such audits to identify as many problems as possible, with the goals of identifying systemic issues and making faster progress toward business reform. <4. Issues for Congress> Although the CFO Act required annual audits of federal agencies' financial statements, DOD did not complete an agency-wide audit until 2018 28 years later. One of DOD's strategic goals is to reform its business practices for greater performance and affordability. According to DOD, the annual audit process helps it reform its business practices consistent with the National Defense Strategy (NDS): The financial statement annual audit regimen is foundational to reforming the Department's business practices and consistent with the National Defense Strategy. Data from the audits is driving the Department's strategy, goals, and priorities and enabling leaders to focus on areas that yield the most value to the warfighter. The audits are already proving invaluable and have the potential to support long-term, sustainable reform that could lead to efficiencies, better buying power, and increased public confidence in DoD's stewardship of funds. Continued congressional oversight of DOD's plan to achieve a clean audit opinion could help DOD achieve a clean audit opinion. As more components receive a clean audit opinion, audit costs might eventually decrease. For FY2018, DOD incurred nearly $1 billion in total audit costs, which was less than 0.25% of DOD's FY2018 budget. Although the cost of an audit is a consideration, the more impactful benefits from an annual financial audit, arguably, are the changes in DOD business practices that directly impact the NDS while increasing transparency. The audits identified three critical areas of improvement that are consistent with the NDS: (1) financial management systems and information technology (IT), (2) financial reporting and fund balance with Treasury, and (3) property (real property, inventory, and supplies, and government property in the possession of contractors). Addressing the issues in these critical areas not only could help DOD improve its business practices, but it might also help resolve many of the NFRs, which could enable some audit components to receive clean audit opinions in the next few years instead of in another decade or more. <4.1. Financial Management Systems and Information Technology> According to DOD, its financial management systems and information technology provide a broad range of functionality to support agency financial management, supply chain management, logistics, and human resource management. Reliable systems are mission critical to DOD meeting its NDS and supporting the warfighter. Also, DOD is required to comply with laws and regulations, such as the Federal Managers' Financial Integrity Act of 1982, the Federal Financial Management Improvement Act of 1996, and OMB Circular A-123. These laws and regulations collectively require DOD to maintain a system of internal controls that can produce reliable operational and financial information. The challenges DOD faces in financial management systems and information technology are twofold and compromise nearly half of all NFRs (see Table 2 or Table 3 ). First, DOD's initiatives to address the issues related to access controls for IT systems are partially implemented. A fully implemented plan to address access control issues would potentially restrict access rights to appropriate personnel, monitor user activity, and safeguard sensitive data from unauthorized access and misuse. As part of its corrective action plan, DOD is requiring financial system owners and owners of business systems that contribute financial information to review and limit access only to those who need it and only to the specific areas within the systems that they need to access. DOD has developed security controls and standardized test plans that align with the Federal Information Systems Control Audit Manual methodology used to test systems during an audit. Further, DOD management has directed components without a proper software maintenance policy to establish a baseline policy for those software systems and maintain a record of all software system changes. In addition to requiring components to develop reports on privileged users and transactions, including privileged user activities, the department has directed components to periodically review user access rights and remove unauthorized users. Second, the number and variety of financial systems complicate DOD's financial statement audits. In 2016, DOD reported more than 400 separate information technology systems were used to process accounting information to support DOD's financial statements. Many of these legacy systems were designed and implemented to support a particular function, such as human resource management, property management, or logistics management, and were not designed for financial statement reporting. These systems include newer ERP systems and custom-built legacy systems, financial systems, and nonfinancial feeder systems. Also, aging systems and technology that predate modern data standards and laws, as well as nonaccounting feeder systems, affect data exchange with modern ERPs to facilitate auditable financial reports. DOD's IT modernization program is investing in ERPs and aims to migrate 51 legacy systems to core modern ERPs by the end of 2023. How the remediation plans evolve and how they are implemented as DOD migrates to the new ERPs could be a significant determiner of DOD's ability to address nearly half of the NFRs. <4.2. Financial Reporting and Fund Balance with Treasury> According to DOD's auditors, its policies and procedures for compiling and reporting financial statements are not sufficient to identify, detect, and correct inaccurate and incomplete balances in the general ledger. Without an adequate process to identify and correct potential misstatements in the general ledger, balances reported on financial statements, accompanying footnotes, and related disclosures may not be reliable or useful for decisionmaking for Congress, including appropriating the DOD budget. The lack of accurate numbers, arguably, also presents challenges for DOD leadership in making agency financial decisions. DOD's assets increased by nearly $200 billion in FY2018 over FY2017. Fund Balance with Treasury, one of the assets, increased by $78.6 billion. According to DOD, the increase in Fund Balance with Treasury resulted from additional appropriations received in FY2018. DOD is unable to effectively track and reconcile collection and disbursements activity from its financial systems, which resulted in DOD being unable to reconcile its general ledger and Treasury accounts. The fund balance with the Treasury Department is an asset account reported on DOD's general ledger, which shows a DOD component's available budget authority. Similar to a personal checking account, the fund's balance increases and decreases with collections and disbursements of new appropriations and other funding sources. Each DOD component should be able to perform a detailed monthly reconciliation that identifies all the differences between its records and Treasury's records. The reconciliations are essential to supporting the budget authority and outlays reported on the financial statements. The auditors identified several deficiencies in the design and operation of internal controls for fund balance with the Treasury that resulted in DOD-wide material weakness. DOD has undertaken business process improvements to streamline reporting, reduce differences to an insignificant amount, and support account reconciliations. <4.3. Property and Inventory> The auditors report that DOD faces challenges with properly recording, valuing, and identifying the physical location of real property, inventory, and government property that is in the possession of contractors. DOD's challenges with property and inventory complicate Congress's ability to perform effective oversight and budget appropriations. Without accurate real estate counts and values, DOD will continue to face challenges in meeting the National Strategy for Efficient Use of Real Property. DOD faces similar issues with inventory. It is unable to provide assurance that inventory recorded in the financial statements exists and is valued properly. Without accurate inventory counts, DOD might not be able to support its missions without incurring additional costs. Some appropriated funds could be used to purchase extraneous inventory that DOD might already have on hand, or DOD might rely on inventory that appears in an inaccurate count but does not actually exist. <4.3.1. Real Property> The auditors report that DOD is unable to accurately account for all of its buildings and structures. This includes houses, warehouses, vehicle maintenance shops, aircraft hangars, and medical treatment facilities, among others. As an example, during the FY2018 audit, the Air Force identified 478 buildings and structures at 12 installations that were not in the real property system. DOD faces issues with demonstrating the right of occupancy or ownership through supporting documentation and with incomplete or out-of-date systems of record. Accurate property records, valuation, and right of ownership could potentially help inform DOD leadership as it considers any future base realignment and closure. According to DOD, military departments are executing real property physical inventories to reconcile with the systems of record. The Army has the largest real property portfolio in the department. All branches of the Armed Forces are facing challenges with obtaining source documents, establishing value for properties, and assessing and reporting expected maintenance costs. The Air Force is focused on correcting its records for buildings, which account for more than 90% of its real property value, first addressing its building inventory at its most significant bases. The Navy has completed its physical inventory and corrected its records. Initial results showed a 99.7% accuracy rate. The Marine Corps has undertaken a process of accurately counting and recording its physical inventory. The Armed Forces will be unable to obtain a clean audit opinion without determining the value of their real property and other assets. <4.3.2. Inventory, Materials, and Supplies> DOD manages inventory and other property at over 100,000 facilities located in more than 5,000 different locations. The military services and DOD components report inventory ownership on their financial statements, but this inventory can be in the custody of or managed by the military service or another DOD component. For example, as of FY2017 year end, the military services reported that the Defense Logistics Agency held approximately 46% of the Army's inventory, 39% of the Navy's inventory, and 45% of the Air Force's inventory, ranging from clothes to spare parts to engines. Given the vast geographic dispersion of DOD resources and the complexity of how they are managed, the system of records and physical inventory must agree with each other for DOD leadership to have an accurate understanding of available resources. GAO highlighted a few examples in its latest high-risk series: The Army found 39 Blackhawk helicopters that were not recorded in the property system; 107 Blackhawk rotor blades could not be used but were still in the inventory records; 20 fuel injector assemblies for Blackhawk helicopters did not have documentation to indicate ownership by any specific military service; and 24 gyro electronics for military aircraft that should not be used were still in the inventory records. Accurate inventory, materials, and supplies help DOD avoid purchasing materials it does not need and help ensure that the right parts, supplies, and other inventory are available to support mission readiness. Ensuring that parts, supplies, and inventory are usable not only helps with mission readiness but also helps avoid unnecessary warehousing costs. Many of the parts, supplies, and inventory are unique to DOD and require long lead times to contract and manufacture. An accurate physical count and system of records could help shorten the time before items are available for the warfighter. <4.3.3. Government Property in the Possession of Contractors> At times, DOD might provide contractors with property for use on a contract, such as tooling, test equipment, items to be repaired, and spare parts held as inventory. The government-provided property and contractor-acquired property should be recorded in DOD's property system, and at the end of the contract, it might be disposed of, consumed, modified, or returned to DOD. The auditors report that the DOD property system should be able to accurately distinguish DOD property ownership and possession between DOD and the contractor. For DOD to receive a clean audit opinion, it should consider requiring its contractors to maintain and provide auditors with accurate records. Transferring property from DOD to contractors, and from contractors to DOD, requires an accurate real-time system of record keeping. <4.4. Audit Costs> Total DOD audit-related costs for FY2018, including the cost of remediating audit findings, supporting the audits and responding to auditor requests, and achieving an auditable systems environment, were $973 million (see Table 4 ). DOD predicts that audit-related costs will remain relatively consistent for a few more years until more components begin to achieve unmodified opinions. In addition to the issues previously discussed, there are three agency-level issues or approaches that contribute to DOD audit costs remaining relatively constant in the near term: more substantive testing, completion of audit procedures even for those components that are likely to receive a disclaimer of opinion, and expansion of DOD service provider examinations. While DOD's annual audit costs (i.e., excluding remediation costs) might remain close to FY2018 costs (nearly $413 million) or increase in the near term, the cost is expected to decrease after the first few years, as more components achieve a clean audit opinion. Eventually, DOD audit costs might increase as costs for travel and accounting increase with economic growth. <4.4.1. Substantive Testing> To reduce the risk of potential material misstatement without reliable internal controls, auditors seek other ways of validating financial information. Reliance on internal controls is not a pass-or-fail approach; rather, it is incremental. DOD received 20 agency-wide material weaknesses and 129 component-level material weaknesses in internal controls in the FY2018 audit; until those are resolved, DOD auditors must rely on substantive testing, which will keep audit costs relatively high. There are two categories of substantive testing: Analytical P rocedures . Substantive testing through analytical procedures might include comparing current-year information with the prior year, examining trend lines, or reviewing various financial ratios. Because FY2018 was the first full financial audit of DOD and many systems of records are not reliable, auditors may have difficulty performing analytical procedures and must rely more on tests of details. Tests of Details. An auditor selects individual items for testing and applies detail procedures, such as verifying that invoiced items from a vendor match payments made by DOD, physically locating an inventory item that is recorded in DOD's financial systems, and verifying mathematical accuracy by recalculating certain records. <4.4.2. Completion of Audit Procedures> To gain a detailed understanding of the underlying issues that prevent DOD components from receiving clean audit opinions, the department has requested comprehensive completion of audit procedures even after auditors have determined components will receive disclaimers of opinion. While this approach might initially incur higher audit costs, in the long run it might enable DOD to resolve the component-specific issues more quickly and to gain a holistic perspective of system-wide issues. These benefits might help DOD lower its financial audit costs in the long run. <4.4.3. Service Provider Examinations> Some DOD organizations provide common information technology services to other organizations within DOD, such as the Defense Information Systems Agency's (DISA's) Automated Time Attendance and Production System. For FY2018, auditors completed 20 DOD service provider examinations; 14 resulted in unmodified opinions and 6 resulted in qualified opinions. See Table B-1 for more information, including auditors' opinions and the number of FY2018 NFRs issued. Service provider examinations assess whether information technology control activities were designed, implemented, and operated effectively to provide management reasonable assurance that control objectives function as designed or intended in all material respects. The procedures performed by the auditors for examinations are not meant to provide the same level of assurance as a full audit. These examinations' results can be used to reduce redundant testing of control by component-level auditors, saving time and money; see Table 1 for the list of audited DOD components. For FY2019, DOD expects to complete 23 common service provider examinations, compared to 20 in FY2018. The expanded service provider examinations for FY2019 might incrementally increase DOD audit costs over FY2018. <4.5. Financial Audit Limitations and Benefits> Since passing the CFO Act of 1990, Congress has continued to express interest in DOD completing an annual financial audit. Financial audits can help DOD increase transparency and accountability, improve business processes, and improve the visibility of assets and financial resources, but by design, audits are meant to accomplish a specific purpose, and therefore there are some inherent limitations on the benefits they can provide. Financial audits' limitations and benefits are discussed below. <4.5.1. Limitations of Financial Audits> A financial audit is a tool to help improve business processes and readiness on an annual basis. It does not address program effectiveness or efficiency, but it does consider whether an entity's assets, including its budget authority, are used to accomplish its programmatic purpose. To communicate the annual audit's benefits to Congress and other stakeholders, DOD may attempt to measure cost savings or business process improvements, but it may struggle to fully quantify the benefits, as many of the daily operational improvements are likely to be organic and informal. Only the most significant issues will be identified in auditors' reports. DOD will likely benefit from auditors' NFRs, as well as ongoing informal dialogue between auditors and DOD personnel. When an auditor identifies an issue, DOD could seek to address the issue immediately rather than wait for a written report. It is inefficient for auditors or DOD to capture and write a report on all issues, large and small. In the private sector, generally, only critical audit matters that involve especially challenging or complex auditor judgments are included in audit reports. Many other issues are addressed in the normal course of business. Reporting or recording every instance of savings or process improvement based on auditors' informal feedback arguably detracts from the audit's purpose. Allowing a degree of flexibility to identify and report the cost savings and process improvements that DOD determines are the most significant may help the department focus effectively on responding to audit findings. Independent audit opinions do not fully guarantee that financial statements are presented fairly in all material respects, but provide reasonable assurance for the following reasons: Auditors use statistical methods for random sampling and look at only a fraction of economic events or documents during an audit. It is cost- and time-prohibitive to recreate all economic events. Some line items on financial statements involve subjective decisions or a degree of uncertainty as a result of using estimates. Audit procedures cannot eliminate potential fraud, though an auditor may identify fraud. Financial audits are not specifically designed to detect fraud, but an auditor assesses the potential for fraud, including evaluating internal controls designed by management to prevent and identify potential fraud, waste, and abuse. Auditors are required to consider whether financial statements could be misstated as a result of fraud. Effective internal controls could prevent or mitigate risks for fraudulent financial reporting, misappropriation of assets, bribery, and other illegal acts. Fraud risk factors do not necessarily indicate fraud exists, but risk factors often exist when fraud occurs. In a few years, if DOD has improved its current business practices, future improvements might be less significant and more incremental. Even so, annual audits could potentially be a valuable tool to help DOD continue to improve its business processes. <4.5.2. Benefits of an Annual Financial Audit> The annual audit gives Congress an independent opinion on DOD's financial systems and business processes. It provides a way for DOD to continue to improve its performance and highlights areas that need to be fixed. DOD has identified four categories of how the annual audit improves its operations, along with some examples: Increases Transparency and Accountability. Holds DOD accountable to Congress and the taxpayers that DOD takes spending taxpayer dollars seriously through efficient practices. Auditing DOD helps improve public confidence in DOD operations, similar to other Cabinet-level agencies that conduct an annual financial audit. Streamlines Business Processes. Audits help reduce component silos and help leadership better understand interdependencies within DOD. The department might be able to improve its buying power and reduce costs, as well as improve operational efficiencies. Improves Visibility of Assets and Financial Resources. More accurate data could enhance DOD readiness and decisionmaking. Getting the appropriate supplies to warfighters helps improve their fighting posture. If a service does not know whether it has enough spare parts to ensure that aircraft are able to fly, it may spend significant amounts of money to get spare parts quickly to meet operational requirements. Accurate cost information related to assets, such as inventory and property, can help DOD make more informed decisions on repair costs and future purchases. Strengthens Internal Controls. Strengthened internal controls help minimize fraud, waste, and abuse. In addition, they help improve DOD's cybersecurity and enhance national security. In addition to the previously described identification of Blackhawk helicopters and parts, DOD is starting to see gains by eliminating recurring annual costs. For example, strengthening internal controls to improve operations at the U.S. Pacific Fleet has freed up purchasing power to fund $4.4 million in additional ship repair costs. Also, the Army has implemented a materiality-based physical inventory best practice to count assets at Army depots. The Army estimates this process improvement could help avoid approximately $10 million in future costs. <5. Conclusion> Since passing the CFO Act of 1990, which required 24 agencies to conduct an agency-wide annual financial audit, Congress has continued to express interest in DOD completing an annual audit. DOD completed its first agency-wide audit in FY2018 and a subsequent audit in FY2019. Both audits resulted in a disclaimer of o pinion . The ongoing independent assessment of DOD's financial systems, arguably, provides Congress and DOD leadership with an independent third-party assessment of DOD's financial and business operations. Reliable systems that produce auditable financial information, including an accurate count and valuation of real estate and inventory, could help Congress provide better oversight and ultimately determine how funds appropriated for DOD should be spent in support of the NDS. Further, the annual financial audit of DOD by independent auditors might provide DOD with a competitive advantage when compared to other countries' defense agencies. In many other countries, financial information including a financial audit of defense agencies is nonexistent or opaque at best and not readily available to legislators or citizens. Many of DOD's financial management systems are also used for operational purposes. Testing of the financial management systems and other systems that interface with each other as part of the annual audit process can help identify and improve cybersecurity vulnerabilities and the conduct of military operations. DOD's efforts to fix its vulnerabilities and reduce wasteful practices, arguably, could enable it to respond to future threats more effectively. The implementation of new ERP systems and the complexity of auditing DOD might result in DOD not achieving a clean audit opinion within the next decade. Without each of the Armed Forces receiving a clean audit opinion, DOD will not be able to receive an agency-wide clean audit opinion even if all other DOD components receive a clean audit opinion. Appendix A. DOD Agency-Wide Material Weaknesses Weaknesses and inefficiencies in internal controls are classified based on severity. Auditors identified 20 material weaknesses at DOD (see Table A-1 ) related to internal controls that range from issues with financial management systems to inventory management. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting that results in a reasonable possibility that management will not prevent, or detect and correct, a material misstatement in the financial statements in a timely manner. In addition to material weaknesses, the auditors issue two types of deficiencies a significant deficiency or a control deficiency that are less severe than a material weakness, but a combination or multiple instances of either deficiency can result in material weaknesses. A significant deficiency is a deficiency or a combination of deficiencies that are less severe than a material weakness, but important enough to merit management's attention. A control deficiency is a noted weakness or deficiency that auditors typically bring to management's attention, but that does not have an impact on the financial statement unless a combination of them results in a material weakness. Improvements in either type of deficiency could improve the business process and help prevent waste, abuse, and fraud. Appendix B. Common Service Providers Some organizations within DOD provide common information technology services to other organizations at DOD. These organizations report to higher-level organizations. For FY2018, auditors completed 20 DOD service provider examinations 14 resulted in unmodified opinions and 6 resulted in qualified opinions. See Table B-1 for more information, including auditors' opinions and the number of FY2018 NFRs issued. Service provider examinations provide a positive assurance as to whether information technology control activities were designed, implemented, and operate effectively to provide management reasonable assurance that control objectives function as designed or intended in all material respects. Examination procedures are limited in scope as compared to a financial audit. Component-level auditors can use these examinations' results to reduce redundant testing, saving time and money; see Table 1 for the list of audited DOD components. For FY2019, DOD expects to complete 23 common service provider examinations.

The Chief Financial Officers Act of 1990 (CFO Act, P.L. 101-576 ) requires annual financial audits of federal agencies' financial statements to "assure the issuance of reliable financial information ... deter fraud, waste and abuse of Government resources ... [and assist] the executive branch ... and Congress in the financing, management, and evaluation of Federal programs." Agency inspectors general (IGs) are responsible for the audits and may contract with one or more external auditors. Congressional interest in the Department of Defense's (DOD's) audits is especially acute because DOD's expenditures represent about half of federal discretionary spending and about 15% of total spending by the federal government. Also, DOD's financial management has been on the Government Accountability Office's high-risk list since 1995. Those on the high-risk list are considered more vulnerable to fraud, waste, abuse, and mismanagement. DOD completed its first-ever agency-wide financial audit in FY2018 and recently completed its FY2019 audit. As expected, DOD received an agency-wide disclaimer of o pinion from the DOD IG in both audits—meaning auditors could not express an opinion on the department's financial statements because the financial information was not sufficiently reliable. DOD has stated it could take up to 10 years to receive a clean audit opinion. Some reasons for a disclaimer of opinion can include inadequate internal controls (i.e., a series of integrated actions that management uses to guide operations), financial statements not conforming to Generally Accepted Accounting Principles (GAAP), insufficient property and inventory records, and financial management systems that do not provide sufficient evidence for the auditor to express an opinion. The FY2018 audit included 2,358 notices of findings and recommendations (NFRs), which capture issues that require corrective action. Approximately 94% of the NFRs were related to three critical areas: financial management systems and information technology; financial reporting and DOD's fund balance with Treasury; and property. These NFRs resulted in 20 agency-wide material weaknesses and 129 component-level material weaknesses. All material weaknesses were related to issues with internal control. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting that results in a reasonable possibility that management will not prevent, or detect and correct, a material financial misstatement. Comprehensive data from the FY2019 audit are not currently available. However, DOD has announced that auditors validated that DOD had resolved over 550 findings, more than 23%, from the department's FY2018 audit and that the audits have helped DOD "target and prioritize corrective actions as we strive to achieve an unmodified audit opinion." After describing what a financial audit entails, this report examines the FY2018 audit in detail and addresses several issues for Congress, including the audit's cost (approximately $413 million in FY2018) and the challenges the material weaknesses identified in the FY2018 audit may create for congressional oversight of DOD.

crs_R46347

crs_R46347_0

<1. Introduction> Since the novel coronavirus designated Coronavirus Disease 2019, or COVID-19 first appeared in the United States in mid-January, it has contributed to substantial economic upheaval across the U.S. economy, including the agricultural sector. In response to the COVID-19 pandemic, Congress has passed and the President has signed four supplemental appropriations acts ( P.L. 116-123 , P.L. 116-127 , P.L. 116-136 , and P.L. 116-139 ) that have included both direct and indirect funding for the U.S. agricultural sector. Using funds from these acts and from other authorities, the U.S. Department of Agriculture (USDA) announced, on April 17, 2020, the Coronavirus Food Assistance Program (CFAP), valued at $19 billion, to provide immediate financial relief to farmers, ranchers, and consumers in response to the COVID-19 national emergency. USDA could provide additional financial assistance for the U.S. agricultural sector beyond CFAP later in the summer when a replenishment payment of $14 billion for the Commodity Credit Corporation becomes available. Congress is also considering providing additional support. This report describes some of the actions that USDA has taken in response to the COVID-19 emergency, including CFAP in particular, how CFAP is funded and how USDA intends to use the funds. The description of USDA COVID-19 response efforts is preceded by: first, a brief review of food supply chain issues where the U.S. agricultural sector has experienced economic harm or is potentially vulnerable to the effects of the COVID-19 pandemic; and second, a review of current assessments of the economic harm to U.S. farm income, as well as to individual commodity sectors, resulting from COVID-19. The report then describes the emergency funds that have been allocated to address the U.S. agricultural sector, and how USDA plans on using those funds, including a detailed description of CFAP producer payments, and USDA's food purchase and distribution efforts. This is followed by a review of the announced positions for selected U.S. agricultural stakeholders in regard to how the COVID-19 pandemic has affected their industries, what their anticipated losses might be, and what their expectations are vis- -vis congressional funding and USDA's announced program response. Finally, several issues related to CFAP and the U.S. agricultural sector in a post-COVID economy that could be of potential interest to Congress are presented at the end of this report. An appendix at the end of the report includes a table ( Table A-1 ) that summarizes estimates from selected studies of the economic damage to several major agricultural sectors of the United States due to the COVID-19 emergency. <2. U.S. Agricultural Sector Vulnerability to COVID-19> As COVID-19 has spread throughout the United States, it has reduced domestic economic activity and disrupted domestic and international supply chains for goods and services, including food and agricultural products. These disruptions have produced an immediate and very strong demand shock on the U.S. food supply chain. In particular, the abrupt shutdown of much food service and institutional buying has affected commodity prices throughout the food supply chain. On the supply side, there is no food shortage in the United States. Supplies for most commodities remain relatively abundant; however, inflexibilities in the food supply chain (from food product specialization targeting food service and institutional markets that have closed, to pandemic outbreaks at processing plants) have resulted in bottlenecks that have left many farmers with unmarketable surpluses, while some retail outlets have experienced temporary shortages of various food and agricultural products. <2.1. Temporarily Empty Grocery Store Shelves> During the early weeks of shutdown in March and April, many grocery stores had empty shelves for basic staples such as pasta, rice, sugar, and flour, as well as frozen ready-to-eat foods, household cleaning products, and toilet paper. This was the result of a temporary surge in consumer food stockpiling much of it in the form of panic buying and potential hoarding that occurred in March when consumers worried that they might be locked down in their houses for weeks or months. This type of shortage is temporary. Eventually the existing supplies of foodstuffs and other household products work their way through the food supply chain and restock the grocery store shelves. The temporary shortage occurred due to two primary factors. First, consumers had been getting a significant share (54%) of their food from restaurants and other away-from-home venues. All of this demand was suddenly diverted to grocery stores and retail outlets almost overnight. This switch is not simply a matter of redirecting truckloads of products away from institutional buyers towards retail outlets, but also of transforming many products from bulk or vendor-ready forms to consumer-ready forms in smaller packages with new product labelling. Furthermore, truckers would now be making many stops for smaller deliveries to retail outlets along their routes, rather than a few stops to large buyers. All of this would require re-engineering of the food supply networks that ultimately may be temporary once the pandemic eases. Second, much of the food supply chain operates on a "just-in-time" principle to minimize costs associated with storage and waste of products. Under this principle, many processing plants and transportation routes are designed to operate near full capacity on a routine basis in expectation of slow, steady demand and to avoid the cost of idled resources this is particularly true for food products and other items like toilet paper that normally do not experience large fluctuations in demand over time. Thus, not all production processes can ramp up on short notice to meet unexpected surges in demand for their products, or to suddenly alter the product form, packaging, labeling, and shipping methods. As a result, shortages due to consumer stockpiling create bulges in the supply chain that may take weeks or months to eliminate as the food supply chain re-engineers itself in response. <2.2. The U.S. Food Supply Is Ample> U.S. and global supplies of major agricultural commodities are in a state of relative abundance thanks to large harvests over the past several years which has kept market prices at relatively low levels for the past five years. The surplus supply situation has been compounded by the ongoing trade dispute between the United States and China, which disrupted traditional trade patterns and contributed to lower trade levels (and greater than expected U.S. stock levels) for several major commodities in the second half of 2018 and 2019. Globally, the Food and Agriculture Organization (FAO) of the United Nations reports that stocks for many major agricultural commodities including wheat, rice, corn, barley, coffee, sugar, butter, cheese, palm oil, soybean oil, poultry, and pork are at or near 20-year highs. A similar situation exists within the United States. On April 9, 2020, USDA reported that the major U.S. grain and oilseed crops, as well as upland cotton, all had relatively large end-of-year stocks levels last fall (2019) to carry into this year. On April 22, 2020, USDA reported abundant supplies of meat, dairy, fruit, vegetable, and tree nut products in cold storage. Similarly, USDA reports that hog and poultry populations in the United States are historically large, while the cattle population has rebounded from its low point in 2014. In addition, USDA reported that for 2020, U.S. farmers intended to increase corn and soybean planted acres by 8% and 10%, respectively, while adjusting wheat (1%) and cotton acres (<1%) down slightly from 2019. If such large planted acres are realized, under normal weather conditions, they could produce bumper crops and further expand domestic supplies. According to news reports, Secretary of Agriculture Sonny Perdue has said that consumers should not worry about a shortage of food, saying the supply chain is just mismatched. Although demand has surged at the retail level in response to the pandemic, demand from restaurants, cafeterias, sports venues, and tourism has plummeted. <2.3. Disruption of Food Supply Chains Impact Commodity Prices> The food supply chain refers to the path that raw agricultural commodities take from the farm where they are produced, through the food processing and distribution network to the consumer where they are used. The domestic food supply chain has the potential to break down at any of a number of different points: availability of inputs and labor for agriculture production; trucks and truck drivers for transporting raw and finished products; food processing plants, plant workers, and food safety inspectors; packaging, warehousing, and storage capacity; and wholesale and retail outlets and their workers. For exported products, the supply chain includes containers, ships, crew, and port workers. There is a finite supply of trucks, railcars, and shipping containers, and they may not be situated where they are needed when a temporary surge in demand occurs. Labor shortages at any point along the supply chain can lead to bottlenecks, delays, and regional shortages. Similarly, there is a finite supply of warehousing and cold storage (i.e., refrigerated and frozen) space, which may contribute to temporary regional shortages. With respect to COVID-19's impact, supply chain disruptions have been primarily due to two factors: widespread shutdowns of all but essential businesses; and uncertainty about the availability of labor for the food distribution network, from farms to retail outlets whether from illness, fear of illness, or immigration status. <2.3.1. Loss of Institutional Buyers> The first effect of the COVID-19 pandemic on agricultural producers occurred when many states and municipalities closed schools and instituted economy-wide shutdowns of all but essential businesses. The wholesale and retail food distribution network has been deemed essential; however, many institutional purchasers of agricultural products (often referred to as the food services sector, including restaurants, hotels, schools, and entertainment venues) have been closed. According to USDA, U.S. consumers normally spend 54% of their food and drink dollars on away-from-home food purchases. Thus, a large share of U.S. food products traveling through the food supply chain was going to the food services sector, often in bulk or vendor-ready form, for away-from-home consumption. In order to redirect this food product flow towards retail outlets and at-home consumption, much of it would require processing into consumer-usable quantities and forms, requiring repackaging, and relabeling. This requires some level of retooling by food packagers and processors. As a result, the near total stoppage of institutional food purchases contributed to sharp declines in the prices of affected commodities ( Figure 1 ), and led to unanticipated conditions of oversupply from commodities that could no longer move through the food supply chain and were, instead, backing up to the farms that produced them. This left many agricultural producers with excess supplies of perishable products including fruit, vegetables, milk, and market-ready livestock that are not easily diverted to alternate uses or retail outlets. In the interim, the temporary glut of perishable products with nowhere to go has led to news reports of producers dumping fresh milk, burying truckloads of raw onions, plowing fields of ripe vegetables back into the ground, and more disturbingly, depopulating millions of market-ready hogs and poultry. The surplus of perishable, unsold commodities worsened starting in mid-April, when a surge in COVID-19 infections among workers in meat packing plants and other food processing plants led to multiple plant closures, and contributed to both animal surpluses on farms and public concerns about the reliability of the nation's food supply. <2.3.2. Uncertainty over Labor Availability> Agriculture has been classified by the federal government as a critical industry that must remain operating, even as much of the rest of the country shuts down to help contain the virus' spread. However, labor shortages at any stage of the supply chain can create temporary food product shortages in affected markets. If labor shortages become severe, they could lead to wider multi-state, and possibly national, food shortages of affected products. Many fruit and vegetable production activities are labor-intensive and require an adequate work force at key points in the products cycle particularly at harvest to successfully bring the crop to market. In addition, the U.S. agricultural sector relies on a large workforce to operate the production lines in food processing plants, including meat packing plants, as well as fruit and vegetable wholesale and distribution networks. This labor force performs supply chain activities including production, transportation, processing, warehousing, packaging, and retailing. Many of these supply chain activities cannot be automated or done remotely, but rely on workers being on site. For example, USDA reports that more than 1.5 million people worked in food processing in the United States in 2016. Meat processing, which tends to be more labor intensive than other parts of the food sector, accounted for 500,000 of those employees. Workers that are still planting and harvesting crops, or standing on an assembly line in a meat packing plant, during the coronavirus outbreak have a high risk of being infected with the disease given that they live, work, and travel in crowded conditions, and most do not have health care or paid sick leave. Another labor-intensive component of the food supply chain is federal safety inspection, which is undertaken by about 8,000 USDA safety inspectors stationed at every agricultural manufacturing facility throughout the country, as well as about 3,800 safety inspectors from the Food and Drug Administration (FDA). As the food distribution network shifts more food products away from institutional outlets to grocery stores, labor at the retail level has come under greater stress. Many grocery stores have begun implementing preventative measures, like reducing hours to give staff time to rest, clean, and stock shelves, while limiting exposure to customers. All of these COVID-19 related measures tend to slow the food supply chain's throughput rate and thus have prolonged the period of empty or partially filled grocery store shelves. <2.3.3. Many Meat and Food Processing Plants Slow Operations or Close> Starting in mid-April, a surge in infections among workers in meat packing plants and other food processing plants led to multiple plant closures and contributed to unexpected surpluses of ready-for-market hogs, cattle, and poultry at the farm level. As of May 1, news sources reported that at least 20 meatpacking and 5 food processing plants had been closed. Due to a high degree of consolidation in the meat processing industry, a shutdown of four or five big plants could impact retail supplies. On May 1, the Centers for Disease Control and Prevention (CDC) reported that 115 meat and poultry processing plants (with over 130,000 workers) had a combined 4,913 workers with confirmed cases of COVID-19, including 20 that had died from COVID-19. Meat processing plant closures have two opposing effects: on the one hand, demand for livestock in the surrounding region is reduced and this tends to depress cash and futures prices, lowering prices that producers receive and that packers pay for market-ready livestock; on the other hand, the supply of consumer-ready product is reduced, which tends to raise wholesale and retail prices for the affected products. As evidence of this, USDA has reported a widening price gap between farm and wholesale prices for beef. On April 22, news sources reported that, with the closure of Tyson's pork processing plant in Waterloo, IA, about 15% of total U.S. pork processing capacity was off line. According to an official with the Commodity Futures Trading Commission's (CFTC's) Livestock Marketing Task Force, most plants that were still open during this same period were operating at only 50% to 75% of normal production due to employee absenteeism. Furthermore, the CFTC official noted that U.S. pork processing plants normally handled about 2.5 million hogs per week, but that slower operating line speeds had reduced that number to 2.1 million hogs, implying that an additional 400,000 market-ready hogs had to stay on the farm each week. By May 1, weekly hog slaughter had fallen to 1.5 million, implying that nearly a million hogs per week were backing up to the farm. On April 28, President Trump signed an executive order using authority under the Defense Production Act (DPA) of 1950, as amended (50 U.S.C. 4501 et seq.), and Section 301 of title 3, United States Code, to order the Secretary of Agriculture to take all appropriate action to ensure that meat and poultry processors continue operations consistent with the guidance for their operations jointly issued by the CDC and Occupational Safety and Health Administration (OSHA). Two issues associated with the reopening of closed plants are the availability of personal protective equipment (PPE) for plant workers, and the liability associated with hospitalization costs and/or deaths of infected plant workers. On April 30, Secretary Perdue stated that USDA will ask meat processors to submit written plans to safely operate packing plants and review them in consultation with local officials. Perdue said that USDA will work collaboratively with companies and state and local officials to set safety standards based on guidelines for workers released by the CDC and OSHA, and that USDA was working to insure the availability of the necessary PPE for plants to operate safely. The Secretary also said that President Donald Trump's executive order to open the plants will not remove legal liability, but that the CDC protection guidelines will give meat plants "a defensible answer" should they be sued, as long as they follow the guidance. <2.3.4. Commodity Prices Plummet> Since mid-February, prices for many major agricultural commodities have plummeted ( Figure 1 ). Commodity market price declines have been led, in part, by a precipitous fall in the price of crude oil (down 67% between January 2 and April 15), which feeds back into the U.S. market for ethanol and corn, and subsequently through the expanded market for livestock feedstuffs. Prices for the livestock sector cattle, hogs, poultry, and dairy were hit particularly hard by the sudden economic shutdown and the associated dilemma of what to do with market-ready livestock, and because of the difficulty in diverting product from restaurants to retail outlets. During the January 2 to April 15 period, prices for lean hogs were down by 53.2%, live cattle 25.1%, and milk 20.6%. The cotton and textile industries were negatively impacted by the widespread shutdown of retail businesses. Demand for clothing and apparel dropped precipitously with the economic closure. This fed back into a collapse of demand that affects manufacturers, which affects cotton mills, and finally to contracts for cotton being canceled. U.S. cotton prices dropped by over 25% between January 2 and April 15 ( Figure 1 ). USDA's Foreign Agricultural Service (FAS) reduced its forecast for global cotton consumption for 2020 by 6.4%. According to FAS, spending on clothing is highly correlated to changes in GDP, and most economic forecasters are expecting strong declines in global GDP in the first half of 2020. Reduced travel, slowing economic activity, and petroleum-product demand suppression related to the COVID-19 outbreak, combined with announced plans to increase crude oil supplies by Saudi Arabia and Russia in mid-April, contributed to the severe decline in crude oil prices. Low oil prices contribute to lower agricultural prices via a strong biofuels link between the two sectors. Corn is both the world's foremost livestock feed grain and the principal feedstock in the production of the biofuel ethanol. Ethanol is blended with gasoline in the United States (at about a 10% share) for use in automobiles and light trucks. Thus, declining fuel demand contributes directly to falling prices for gasoline, ethanol, and corn. Ethanol prices fell by nearly 33% from January 2 to April 15 ( Figure 1 ). As of April 21, news sources report that nearly 30% of the nation's 204 biofuel plants have been idled since March 1, while many others have reduced their production volumes. By April 25, the Renewable Fuels Association reported that about 46% of ethanol production capacity was idled. Furthermore, the prices of nearly all feed grains and oilseeds produced in the United States move in tandem with corn prices since they all compete for the same feed markets in consumption and farmland in production. Thus, this combination of the COVID-induced sudden disruption of normal agricultural demand and use, slowing U.S. and global economic activity, and sharply lower oil prices have placed strong downward pressure on commodity prices in international markets since the start of 2020. <2.3.5. International Market Export Restrictions> On top of these domestic disruptive factors, international markets for some major food items, such as rice and wheat, have experienced trade disruptions due to threats or actual imposition of protectionist policies on exports of major food products in certain important producer countries including Russia (the world's leading wheat exporter), Kazakhstan, and Vietnam. According to the World Trade Organization (WTO), 80 countries and customs territories so far have introduced export prohibitions or restrictions as a result of the COVID-19 pandemic. In response, the United States, China, the European Union, and other members of the WTO representing over 60% of world agricultural exports pledged to refrain from imposing restrictions on the free flow of food out of their countries. By threatening to limit supplies to international markets, these protective policies have actually been supportive of rice and wheat prices in international markets ( Figure 1 ). Since January, the nearby futures contract price for rough rice on the Chicago Board of Trade has actually risen by 7%, while the contract for wheat has fallen by 4%, unlike corn and soybean prices that have fallen 20% and 13%, respectively. <3. Current Assessments of Economic Damage> U.S. policymakers and business interests are concerned that the COVID-19 pandemic will inflict widespread economic harm on the U.S. and global economies. It is still too early to make any definitive statements about what the eventual economic impacts will be on the U.S. economy or the agricultural sector, since it is unknown how long the disease will persist and what shape the economic recovery might take. For example, will the overall impact be V-shaped with a quick outbreak followed by a quick recovery, or will it be L-shaped with an elongated tail representing a slow recovery and a gradual reopening of businesses and retail outlets? Or be W-shaped if the virus recycles and re-emerges later in the summer or fall in a more virulent form as did the H1N1 pandemic in 2009, or the 1918 flu pandemic thus, causing a new round of shutdowns and economic closures? <3.1. U.S. and Global GDP Outlook Revised Downward> As commerce slows, economic output is expected to follow with projections of a significant contraction in U.S. gross domestic product (GDP). On April 29, the Bureau of Economic Analysis (BEA) reported the U.S. GDP (adjusted for inflation) had decreased by 4.8% during the first quarter of 2020. Many major financial institutions have also issued preliminary assessments of the economic impact of the COVID-19 pandemic with dire predictions. For example, in March, JP Morgan predicted a 25% decline in 2 nd quarter U.S. GDP. The International Monetary Fund (IMF), in early April projected that the U.S. GDP would decline by 5% during 2020 (down 7.9 points from its January 2020 pre-COVID forecast of 2.9% growth). The IMF also forecast that global GDP would decline by 3% (-6.3 points from January), and major economies would also see strong declines in GDP including the Euro-zone (-7.5%, -8.8 point from January), and Japan (-5.2%, -4.8 points from January). On April 24, the Congressional Budget Office (CBO) released an update to its long-run baseline projection for the U.S. economic outlook that included a preliminary assessment of the economic impact of the COVID-19 pandemic. CBO projected that the U.S. economy will experience a sharp contraction in the 2 nd quarter of 2020 inflation-adjusted GDP is expected to decline by about 12% during the 2 nd quarter, equivalent to a decline at an annual rate of -40% for that quarter. CBO also projected a 2.8% increase in real GDP in 2021. In addition, the U.S. unemployment rate is expected to average 11.4% for 2020 and 10.1% for 2021, consistent with CBO's current projection for a slow economic recovery. Between March 14 and May 7, over 33 million American workers have filed first-time claims for unemployment benefits, according to the seasonally adjusted numbers of the U.S. Department of Labor. According to news sources, numbers at that level indicate that over 20% of the U.S. labor force is suffering from layoffs, furloughs, or reduced hours during the coronavirus pandemic. In addition to reflecting the strong likelihood for high unemployment and impactful declines in consumer incomes through 2020, these forecasts also have important implications for the rural, off-farm economy that so many farm households depend on (as described below). <3.2. Major Agricultural Commodity Sectors Suffer Substantial Harm> Several industry groups from the U.S. agricultural sector have released estimates of the economic damage experienced by producers and ranchers. Most of these early assessments are limited to evaluating the effect of the price decline on any unsold production of crops or livestock remaining under farmers' control, and the unexpected marketing costs of unsold products due to the shutdown of most institutional buying of agricultural products. Several of these damage assessments are summarized in Table A-1 . The livestock sector appears to be the hardest hit, as hog and cattle prices have dropped by 53% and 25% from January into mid-April, thus generating large sectoral losses estimated at $13.6 billion to $14.6 billion for the cattle/beef sector, and $5 billion for the hog sector. Early estimates of dairy sector losses exceed $8 billion, while the fresh produce sector losses are estimated at $5 billion. Other major commodity sector losses include corn ($4.7 billion to $6 billion), soybeans ($2 billion), cotton ($610 million to $3.5 billion), and the sheep and wool sector ($300 million). The ethanol sector has not reported an overall dollar loss estimate, but reports that nearly 46% of its production capacity is offline (the United States produced 15.8 billion gallons of ethanol in 2019) and the price of ethanol has fallen by almost 33% ( Figure 1 ). Prices for several, but not all, of the affected commodities have turned upward slightly since mid-April when USDA's assistance program was announced. Corn prices are the most notable exception as they have continued their decline through the end of April. The corn price decline is partially driven by the catastrophic near collapse of the U.S. ethanol sector. Corn is the primary feedstock for U.S. ethanol production nearly 38% of annual U.S. corn production is consumed by the ethanol sector. <3.3. U.S. Farm Income Projections Revised Downward> USDA's most recent U.S. farm economic outlook for 2020 (released on February 5, 2020) did not include the market effects of the COVID-19 pandemic. USDA is not expected to release its next U.S. farm income projections until September 2, 2020. However, the Food and Agricultural Policy Research Institute (FAPRI), at the University of Missouri, released a preliminary assessment of the impact of COVID-19 on the U.S. farm income outlook in April. FAPRI's preliminary projections assume a V-shaped recession where the market recovers quickly; market outcomes are driven largely by GDP and commodity price declines, and the supply chain disruptions described earlier in this report are not included in the analysis. Macro factors include an inflation-adjusted 5% decline in consumer expenditures from FAPRI's January pre-COVID baseline projections, and a 10% decline in gasoline use. Under these assumptions, FAPRI projects substantial price declines for all major grain, oilseed, and livestock commodities in 2019/20 and 2020/21, which result in large declines in farm revenue including -$11.9 billion in crop and -$20.2 billion in livestock cash receipts ( Table A-1 ). The revenue declines are partially offset by declines in production expenses (-$11.3 billion) and an increase in farm program payments (+$2.3 billion) under the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. However, the sum of the projected changes is for a large decline in U.S. net farm income of -$20 billion for 2020 (down from FAPRI's January forecast of $99 billion in 2020 net farm income, and compared to $95.3 billion in 2019). FAPRI does not include any payments under USDA's proposed CFAP. Although preliminary, FAPRI's early projections are indicative of the potentially large impact that COVID-19 may have on the U.S. agricultural sector. <3.4. Potential Impact on Farm Household Cash Flow> The COVID-19's economic impact is expected to vary across commodity sectors and regions based on the extent of price declines across commodities, the seasonality of production cycles, and off-farm work opportunities, as well as each household's level of near-term debt, tenure status, asset valuations, and other economic factors. Thus, each farm household's situation may be unique. This section briefly describes where COVID-19's economic impact may be felt most immediately. The potential impact on the farm household credit situation is not discussed here. If the economic impact of COVID-19 persists into 2021, a broader range of economic factors are likely to be impacted, such as asset valuations and bankruptcies. <3.4.1. On-Farm Revenue, Expenses, and Federal Payments All Impacted> The principal market effects to date of COVID-19 have been the commodity price declines experienced in early 2020 ( Figure 1 ), as well as lost sales and the costs associated with unexpected surplus animals, grains, and oilseeds held by farmers. The price declines, in particular, can have several potential effects on farm household income, including the selling prices for 2019 crops still held in on-farm inventory; farm program payments for the 2019 crops under the marketing assistance loan (MAL), ARC, and PLC programs; prices and crop insurance payments for the 2020 crop; farm program payments for the 2020 crops under MAL, ARC, and PLC; and changes in input prices. The sharp drop in commodity prices is expected to result in reduced farm household revenue. Revenue losses are expected to be partially offset by both increases in government payments under traditional farm revenue support programs (which are available for about two dozen designated program crops) and crop insurance, and by reductions in input expenses. However, the net effect is expected to be an overall decline in farm revenue compared with 2019. For farm operations carrying above average levels of debt, the restricted cash flow can cause severe financial stress. The emergency-response payment and purchase program announced by USDA (described below) is intended to help address, at least partially, the revenue decline and tightening cash flow situation for a wider array of farm households than usually receive government payments. <3.4.2. Off-Farm Income Impacted by Rural Economic Situation> The drop in prices for major farm commodities in early 2020 ( Figure 1 ) suggests that farm revenues are likely to decline. However, of perhaps greater consequence to farm households has been the blow to off-farm income from the widespread economic shutdown and increases in unemployment. On average, 82% of farm household income comes from off-farm revenue sources. As a result, the cash flows of farm households have been diminished from both the on-farm and off-farm effects of the COVID-19 pandemic. Another blow to the rural economy is the strong decline in tax revenues, fees, and other sources of income, which hampers the ability of state and local governments to respond to the developing crisis through local programs and initiatives. <4. Federal Response to COVID-19 for Agriculture> This section reviews federal supplementary funding appropriated for assistance to the U.S. agricultural sector in response to the COVID emergency, and the USDA programs that were initiated with that supplementary funding. In addition to the supplementary funding, USDA announced that it was increasing certain flexibilities and extensions in several of USDA's farm programs many authorized by the 2018 farm bill ( P.L. 115-334 ) as part of its effort to support the food supply chain. Also, USDA has established a "Coronavirus Disease (COVID-19)" web page that assembles information from a broad range of agriculture-related topics and issues, including the expanded program flexibilities. The website includes "Frequently Asked Questions (FAQs)" for several prominent issues and agencies, links to additional resources, and a USDA COVID-19 Federal Rural Resource Guide. <4.1. Supplemental Agriculture Appropriations> In March and April 2020, Congress passed and the President signed four supplemental appropriations acts in response to the COVID-19 pandemic: Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 ); Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ); Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ); and Paycheck Protection Program and Health Care Enhancement Act ( P.L. 116-139 ). These acts provide over $36 billion of new appropriations and policy changes in the jurisdiction of the Agriculture appropriations subcommittees, including nearly $10 billion for agricultural assistance, about $26 billion for nutrition assistance programs, and $163 million for the Food and Drug Administration. <4.1.1. Funds Directly Targeting Agriculture> The CARES Act provides $9.5 billion for USDA to "support agricultural producers impacted by coronavirus, including producers of specialty crops, producers that supply local food systems, including farmers' markets, restaurants, and schools, and livestock producers, including dairy producers." This approach provides funding to the Secretary of Agriculture with general authority to respond to a crisis, and therefore is similar to emergency appropriations for wildfires and hurricanes in 2018 and 2019 in which USDA was tasked to develop a payment program from a general appropriation. The CARES Act also replenishes up to $14 billion of funding availability for the Commodity Credit Corporation (CCC). The CCC operates with a $30 billion line of credit with the U.S. Treasury. In April 2020, USDA said that the CCC's borrowing authority was becoming low and that about $6 billion remained after having paid regular farm bill obligations and the final tranche of the 2019 Market Facilitation Program. The $14 billion in the CARES Act is not new spending; rather, it would reimburse the CCC for past spending. After the funds are transferred, which requires waiting for a June 2020 financial statement, the CCC would have renewed access to more funding for future obligations. For flexibility in the regular farm commodity support programs, the CARES Act allows Marketing Assistance Loans in FY2020 to be repaid over 12 months (rather than the usual nine months) to provide producers with flexibility in responding to disruptions. <4.1.2. Funds Indirectly Targeting Agriculture and the Rural Economy> Access to food has been a concern during the pandemic, particularly in light of school closures. Rising unemployment may increase participation in the Supplemental Nutrition Assistance Program (SNAP) and other food assistance programs such as The Emergency Food Assistance Program (TEFAP), which provides aid to food banks and other emergency feeding organizations. Financial assistance through SNAP benefits or in-kind assistance through TEFAP may increase demand for agricultural products. The FFCRA and the CARES Act provide a total of $26 billion for various nutrition assistance programs and give USDA certain temporary flexibilities to increase program access and accommodate social distancing. This includes $850 million for TEFAP, which is to increase USDA commodity purchases for food distribution. The FFCRA has language that, "During fiscal year 2020, the Secretary of Agriculture may purchase commodities for emergency distribution in any area of the United States during a public health emergency designation" ( 1101(g)). CBO did not score this provision. USDA is using this authority for a $3 billion commodity purchase and distribution ("Farmers to Families Food Box") program (described later in this report). CBO estimated that SNAP policies in the FFCRA will increase mandatory spending by more than $21 billion over FY2020-FY2021, which is subject to appropriation and for which the CARES Act provides some funding. For rural development, the CARES Act provides $146 million, including $100 million for rural broadband grants, $25 million for rural telemedicine and distance learning, and $20.5 million to support rural business loans. For USDA agency operations, the CARES Act provides $141 million to six USDA agencies or offices. This includes $55 million for the Animal and Plant Health Inspection Service (APHIS), $45 million for the Agricultural Marketing Service (AMS), $33 million Food Safety and Inspection Service (FSIS), $4 million for the Foreign Agricultural Service (FAS), $3 million for the Farm Service Agency (FSA), and $750,000 for the Office of the Inspector General (OIG). The APHIS and AMS amounts are to replace user fee revenues that are expected to decline due to reduced air passenger traffic (APHIS) and because of reduced grading, inspections and audit services (AMS). The amounts for FSIS and FSA are to support temporary employees and adjustments to respond to COVID-19 workload demands. FAS received funding to repatriate staff from foreign postings during the pandemic. Other provisions in the CARES Act outside the jurisdiction of agriculture appropriations may have provided loans and grants to certain agriculture-related businesses, such as through the Small Business Administration (SBA), or to individuals through stimulus checks. Prior to enactment of P.L. 116-139 , the SBA reported that agricultural, forestry, fishing, and hunting businesses received $4.37 billion of Paycheck Protection Loans. <4.2. USDA's Coronavirus Food Assistance Program (CFAP)> On April 17, 2020, Secretary of Agriculture Perdue announced the Coronavirus Food Assistance Program (CFAP), valued at $19 billion, to provide immediate financial relief to farmers, ranchers, and consumers in response to the COVID-19 national emergency. According to Secretary Perdue, CFAP will include $16 billion in direct payments to producers that have been impacted by the decline in commodity prices and the disruption in food supply chains related to COVID-19, and $3 billion in commodity purchases for distribution through food banks, faith-based organizations, and other nonprofit organizations. Direct payments are intended to partially offset the loss of market revenue from the price decline, and the unexpected carry-cost of unsold commodities for producers and ranchers of products that have been negatively affected by COVID-19. Commodity purchase and distribution programs serve the dual roles of supporting commodity market prices by temporarily increasing demand, and of expanding the availability of food to consumers who have lost their jobs or have limited resources. CFAP funding is from three primary sources: the FFCRA, the CARES Act, and existing USDA authorities under the Commodity Credit Corporation (CCC) Charter Act. In particular, Senator Hoeven, Chairman of the Senate Agriculture Appropriations Committee, stated that the $16 billion designated for the direct payments program derives from the $9.5 billion emergency program spending authorized by the CARES Act and an existing $6.5 billion balance in the CCC. The $3 billion for the commodity purchase portion of CFAP derives from the FFCRA ( 1101(g)) that authorizes USDA to purchase commodities for emergency distribution in the United States. <4.2.1. CFAP Direct Payment Program> USDA has released limited information to date on the specifics of how CFAP will be implemented; however, information released by Senator Hoeven's office, coupled with news sources that have gleaned pieces of program information from USDA sources, could provide some context for understanding how CFAP's direct payments program may unfold. Senator Hoeven's press release says that the $16 billion is to be allocated across four different commodity groupings as follows: livestock ($9.6 billion or 60%); row crops ($3.9 billion, 24.4%); specialty crops ($2.1 billion, 13.1%); and "other" crops ($500 million, 3.1%) ( Figure 2 ). Direct payment spending under the livestock category would be further delineated as $5.1 billion for cattle, $2.9 billion for dairy, and $1.6 billion for hogs. To be eligible for CFAP direct payments, farmers and ranchers must produce commodities that have experienced at least a 5% price decrease between January and April of 2020. The specific prices and dates to be used for this calculation have not yet been announced, but using nearby futures contract prices as a guide would suggest that many commodities including hogs, cattle, cotton, milk, corn, and soybeans would relatively easily meet the 5%-decline threshold ( Figure 1 ). Also, the "other" category was not specifically defined, but is expected to include commodities such as horticulture, hemp, sheep and goats, or any other commodity where a producer can show a revenue loss associated with at least a 5% price drop since January. USDA has said the direct payments to producers will be based on estimated losses as measured by both: (a) market price declines, and (b) additional marketing costs associated with the unexpected oversupply of unsold production in calendar 2020. Under this structure, CFAP direct payments would be directly proportional, or "coupled," to actual production. Determination of the payment amounts and delivery mechanisms may develop similarly to the three tranches associated with payments under the Market Facilitation Programs (MFPs) in 2018 and 2019. The payments are to represent the summation of the two different loss measures described above: First, payments, according to Senator Hoeven's news release, are to cover the market price declines of greater than 5% that occurred between January 1, 2020, and April 15, 2020. The payment is to equal 85% of the loss some policy analysts think that the loss could be calculated using some measure of the price decline times the normal volume of the commodity marketed during that period. Second, payments to cover future marketing losses from unsold product. This additional cost is valued as 30% of the expected losses from April 15 through the next two quarters (i.e., six months) or until mid-October. Again, the expected loss would most likely be calculated using some measure of the price decline times the normal volume of the commodity marketed during that period. For its part, USDA has not provided details on: which prices will be used in the formula (such as local elevator prices, regional wholesale prices, or nearby futures contract prices); how the price decline will be measured (that is, will two specific dates be used, or will representative averages of prices in January and April be used); or how the share of production, characterized as "routine marketing for the relevant period" and eligibility for payments, will be measured. Many of the program specifics are expected to be delineated in rulemaking. Since enforcement of social distancing remains in effect for the foreseeable future, producers may be asked to self-certify their losses. If so, producers will need to save records and paperwork to demonstrate losses, especially producers that have destroyed their product (e.g., dumping of milk or plowing under specialty crops). It is expected that producers will be compensated for "dumped" milk, but whether compensation may be provided for depopulated (i.e., euthanized) livestock and poultry is uncertain. Furthermore, CFAP direct payments are expected to be limited to cover producers who own the commodity or product, thus animals raised under contact are not expected to be covered. USDA is expediting the rulemaking process for the direct payment program and expects to begin sign-up for the new program in early May. CFAP direct payments are expected to be issued to producers by the end of May or early June. According to the Senator Hoeven press release, payment limits are expected at $125,000 per commodity grouping (livestock, row crops, and specialty crops), with an overall limit of $250,000 per individual or entity. Neither the CARES Act nor the underlying CCC authority requires payment limits. Applying payment limits at this point would be at USDA's discretion, as it chose to do when establishing the MFP and Wildfire and Hurricane Indemnity Program (WHIP) programs that were undertaken at the Secretary's discretion. The American Farm Bureau Federation expects that benefits received under traditional farm support programs such as ARC and PLC will not be added to CFAP payments when evaluating payment limits. In other words, payment limits for CFAP are expected to be independent of other farm program benefits received by a farm. <4.2.2. CFAP Purchase and Distribution Program> In the press release that announced the CFAP, USDA designated $3 billion for a commodity purchase and distribution program. In subsequent announcements, the program has been called the USDA Food Box Distribution Program, and the USDA Farmers to Families Food Box Program. The intention is to capture some of the supply chain and market disruption caused by the closure of restaurants, hotels, and other food service entities. Under the program, agricultural products are to be purchased from farmers and processors to support agricultural markets and reduce food waste. Products are to be distributed to food banks and other nonprofit organizations that serve those in need. This program is operated differently than, and separately from, existing USDA commodity purchase programs such as Section 32, TEFAP, and other Food and Nutrition Service (FNS) food distribution programs. However, food banks, school food authorities, and other nonprofits that participate in other FNS programs are to be eligible to receive food boxes through the USDA Farmers to Families Food Box Program. USDA plans to purchase about $100 million per month of fresh produce, $100 million per month of dairy products, and $100 million per month of meat products (chicken and pork). Because of the potential for food waste (lack of marketing options for ripe produce, dumping expressed milk, and euthanizing market-ready livestock) and high demand for food bank distribution during this pandemic discussed earlier in this report, USDA is expediting this purchase program relative to its usual commodity procurement and distribution timeline. Usually, the procurement-to-distribution timeline is two to five months, starting with product selection and identification and/or thorough analysis of market conditions for individual commodities, a solicitation period, review of applications, and manufacturing and delivery from producers to processors (vendors) and intermediaries that may reassemble or briefly store products for distribution and recipients. The current food box program shortens the procurement-to-delivery to as little as one month, with an expected one week interval for each of the bidding, approval, and delivery stages. Solicitation for bids began on April 24, with bids due to USDA on May 1. Contracts are expected to be awarded on May 8, and initial program delivery may be as early as May 15. The program is expected to operate through the end of 2020. Another significant change is the product format. Under normal circumstances, products are often delivered from vendors (who sell to USDA) to recipient organizations in bulk formats that may require re-packaging before distribution to households. The CFAP purchase program intends for vendors to deliver household-ready boxes of the previously mentioned produce, meat and dairy products, or combinations thereof ready for more convenient and immediate distribution ("off the truck and into the trunk") in order to support social distancing. In addition to the $3 billion CFAP purchase and distribution program, USDA announced on May 4, 2020, a plan to purchase $470 million of commodities with Section 32 authority that is at the discretion of the department. USDA's initial press release for the CFAP had mentioned availability of $873 million in the Section 32 account. The plan for this initial tranche is to solicit bids from vendors in June 2020 and begin deliveries as soon as July. In this purchase, USDA intends to buy $170 million of produce, $120 million of dairy products, $80 million of poultry, $70 million of fish, and $30 million of pork. <4.3. Next Steps> In addition to the $9.5 billion in funding to assist U.S. agricultural producers and ranchers with COVID-related losses, the CARES Act also provided $14 billion to replenish the CCC this additional CCC spending authority is expected to be available in July after CCC prepares its June financial statement. The CCC borrows from the U.S. Treasury to finance its programs consistent with its permanent, indefinite authority to borrow up to $30 billion. Congress usually replenishes the CCC borrowing authority by annually appropriating funding to cover the CCC's net realized losses. The supplemental reimbursement in the CARES Act could increase opportunities for USDA to use its executive authority in CCC to provide further direct support payments, as it did with trade aid payments in 2018 and 2019. The CCC's annual borrowing authority has been fixed at $30 billion since 1987. On April 21, 2020, the American Farm Bureau released a report showing that, if adjusted for inflation, the CCC's borrowing authority would be $67.5 billion in 2020. In Congress, Senator John Hoeven has called for increasing the CCC's borrowing authority to $50 billion, while H.R. 6728 would raise CCC's borrowing authority to $68 billion. Increases in CCC's borrowing authority could be permanent or temporary (for certain fiscal years, or the duration of the public health emergency). While farm bills designate CCC to make various types of congressionally directed payments, it is USDA's use of its discretionary authority in recent years that has put pressure on the CCC borrowing limit. <4.3.1. More USDA Assistance> At present, USDA appears to have used nearly all of its available borrowing authority in the CCC in composing the CFAP payments. By July, USDA may be expected to use some of the $14 billion in supplemental CCC funding in the CARES Act, and its general CCC authority, to provide additional support to the agriculture sector. However, the nature and timing of any further support has not yet been announced by USDA. After it completes the $470 million Section 32 purchase described above, USDA would be expected to have about $400 million remaining in the Section 32 account for the rest of the fiscal year, based on the $873 million that USDA mentioned in its initial CFAP announcement. USDA may also be directed by Congress to provide certain future support to agriculture. Representative Austin Scott has introduced a bill ( H.R. 6611 ) that would provide an additional $50 billion of funding (separate from the CCC, and similar to the $9.5 billion in the CARES Act) for COVID-related agricultural assistance programs. <4.3.2. Rural COVID-19 Task Force Proposed> Many Members of Congress have expressed concerns that rural America is not well prepared to handle the COVID-19 emergency, and that rural problems feed over into agriculture. For example, in April, Senate Democrats released a report warning that more isolated rural areas of the United States "face disproportional challenges that put them at high risk," and that laid out their own rural policy ideas. Several U.S. Representatives and Senators have asked USDA to establish a Rural COVID-19 Task Force to help identify rural needs and tailor the allocation of resources to address them. They suggest that the Task Force could consist of a diverse group of experts and representatives from all sectors of rural areas, including agriculture, health care including mental health, and the private sector. In particular, the Rural COVID-19 Task Force would help to identify rural challenges, develop strategies and policy recommendations, assemble a guide of available federal programs and resources, consult with the USDA and congressional committees, and provide oversight on the distribution of funding. In their letter, the Members noted that people living in rural America are more likely to be uninsured, advanced in age, and have pre-existing medical conditions. Rural hospitals and health systems often have fewer ICU beds and resources available to handle an increased demand on rural health care infrastructure during a pandemic. According to the letter, one in five Americans living in rural areas are people of color, who have been disproportionately affected by the current crisis. Many rural areas are without reliable internet access, which limits their ability to work or attend school remotely. <5. U.S. Agricultural Stakeholders> In March and early April, prior to USDA's announcement of CFAP, many industry groups from the U.S. agricultural sector had written public letters to Secretary Perdue and USDA detailing their concerns and the need for federal assistance in response to the economic damage that has hit their different industries as a result of the COVID-19-related emergency. Many of these letters included industry estimates of their sectoral economic losses due to COVID-19 (several of these estimates have been compiled by CRS and are presented in Table A-1 ). Following the announcement of CFAP, most industry groups that are targeted for CFAP assistance have expressed appreciation for the aid that USDA has announced. At the same time, several agriculture-related industries do not appear to be eligible for support under the CFAP including ethanol, poultry, sheep and lamb, specialty livestock such as mink, or horticultural products. Also, agriculture industry groups almost universally note that CFAP can be only the first step in the federal response, as the amounts provided fall well short of industry loss estimates for most sectors. Another industry concern involves the announced payment limits associated with CFAP direct payments. Industry groups have stated that a $125,000 payment limit would severely restrict needed aid to individual producers. Some Senators and Representatives have followed up on industry concerns about payment limits by sending a letter to the Administration asking that the limits be removed for livestock, dairy, and specialty crop producers. The issue of payment limits may be addressed in the next round of USDA COVID-19 assistance or related bills (e.g., H.R. 6611 ). <6. Issues for Congress> Immediate congressional concerns involve how to channel assistance to those industries affected by COVID-19. This involves identifying affected industries, as well as measuring the extent of their losses, and providing some measure of compensation to help foster survival and recovery. Another immediate concern may be monitoring and oversight of the large sums of taxpayer money that will be flowing out through the CCC. Producer self-certification of losses may create a moral hazard and an incentive to over-report losses. Congress may consider using its investigative authority to better understand the nature and institutional rigidities inherent in the current food supply chain, and to ascertain whether there is a role for the federal government to help facilitate food supply chain management. Such considerations may include an evaluation of whether there is a need to facilitate less reliance by the private sector on low-cost, just-in-time supply chains. This model has proven to be inflexible in responding to the COVID-19 emergency, which requires rapid product transition from bulk institutional buyers to consumer-ready retail outlets, and greater regional storage capacity to hold temporary surges in unsold product. The potential costs to taxpayers of supporting a more flexible supply chain could include expanded regional warehousing, cold storage, food bank storage, etc. Expediting the food assistance supply chain is also being proposed through "farm-to-food bank" programs ( S. 3605 ). These actions could be coupled with new federal programs designed to increase demand by temporarily expanding SNAP benefits and/or federal food purchases when certain market or economic conditions are triggered. Congress may also want to consider whether the current farm safety net programs authorized by the farm bill's Title I targeting of program crops are sufficiently flexible and responsive when confronted with sudden, widespread price declines and an abrupt cessation of institutional purchases. For example, payments under the current ARC and PLC programs are delayed nearly 13 months after the program crop's harvest and reflect a 12-month average price that may not fully capture the potential short-term price drop related to the COVID outbreak. Program modifications such as the inclusion of an early partial payment for ARC and PLC could offer greater flexibility in responding to short-term cash flow problems for farm households. As one alternative, ARC and PLC could be supplemented or replaced by a new payment program that would be: short-term in nature; would better reflect local market conditions to capture disparities in regional economic harm; and would rely on market conditions both to trigger payments and to determine the size of those payments. The payment triggers could be set at catastrophic levels such that they would only be triggered under unique circumstances such as a major price plunge sparked by an event of the magnitude of COVID-19. The payment formula could be designed such that USDA could make payments under such a program before or shortly after harvest. In addition, Congress may also consider the long-term effects that might result from the COVID-19 emergency, particularly if the economic recovery is slow and lengthy. Such long-term effects may include heightened indebtedness and potential bankruptcies by farm households across the agricultural sector, as well as accelerated industry consolidation and altered consumption patterns. Without robust agricultural production to serve as the engine of growth, rural America might experience a slower recovery than the rest of the country. Prolonged depressed market conditions due to widespread layoffs, limited employment opportunities, and sustained reductions to rural wages and incomes would provide a weak background to foster agriculture's eventual recovery. Congress may also consider that rural banks tend to be smaller and less well-capitalized than banks catering to urban and suburban markets. Farm loan debt forgiveness (e.g., S. 3602 ) and loan repayment flexibilities are also in discussion. A slow rural economic recovery might reduce business and consumer confidence, leading to a reduction in spending and investment, and a tightening of financial conditions that could further slow the return to economic normalcy in rural areas. <6.1. Appendix. Assessing the Economic Impact of COVID-19 on U.S. Agriculture> Studies Project Deep Losses Across Major Commodity Sectors Several universities, think tanks, and commodity groups have released early assessments of COVID-19's potential impact on selected commodity sectors ( Table A-1 ). Most of these early assessments are limited to evaluating the effect of the price decline on any unsold production remaining under farmers' control, and the unexpected surplus of unsold products due to the shutdown of most institutional buying of agricultural products.

As COVID-19 has spread throughout the United States, it has reduced domestic economic activity and disrupted domestic and international supply chains for goods and services, including food and agricultural products. These disruptions have produced an immediate and very strong demand shock on the U.S. food supply chain that has sent many commodity prices sharply lower. The food supply chain refers to the path that raw agricultural commodities take from the farm where they are produced, through the food processing and distribution network to the consumer where they are used. Supply chain disruptions have been primarily due to two factors: widespread shutdowns of all but essential businesses; and uncertainty about the availability of labor for the food distribution network—whether from illness, fear of illness, or immigration status. The food supply chain has been deemed essential; however, many institutional purchasers (including restaurants, hotels, schools, and entertainment venues) have been closed. According to the U.S. Department of Agriculture (USDA), U.S. consumers normally spend 54% of their food and drink dollars on away-from-home food purchases. Thus, prior to the COVID-19 pandemic a large share of U.S. food products traveling through the food supply chain was going to institutional buyers, often in bulk or vendor-ready form, for away-from-home consumption. In order to redirect this food product flow towards retail outlets and at-home consumption, much of this food would require processing into more consumer-usable forms, repackaging, and relabeling. This requires some level of retooling by food packagers and processors. In addition, several plants in the food processing industry, including meat processing plants, have experienced severe COVID infection outbreaks among workers and been forced to shut (at least temporarily). Several industry groups from the U.S. agricultural sector have released estimates of the economic damage experienced by producers and ranchers. Most of these early assessments are limited to evaluating the effect of the price decline on any unsold production of crops or livestock remaining under farmer's control, and the unexpected marketing costs of unsold products due to the shutdown of most institutional buying of agricultural products. Cumulatively, industry estimates of COVID-related losses approach $40 billion (this would represent over 10% of annual cash receipts). The effect on farm net income is expected to be similarly negative. In response to the COVID-19 pandemic, Congress has passed and the President has signed four supplemental appropriations acts ( P.L. 116-123 , P.L. 116-127 , P.L. 116-136 , and P.L. 116-139 ) that have included both direct and indirect funding for the U.S. agricultural sector. On April 17, 2020, Secretary of Agriculture Sonny Perdue announced the Coronavirus Food Assistance Program (CFAP), valued at $19 billion, to provide immediate financial relief to farmers, ranchers, and consumers in response to the COVID-19 national emergency. According to Secretary Perdue, CFAP will include $16 billion in direct payments to producers that have been impacted by the sudden drop in commodity prices and the disruption in food supply chains that has occurred since the outbreak, and $3 billion in commodity purchases for distribution through food banks, faith-based organizations, and other nonprofit organizations. CFAP direct payments are intended to partially offset the loss of market revenue from the price decline, and the unexpected carry-cost of unsold commodities for producers and ranchers of products that have been negatively affected by COVID-19. USDA has released limited information on the specifics of how CFAP's direct payment program will be implemented. Many of the program specifics are expected to be delineated in an expedited rulemaking process. CFAP direct payments are expected to go out to producers by the end of May or early June. CFAP's commodity purchase and distribution program serves the dual roles of supporting commodity market prices by temporarily increasing demand, and of expanding the availability of food distribution to consumers that have lost their jobs or have limited resources. Expectations are that it will be operated differently than, and separate from, existing USDA commodity purchase programs such as Section 32 or Food and Nutrition Service (FNS) food distribution programs in two major ways. First, USDA plans to purchase about $100 million per month of fresh produce, $100 million per month of dairy products, and $100 million per month of meat products (chicken and pork). Second, the CFAP purchase program intends for vendors to deliver household-ready boxes—potentially a diversified mix of the previously mentioned produce, meat and dairy products—which are ready for more convenient and immediate distribution ("off the truck and into the trunk") that is consistent with social distancing. Initial program delivery may be as early as May 15. The program is expected to operate through the end of 2020. Potential congressional concerns include how to channel assistance to industries affected by COVID-19, long-term effects of the pandemic, and the capacity of rural banks to help with recovery. Several issues related to CFAP and the U.S. agricultural sector in a post-COVID economy that could be of potential interest to Congress are presented at the end of this report.

crs_R45973

crs_R45973_0

<1. Background> Family reunification and the admission of immigrants with needed skills are two of the major principles underlying U.S. immigration policy. As a result, current law weights the allocation of immigrant visas heavily toward individuals with close family in the United States and, to a lesser extent, toward individuals who meet particular employment needs. The diversity immigrant category was added to the Immigration and Nationality Act (INA) by the Immigration Act of 1990 ( P.L. 101-649 ) to stimulate "new seed" immigration (i.e., to foster new, more varied migration from other parts of the world). Diversity visas are allocated to natives of countries from which the combination of immediate relatives, family preference, and employment preference immigrant admissions were lower than a total of 50,000 over the preceding five years combined. <1.1. Legislative Origins> The Immigration Amendments of 1965 replaced the national origins quota system, which prioritized European source countries, with equally distributed per-country ceilings. In the 1980s, some Members of Congress began expressing concern that U.S. legal immigration admissions were skewed in favor of immigrants from Asia and Latin America because of the 1965 amendments. The first legislative response to this concern occurred in Section 314 of the Immigration Reform and Control Act of 1986 (IRCA), which allowed an extra 5,000 immigrant visas per year for FY1987 and FY1988 to be distributed to natives of 36 countries that had been adversely affected by the 1965 changes to the INA. Over 1 million people applied for what was then called the NP-5 program, and visas were made available according to the chronological order in which qualified applications were mailed to the State Department (DOS). Natives of Ireland received the largest proportion (31%) of the NP-5 visas, followed by natives of Canada (21%) and Great Britain (11%). In 1988, Congress extended the NP-5 program for two more years and made 15,000 additional immigrant visas available each year in FY1989 and FY1990. What is now known as the diversity immigrant category was added to the INA by P.L. 101-649 and went fully into effect in FY1995. Section 132 of P.L. 101-649 provided 40,000 visas per year for a transitional program during FY1992-FY1994 for certain natives of foreign states that were adversely affected by the 1965 changes to the INA. At least 40% of these visas were earmarked for natives of Ireland. The current diversity visa category had an annual allocation of 55,000 visas when it went into effect in FY1995. While the diversity visa category has not been directly amended since its enactment, P.L. 105-100 , the Nicaraguan Adjustment and Central American Relief Act of 1997 (NACARA), temporarily decreased the 55,000 annual ceiling to 50,000. Beginning in FY2000, the 55,000 ceiling has been reduced by 5,000 annually to offset immigrant visas made available to certain unsuccessful asylum seekers from El Salvador, Guatemala, and formerly communist countries in Europe who are being granted immigrant status under special rules established by NACARA. The 5,000 offset is temporary, but it is not clear how many years it will be in effect to handle these adjustments of status. <1.2. Eligibility Criteria and Application Process> To be eligible for a diversity visa, the INA requires that a foreign national must have at least a high school education or the equivalent, or two years of experience in an occupation that requires at least two years of training or experience. The applicant or the applicant's spouse must be a native of one of the countries listed as a foreign state qualified for the DV program. Minor children of the qualifying diversity immigrant, as well as the spouse, may accompany as lawful permanent residents (LPRs) and are counted toward the 50,000 annual limit. Because the demand for diversity visas is much higher than the supply, a lottery is used to randomly select who may apply for one of the 50,000 diversity visas available annually. (See Figure 1 for an illustration of the process). There is no fee to enter the diversity lottery. Registration for the FY2020 diversity lottery began on October 3, 2018, and closed on November 6, 2018. Beginning on May 7, 2019, and continuing through September 30, 2020, those who registered can use an online system to find out if they had been selected. The FY2018 lottery had 14.7 million entries, representing over 23 million people (including family members). From the millions of entries, approximately 100,000 selectees are randomly chosen. Being chosen as a selectee ("lottery winner") does not guarantee receipt of a diversity visa; rather, it identifies those who are eligible to apply for one. To receive a visa, selectees must successfully complete the application process (including security and medical screenings and in-person interviews) by the end of the fiscal year for which they registered for the lottery or they lose their eligibility. DV applicants, like all other foreign nationals applying to come to the United States, must pay applicable fees and undergo reviews and biometric background checks performed by DOS consular officers abroad and Department of Homeland Security (DHS) immigration officers upon entry to the United States. Individuals selected for a diversity visa who are residing in the United States as nonimmigrants must undergo reviews by U.S. Citizenship and Immigration Services (USCIS) prior to adjusting to LPR status. These reviews, which include an in-person interview, are intended to ensure that the applicants are not inadmissible under the grounds spelled out in Section 212(a) of the INA. Grounds for inadmissibility include health, criminal history, security and terrorist concerns, public charge, illegal entry, and previous removal. <2. Trends in Source Regions and Countries> The diversity immigrant visa program currently makes 50,000 visas available annually to natives of countries from which immigrant admissions were lower than a total of 50,000 over the preceding five years. USCIS implements a formula for allocating visas according to statutory specifications: visas are divided among six global geographic regions, and each region and country is identified as either high admission or low admission based on how many immigrant visas each received over the previous five-year period. Higher proportions of diversity visas are allocated to low-admission regions and low-admission countries. Each country is limited to 7%, or 3,500, of the total, and the INA provides that Northern Ireland be treated as a separate foreign state. The distribution of diversity visas by global region of origin has shifted over time (see Figure 2 ). From FY1995 through FY2001, foreign nationals from Europe garnered a plurality of diversity visas, ranging from 38% to 47% of the total. In the early 2000s, the share of DV recipients from Africa was on par with those from Europe. Europe's share dropped by nine percentage points from FY2005 to FY2006 as the shares from African and Asian countries continued to increase. Since FY2008, Europe has accounted for smaller shares than Africa or Asia. Latin America (which includes South America, Mexico, Central America, and the Caribbean), Oceania, and North America accounted for less than 8% each year. In total, from FY1995 through FY2017 immigrants from Africa accounted for 40% of diversity immigrants, while Europeans accounted for 31% and Asians for 25%. These trends are consistent with the statutory formula Congress outlined to allocate diversity visas. Figure 3 presents the countries from which at least 1,000 DV immigrants were admitted in the first five years that the program was in full effect (FY1995-FY1999) and the most recent five years for which data are available (FY2013-FY2017). Early in the program, most of the top countries were in Europe (particularly Eastern Europe) and Africa. In more recent years, there has been a shift toward Africa and Asia. Certain countries such as Ethiopia, Ukraine, and Egypt rank high across many years of the program, while others such as Ireland, Poland, and Venezuela are limited to particular periods of time. From FY1995-FY2017, natives of six countries received at least 40,000 diversity visas in total: Ethiopia (67,832), Nigeria (58,563), Egypt (56,862), Ukraine (52,654), Albania (47,136), and Bangladesh (40,847). <3. Characteristics of Diversity Immigrants> <3.1. Regions of Birth> As one would expect, diversity immigrants come from different parts of the world that differ from the leading immigrant-sending regions. Department of Homeland Security data ( Figure 4 ) reveal that Africa accounted for 43% of diversity immigrants admitted in FY2017, but 11% of all LPRs admitted that fiscal year. Europeans made up 7% of all LPRs admitted in FY2017, but 22% of diversity immigrants. In contrast, Latin America (Mexico, Central America, the Caribbean, and South America) was the sending region for 43% of all LPRs admitted in FY2017, but provided 4% of the diversity immigrants during that fiscal year. North America (excluding Mexico) and Oceania account for a small percentage of LPRs admitted by any means. The distribution of LPR admissions and DV admissions from Asia illustrates the impact of the two-step visa allocation formula, which considers both regional and national admissions levels. Asia includes many top-sending countries such as China, India, and the Philippines for family- and employment-based LPRs, making it a high-admission region. Yet it also includes low-admission countries such as Nepal, Iran, and Uzbekistan that rank high for their number of diversity visas. As a result, as Figure 4 illustrates, in FY2017 foreign nationals from Asia represented a somewhat more equivalent share of the 1.1 million LPRs (38%) in relation to their share (30%) of diversity LPRs in contrast to the other world regions. <3.2. Age and Sex> Diversity immigrants are, on average, younger than other LPRs. Department of Homeland Security data (see Figure 5 ) reveal that DV immigrants are more likely to be working-age adults and their children, and less likely to be over the age of 40 than LPRs overall. Also, the foreign-born population of the United States is more likely to be in the prime working-age group (i.e., ages 25 to 64) than the native-born population, and diversity immigrants have a younger age distribution than the foreign-born population as a whole. In addition, 56% of diversity immigrants in FY2017 were male compared to 46% of all LPRs. <3.3. Marital Status> Diversity immigrants were less likely to be married than LPRs generally (47% versus 58%) in FY2017, perhaps a function of their relative youth. Over half (52%) of diversity immigrants were single, in contrast to 36% of LPRs overall. Few of either group were likely to be widowed, divorced, or separated. <3.4. Educational Attainment and Labor Market Characteristics> Recent critics of the diversity immigrant visa have argued against the program on the grounds that individuals do not need high levels of education or work experience to qualify for the DV program and that the U.S. admissions system should prioritize "high-skilled" immigrants. Neither DHS nor DOS publish data on the educational attainment of DV immigrants, but other sources provide some information. According to now-dated data from the New Immigrant Survey, a widely cited, nationally representative, longitudinal study of individuals who obtained LPR status in 2003, those who entered as principals via the diversity visa category had, on average, 14.5 years of schooling when they entered the United States, which was higher than those who were admitted on family-based visas as spouses or siblings of U.S. citizens (13.0 and 11.5 years, respectively), but lower than those who were admitted as principal employment-based immigrants (15.6 years). Similarly, DV immigrants were more likely to be fluent in English than most family-based immigrants (except for immigrant spouses of native-born U.S. citizens), but less likely than employment-based immigrants to be fluent in English. Using the same data source, the Migration Policy Institute found that 50% of DV immigrants who entered in 2003 had a college degree (32% with a bachelor's and 18% with a graduate degree). It is likely that the educational attainment of recent DV immigrants is higher than it was for those represented in the New Immigrant Survey, given that more recently arrived immigrants have higher levels of education overall than their predecessors. Government data on other labor market characteristics of DV immigrants are also limited. According to the New Immigrant Survey, DV immigrants who entered in 2003 had higher initial unemployment rates than employment-based immigrants and those who immigrated as spouses of U.S. citizens, but lower unemployment rates than those who immigrated as siblings of U.S. citizens. Four to six years after U.S. entry, however, DV immigrants' unemployment rates had dropped significantly and were similar to those of all other groups except employment-based principals (who had the lowest rates at both initial entry and four to six years later). DV immigrants' hourly earnings were similarly situated between that of employment-based immigrant category (which had the highest earnings) and that of the sibling category (which had the lowest). Among male immigrants earning wages, those who entered on diversity visas had the highest percentage growth in real hourly wages between initial entry and re-sampling four to six years later. <4. Impact of the DV Program on Immigrant Diversity> Given its name and the discourse about "new seed" immigrants that preceded the creation of the diversity visa, the question arises whether the DV program has led to an increase in the diversity of immigrant flows to the United States. Leading up to and since its enactment, some observers have noted that, regardless of its name, the DV program was intended to benefit Irish and Italian constituents who had been negatively affected by the Immigration Act of 1965 that resulted in an increase in immigration from Asia and Latin America. During the transition period after the program was created (FY1992-FY1994), at least 40% of diversity visas were earmarked for Irish immigrants, and 92% of diversity visas in FY1994 went to Europeans. Since its full implementation in FY1995, however, immigrants from a wider range of countries and regions have entered via the program (see " Regions of Birth " above). The DV program's small size relative to total annual immigrant admissions (DV admissions make up about 5% of annual LPR admissions) limits its impact on the make-up of the immigrant population. Former Representative Bruce Morrison, who helped create the program, stated in a 2005 hearing that it was not Congress's intent to diversify the immigrant flow as a whole ("It could not have possibly done so at the 50,000 number"), but rather to add a new pathway for those who would not be able to enter under the family- or employment-based systems. By that standard, the program arguably fulfills its objectives, having admitted more than 1 million immigrants from under-represented countries since FY1995 (see Figure 3 ). Another way to assess the program's impact is to analyze the diversity of annual LPR flows before and after the DV program was established. Using a measure of diversity called the entropy index, CRS found that in FY1990, before the DV program was in effect, the diversity of LPR admissions was 0.52. In every year from FY1995 (when the DV program went into full effect) through FY2017 (the most recent data available), the diversity of annual LPR admissions was higher than in 1990, ranging from 0.67 to 0.72. In each of those years, the diversity of LPR admissions not including the DV admissions was lower than it was with DV admissions included (see the Appendix ), indicating that the admission of DV immigrants does increase the diversity of annual LPR admissions. A full analysis of the impacts of the DV program on admission numbers would also take into account individuals whom DV immigrants subsequently sponsor through the family-based admissions system. Because administrative data on immigrant admissions do not specify these linkages, this type of direct analysis is not currently possible. However, admissions data suggest that, at least for Africans, the DV has led to an increase in immigration via the family-based system (particularly immediate relatives). From 1992 to 2007, admissions of Africans based on family sponsorship grew faster than other categories of admissions for Africans, including diversity, which remained fairly stable over the time period. The DV seems to have diversified the African flow itself by boosting emigration from non-English speaking African countries (whereas English-speaking African countries have longer histories of U.S. immigration and are therefore more likely to be the source of sponsoring immigrant family members). <5. Selected Legislative Action> Legislation related to the Diversity Immigrant Visa has focused largely on eliminating the program. Bills to eliminate the diversity visa category have been introduced in nearly every Congress since the program was created and have passed one chamber on more than one occasion. Most recently, S. 744 in the 113 th Congress, a comprehensive immigration reform bill that the Senate passed in 2013 by a vote of 68 to 32, would have eliminated the program. Other bills introduced in the past would have raised the annual limit of diversity visas or temporarily re-allocated diversity visas for other purposes. In the 116 th Congress, several bills to eliminate the DV program have been introduced, including H.R. 479 , H.R. 2278 , S. 1103 , and S. 1632 . In contrast, H.R. 3799 would raise the annual diversity visa allocation to 80,000. <6. Selected Policy Questions> As Congress weighs whether to eliminate or revise the diversity visa category, it may want to consider various policy questions pertinent to this discussion. <6.1. Is it fair to have the diversity visa category when there are family members and prospective employees who have been waiting for years for visas to become available?> Given the 3.7 million approved family-based and employment-based petitions waiting for a visa to become available at the close of FY2018, some argue that the 50,000 diversity visas should be used for backlog reduction in these visa categories. Others might observe that the family-based, employment-based, and diversity visa categories are statutorily designed as independent pathways to LPR status and that the problems of the family-based and employment-based backlogs should be addressed separately. Some also argue that the DV program increases fairness in the immigration system by making visas available to individuals who would not otherwise have a chance of obtaining one and by discouraging illegal immigration through expanding access to the legal immigration system. <6.2. Should the United States base admissions decisions on nationality?> Some argue that the diversity visa program reverts to discriminatory national origin quotas, which Congress eliminated through the 1965 amendments to the Immigration and Nationality Act. However, there are other examples of admissions policies that effectively discriminate based on nationality (e.g., H-2A, H-2B, E, and TN nonimmigrant visas, the Visa Waiver Program, and the per country caps on family- and employment-based LPR admissions, all of which limit admissions by nationality). Some also argue that admissions decisions should be based on higher levels of education, job experience, and language skills, or family ties to U.S. residents, rather than country of origin and being selected at random via a lottery. In contrast, others argue that the program bolsters equity of opportunity a quintessential American value by providing a pathway for individuals particularly those from Africa, Eastern Europe, and the former Soviet Union who do not have family or employer connections in the United States. Some also argue that the more than one million immigrants who have moved to the United States as a result of the program have enriched the United States culturally and economically, and strengthened the nation's global connections. Some also argue that efforts to end it are racially motivated or point out that for most of U.S. history, Africans in particular had little opportunity to come to the United States other than as slaves. <6.3. Is a lottery the best way to choose applicants for diversity visas?> Some equate the use of a lottery system in the DV program to awarding "green cards" at random and argue that luck should not come into play in U.S. admissions decisions. Others argue that, given the millions of interested applicants every year, a lottery is a fair method of reducing the applicant pool because it gives all entrants who meet the program's qualifications an equal chance to apply for a diversity visa. They also cite the use of a lottery in other over-subscribed visa categories such as the H-1B and H-2B temporary worker classifications to illustrate that U.S. immigration policy considers it a reasonable tool. <6.4. Is the diversity visa lottery more vulnerable to fraud and misuse than other immigration pathways?> Some observers concerned about immigration fraud surrounding the DV program reference a 2003 State Department Office of Inspector General report and a 2007 GAO report which found fraud vulnerabilities in the DV program. They may also cite the 2017 and 2018 complaints filed by the Department of Justice (DOJ) in two cases seeking the denaturalization of individuals who had gained admission (in 1997 and 2001) to the United States through the DV program. In the first case, DOJ filed a complaint to denaturalize four Somali-born diversity visa recipients who falsely claimed to be a family. In the second case, DOJ filed a complaint to denaturalize a diversity visa recipient who obtained naturalization without having disclosed two prior orders of removal. Those defending the fraud protections of the DV program counter that DOS has since revised the diversity lottery procedures to address fraud vulnerabilities, including a requirement to submit a recent photograph, the addition of biographic and facial recognition checks to reduce duplicate entries, a policy requiring the disqualification of entrants who fail to list their spouse and children on their entries, and technical improvements to limit manipulation of entries by automated bots. They also argue that the risk of fraud is not unique to the DV program and refer to the numerous fraud investigations and arrests of immigrants who entered the United States via other visa categories and the significant resources that DOS commits to fraud prevention for all immigrant and nonimmigrant visa applications through its Fraud Prevention Units at posts overseas. In addition, on June 5, 2019, DOS published an interim final rule to require diversity visa entrants to provide certain information from a valid, unexpired passport on the electronic entry form. This rule is intended to make it more difficult for third parties to submit unauthorized entries, because third parties are less likely to have individuals' passport numbers. <6.5. Are there national security reasons to eliminate the diversity visa?> Some assert that the difficulties of performing background checks in many of the countries whose natives currently qualify for the DV program, as well as broader concerns about terrorism, justify the elimination of the category. Some cite the 2004 warning of the DOS Deputy Inspector General that the diversity visa lottery "contains significant vulnerabilities to national security" from state sponsors of terrorism. They argue that DV immigrants, by definition, are not required to have employer or family ties in the United States and thus may be more likely to have nefarious intent. They cite the case of a New Jersey resident responsible for killing eight people with his rental truck in lower Manhattan in 2017, who had immigrated to the United States from Uzbekistan on a diversity visa. In response to that event, the Trump Administration called on Congress to immediately terminate the diversity visa lottery program. Others respond that immigrants coming to the United States in other immigrant visa categories are not restricted if they come from these same countries, and further argue that background checks for national security risks are performed on all prospective immigrants seeking to come to the United States. They also point to the 2005 DOS Inspector General's testimony that DOS's Bureau of Consular Affairs strengthened the DV program by complying with most of the recommendations in the OIG's 2003 report. They similarly note the testimony of one of the creators of the DV Program who contended that "it is absurd to think that a lottery would be the vehicle of choice for terrorists" and that attention should instead be focused on greater security risks. They also point out that since the creation of the Visa Security Program in 2003, DHS has aided consular officers in extensively vetting individuals applying for visas. They also reference a 2007 GAO report stating: "We found no documented evidence that DV immigrants from these, or other, countries posed a terrorist or other threat. However, experts familiar with immigration fraud believe that some individuals, including terrorists and criminals, could use fraudulent means to enter or remain in the United States." <6.6. Are there foreign policy reasons to continue the diversity visa program?> Citing the millions of diversity visa lottery entries every year from around the world, some argue that the DV program is an efficient means of boosting American goodwill and "soft power" abroad, and that a diversity of immigrant origins helps the United States better respond to the challenges of globalization. Some also cite the value of remittances sent by diversity immigrants to their countries of origin as international development assistance without U.S. government expense. Others argue that the DV program encourages "brain drain" from developing countries, a concern which acknowledges that many DV immigrants particularly from Africa possess education and skills beyond the minimum requirements for program eligibility. <6.7. Are the reasons that led to establishment of the diversity visa (e.g., to stimulate "new seed" immigration) still germane?> Supporters of the DV program argue that it honors the United States' history as a destination for enterprising immigrants the "self-selected strivers" who arrive without family ties but with a desire to work hard for a better life. Some point to the present-day preponderance of immigrants from a handful of countries and argue that the diversity visa fosters new and more varied migration to counterbalance an admissions system weighted disproportionately to family-based immigration, which tends to perpetuate the dominance of certain countries. They also point to wide support for legislation that would remove or raise the 7% per-country limits on family- and employment-based immigrant admissions, which would likely result in further concentration of immigrant flows from the top sending countries. Even with the per-country limits and DV program in place, the total foreign-born population has become more concentrated in the top ten source countries compared to 1990 (see " Impact of the DV Program on Immigrant Diversity "). Others argue that, after almost 30 years, the diversity visa category has run its course. They might cite the countries such as Pakistan, Brazil, Nigeria, and Bangladesh that formerly qualified for the DV program and no longer do due to their increase in admissions, or the growth in immigration from Africa, Eastern Europe, and parts of Asia as an indication that the need for "new seed" immigration has been met. Others counter that these trends indicate that the program is meeting its goals and should be continued. They further argue that in many countries around the world, the diversity visa remains the only accessible avenue for immigrating to the United States. <6.7.1. Appendix. Entropy Index Methodology and Results> The entropy index (also called the Shannon index) is a measure of the diversity of a population. Diversity can be defined as the "relative heterogeneity of a population." It is at its maximum when all subpopulations are present in equal proportions (for the purposes of this report, when each country of birth receives an equal number of LPR admissions). The formula for the entropy index is where H is the entropy index, k is the country-of-origin group, and P is the proportion of the total from each country-of-origin group. The index can be standardized by dividing by its maximum, log K. Doing so results in a range of 0 (for the case where all of the population is in one subpopulation) to 1.0 (for the case where all subpopulations are present in equal proportions). For this report, the standardized entropy index was calculated by year for country of birth of total LPR admissions, LPR admissions minus DV admissions, and DV admissions. This was calculated after creating a standardized list of countries across all years so that K was held constant. As shown in Figure A-1 , between FY1995 and FY2017, the entropy index varied, but in all years the index was higher when DV LPRs were included.

The purpose of the diversity immigrant visa program (DV program, sometimes called "the green card lottery" or "the visa lottery") is, as the name suggests, to foster legal immigration from countries other than the major sending countries of current immigrants to the United States. Current law weights the allocation of immigrant visas primarily toward individuals with close family in the United States and, to a lesser extent, toward those who meet particular employment needs. The diversity immigrant category was added to the Immigration and Nationality Act (INA) by the Immigration Act of 1990 ( P.L. 101-649 ) to stimulate "new seed" immigration (i.e., to foster new, more varied migration from other parts of the world). The DV program currently makes 50,000 visas available annually to natives of countries from which immigrant admissions were less than 50,000 over the preceding five years combined. The formula for allocating these visas is specified in statute: visas are divided among six global geographic regions, and each region and country is identified as either high-admission or low-admission based on how many immigrant visas were given to foreign nationals from each region and country over the previous five-year period. Higher proportions of diversity visas are allocated to low-admission regions and countries. The INA limits each country to 7% (3,500, currently) of the total and provides that Northern Ireland be treated as a separate foreign state. Because demand for diversity visas greatly exceeds supply, a lottery system is used to select individuals who may apply for them. Those selected by lottery ("lottery winners"), like all other foreign nationals wishing to come to the United States, must undergo reviews performed by Department of State consular officers abroad and Department of Homeland Security immigration officers upon entry to the United States. These reviews are intended to ensure that the foreign nationals are not ineligible for visas or admission to the United States under the grounds for inadmissibility spelled out in the INA. To be eligible for a diversity visa, the INA requires that a foreign national have at least a high school education or the equivalent, or two years' experience in an occupation that requires at least two years of training or experience. The foreign national or the foreign national's spouse must be a native of one of the countries listed as a foreign state qualified for the diversity visa program. The distribution of diversity visas by global region of origin has shifted over time, with higher shares coming from Africa and Asia in recent years compared to earlier years when Europe accounted for a higher proportion. Of all those admitted through the program from FY1995 (the first year it was in full effect) through FY2017 (the most recent year for which data are available), individuals from Africa accounted for 40% of diversity immigrants, while Europeans accounted for 31% and Asians for 25%. Some argue that the DV program should be eliminated and its visas re-allocated for employment-based visas or backlog reduction in various visa categories. Critics of the DV program warn that it is vulnerable to fraud and misuse and is potentially an avenue for terrorists to enter the United States, citing the difficulties of performing background checks in many of the countries whose citizens are eligible for a diversity visa. Critics also argue that admitting immigrants on the basis of their nationality is discriminatory and that the reasons for establishing the DV program are no longer germane. Supporters of the program argue that it provides "new seed" immigrants for a system weighted disproportionately to family-based immigrants from a handful of countries. Supporters contend that fraud and abuse have declined following measures put in place by the State Department, and that the system relies on background checks for criminal and national security matters that are performed on all prospective immigrants seeking to come to the United States, including those applying for diversity visas. Supporters also contend that the DV program promotes equity of opportunity and serves important foreign policy goals.

crs_R45996

crs_R45996_0

<1. Introduction> This report focuses on selected precision-guided munitions (PGMs) fielded by the Air Force, Army, Navy, and Marine Corps. Over the years, the U.S. military has relied on PGMs to execute ground, air, and naval military operations. PGMs have become ubiquitous in U.S. military operations; funding for these weapons has increased dramatically from FY1998 to the present as depicted in. In FY2021, the Department of Defense (DOD) requested approximately $4.1 billion for more than 41,337 weapons in 15 munitions programs. DOD projects requesting approximately $3.3 billion for 20,456 weapons in FY2022, $3.9 billion for 23,306 weapons in FY2023, $3.9 billion for 18,376 weapons in FY2024, and $3.6 billion for 16,325 weapons in FY2025. Congress, through the defense authorization and appropriations bills, has historically exercised its role in the decision to approve, reject, or modify DOD's proposals for PGMs. In addition, these programs pose a number of potential oversight issues for Congress. Congress's decisions on these issues could affect future U.S. military capabilities and funding requirements. Potential issues for Congress include planned procurement quantities and stockpile assessments, defense industrial base production capacity, development timelines, supply chain security, affordability and cost-effectiveness, and emerging factors that may affect PGM programs. <2. Background> DOD defines a PGM as "[a] guided weapon intended to destroy a point target and minimize collateral damage." In addition to these virtues, PGMs also offer other advantages over unguided weapons, namely range and the reduction in numbers of combat sorties required to deliver the desired effects on the battle field. The main disadvantage of these weapons is cost; particularly long range missiles. PGMs include air- and ship-launched missiles, multiple launched rockets, and guided bombs. Current munitions typically use a combination of radio signals from the global positioning system (GPS), laser guidance, and inertial navigation systems (INS) using gyroscopes to improve a weapon's accuracy to reportedly less than 3 meters (approximately 10 feet). PGMs have transformed attack operations from the air; instead of using hundreds of bomber sorties to attack a single target, a single sortie from a PGM-carrying platform can attack multiple targets while minimizing collateral damage. Guided munitions were first developed in the 1940s, when the U.S. Army Air Corps tested radio guidance to glide bombs onto a target. Prior to precision guidance, bomber missions reported an accuracy of 1,200 feet; 16% of munitions dropped by crews landed within 1,000 feet of their intended target. According to defense analyst Barry Watts, guidance systems showed promise in improving weapon accuracy; however, these systems were not fully fielded during the Second World War. This can partly be attributed to technological challenges in developing guidance systems, as well as relatively large unit costs per munition used. Guidance systems during this era used television signals, and required a chase aircraft to provide command and control for the weapon to strike its target. DOD continued to develop PGMs through the 1950s and 1960s, where they gained prominence during the Vietnam War with the introduction of the laser-guided bomb. Laser-guided bombs became a preferred munition for bombing operations; an Air Force study in 1973 found that the U.S. military used more than 10,500 laser-guided bombs the previous year, with 5,107 weapons achieving a direct hit and another 4,000 achieving a circular error probable of 25 feet. During the 1970s and 1980s, all of the military services developed guided missiles capable of attacking fixed and moving targets. Laser-guided bombs gained prominence during Operation Desert Storm in 1991. Although PGMs represented only 6% of the total munitions used during the campaign, they struck a number of critical targets, reduced the number of combat sorties required, and limited collateral damage to civilian structures. Operations over the past decade in Afghanistan, Iraq, and Syria have demonstrated DOD's increasing reliance on PGMs and how important they have become for modern military operations. The Air Force reports that nearly 139,000 weapons have been used in combat operations in the Middle East since 2014. Counter-Islamic State (IS) operations in Iraq and Syria have used numerous weapons: in 2015, coalition air forces used more than 28,000 weapons; in 2016, the campaign used an additional 30,700 weapons; and in 2017 (the height of operations), the campaign used 39,500 weapons (see Figure 2 for a graphical representation of operational usage compared to DOD procurement). Nearly all of the weapons employed were PGMs, particularly Joint Direct Attack Munitions (JDAMs) and Hellfire Missiles. In addition to PGM use in current operations, the proliferation of anti-access/area denial (A2/AD) systems is likely to increase the operational utility of PGMs. Anti-access systems can be defined as capabilities "associated with denying access to major fixed-point targets, especially large forward bases." Area denial systems can be defined as capabilities "that threaten mobile targets over an area of operations, principally maritime forces, to include those beyond the littorals." Peer competitors like China and Russia have developed sophisticated air defenses, such as the S-300PMU (SA-20) and S-400 (SA-21), the HQ-9 surface-to-air missile (China), the DF-21D and DF-26 anti-ship ballistic missiles (China), and the 3M-54 Kaliber anti-ship cruise missile (Russia). Figure 3 illustrates ranges of potential A2/AD systems. These systems outrange U.S. weapons systems at what experts assess as unacceptable risk some of these weapons have reported ranges in excess of 1,000 nautical miles. As a result, U.S. ships and aircraft would need to engage targets at long ranges in order to not put themselves in danger. For instance, naval ships could be threatened at ranges of 809 nautical miles from bases that field DF-21D anti-ship ballistic missiles. The effectiveness of these missiles is often debated, as is the amount of risk an anti-ship ballistic missile presents to naval forces. Some analysts argue that in a combat situation, aircraft carriers would not enter these weapons' engagement zones because of the threat. Others argue that while there is some risk posed to naval forces, aircraft carriers and major surface combatants would nonetheless be able to operate effectively. Similarly, an S-400 (SA-21) presents risks to aircraft at ranges of up to 215 nautical miles. Many weapons in the U.S. inventory have relatively short ranges. Figure 4 illustrates the impact that A2/AD systems have on potential military operations. Some analysts argue that U.S. forces would substantially increase their operational risk at ranges in excess of 500 nautical miles (NM). <2.1. Air-Launched Precision-Guided Munitions> <2.1.1. Paveway Laser-Guided Bombs> The Paveway is a family of guidance kits that attach to unguided bombs. The assembly includes a guidance seeker on the nose of the bomb, which looks for a laser to mark a target, and a tail kit to guide the bomb onto the target. The Paveway series was originally developed during the Vietnam War to enable tactical aircraft like the F-4 Phantom and the A-6 Intruder to deliver precise munitions onto a target. Paveway has received several upgrades, with the development of Paveway III (in the 1990s), which improves low-altitude guidance, and Paveway IV (in the late 1990s), which adds satellite guidance to improve accuracy. The U.S. military predominately uses Paveway II (see Figure 5 and Figure 6 ) and Paveway III kits; Paveway IV is used exclusively by foreign militaries. According to IHS Janes, Raytheon has produced more than 350,000 Paveway kits, with Lockheed Martin producing an additional 200,000 kits. Funding for Paveway procurement appears in the Air Force's General Purpose Bomb line item; however, the Air Force does not report procurement quantities in its budget justification documentation. DOD has exported Paveway II kits to more than 30 countries, and exported Paveway III kits to at least 9 countries. Paveway IV is used by the United Kingdom, the Philippines, Saudi Arabia, and Qatar. <2.1.2. Joint Direct Attack Munition (JDAM)> JDAM modifies unguided bombs such as the 500-pound Mk-82, the 1,000-pound Mk-83, and the 2,000-pound Mk-84 with GPS guidance. (For a fully assembled JDAM, see Figure 7 ; for a JDAM tail kit, see Figure 8 .) When a JDAM kit is attached, the weapon is designated as GBU-31/32/38 depending on the weight of the bomb. These weapons have a reported range of 13 nautical miles. The Air Force and Navy began studying how to deliver such weapons in a program known as the Advanced Bomb Family during the 1980s. The first JDAMs were delivered in 1997, and underwent operational testing between 1998 and 1999. JDAM kits are reported to have an accuracy to within 3 meters (approximately 10 feet). The first operational use of a JDAM was during Operation Allied Freedom in Kosovo by a B-2 Spirit bomber. Since their development, JDAMs have been integrated with all U.S. fixed-wing strike platforms. JDAMs have received several upgrades since their introduction into service. One of the major developments has been developing a laser guidance system in addition to receiving GPS guidance. Adding laser guidance enables JDAMs to strike both moving and fixed targets. In February 2020, Boeing announced its intention to develop a "powered" JDAM to provide a low-cost alternative to cruise missiles. According to Air Force Magazine, this new JDAM would use a 500-pound bomb, and would be the size of a 2,000-pound bomb. Boeing has not stated a unit cost for this new development. DOD has procured more than 371,000 JDAM kits since 1998, and it plans to procure an additional 75,000 between FY2020 and FY2024. According to IHS Janes, the Air Force originally projected procuring 270,000 JDAM kits. Production peaked at 30,000 kits prior to 2007 before declining until 2015. Increased operational use in Iraq and Syria, in particular, resulted in a reduction in JDAM stockpiles, leading to increased procurement from FY2016 through FY2020. Table 1 outlines the FY2020 request, along with the programmed force between FY2021 through FY2024. The DOD projects to reduce JDAM procurement in the future years defense program (FYDP); the current programmed force for FY2021 reduces procurement from more than 40,000 tailkits in FY2020 to approximately 10,000 tailkits in FY2021 and ends the FYDP with approxmately 3,700 tailkits in FY2024. In addition to U.S. military use, JDAMs have been exported to 26 countries, including Australia, Bahrain, Denmark, Finland, Israel, Italy, Japan, Kuwait, Pakistan, Saudi Arabia, Singapore, South Korea, Taiwan, Turkey, and the United Arab Emirates. <2.1.3. Small Diameter Bomb (SDB) and Small Diameter Bomb II> The Small Diameter Bomb, designated as GBU-39 ( Figure 9 ), is a 250-pound guided bomb. The SDB can use both GPS and laser guidance, enabling it to strike both fixed and moving targets. In 1997, responding to improvements in accuracy due to GPS, the Air Force stated a need to develop a smaller bomb to reduce collateral damage. The SDB reached initial operating capability in 2006. According to the Air Force, the SDB has a range of approximately 40 nautical miles. The SDB was specifically designed around space constraints in both the F-22 Raptor and F-35 Lightning II aircraft to enable these fighter aircraft to carry SDBs internally, while protecting their low observable signature. The Air Force developed a second small diameter bomb, the GBU-53 laser-guided smaller diameter bomb, or SDB II (see Figure 10 ). The added laser guidance enables the SDB II to strike both fixed and moving targets. SDB II uses Link 16 and ultra-high frequency datalinks, along with infrared guidance, to provide course corrections. Development for the SDB II began in 2005, and the Air Force declared initial operating capability in 2019. The U.S. exports SDB II to Australia and South Korea as of 2019. The Air Force procures SDBs as of 2019. From FY2005 through FY2019, the Air Force purchased more than 28,000 SDBs for more than $1.7 billion. Both the Air Force and the Navy requested more than 7,000 SDBs in FY2020 (the second-largest procurement on the line) for $275 million, and plan to procure an additional 8,400 SDBs from FY2021 through FY2024. In addition both services are procuring SDB IIs. Procurement of the SDB II began in FY2018 with 80 bombs, increasing to 1,200 bombs in FY2019. DOD requested 1,900 bombs in FY2020 for approximately $331 million, and it plans to purchase more than 10,500 SDB IIs from FY2021 through FY2024 for $1.6 billion (see Table 2 ). <2.1.4. AGM-114 Hellfire Missile> In the early 1970s, the Army developed a requirement for an anti-tank missile, which resulted in the AGM-114 Hellfire (see Figure 11 ). The first Hellfire was introduced into service in 1982 on the Army's AH-64 Apache, using laser guidance to target tanks, bunkers, and structures. Hellfire missiles have a maximum effective range of 4.3 nautical miles. By the mid-1980s, the Marine Corps had introduced Hellfire missiles to its attack helicopter fleet. Hellfire missiles have received continual upgrades over the past decades, including integrating infrared sensors, warheads to target small boats, and integration with the Apache's Longbow radar. During the late 1990s and early 2000s, Hellfire missiles were introduced to the MQ-1 Predator, and later to the MQ-9 Reaper, enabling unmanned aerial vehicles to provide a strike capability. Hellfire missiles have become a preferred munition for operations in the Middle East, particularly with increased utilization of unmanned aircraft like MQ-1s and MQ-9s. Hellfire missiles have been exported to a number of countries, including Australia, Bahrain, Egypt, India, Iraq, South Korea, Kuwait, Qatar, Saudi Arabia, Taiwan, Turkey, United Arab Emirates, and the United Kingdom. The Army and the Marine Corps identified the need to replace the Hellfire missile. During the mid-2000s, the two services started a new development project called the Joint Air-to-Ground Missile (JAGM), which entered testing in 2012. Both services plan to replace the Hellfire with the JAGM; however, it is unclear when they plan to make the transition. All three military departments procure Hellfire missiles. From 1998 through 2018, DOD procured more than 71,500 missiles at a cost of $7.2 billion. Congress appropriated nearly $484 million for approximately 6,000 missiles in FY2019. For FY2020, DOD requested approximately $730 million for 9,000 Hellfire missiles, and it plans to purchase 13,100 missiles at a cost of $1.2 billion between FY2021 and FY2024 ( Table 3 ). In its FY2020 recent budget request, DOD states that it is requesting to procure the maximum production of Hellfire missiles. <2.1.5. AGM-169 Joint Air-to-Ground Missile (JAGM)> The Joint Air-to-Ground Missile is designed to replace the Hellfire, TOW, and Maverick missiles. JAGM uses a new warhead/seeker paired with an existing AGM-114R rocket motor which is the latest model to provide improved target acquisition and discrimination (see Figure 12 ). The JAGM has a maximum effective range of 8.6 nautical miles when launched from a helicopter and 15.1 nautical miles when launched from fixed-wing aircraft. JAGM underwent testing starting in 2010, and the missile entered initial operating capability in 2019, having been successfully integrated on the AH-64E Apache and AH-1Z Super Cobra attack helicopters. JAGM is expected to be integrated on other platforms as well, including the FA-18E/F Super Hornet, MQ-1C Grey Eagle, MH-60M Defensive Air Penetrator, MH-60S Seahawk, F-35 Lightning II, and P-8 Poseidon. In addition, the Air Force has begun procuring JAGMs but has not announced publicly what platforms will employ the missile. JAGM entered low-rate initial production in FY2017. All three services are procuring JAGM, though the Air Force is requesting only 60 missiles in FY2020, with no projections of additional procurement. DOD requested more than $339 million and 1,000 missiles for FY2020, and it projects procuring approximately 4,600 additional missiles through FY2024 for about $1.5 billion (see Table 4 ). <2.1.6. AGM-158A/B Joint Air-to-Surface Strike Missile (JASSM) and AGM-158C Long-Range Anti-Ship Missile (LRASM)> The Joint Air-to-Surface Strike Missile was conceived in the mid-1990s as a stealthy cruise missile designed to strike targets in heavily defended airspace. The JASSM is a 14-foot-long, 2,250-pound missile that can be carried internally on B-1B Lancer and B-52 Stratofortress aircraft and carried externally on a number of tactical fighters, including the F-16 Falcon, F-15E Strike Eagle, F/A-18 Hornet, F/A-18E/F Super Hornet, and F-35 Lightning II (see Figure 13 ). The AGM-158A JASSM has a stated range of more than 200 nautical miles. Initial operating capability was declared in 2005 (see Figure 14 ). AGM-158As have been exported to Australia, Finland, and Poland. In 2004, the Air Force decided that it required additional range on the JASSM and developed an extended range version, the AGM-158B JASSM-ER. The JASSM-ER uses the same body as the previous version with an improved infrared seeker, a two-way datalink, and enhanced anti-jam GPS receiver. The range of the JASSM-ER increased from more than 200 nautical miles to 500 nautical miles. This munition reached initial operating capability in 2014 on the B-1B Lancer. It reached full operating capability in 2018 with integration onto the F-15E Strike Eagle, and it is in full-rate production. The Air Force originally planned to procure 2,866 JASSMs and JASSM-ERs, but it has since changed the requirement to 7,200 missiles; as of 2019 the Air Force has procured more than 4,000 JASSMs. Japan has expressed interest in procuring JASSM-ERs, and Poland was approved to receive 70 missiles in 2016. The Air Force announced plans in September 2019 to increase JASSM production to a maximum rate of 550 missiles per year. The Service intends to grow the total JASSM inventory to approximately 10,000 missiles. In February 2020, the Air Force announced an $818 million contract to produce the latest version of the JASSM-Extreme Range Missile. According to Inside Defense, this new contract will produce 790 JASSM-ER missiles over two production lots. The new production contract includes 40 JASSM missiles to support foreign military sales; however, it is unclear which country will receive these missiles. The Long Range Anti-Ship Missile (LRASM) was conceived by the Defense Advanced Research Projects Agency (DARPA) as a concept to use a JASSM body to replace the AGM-88 Harpoon. Flight testing for LRASM began in 2012 on board a B-1B, and the missile was tested on an F/A-18E/F Super Hornet. LRASM uses a combination of passive radio-frequency sensors, and electro-optical/infrared seekers for terminal guidance. Japan has expressed interest in procuring the LRASM. In September 2019, the Air Force announced its intent to procure up to 410 LRASM missiles, changing its plan from an original estimate of 110 missiles. The JASSM-ER and the LRASM are produced in the same facility. According to budget documents, DOD states that JASSM and LRASM procurement in FY2020 is at maximum production rate. The Air Force and Navy are procuring JASSM-ER and LRASM as of 2019. In FY2020, DOD requested to procure 430 JASSM-ER missiles and an additional 48 LRASMs (see Table 5 ). In September 2019, the Air Force announced plans to increased JASSM production to 500 missiles per year, with additional capacity to up produce 96 LRASMs. DOD projects reduced procurement quantities of JASSM-ER, while maintaining procurement quantities of LRASM through FY2024. <2.1.7. AGM-88E Advanced Anti-Radiation Guided Missile (AARGM)> The Advanced Anti-Radiation Guided Missile is designed to target enemy integrated air defenses, specifically guidance radars (see Figure 15 ). AARGM was conceived in 2001 to replace the High-Speed Anti-Radiation Missile (HARM). DOD identified several deficiencies in the HARM that limited its operational effectiveness during Operation Iraqi Freedom. Thus, AARGM incorporated a new solid-propellant rocket motor that improved its range over the HARM, along with new guidance and seeker systems using GPS inertial navigation for guidance and millimeter wave and W-band (higher than 40 GHz) sensors. AARGM entered operational testing in 2010 and initial operational capability in 2012. AARGM has been integrated on the F/A-18C/D Hornet, F/A-18E/F Super Hornet, E/A-18G Growler, F-16C/D Falcon, and the F-35 Lightning II. Both the Navy and the Air Force have procured the AARGM or its predecessor the HARM; however, neither service is procuring additional missiles as of FY2020. The Navy, however, has requested $183 million of procurement appropriations to modify its current stockpile of AARGMs. The Air Force has not requested appropriations to modify its stockpile of HARMs since FY2016. Table 6 describes the total DOD request for AARGM. AARGM has been exported to a number of countries, including Australia, Italy, Finland, Germany, and Poland. <2.2. Ground-Launched Guided Munitions> <2.2.1. Guided Multiple Launch Rocket System (GMLRS)> GMLRS (see Figure 16 ) is a GPS-guided 227-millimeter rocket that was jointly developed by the United States, France, Germany, Italy, and the United Kingdom. Development began in 1999, and the U.S. military began procuring GMLRS in FY2003. GMLRS is capable of being launched from the M270 multiple launch rocket system (MLRS) and the M142 High Mobility Artillery Rocket System (HIMARS). GMLRS has a 200-pound unitary warhead and a maximum range of 70 kilometers. Both the Army and the Marine Corps have procured GMLRS. Since 1998, DOD has spent nearly $5.4 billion to procure more than 42,000 rockets. DOD has requested more than $1.2 billion for approximately 9,900 rockets in FY2020, and it plans to spend an additional $4.3 billion for nearly 29,000 GMLRS between FY2021 and FY2024. In addition, GMLRS is being exported: Bahrain, United Arab Emirates, Poland, and Romania are procuring GMLRS, as are the development partners (France, Germany, Italy, and the United Kingdom). See Table 7 for an overview of the current DOD request for GMLRS. <2.2.2. Army Tactical Missile System (ATACMS)> ATACMS (see Figure 17 ) is a 610-millimeter rocket that can be launched from either the M270 MLRS (two rockets) or the M142 HIMARS (a single rocket). This rocket was originally developed in the 1980s and was later updated to provide GPS guidance. ATAMCS underwent a second upgrade in 1991, which allowed ATACMS warheads to seek and attack armored targets. Other upgrades have improved target discrimination and new penetrating warheads for hardened targets. In 2016, then-Secretary of Defense Ash Carter announced that the Strategic Capabilities Office had developed a new seeker that allowed the ATACMS rocket to target ships. The Army has stated that it intends to retire the ATACMS and replace it with the new Precision Strike Missile. The Army is procuring ATACMS in FY2020, though this procurement will curtail as the Precision Strike Missile enters service. DOD requested to procure 240 missiles for $340 million in FY2020; it plans to procure 492 missiles for $611 million between FY2021 and FY2024. Table 8 provides an overview of the most recent request for ATACMS. Five hundred and six ATACMS have been exported to a number of countries, including the United Arab Emirates and Romania. <2.2.3. Precision Strike Missile (PrSM)> The PrSM is a new development program intended to replace ATACMS. PrSM is designed to be launched from the M270 and the M142 HIMARS multiple rocket launcher system. The Army states that PrSM is designed to launch two missiles in a launcher pod compared to ATACMS single missile, has a range in excess of 400 kilometers, and has an anti-jam GPS antenna. PrSM is in development and is planned to enter early operational service in FY2023. The Army has not stated when it intends to begin testing the PrSM. The Army states that although this missile might be sold to foreign militaries in the future, there are no purchase commitments from foreign governments as of 2019. The Army tested the PrSM at White Sands, NM, in its first flight test in December 2019. In its second test in March 2019, the Army successfully tested the PrSMs short-range capabilities. <2.3. Naval Precision-Guided Munitions> <2.3.1. Tomahawk Cruise Missile> The Tomahawk cruise missile was originally developed during the early- to mid-1970s. It was designed to be launched by submarines and from surface combatants. Designed to fly at 570 miles per hour (Mach 0.74, or 74% of the speed of sound) for up to 870 nautical miles, the Tomahawk has received a number of upgrades since it entered service. The Tomahawk Block IV is the current cruise missile in production and comes in two versions one for surface ships and another for submarines (see Figure 19 ). Upgrades have included improvements to GPS guidance, satellite datalink communications, and propulsion. The first operational use of the Tomahawk was during Operation Desert Storm, where the Navy launched 290 missiles from 12 submarines. Since then, IHS Janes reports that the Navy has used more than 1,600 missiles in Iraq, Bosnia, Serbia, Afghanistan, and Syria. The United Kingdom is the only export customer of the Tomahawk Block IV. From FY1998 through FY2018, the Navy spent $5.87 billion on 4,984 Tomahawk cruise missiles. The Navy has requested nearly $387 million for 90 missiles in FY2020, and it projects to procure an additional 90 missiles for nearly $374 million in FY2021, with no plans to procure additional missiles in FY2022-FY2024. The Navy projects requesting $819 million for additional procurement appropriations. (See Table 10 for the most recent Tomahawk request.) <2.3.2. Standard Missile-6 (SM-6)> The Standard Missile-6 was originally designed in 2004 as an anti-aircraft missile, derived from the Navy's SM-2 Block IV (see Figure 20 ). Since its development, the SM-6 has been integrated into the Navy's Naval Integrated Fires-Counter Air (NIF-CA) program to strike enemy surface ships. The missile was designed to receive targeting information from AEGIS radars and has been upgraded to receive target information from the E-2D Advanced Hawkeye. In addition to anti-air and anti-surface missions, the SM-6 is also capable of performing anti-ballistic missile missions. SM-6 entered low-rate initial production in FY2009 and full rate production in FY2013. The SM-6 is funded under the Navy's procurement line item 2234 Standard Missile. According to the latest Selected Acquisition Reports, DOD increased the requirement for SM-6 missiles from 1,800 to 2,331. DOD requested $488 million for 125 missiles in FY2020; it is projected that DOD will procure an additional 615 missiles between FY2021 and FY2024 at a cost of nearly $2.9 billion. Table 11 provides an overview of the current DOD request for SM-6 missiles. <2.3.3. Naval Strike Missile (NSM)> The Naval Strike Missile was originally developed by the Norwegian company Kongsberg as a replacement for the Penguin anti-ship missile (see Figure 21 and Figure 22 ). This missile is an anti-ship, low-observable cruise missile capable of flying close the surface of the ocean to avoid radar detection. IHS Janes states that "[t]he NSM airframe materials and missile shape are intended to minimise its infrared (IR) and radar signatures and radar cross section." The NSM is designed to fly multiple flight profiles different altitudes and speeds with effective ranges of between 100 and 300 nautical miles at a cruise speed of up to 0.9 Mach. The Navy has integrated the NSM on its Littoral Combat Ship, which deployed into the Pacific region in September 2019. The Navy began procuring the NSM in FY2019 under the Littoral Combat Ship Over-the-Horizon Missile procurement line (see Table 12 ). The Navy has requested $38 million for 18 missiles, and it plans to spend approximately $166 million for an additional 83 missile through FY2024. According to its budget justification, the Navy does not have a specific requirement for the number of missiles it plans to procure. <3. Potential Issues for Congress> Planned procurement quantities and stockpile assessment. One potential issue for Congress is whether DOD's desired quantities of standoff munitions are appropriate. Current operations have demonstrated a large demand for all types of PGMs. A potential high-intensity conflict would potentially require large stockpiles of all types of weapons. Several of these types of munitions particularly JASSM, LRASM, and AARGM are being procured in relatively small quantities, given their potential use rates in a high-intensity conflict scenario, along with the time it would take for replacement spent munitions once initial inventories are exhausted. A related issue is whether DOD has adequately assessed the sufficiency of existing and planned PGM stockpiles, particularly in light of recent use rates for such weapons. Congress has from time to time required DOD to assess munitions requirements, as well as to report on combatant command munitions requirements. More recently, Congress required DOD to provide an annual report on the munitions inventory, along with an unconstrained assessment of munitions requirements. Defense industrial base production capacity. Another potential issue for Congress concerns the defense industrial base's capacity for building PGMs, particularly for meeting increased demands for such weapons during an extended-duration, high-intensity conflict. The question is part of a larger issue of whether various parts of the U.S. defense industrial base are adequate, in an era of renewed great power competition, to meet potential wartime mobilization demands. Supply chain security. Another potential issue for Congress concerns supply chain security, meaning whether U.S. PGMs incorporate components, materials, or software of foreign origin. Supply chain security could affect wartime reliability of these weapons as well as the ability of the U.S. industrial base to build replacement PGMs in a timely manner during an extended-duration, high-intensity conflict. Development timelines. Congress may be concerned about the development timeline of PGMs compared with development timelines of adversary A2/AD capabilities. China and Russia have developed sophisticated systems over the past 10 years, while DOD has developed relatively few systems. Some analysts argue that these systems can exceed DOD munitions capabilities (such as range and speed). Can and, if so, should DOD develop new systems and at a pace that can match or exceed that of Chinese or Russian weapons systems? Affordability and cost-effectiveness. Congress may also be concerned about the affordability of DOD's plans for procuring various PGMs in large numbers, and the cost-effectiveness of PGMs relative to other potential means of accomplishing certain DOD missions, particularly in a context of finite DOD resources and competing DOD program priorities. Another aspect of cost-effectiveness concerns the cost of the weapon compared to the cost of a target. For instance, in 2017 a U.S. ally used a $3 million Patriot missile to engage a $300 quadcopter drone. Emerging factors that may affect PGM programs. Another potential issue for Congress is how DOD's programs for developing and procuring PGMs might be affected by emerging factors such as the U.S. withdrawal from the Intermediate Nuclear Force (INF) treaty; new U.S. military operational concepts for countering Chinese A2/AD forces in the Indo-Pacific region, such as the Army's new Multi-Domain Operations (MDO) operational concept and the Marine Corps' new Expeditionary Advanced Base Operations (EABO) concept, both of which possibly feature the potential use of such weapons from island locations in the Pacific as a way of countering China's A2/AD forces; and emerging technologies such as hypersonics and artificial intelligence (AI). Appendix A. Prior Year Procurement by Service Appendix B. Prior Year Procurement by Program

Over the years, the U.S. military has become reliant on precision-guided munitions (PGMs) to execute military operations. PGMs are used in ground, air, and naval operations. Defined by the Department of Defense (DOD) as "[a] guided weapon intended to destroy a point target and minimize collateral damage," PGMs can include air- and ship-launched missiles, multiple launched rockets, and guided bombs. These munitions typically use radio signals from the global positioning system (GPS), laser guidance, and inertial navigation systems (INS)—using gyroscopes—to improve a weapon's accuracy to reportedly less than 3 meters (approximately 10 feet). Precision munitions were introduced to military operations during World War II; however, they first demonstrated their utility operationally during the Vietnam War and gained prominence in Operation Desert Storm in 1991. Since the 1990s, due in part to their ability to minimize collateral damage, PGMs have become critical components in U.S. operations, particularly in Afghanistan, Iraq, and Syria. The proliferation of anti-access/area denial (A2/AD) systems is likely to increase the operational utility of PGMs. In particular, peer competitors like China and Russia have developed sophisticated air defenses and anti-ship missiles that increase the risk to U.S. forces entering and operating in these regions. Using advanced guidance systems, PGMs can be launched at long ranges to attack an enemy without risking U.S. forces. As a result, DOD has argued it requires longer range munitions to meet these new threats. The Air Force, Army, Navy, and Marine Corps all use PGMs. In FY2021, the Department of Defense (DOD) requested approximately $4.1 billion for more than 41,337 weapons in 15 munitions programs. DOD projects requesting approximately $3.3 billion for 20,456 weapons in FY2022, $3.9 billion for 23,306 weapons in FY2023, $3.9 billion for 18,376 weapons in FY2024, and $3.6 billion for 16,325 weapons in FY2025. Previously DOD obligated $1.96 billion for 13,985 weapons in FY2015, $2.98 billion for 35,067 weapons in FY2016, $3.63 billion for 44,446 weapons in FY2017, $5.05 billion for 68,988 weapons in FY2018, and $4.3 billion in FY2019 for 60,62 munitions. In FY2020, Congress authorized $5.30 billion for 56,067 weapons. Current PGM programs can be categorized as air-launched, ground-launched, or naval-launched. Air-Launched: Paveway Laser Guided Bomb, Joint Direct Attack Munition (JDAM), Small Diameter Bomb, Small Diameter Bomb II, Hellfire Missile, Joint Air-to-Ground Missile, Joint Air-to-Surface Strike Missile (JASSM), Long Range Anti-Ship Missile (LRASM), and Advanced Anti-Radiation Guided Missile. Ground - Launched: Guided Multiple Launch Rocket System (GMLRS), Army Tactical Missile System (ATACMS), and Precision Strike Missile (PrSM); Naval PGMs: Tomahawk Cruise Missile, Standard Missile-6 (SM-6), and Naval Strike Missile. Congress may consider several issues regarding PGMs, including planned procurement quantities and stockpile assessments, defense industrial base production capacity, development timelines, supply chain security, affordability and cost-effectiveness, and emerging factors that may affect PGM programs.

crs_R45757

crs_R45757_0

<1. Introduction> This report provides background information and potential issues for Congress for three types of large unmanned vehicles (UVs) that the Navy wants to develop and procure in FY2021 and beyond: Large Unmanned Surface Vehicles (LUSVs); Medium Unmanned Surface Vehicles (MUSVs); and Extra-large Unmanned Undersea Vehicles (XLUUVs). The Navy wants to acquire these large UVs as part of an effort to shift the Navy to a new fleet architecture (i.e., a new combination of ships and other platforms) that is more widely distributed than the Navy's current fleet architecture. The Navy is requesting $579.9 million in FY2021 research and development funding for these large UVs and their enabling technologies. The issue for Congress is whether to approve, reject, or modify the Navy's acquisition strategies and FY2021 funding requests for these large UVs. The Navy's proposals for developing and procuring them pose a number of oversight issues for Congress. Congress's decisions on these issues could substantially affect Navy capabilities and funding requirements and the shipbuilding and UV industrial bases. In addition to the large UVs covered in this report, the Navy also wants to develop and procure smaller USVs and UUVs, as well as unmanned aerial vehicles (UAVs) of various sizes. Other U.S. military services are developing, procuring, and operating their own types of UVs. Separate CRS reports address some of these efforts. <2. Background> <2.1. Navy USVs and UUVs in General> <2.1.1. UVs in the Navy> UVs are one of several new capabilities along with directed-energy weapons, hypersonic weapons, artificial intelligence, and cyber capabilities that the Navy says it is pursuing to meet emerging military challenges, particularly from China. UVs can be equipped with sensors, weapons, or other payloads, and can be operated remotely, semi-autonomously, or (with technological advancements) autonomously. They can be individually less expensive to procure than manned ships and aircraft because their designs do not need to incorporate spaces and support equipment for onboard human operators. UVs can be particularly suitable for long-duration missions that might tax the physical endurance of onboard human operators, or missions that pose a high risk of injury, death, or capture of onboard human operators. Consequently UVs are sometimes said to be particularly suitable for so-called "three D" missions, meaning missions that are "dull, dirty, or dangerous." The Navy has been developing and experimenting with various types of UVs for many years, and has transitioned some of these efforts (particularly those for UAVs) into procurement programs. The Department of the Navy states, for example, that its inventory of 4,094 aircraft at the end of FY2019 included 99 UAVs, that its projected inventory of 3,912 aircraft at the end of FY2020 will include 45 UVs, and that its projected inventory of 4,075 aircraft at the end of FY2021 will include 57 UVs. Even so, some observers have occasionally expressed dissatisfaction with what they view as the Navy's slow pace in transitioning UV development efforts into programs for procuring UVs in quantity and integrating them into the operational fleet. <2.1.2. Navy USV and UUV Categories> As shown in Figure 1 and Figure 2 , the Navy organizes its USV acquisition programs into four size-based categories that the Navy calls large, medium, small, and very small, and its UUV acquisition programs similarly into four size-based categories that the Navy calls extra-large, large, medium, and small. The large UVs discussed in this CRS report fall into the top two USV categories in Figure 1 and the top UUV category in Figure 2 . The smaller UVs shown in the other categories of Figure 1 and Figure 2 , which are not covered in this report, can be deployed from manned Navy ships and submarines to extend the operational reach of those ships and submarines. The large UVs covered in this CRS report, in contrast, are more likely to be deployed directly from pier to perform missions that might otherwise be assigned to manned ships and submarines. <2.1.3. Large UVs and Navy Ship Count> Because the large UVs covered in this report can be deployed directly from pier to perform missions that might otherwise be assigned to manned ships and submarines, some observers have a raised a question as to whether the large UVs covered in this report should be included in the top-level count of the number of ships in the Navy. Navy officials state that they have not yet decided whether to modify the top-level count of the number of ships in the Navy to include these large UVs. <2.1.4. Part of More Distributed Navy Fleet Architecture> The Navy wants to acquire the large UVs covered in this report as part of an effort to shift the Navy to a new fleet architecture that is more widely distributed than the Navy's current architecture. Compared to the current fleet architecture, this more distributed architecture is to include proportionately fewer large surface combatants (or LSCs, meaning cruisers and destroyers), proportionately more small surface combatants (or SSCs, meaning frigates and Littoral Combat Ships), and the addition of significant numbers of large UVs. Figure 3 provides, for the surface combatant portion of the Navy, a conceptual comparison of the current fleet architecture (shown on the left as the "ship centric force") and the new, more distributed architecture (shown on the right as the "distributed/nodal force"). The figure does not depict the entire surface combatant fleet, but rather a representative portion of it. In the figure, each sphere represents a manned ship or USV. (Since the illustration focuses on the surface combatant force, it does not include UUVs.) As shown in the color coding, under both the current fleet architecture and the more distributed architecture, the manned ships (i.e., the LSCs and SSCs) are equipped with a combination of sensors (green), command and control (C2) equipment (red), and payloads other than sensors and C2 equipment, meaning principally weapons (blue). Under the more distributed architecture, the manned ships would be on average smaller (because a greater share of them would be SSCs), and this would be possible because some of the surface combatant force's weapons and sensors would be shifted from the manned ships to USVs, with weapon-equipped LUSVs acting as adjunct weapon magazines and sensor-equipped MUSVs contributing to the fleet's sensor network. As shown in Figure 3 , under the Navy's current surface combatant force architecture, there are to be 20 LSCs for every 10 SSCs (i.e., a 2:1 ratio of LSCs to SSCs), with no significant contribution from LUSVs and MUSVs. This is consistent with the Navy's current force-level objective, which calls for achieving a 355-ship fleet that includes 104 LSCs and 52 SSCs (a 2:1 ratio). Under the more distributed architecture, the ratio of LSCs to SSCs would be reversed, with 10 LSCs for every 20 SSCs (a 1:2 ratio), and there would also now be 30 LUSVs and 40 MUSVs. A January 15, 2019, press report states The Navy plans to spend this year taking the first few steps into a markedly different future, which, if it comes to pass, will upend how the fleet has fought since the Cold War. And it all starts with something that might seem counterintuitive: It's looking to get smaller. "Today, I have a requirement for 104 large surface combatants in the force structure assessment; [and] I have [a requirement for] 52 small surface combatants," said Surface Warfare Director Rear Adm. Ronald Boxall. "That's a little upside down. Should I push out here and have more small platforms? I think the future fleet architecture study has intimated 'yes,' and our war gaming shows there is value in that." Another way of summarizing Figure 3 would be to say that the surface combatant force architecture (reading vertically down the figure) would change from 20+10+0+0 (i.e., a total of 30 surface combatant platforms, all manned, and a platform ratio of 2-1-0-0) for a given portion of the surface combatant force, to 10+20+30+40 (i.e., a total of 100 surface combatant platforms, 70 of which would be LUSVs and MUSVs, and a platform ration of 1-2-3-4) for a given portion of the surface combatant force. The Navy refers to the more distributed architecture's combination of LSCs, SSCs, LUSVs, and MUSVs as the Future Surface Combatant Force (FSCF). Figure 3 is conceptual, so the platform ratios for the more distributed architecture should be understood as notional or approximate rather than exact. The point of the figure is not that relative platform numbers under the more distributed architecture would change to the exact ratios shown in the figure, but that they would evolve over time toward something broadly resembling those ratios. Some observers have long urged the Navy to shift to a more distributed fleet architecture, on the grounds that the Navy's current architecture which concentrates much of the fleet's capability into a relatively limited number of individually larger and more expensive surface ships is increasingly vulnerable to attack by the improving maritime anti-access/area-denial (A2/AD) capabilities (particularly anti-ship missiles and their supporting detection and targeting systems) of potential adversaries, particularly China. Shifting to a more distributed architecture, these observers have argued, would complicate an adversary's targeting challenge by presenting the adversary with a larger number of Navy units to detect, identify, and track; reduce the loss in aggregate Navy capability that would result from the destruction of an individual Navy platform; give U.S. leaders the option of deploying USVs and UUVs in wartime to sea locations that would be tactically advantageous but too risky for manned ships; and increase the modularity and reconfigurability of the fleet for adapting to changing mission needs. For a number of years, Navy leaders acknowledged the views of those observers but continued to support the current fleet architecture. More recently, however, Navy have shifted their thinking, with comments from Navy officials like the one quoted above and Navy briefing slides like Figure 3 indicating that Navy leaders now support moving the fleet to a more distributed architecture. The views of Navy leaders appear to have shifted in favor of a more distributed architecture because they now appear to believe that such an architecture will be increasingly needed as the observers have long argued to respond effectively to the improving maritime A2/AD capabilities of other countries, particularly China; technically feasible as a result of advances in technologies for UVs and for networking widely distributed maritime forces that include significant numbers of UVs; and no more expensive, and possibly less expensive, than the current architecture. The more distributed architecture that Navy leaders now appear to support may differ in its details from distributed architectures that the observers have been advocating, but the general idea of shifting to a more distributed architecture, and of using large UVs as a principal means of achieving that, appears to be similar. The Navy's FY2020 30-year shipbuilding plan mentions a new overarching operational concept for the Navy (i.e., a new general concept for how to employ Navy forces) called Distributed Maritime Operations (DMO). A December 2018 document from the Chief of Naval Operations states that the Navy will "continue to mature the Distributed Maritime Operations (DMO) concept and key supporting concepts" and "design and implement a comprehensive operational architecture to support DMO." While Navy officials have provided few details in public about DMO, the Navy does state in its FY2021 budget submission that "MUSV and LUSV are key enablers of the Navy's Distributed Maritime Operations (DMO) concept, which includes being able to forward deploy and team with individual manned combatants or augment battle groups. Fielding of MUSV and LUSV will provide the Navy increased capability and necessary capacity at lower procurement and sustainment costs, reduced risk to sailors and increased readiness by offloading missions from manned combatants." <2.1.5. Accelerated Acquisition Strategies and Enabling Technologies> The Navy wants to employ accelerated acquisition strategies for procuring large UVs, so as to get them into service more quickly. The Navy's desire to employ these accelerated acquisition strategies can be viewed as an expression of the urgency that the Navy attaches to fielding large UVs for meeting future military challenges from countries such as China. The LUSV and MUSV programs are building on USV development work done by the Strategic Capabilities Office (SCO) within the Office of the Secretary of Defense (OSD). SCO's effort to develop USVs is called Ghost Fleet, and its LUSV development effort within Ghost Fleet is called Overlord. As shown in Figure 4 , the Navy has identified five key enabling groups of technologies for its USV and UUV programs. Given limitations on underwater communications (most radio-frequency electromagnetic waves do not travel far underwater), technologies for autonomous operations (such as artificial intelligence) will be particularly important for the XLUUV program (and other UUV programs). In May 2019, the Navy established a surface development squadron to help develop operational concepts for LUSVs and MUSVs. The squadron will initially consist of a Zumwalt (DDG-1000) class destroyer and one Sea Hunter prototype medium displacement USV ( Figure 5 ). A second Sea Hunter prototype will reportedly be added around the end of FY2020, and LUSVs and MUSVs will then be added as they become available. <2.2. LUSV, MUSV, and LXUUV Programs in Brief> <2.2.1. LUSV Program> The Navy envisions LUSVs as being 200 feet to 300 feet in length and having full load displacements of 1,000 tons to 2,000 tons, which would make them the size of a corvette. Figure 6 shows a detail from a Navy briefing slide showing images of prototype LUSVs and silhouettes of a notional LUSV and a notional MUSV. In unclassified presentations on the program, the Navy has used images of offshore support ships used by the oil and gas industry to illustrate the kinds of ships that might be used as the basis for LUSVs. The Navy wants LUSVs to be low-cost, high-endurance, reconfigurable ships based on commercial ship designs, with ample capacity for carrying various modular payloads particularly anti-surface warfare (ASuW) and strike payloads, meaning principally anti-ship and land-attack missiles. The Navy wants LUSVs to be capable of operating with human operators in the loop, or semi-autonomously (with human operators on the loop), or fully autonomously, and to be capable of operating either independently or in conjunction with manned surface combatants. Although referred to as UVs, LUSVs might be more accurately described as optionally or lightly manned ships, because they might sometimes have a few onboard crew members, particularly in the nearer term as the Navy works out LUSV enabling technologies and operational concepts. LUSVs are to feature both built-in capabilities and an ability to accept modular payloads, and are to use existing Navy sensors and weapon launchers. In marking up the Navy's proposed FY2020 budget, some of the congressional defense committees expressed concerns over whether the Navy's accelerated acquisition strategies provided enough time to adequately develop concepts of operations and key technologies for large UVs, particularly the LUSV. In its report ( S.Rept. 116-48 of June 11, 2019) on the FY2020 National Defense Authorization Act ( S. 1790 ), the Senate Armed Services Committee stated: The committee is concerned that the budget request's concurrent approach to LUSV design, technology development, and integration as well as a limited understanding of the LUSV concept of employment, requirements, and reliability for envisioned missions pose excessive acquisition risk for additional LUSV procurement in fiscal year 2020. The committee is also concerned by the unclear policy implications of LUSVs, including ill-defined international unmanned surface vessel standards and the legal status of armed or potentially armed LUSVs. Additionally, the committee notes that the Navy's "Report to Congress on the Annual Long-Range Plan for Construction of Naval Vessels for Fiscal Year 2020" acknowledges similar issues: "Unmanned and optionally-manned systems are not accounted for in the overall battle force[.] ... The physical challenges of extended operations at sea across the spectrum of competition and conflict, the concepts of operations for these platforms, and the policy challenges associated with employing deadly force from autonomous vehicles must be well understood prior to replacing accountable battle force ships." The committee believes that further procurement of LUSVs should occur only after the lessons learned from the current SCO initiative have been incorporated into the next solicitation to enable incremental risk reduction. In addition, the committee believes that the LUSV program, which appears likely to exceed the Major Defense Acquisition Program cost threshold, would benefit from a more rigorous requirements definition process, analysis of alternatives, and deliberate acquisition strategy. S.Rept. 116-48 also stated: While recognizing the need for prototypes to reduce acquisition risk, the committee is concerned that the acquisition strategies for the Large USV, Medium USV, Orca UUV, and Snakehead UUV could lead to procurement of an excessive number of systems before the Navy is able to determine if the USVs and UUVs meet operational needs. Therefore, the committee directs the Secretary of the Navy to submit a report to the congressional defense committees, not later than November 1, 2019, that provides acquisition roadmaps for the Large USV, Medium USV, Orca UUV, and Snakehead UUV. In its report ( S.Rept. 116-103 of September 12, 2019) on the FY2020 DOD Appropriations Act ( S. 2474 ), the Senate Appropriations Committee stated that the Committee is concerned that for several unmanned programs the Navy is pursuing acquisition strategies that would limit future competitive opportunities by awarding system-level prototypes early in the acquisition process and failing to articulate capability, requirements or technology roadmaps to encourage industrial innovation. The Assistant Secretary of the Navy (Research, Development and Acquisition) is directed to submit to the congressional defense committees with the fiscal year 2021 President's budget request such acquisition roadmaps for each unmanned acquisition program that include no less than mission requirements, program requirements for each increment, key technologies, acquisition strategies, test strategies, sub-system and system-level prototyping plans, and cost estimates. S.Rept. 116-103 also stated The Committee fully supports additional investments in unmanned and autonomous technologies, systems and sub-systems, including surface and sub-surface vessels. However, the Committee is concerned with the proposed acquisition and funding strategies for the MUSV and LUSV in this budget request, to include the Future Years Defense Program. Therefore, the Committee recommends several adjustments, as detailed elsewhere in this report, and directs the Assistant Secretary of the Navy (Research, Development and Acquisition) to review the acquisition strategies for these programs to address congressional concerns, as appropriately balanced with warfighter needs. (Page 194) The explanatory statement for the final version of the FY2020 DOD Appropriations Act (Division A of H.R. 1158 / P.L. 116-93 of December 20, 2020) stated: The Secretary of the Navy is directed to comply with the full funding policy for LUSVs in future budget submissions. Further, the agreement recommends $50,000,000 for the design of future LUSVs without a vertical launch system [VLS] capability in fiscal year 2020. Incremental upgrade capability for a vertical launch system may be addressed in future fiscal years. It is directed that no funds may be awarded for the conceptual design of future LUSVs until the Assistant Secretary of the Navy (Research, Development and Acquisition) briefs the congressional defense committees on the updated acquisition strategy for unmanned surface vessels. In response to the markups from the congressional defense committees, the Navy's FY2021 budget submission proposes to modify the acquisition strategy for the LUSV program so as to provide more time for developing operational concepts and key technologies before entering into serial production of deployable units. Under the Navy's proposed modified LUSV acquisition strategy, the Navy is proposing to use research and development funding to acquire two additional prototypes in FY2021 and one more additional prototype in FY2022 before shifting in FY2023 to the use of procurement funding for the procurement of deployable LUSVs at annual procurement rates in FY2023-FY2025 of 2-2-3. The Navy's FY2021 budget submission states: Major changes [in the LUSV program] from [the] FY 2020 President's Budget request to [the] FY 2021 President's Budget request [include the following]: (1) The program will award Conceptual Design (CD) contracts to multiple vendors in FY20. The CD effort will support refinement of a LUSV Performance Specification that does not include the Vertical Launch System (VLS). The final Performance Specification will define a LUSV with reservations in the design to support integration of a variety of capabilities and payloads. This effort, which was originally planned to award in Q2 [the second quarter of] FY 2020 will be delayed until early Q4 [the fourth quarter of] FY 2020 in order to support amendment of the CD Request for Proposals (RFP), Performance Specification, and associated artifacts. (2) The delay in award of the LUSV CD effort will delay follow-on activities (RFP [Request for Proposals], [and] source selection) leading up to the award of the LUSV Detail Design and Construction (DD&C) contract. DD&C award will be delayed one year, from FY 2021 to FY 2022. The DD&C award will deliver a non-VLS LUSV prototype based on the Performance Specification developed during the CD effort. (3) In lieu of the FY 2020 President's Budget request plan of awarding the LUSV DD&C contract in FY21, the Navy is planning to procure up to two additional Overlord prototypes, building on the lessons learned through the Ghost Fleet program and advances in C4I and combat system prototyping efforts. (4) The Navy plans to transition LUSV to a program of record in FY 2023 and align [the program's] procurement funding to the Shipbuilding and Conversion, Navy (SCN) account. A January 13, 2020, press report stated that the Navy plans to submit a report on the Navy's concepts of operations for LUSVs and MUSVs in April 2020. <2.2.2. MUSV Program> The Navy defines MUSVs as being 45 feet to 190 feet long, with displacements of roughly 500 tons. The Navy wants MUSVs, like LUSVs, to be low-cost, high-endurance, reconfigurable ships that can accommodate various payloads. Initial payloads for MUSVs are to be intelligence, surveillance and reconnaissance (ISR) payloads and electronic warfare (EW) systems. The Navy is pursuing the MUSV program as a rapid prototyping effort under what is known as Section 804 middle tier acquisition authority. The first MUSV prototype was funded in FY2019 and the Navy wants fund the second prototype in FY2023. The MUSV program is building on development work by the Defense Advanced Research Projects Agency (DARPA) under its Anti-Submarine Warfare Continuous Trail Unmanned Vessel (ACTUV) effort and the Office of Naval Research (ONR) under its Medium Displacement USV effort. As shown in Figure 1 , this work led to the design, construction, and testing of the prototype Sea Hunter medium displacement USV, which has a reported length of 132 feet (about 40.2 meters) and a displacement of about 140 tons. The Navy's MUSV program is also to employ a fleet-ready command and control (C2) solution for USVs that was developed by the Strategic Capabilities Office for the LUSV program. <2.2.3. XLUUV Program> The XLUUV program, also known as the Orca program, was established to address a Joint Emergent Operational Need (JEON). As shown in Figure 2 , the Navy defines XLUUVs as UUVs with a diameter of more than 84 inches, meaning that XLUUVs are to be too large to be launched from a manned Navy submarine. Consequently, XLUUVs instead will transported to a forward operating port and then launched from pier. The Navy wants XLUUVs to be equipped with a modular payload bay for carrying mines and other payloads. The first five XLUUVs were funded in FY2019 through the Navy's research and development appropriation account. The Navy conducted a competition for the design of the XLUUV, and announced on February 13, 2019, that it had selected Boeing to fabricate, test, and deliver the first four Orca XLUUVs and associated support elements. (The other bidder was a team led by Lockheed Martin.) On March 27, 2019, the Navy announced that the award to Boeing had been expanded to include the fifth Orca. Boeing has partnered with the Technical Solutions division of Huntington Ingalls Industries (HII) to build Orca XLUUVs. (A separate division of HII Newport News Shipbuilding (NNS) of Newport News, VA is one of the Navy's two submarine builders.) The Navy wants procure additional XLUUVs at a rate of two per year starting in FY2023. The Navy's FY2021 budget submission does not include funding for the procurement of additional XLUUVs in FY2021 or FY2022. The Navy is proposing to fund the procurement of XLUUVs in FY2023 and subsequent years through the Other Procurement, Navy (OPN) appropriation account. Boeing's Orca XLUUV design will be informed by (but likely differ in certain respects from) the design of Boeing's Echo Voyager UUV ( Figure 7 , Figure 8 , and Figure 9 ). Echo Voyager is 51 feet long and has a rectangular cross section of 8.5 feet by 8.5 feet, a weight in the air of 50 tons, and a range of up to 6,500 nautical miles. It can accommodate a modular payload section up to 34 feet in length, increasing its length to as much as 85 feet. A 34-foot modular payload section provides about 2,000 cubic feet of internal payload volume; a shorter (14-foot) section provides about 900 cubic feet. Echo Voyager can also accommodate external payloads. <2.2.4. FY2021-FY2025 Funding> Table 1 shows FY2021-FY2025 requested and programmed funding for the large UV programs covered in this report. <3. Issues for Congress> The Navy's proposals for developing and procuring the large UVs covered in this report pose a number of oversight issues for Congress, including those discussed below. <3.1. Analytical Basis for More Distributed Fleet Architecture> One potential oversight issue for Congress concerns the analytical basis for the Navy's desire to shift to a more distributed fleet architecture featuring a significant contribution from large UVs. Potential oversight questions for Congress include the following: What Navy analyses led to the Navy's decision to shift toward a more distributed architecture? What did these analyses show regarding the relative costs, capabilities, and risks of the Navy's current architecture and the more distributed architecture? How well developed, and how well tested, are the operational concepts associated with the more distributed architecture? <3.2. Accelerated Acquisition Strategies and Funding Method> Another potential oversight issue for Congress concerns the accelerated acquisition strategies that the Navy wants to use for these large UV programs. Potential oversight questions for Congress include the following: What are the potential costs, benefits, and risks of pursuing these accelerated strategies rather than a more traditional acquisition approach that would spend more time developing the technologies and operational concepts for these UVs prior to putting them into serial production? How are those considerations affected by the shift in the international security environment from the post-Cold War era to the new era of renewed major power competition? Are the Navy's proposed changes to the LUSV's accelerated acquisition strategy appropriate and sufficient? To what degree, if any, can these large UV programs contribute to new approaches for defense acquisition that are intended to respond to the new international security environment? <3.3. Technical, Schedule, and Cost Risk> Another potential oversight issue for Congress concerns the amount of technical, schedule, and cost risk in these programs. Potential oversight questions for Congress include the following: How much risk of this kind do these programs pose, particularly given the enabling technologies that need to be developed for them? In addition to the Navy's proposed changes to the LUSV's acquisition strategy, what is the Navy doing to mitigate or manage cost, schedule, and technical risks while it seeks to deploy these UVs on an accelerated acquisition timeline? Are these risk-mitigation and risk-management efforts appropriate and sufficient? At what point would technical problems, schedule delays, or cost growth in these programs require a reassessment of the Navy's plan to shift from the current fleet architecture to a more distributed architecture? <3.4. Annual Procurement Rates> Another oversight issue for Congress concerns the Navy's planned annual procurement rates for the LUSV and XLUUV programs during the period FY2021-FY2025. Potential oversight questions for Congress include, What factors did the Navy consider in arriving at them, and in light of these factors, are these rates too high, too low, or about right? <3.5. Industrial Base Implications> Another oversight issue for Congress concerns the potential industrial base implications of these large UV programs as part of a shift to a more distributed fleet architecture, particularly since UVs like these can be built and maintained by facilities other than the shipyards that currently build the Navy's major combatant ships. Potential oversight questions for Congress include the following: What implications would the more distributed architecture have for required numbers, annual procurement rates, and maintenance workloads for large surface combatants (i.e., cruisers and destroyers) and small surface combatants (i.e., frigates and Littoral Combat Ships)? What portion of these UVs might be built or maintained by facilities other than shipyards that currently build the Navy's major combatant ships? To what degree, if any, might the more distributed architecture and these large UV programs change the current distribution of Navy shipbuilding and maintenance work, and what implications might that have for workloads and employment levels at various production and maintenance facilities? <3.6. Potential Implications for Miscalculation or Escalation at Sea> Another oversight issue for Congress concerns the potential implications of large UVs, particularly large USVs, for the chance of miscalculation or escalation in when U.S. Navy forces are operating in waters near potential adversaries. Some observers have expressed concern about this issue. A June 28, 2019, opinion column, for example, states The immediate danger from militarized artificial intelligence isn't hordes of killer robots, nor the exponential pace of a new arms race. As recent events in the Strait of Hormuz indicate, the bigger risk is the fact that autonomous military craft make for temping targets and increase the potential for miscalculation on and above the high seas. While less provocative than planes, vehicles, or ships with human crew or troops aboard, unmanned systems are also perceived as relatively expendable. Danger arises when they lower the threshold for military action. It is a development with serious implications in volatile regions far beyond the Gulf not least the South China Sea, where the U.S. has recently confronted both China and Russia . As autonomous systems proliferate in the air and on the ocean, [opposing] military commanders may feel emboldened to strike these platforms, expecting lower repercussions by avoiding the loss of human life. Consider when Chinese naval personnel in a small boat seized an unmanned American underwater survey glider in the sea approximately 100 kilometers off the Philippines in December 2016. The winged, torpedo-shaped unit was within sight of its handlers aboard the U.S. Navy oceanographic vessel Bowditch, who gaped in astonishment as it was summarily hoisted aboard a Chinese warship less than a kilometer distant. The U.S. responded with a diplomatic demarche and congressional opprobrium, and the glider was returned within the week . In coming years, the Chinese military will find increasingly plentiful opportunities to intercept American autonomous systems. The 40-meter prototype trimaran Sea Hunter, an experimental submarine-tracking vessel, recently transited between Hawaii and San Diego without human intervention. It has yet to be used operationally, but it is only a matter of time before such vessels are deployed . China's navy may find intercepting such unmanned and unchaperoned surface vessels or mini-submarines too tantalizing to pass up, especially if Washington's meek retort to the 2016 glider incident is seen as an indication of American permissiveness or timidity. With a captive vessel, persevering Chinese technicians could attempt to bypass anti-tamper mechanisms, and if successful, proceed to siphon off communication codes or proprietary artificial intelligence software, download navigational data or pre-programmed rules of engagement, or probe for cyber vulnerabilities that could be exploited against similar vehicles . Nearly 100,000 ships transit the strategically vital Singapore Strait annually, where more than 75 collisions or groundings occurred last year alone. In such congested international sea lanes, declaring a foreign navy's autonomous vessel wayward or unresponsive would easily serve as convenient rationale for towing it into territorial waters for impoundment, or for boarding it straightaway . A memorandum of understanding signed five years ago by the U.S. Department of Defense and the Chinese defense ministry, as well as the collaborative code of naval conduct created at the 2014 Western Pacific Naval Symposium, should be updated with an expanded right-of-way hierarchy and non-interference standards to clarify how manned ships and aircraft should interact with their autonomous counterparts. Without such guidance, the risk of miscalculation increases. An incident without any immediate human presence or losses could nonetheless trigger unexpected escalation and spark the next conflict. <3.7. Personnel Implications> Another oversight issue for Congress concerns the potential personnel implications of incorporating a significant number of large UVs into the Navy's fleet architecture. Potential questions for Congress include the following: What implications might these large UVs have for the required skills, training, and career paths of Navy personnel? Within the Navy, what will be the relationship between personnel who crew manned ships and those who operate these large UVs? <3.8. FY2021 Funding> Another oversight issue for Congress concerns the funding amounts for these programs that the Navy has requested for these programs for FY2021. Potential oversight questions for Congress include the following: Has the Navy accurately priced the work on these programs that it is proposing to do in FY2021? To what degree, if any, has funding been requested ahead of need? To what degree, if any, is the Navy insufficiently funding elements of the work to be done in FY2021? How might the timelines for these programs be affected by a decision to reduce (or add to) the Navy's requested amounts for these programs? <4. Legislative Activity for FY2021> <4.1. Summary of Congressional Action on FY2021 Funding Request> Table 2 summarizes congressional action on the Navy's FY2021 funding request for the LUSV, MUSV, and XLUUV programs and their enabling technologies.

The Navy in FY2021 and beyond wants to develop and procure three types of large unmanned vehicles (UVs). These large UVs are called Large Unmanned Surface Vehicles (LUSVs), Medium Unmanned Surface Vehicles (MUSVs), and Extra-Large Unmanned Undersea Vehicles (XLUUVs). The Navy is requesting $579.9 million in FY2021 research and development funding for these large UVs and their enabling technologies. The Navy wants to acquire these large UVs as part of an effort to shift the Navy to a more distributed fleet architecture. Compared to the current fleet architecture, this more distributed architecture is to include proportionately fewer large surface combatants (i.e., cruisers and destroyers), proportionately more small surface combatants (i.e., frigates and Littoral Combat Ships), and the addition of significant numbers of large UVs. The Navy wants to employ accelerated acquisition strategies for procuring these large UVs, so as to get them into service more quickly. The Navy's desire to employ these accelerated acquisition strategies can be viewed as an expression of the urgency that the Navy attaches to fielding large UVs for meeting future military challenges from countries such as China. The Navy envisions LUSVs as being 200 feet to 300 feet in length and having full load displacements of 1,000 tons to 2,000 tons. The Navy wants LUSVs to be low-cost, high-endurance, reconfigurable ships based on commercial ship designs, with ample capacity for carrying various modular payloads—particularly anti-surface warfare (ASuW) and strike payloads, meaning principally anti-ship and land-attack missiles. Although referred to as UVs, LUSVs might be more accurately described as optionally or lightly manned ships, because they might sometimes have a few onboard crew members, particularly in the nearer term as the Navy works out LUSV enabling technologies and operational concepts. In marking up the Navy's proposed FY2020 budget, some of the congressional defense committees expressed concerns over whether the Navy's accelerated acquisition strategies provided enough time to adequately develop concepts of operations and key technologies for these large UVs, particularly the LUSV. In response, the Navy's FY2021 budget submission proposes to modify the acquisition strategy for the LUSV program so as to provide more time for developing operational concepts and key technologies before entering into serial production of deployable units. Under the Navy's proposed modified LUSV acquisition strategy, the Navy is proposing to use research and development funding to acquire two additional prototypes in FY2021 and one more additional prototype in FY2022 before shifting in FY2023 to the use of procurement funding for the procurement of deployable LUSVs at annual procurement rates in FY2023-FY2025 of 2-2-3. The Navy defines MUSVs as being 45 feet to 190 feet long, with displacements of roughly 500 tons. The Navy wants MUSVs, like LUSVs, to be low-cost, high-endurance, reconfigurable ships that can accommodate various payloads. Initial payloads for MUSVs are to be intelligence, surveillance and reconnaissance (ISR) payloads and electronic warfare (EW) systems. The Navy is pursuing the MUSV program as a rapid prototyping effort under what is known as Section 804 acquisition authority. The first MUSV prototype was funded in FY2019 and the Navy wants fund the second prototype in FY2023. The first five XLUUVs were funded in FY2019; they are being built by Boeing. The Navy wants procure additional XLUUVs at a rate of two per year starting in FY2023. The Navy's FY2021 budget submission does not include funding for the procurement of additional XLUUVs in FY2021 or FY2022. The Navy's large UV programs pose a number of oversight issues for Congress, including issues relating to the analytical basis for the more distributed fleet architecture; the Navy's accelerated acquisition strategies for these programs; technical, schedule, and cost risk in the programs; the proposed annual procurement rates for the programs; the industrial base implications of the programs; potential implications for miscalculation or escalation at sea; the personnel implications of the programs; and whether the Navy has accurately priced the work it is proposing to do in FY2021 on the programs.

crs_R41184

crs_R41184_0

<1. Small Business Administration Loan Guaranty Programs> The Small Business Administration (SBA) administers programs to support small businesses, including several loan guaranty programs designed to encourage lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions." The SBA's 504 Certified Development Company (504/CDC) loan guaranty program provides long-term fixed rate financing for major fixed assets, such as land, buildings, equipment, and machinery. Its name is derived from Section 504 of the Small Business Investment Act of 1958 (P.L. 85-699, as amended), which provides the most recent authorization in the act concerning the SBA's monthly sale of 20-year and 25-year 504/CDC debentures and bimonthly sale of 10-year 504/CDC debentures. The 504/CDC loan guaranty program is administered through nonprofit Certified Development Companies (CDCs). Of the total project costs, a third-party lender must provide at least 50% of the financing, the CDC provides up to 40% of the financing backed by a 100% SBA-guaranteed debenture, and the applicant provides at least 10% of the financing. The borrower makes two loan payments, one to the third-party lender and another to the CDC. The third-party loan, typically provided by a bank, can have a fixed or variable interest rate, is negotiated between the lender and the borrower, is subject to an interest rate cap, and must have at least a 7-year term for a 10-year debenture and at least 10-year term for a 20- or 25-year debenture. The CDC loan has a fixed interest rate that is determined when the SBA sells the debenture to fund the loan. The CDC loan's term is either 10 years (typically for machinery or equipment) or 20 years or 25 years (typically for real estate). The SBA's debenture is backed by the full faith and credit of the United States and is sold to underwriters that form debenture pools. Investors purchase interests in the debenture pools and receive Development Company Participation certificates (DCPC) representing ownership of all or part of the pool. DCPCs have a minimum value of $25,000 and can be sold on the secondary market. The SBA and CDCs use various agents to facilitate the sale and service of the certificates and the orderly flow of funds among the parties. After a 504/CDC loan is approved and disbursed, accounting for the loan is set up at the Central Servicing Agent (CSA, currently PricewaterhouseCoopers Public Sector LLP), not the SBA. The SBA guarantees the timely payment of the debenture. If the small business is behind in its loan payments, the SBA pays the difference to the investor on every semiannual due date. In FY2018, the SBA approved 5,874 504/CDC loans amounting to nearly $4.8 billion. At the end of FY2018, there were 56,601 504/CDC loans with an unpaid principal balance of about $25.8 billion. Historically, one of the justifications presented for funding the SBA's loan guaranty programs has been that small businesses can be at a disadvantage, compared with other businesses, when trying to obtain access to sufficient capital and credit. Congressional interest in small business access to capital, in general, and the 504/CDC program, in particular, has increased in recent years because of concern that small businesses might be prevented from accessing sufficient capital to enable them to grow and create jobs. Congress authorized several changes to the 504/CDC program during the 111 th Congress in an effort to increase the number and amount of 504/CDC loans. For example P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs ($299 million) and to temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% ($76 million). Congress subsequently appropriated another $265 million and authorized the SBA to reprogram another $40 million to extend those subsidies and the loan modification through May 31, 2010. ARRA also authorized the SBA to allow, under specified circumstances, the use of 504/CDC program funds to refinance existing debt for business expansion. P.L. 111-240 , the Small Business Jobs Act of 2010, increased the 504/CDC program's loan guaranty limits from $1.5 million to $5 million for "regular" borrowers, from $2 million to $5 million if the loan proceeds are directed toward one or more specified public policy goals, and from $4 million to $5.5 million for manufacturers. The act also temporarily expanded for two years after the date of enactment (or until September 27, 2012) the types of projects eligible for refinancing of existing debt under the 504/CDC program; provided $505 million (plus an additional $5 million for administrative expenses) to continue fee subsidies for the 7(a) loan guaranty program and the 504/CDC program through December 31, 2010; and established an alternative size standard that allows more companies to qualify for 504/CDC assistance. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue the fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until funding provided for these purposes in P.L. 111-240 was exhausted (which occurred on January 3, 2011). During the 114 th Congress, P.L. 114-113 , the Consolidated Appropriations Act, 2016, reinstated the expansion of the types of projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs. The act requires each CDC to limit its refinancing so that, during any fiscal year, the new refinancings do not exceed 50% of the dollars it loaned under the 504/CDC program during the previous fiscal year. This limitation may be waived if the SBA determines that the refinance loan is needed for good cause. An interim final rule implementing the new refinancing program was issued by the SBA on May 25, 2016, effective June 24, 2016. During the 115 th Congress, P.L. 115-371 , the Small Business Access to Capital and Efficiency (ACE) Act, amended the Small Business Investment Act of 1958 to increase the threshold amount for determining when a CDC is required to secure an independent real estate appraisal for a 504/CDC loan (from if the estimated value of the project property is greater than $250,000 to if the estimated value of the project property is greater than the federal banking regulator appraisal threshold, which was increased from $250,000 to $500,000 in 2018). In addition, the Trump Administration proposed in its FY2020 budget request that the maximum dollar amount for a 504 loan to a small manufacturer be increased to $6.5 million from $5.5 million. This report opens with a discussion of the rationale for the 504/CDC program and then examines the program's borrower and lender eligibility standards; program requirements; and program statistics, including loan volume, loss rates, proceeds usage, borrower satisfaction, and borrower demographics. Next, it surveys congressional action taken during recent Congresses to enhance small business access to capital, including ARRA, P.L. 111-240 , P.L. 114-113 , and P.L. 115-371 . This report also discusses issues raised concerning the SBA's administration of the program, including the oversight of 504/CDC lenders. <2. Program Participants and Financing Contribution> As shown in Table 1 , 504/CDC projects generally have three main participants: a third-party lender provides 50% or more of the financing; a CDC provides up to 40% of the financing through a 504/CDC debenture, which is 100% guaranteed by the SBA; and the borrower contributes at least 10% of the financing. The CDC's contribution, and the amount of the SBA's 100% guaranteed debenture, generally cannot exceed 40% of the financing for standard 504/CDC loans. It cannot exceed 35% of the financing for new businesses (defined as "a business that is two years old or less at the time the loan is approved") or if the loan is for either a limited-market property (defined as "a property with a unique physical design, special construction materials, or a layout that restricts its utility to the use for which it is designed") or a special purpose property. The SBA lists 27 limited and special purpose properties (e.g., dormitories, golf courses, hospitals, and bowling alleys). The CDC's contribution cannot exceed 30% of the financing when the borrower is a new business and the loan is for either a limited-market property or a special purpose property. Borrowers must contribute at least 10% of the financing for standard 504/CDC loans and at least 15% of the financing if the borrower is a new business or if the loan is for a limited-market property or a special purpose property. They must contribute at least 20% of the financing if the borrower is a new business and the loan is for either a limited-market property or a special purpose property. <3. Borrower Eligibility Standards and Program Requirements> <3.1. Borrower Eligibility Standards> To be eligible for a SBA business loan, a small business applicant must be located in the United States; be a for-profit operating business (except for loans to eligible passive companies); qualify as small; demonstrate a need for the desired credit and that the funds are not available from alternative sources, including personal resources of the principals; and be certified by a lender that the desired credit is unavailable to the applicant on reasonable terms and conditions from nonfederal sources without SBA assistance. Several types of businesses are prohibited from participating in the program. For example, financial businesses primarily engaged in the business of lending, such as banks and finance companies; life insurance companies; businesses located in a foreign country; businesses deriving more than one-third of their gross annual revenue from legal gambling activities; businesses that present live performances of a prurient sexual nature; and businesses with an associate who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude are ineligible. To qualify for a SBA business loan, applicants must be creditworthy and able to reasonably assure repayment. The SBA requires lenders to consider the applicant's character, reputation, and credit history; experience and depth of management; strength of the business; past earnings, projected cash flow, and future prospects; ability to repay the loan with earnings from the business; sufficient invested equity to operate on a sound financial basis; potential for long-term success; nature and value of collateral (although inadequate collateral will not be the sole reason for denial of a loan request); and affiliates' effect on the applicant's repayment ability. <3.2. Borrower Program Requirements> <3.2.1. Use of Proceeds> A 504/CDC loan can be used to purchase land and make necessary improvements to the land, such as adding streets, curbs, gutters, parking lots, utilities, and landscaping; purchase buildings and make improvements to the buildings, such as altering the building's facade and updating its heating and electrical systems, plumbing, and roofing; purchase, transport, dismantle, or install machinery and equipment, provided the machinery and equipment have a useful life of at least 10 years; purchase essential furniture and fixtures; pay professional fees that are directly attributable and essential to the project, such as title insurance, title searches and abstract costs, surveys, and zoning matters; finance short-term debt ( bridge financing ) for eligible expenses that are directly attributable to the project and the financing term is three years or less; pay interim financing costs, including points, fees, and interest; create a contingency fund, provided the fund does not exceed 10% of the project's construction costs; finance "do-it-yourself" construction expenses, including renovations and the installation of machinery and equipment; and finance permissible debt refinancing with or without business expansion. A 504/CDC loan cannot be used for working capital or inventory. <3.2.2. Job Creation and Retention Requirement> All 504/CDC borrowers must meet at least one of two specified economic development objectives. First, borrowers, other than small manufacturers, must create or retain at least one job for every $75,000 of project debenture within two years of project completion. Borrowers who are small manufacturers (defined as a small business with its primary North American Industry Classification System Code in Sectors 31, 32, and 33 and all of its production facilities located in the United States) must create or retain at least one job per $120,000 of project debenture within two years of project completion. Borrowers enter the number of jobs to be created or retained as a result of the project in their application for funds and the CDC verifies that the project meets the job creation or retention requirements. The jobs created do not have to be at the project facility, but 75% of the jobs must be created in the community in which the project is located. Using job retention to satisfy this requirement is allowed only if the CDC "can reasonably show that jobs would be lost to the community if the project was not done." If the borrower does not meet the job creation or retention requirement, the borrower can retain eligibility by meeting (1) any 1 of 5 community development goals, (2) any 1 of 10 public policy goals, or (3) any 1 of 3 energy reduction goals, provided that the CDC's overall portfolio of outstanding debentures meets or exceeds the job creation or retention criteria of at least 1 job opportunity created or retained for every $75,000 in project debenture (or for every $85,000 in project debenture for projects located in special geographic areas such as Alaska, Hawaii, state-designated enterprise zones, empowerment zones, enterprise communities, labor surplus areas, or opportunity zones). Loans to small manufacturers are excluded from the calculation of this average. The five community development goals are improving, diversifying, or stabilizing the economy of the locality; stimulating other business development; bringing new income into the community; assisting manufacturing firms; or assisting businesses in labor surplus areas as defined by the U.S. Department of Labor. The 10 public policy goals are revitalizing a business district of a community with a written revitalization or redevelopment plan; expanding exports; expanding the development of women-owned and -controlled small businesses; expanding small businesses owned and controlled by veterans (especially service-disabled veterans); expanding minority enterprise development; aiding rural development; increasing productivity and competitiveness (e.g., retooling, robotics, modernization, and competition with imports); modernizing or upgrading facilities to meet health, safety, and environmental requirements; assisting businesses in or moving to areas affected by federal budget reductions, including base closings, either because of the loss of federal contracts or the reduction in revenues in the area due to a decreased federal presence; or reducing unemployment rates in labor surplus areas, as defined by the U.S. Department of Labor. The three energy reduction goals are reducing existing energy consumption by at least 10%; increasing the use of sustainable designs, including designs that reduce the use of greenhouse gas-emitting fossil fuels or low-impact design to produce buildings that reduce the use of nonrenewable resources and minimize environmental impact; or upgrading plant, equipment, and processes involving renewable energy sources such as the small-scale production of energy for individual buildings' or communities' consumption, commonly known as micropower, or renewable fuel producers including biodiesel and ethanol producers. If the project cannot meet any of these guidelines, then the debenture amount must be reduced to meet the job creation or retention requirement. <3.2.3. Loan Amounts> The minimum 504/CDC debenture is $25,000. P.L. 111-240 increased the maximum gross debenture amount from $1.5 million to $5 million for regular 504/CDC loans; from $2 million to $5 million if the loan proceeds are directed toward one or more of the public policy goals described above; from $4 million to $5.5 million for small manufacturers; from $4 million to $5.5 million for projects that reduce the borrower's energy consumption by at least 10%; and from $4 million to $5.5 million for projects for plant, equipment, and process upgrades of renewable energy sources, such as the small-scale production of energy for individual buildings or communities consumption (commonly known as micropower), or renewable fuel producers, including biodiesel and ethanol producers. <3.2.4. Loan Terms, Interest Rate, and Collateral> <3.2.4.1. Loan Terms> The SBA determines the 504/CDC program's loan terms and publishes them in the Federal Register . The current maturity for a 504/CDC loan is generally 20 or 25 years for real estate; 10 years for machinery and equipment; and 10, 20, or 25 years based upon a weighted average of the useful life of the assets being financed. The maturities for the first mortgage issued by the third-party lender must be at least 7 years when the CDC/504 loan is for a term of 10 years and at least 10 years when the loan is for 20 or 25 years. <3.2.4.2. Interest Rates> As mentioned previously, 504/CDC borrowers make two loan payments, one to the third-party lender and one to the CDC. The third-party loan can have a fixed or variable interest rate, is negotiated between the lender and the borrower, and is subject to an interest rate cap. The third-party loan's interest rate "must be reasonable" and the interest rate cap is published by the SBA in the Federal Register . The current maximum interest rate that a third-party lender is allowed to charge for a commercial loan that funds any portion of the cost of a 504/CDC project is 6% greater than the New York prime rate or the maximum interest rate permitted in that state, whichever is less. Borrowers have a general sense of what their 504/CDC loan's interest rate will be when their completed loan application is submitted to the SBA for approval. However, the loan's exact interest rate is not known until after it is pooled with other 504/CDC loan requests and sold to private investors (typically large institutional investors such as pension funds, insurance companies, and large banks). Investors receive interest on the debt, called a debenture, semi-annually. Borrowers make monthly payments. The 504/CDC loan's interest rate has several components: the debenture interest rate (i.e., the rate that determines interest paid semi-annually to investors who purchase the debenture), the note rate (i.e., the monthly-pay equivalent of the debenture rate, which is typically four to eight basis points higher than the debenture interest rate depending on the length of the loan's term), and the effective rate (i.e., the note rate and the cost impact of ongoing fees). Effective rates are provided to CDCs on a full-term basis and in 5-year increments. The debenture interest rate is based on comparable market conditions for long-term government debt at the time of sale and pegged to an increment above the current market rate. The SBA's fiscal agent, currently Eagle Compliance, LLC, reaches an agreement with the underwriters on the sale price of the debentures and, after reaching this agreement, must obtain approvals from the SBA and Treasury before proceeding. In May 2019, the 10-year 504/CDC debenture rate was 2.66%, the comparable Treasury market rate was 2.22%, the note rate was 2.76%, and the effective full-term interest rate was 4.69%. In May 2019, the 20-year 504/CDC debenture rate was 2.88%, the comparable Treasury market rate was 2.43%, the note rate was 2.93%, and the effective full-term interest rate was 4.69%. For 25-year 504/CDC debentures sold in May 2019, the debenture rate was 3.07%, the comparable Treasury market rate was 2.43%, the note rate was 3.11%, and the effective full-term interest rate was 4.97%. <3.2.4.3. Collateral> The SBA usually takes a second lien position on the project property to secure the loan. The SBA's second lien position is considered adequate when the applicant meets all of the following criteria: strong, consistent cash flow that is sufficient to cover the debt; demonstrated, proven management; the business has been in operation for more than two years; and the proposed project is a logical extension of the applicant's current operations. If one or more of the above factors is not met, additional collateral or increased equity contributions may be required. All collateral must be insured against such hazards and risks as the SBA may require, with provisions for notice to the SBA and the CDC in the event of impending lapse of coverage. However, for 504/CDC loans, the applicant's cash flow is the primary source of repayment, not the liquidation of collateral. Thus, "if the lender's financial analysis demonstrates that the small business applicant lacks reasonable assurance of repayment in a timely manner from the cash flow of the business, the loan request must be declined, regardless of the collateral available or outside sources of cash." <4. CDC Eligibility Standards, Operating Requirements, and Program Requirements> <4.1. CDC Eligibility Standards> CDCs apply to the SBA for certification to participate in the 504/CDC program. A CDC must be a nonprofit corporation, and it must be in good standing in the state in which it is incorporated; be in compliance with all laws, including taxation requirements, in the state in which it is incorporated and any other state in which it conducts business; provide the SBA a copy of its IRS tax exempt status; indicate its area of operations, which is the state of the CDC's incorporation; and have a board of directors that fulfills specified requirements, such as having at least nine voting members, requiring a quorum of at least 50% of its voting membership to transact business, and meets at least quarterly. If approved by the SBA, newly certified CDCs are on probation for two years. At the end of this time, the CDC must petition for either permanent CDC status or a single, one-year extension of probation. To be considered for permanent CDC status or an extension of probation, the CDC must have satisfactory performance as determined by the SBA in its discretion. Examples of the factors that may be considered in determining satisfactory performance include the CDC's risk rating, on-site review and examination assessments, historical performance measures (like default rate, purchase rate, and loss rate), loan volume to the extent that it impacts performance measures, and other performance-related measurements and information (such as contribution toward SBA's mission). In FY2018, 194 CDCs provided at least one 504/CDC loan. <4.2. CDC Operating Requirements> The CDC's board of directors is allowed to establish a loan committee composed of members of the CDC who may or may not be on the CDC's board of directors. The loan committee reports to the board and must meet specified requirements, such as having at least two members with commercial lending experience satisfactory to the SBA, generally requiring all of its members to live or work in the area of operations of the state in which the 504/CDC project they are voting on is located, not allowing any CDC staff to serve on the loan committee, and requiring a quorum of at least five committee members authorized to vote to hold a meeting. In addition, multistate CDCs are required to have a separate loan committee "for each state into which the CDC expands." The SBA also has a number of requirements concerning CDC staff, such as requiring CDCs to "have qualified full-time professional staff to market, package, process, close and service loans" and "directly employ full-time professional management," typically including an executive director (or the equivalent) to manage daily operations. CDCs are also required to operate "in accordance with all SBA loan program requirements" and provide the SBA "current and accurate information about all certification and operational requirements." CDCs with 504/CDC loan portfolio balances of $20 million or more are required to submit financial statements audited in accordance with generally accepted accounting principles (GAAP) by an independent certified public accountant (CPA). CDCs with 504/CDC loan portfolio balances of less than $20 million must, at a minimum, submit a review of their loan portfolio balances by an independent CPA or independent accountant in accordance with GAAP. The auditor's opinion must state that the financial statements are in conformity with GAAP. <4.3. CDC Program Requirements> <4.3.1. The Application Process> CDCs must analyze each application in a commercially reasonable manner, consistent with prudent lending standards. The CDC's analysis must include a financial analysis of the applicant's pro forma balance sheet. The pro forma balance sheet must reflect the loan proceeds, use of the loan proceeds, and any other adjustments such as required equity injection or standby debt; a financial analysis of repayment ability based on historical income statements, tax returns (if an existing business), and projections, including the reasonableness of the supporting assumptions; a ratio analysis of the financial statements including comments on any trends and a comparison with industry averages; a discussion of the owners' and managers' relevant experience in the type of business, as well as their personal credit histories; an analysis of collateral adequacy, including an evaluation of the collateral and lien position offered as well as the liquidation value; a discussion of the applicant's credit experience, including a review of business credit reports and any experience the CDC may have with the applicant; and other relevant information (e.g., if the application involves a franchise and the success of the franchise). CDCs submit this information, using required SBA forms, to the Sacramento, CA, loan processing center. <4.3.1.1. Accredited Lender Program Status> In 1991, the SBA established the ALP on a pilot basis to provide CDCs that "have developed a good partnership with their SBA field office in promoting local economic development and have demonstrated a good track record in the submission of documentation needed for making and servicing of sound loans" an expedited process for approving loan applications and servicing actions. P.L. 103-403 , the Small Business Administration Reauthorization and Amendments Act of 1994, authorized the SBA to establish the ALP on a permanent basis. CDCs may apply to the SBA for ALP status. Selection is based on several factors, including the CDC's experience as a CDC, the number of 504/CDC loans approved, the size of the CDC's portfolio, its record of compliance with SBA loan program requirements, and its record of cooperation with all SBA offices. The SBA is able to process loan requests from ALP-CDCs more quickly than from regular CDCs because it relies on their credit analysis when making the decision to guarantee the debenture. About one-third of CDCs have ALP status (77 of 226) and they account for about 60% to 70% of all 504/CDC lending each year. <4.3.1.2. Premier Certified Lenders Program Status> P.L. 103-403 also authorized the SBA's Premier Certified Lenders Program (PCLP) on a pilot basis through October 1, 1997. The program's authorization was later extended through October 1, 2002, and given permanent statutory authorization by P.L. 106-554 , the Consolidated Appropriations Act, 2001 ( 1: H.R. 5667 , the Small Business Reauthorization Act of 2000). ALP-CDCs must apply to the SBA for PCLP status. CDCs provided PCLP status have increased authority to process, close, service, and liquidate 504/CDC loans. The loans are subject to the same terms and conditions as other 504/CDC loans, but the SBA delegates to the PCLP-CDC all loan approval decisions, except eligibility. Selection is based on several factors, including all of the factors used to assess ALP status plus evidence that the CDC is "in compliance with its Loan Loss Reserve Fund (LLRF) requirements [described below], has established a PCLP processing goal of 50%, and has a demonstrated ability to process, close, service and liquidate 504 and/or PCLP loans." PCLP-CDCs are required to establish and maintain a LLRF for its financings under the program. The LLRF is used to reimburse the SBA for 10% of any loss sustained by the SBA resulting from a default in the payment of principal or interest on a PCLP debenture. Each LLRF must equal 1% of the original principal amount of each PCLP debenture. As of September 30, 2017, 15 CDCs had active PCLP status. In recent years, the number and amount of 504/CDC loans made through the PCLP program have declined. In FY2009, 373 PCLP loans amounting to $185.4 million were disbursed. In FY2018, 27 PCLP loans totaling $23.8 million were dispersed. <4.3.1.3. Real Estate Appraisals> As part of its analysis of each application, CDCs are required to have an independent appraisal conducted of the real estate if the estimated value of the project property is greater than the federal banking regulator appraisal threshold (currently $500,000). CDCs may be required to have an independent appraisal conducted of the real estate if the estimated value of the project property is equal to or less than the federal banking regulator appraisal threshold "and such appraisal is necessary for appropriate evaluation of creditworthiness." The appraiser must have no appearance of a conflict of interest and be either state licensed or state certified. When the project property's estimated value is more than $1 million, the appraiser must be state certified. <4.3.1.4. Pre-Closing Interim Disbursements> SBA-approved 504/CDC loans are not closed until after project-related construction is complete, which often takes one to two years. All loans must be disbursed within 48 months of approval. Prior to the sale of a debenture and the SBA's funding of the 504/CDC loan, the borrower may obtain interim financing from a third-party lender, usually the same lender that provided the loan covering 50% of the total 504 project financing. The proceeds from the debenture sale repay the interim lender for the amount of the 504/CDC project costs that it advanced on an interim basis. <4.3.1.5. Closing> The CDC closes the loan in time to meet a specific debenture funding date. At the time of closing, the project must be complete (except funds put into a construction escrow account to complete a minor portion of the project). The SBA's district counsel reviews the closing package and notifies the Central Servicing Agent (CSA, currently PricewaterhouseCoopers Public Sector LLP) and the CDC via email if the loan is approved for debenture funding. If the loan is approved, the CDC forwards specified documents needed for the debenture funding directly to the CSA using a transmittal letter or spreadsheet. As mentioned, because the 504/CDC program provides permanent or take-out financing, an interim lender (either the third-party lender or another lender) typically provides financing to cover the period between SBA approval of the project and the debenture sale. Proceeds from the debenture sale are used to repay the interim lender for the amount of the project costs that it advanced on an interim basis. <4.4. Loan Guaranty and Servicing Fees> Borrowers are currently charged fees amounting to about 3.5% of the net debenture proceeds plus annual servicing and guaranty fees of about 1% of the unpaid debenture balance. Some of these fees are charged by the SBA to the CDC and others are charged by the CDC directly to the borrower. <4.4.1. SBA Fees> The SBA is authorized to charge CDCs five fees to help recoup the SBA's expenses: a guaranty fee, servicing fee, funding fee, development company fee, and participation fee. <4.4.1.1. Guaranty Fee> The SBA is authorized to charge CDCs a one-time, up-front guaranty fee of 0.5% of the debenture. The SBA elected not to charge this fee in FY2009, FY2010, and FY2011, and in FY2016, FY2017, and FY2018. The SBA charged this fee in FY2012, FY2013, FY2014, and FY2015, and is charging this fee in FY2019. <4.4.1.2. Servicing Fee> The SBA is authorized to charge CDCs an ongoing servicing fee paid monthly by the borrower and adjusted annually based on the date the loan was approved. By statute, the fee is the lesser of the amount necessary to cover the estimated cost of purchasing and guaranteeing debentures under the 504/CDC program or 0.9375% per annum of the unpaid principal balance of the loan. The SBA's servicing fee for FY2019 is 0.368% of the unpaid principal balance for regular 504/CDC loans and 0.395% for 504 refinancing loans. <4.4.1.3. Funding Fee> The SBA charges CDCs a funding fee, not to exceed 0.25% of the debenture, to cover costs incurred by the trustee, fiscal agent, and transfer agent. <4.4.1.4. Development Company Fee> For SBA loans approved after September 30, 1996, the SBA charges CDCs an annual development company fee of 0.125% of the debenture's outstanding principal balance. The fee must be paid from the servicing fees collected by the CDC and cannot be paid from any additional fees imposed on the borrower. <4.4.1.5. Participation Fee> The SBA charges third-party lenders a one-time participation fee of 0.5% of the senior mortgage loan if in a senior lien position to the SBA and the loan was approved after September 30, 1996. The fee may be paid by the third-party lender, CDC, or borrower. <4.4.2. CDC Fees> CDCs are allowed to charge borrowers a processing (or packaging) fee, closing fee, servicing fee, late fee, assumption fee, CSA fee, other agent fees, and underwriters' fee. <4.4.2.1. Processing (or Packaging) Fee> The CDC is allowed to charge borrowers a processing (or packaging) fee of up to 1.5% of the net debenture proceeds. Two-thirds of this fee is considered earned and may be collected by the CDC when the SBA issues an Authorization for the Debenture. The portion of the processing fee paid by the borrower may be reimbursed from the debenture proceeds. <4.4.2.2. Closing Fee> The CDC is also allowed to charge "a reasonable closing fee sufficient to reimburse it for the expenses of its in-house or outside legal counsel, and other miscellaneous closing costs." Up to $2,500 in closing costs may be financed out of the debenture proceeds. <4.4.2.3. Servicing Fee> CDCs can also charge an annual servicing fee of at least 0.625% per annum and no more than 2% per annum on the unpaid balance of the loan as determined at five-year anniversary intervals. A servicing fee greater than 1.5% for rural areas and 1% elsewhere requires the SBA's prior written approval, based on evidence of substantial need. The servicing fee may be paid only from loan payments received. The fees may be accrued without interest and collected from the CSA when the payments are made. CSAs are entities that receive and disburse funds among the various parties involved in 504/CDC financing under a master servicing agent agreement with the SBA. <4.4.2.4. Late Fee and Assumption Fee> Loan payments received after the 15 th of each month may be subject to a late payment fee of 5% of the late payment or $100, whichever is greater. Late fees will be collected by the CSA on behalf of the CDC. Also, with the SBA's written approval, CDCs may charge an assumption fee not to exceed 1% of the outstanding principal balance of the loan being assumed. <4.4.2.5. Central Servicing Agent Fee> CSAs are allowed to charge an initiation fee on each loan and an ongoing monthly servicing fee under the terms of the master servicing agreement. The current ongoing CSA monthly servicing fee is 0.1% per annum of the loan amount. Also, "agent fees and charges necessary to market and service debentures and certificates may be assessed to the borrower or the investor." CDCs must review the agent's services and related fees "to determine if the fees are necessary and reasonable when there is an indication from a third party that an agent's fees might be excessive, or when an applicant complains about the fees charged by an agent." In cases in which fees appear to be unreasonable, CDCs "should contact" the SBA and if a SBA investigation determines that the fee is excessive, the agent "must reduce the fee to an amount SBA deems reasonable, refund any sum in excess of that amount to the applicant, and refrain from charging or collecting from the applicant any funds in excess of the amount SBA deems reasonable." <4.4.2.6. Underwriters' Fee> Borrowers are also charged an up-front underwriters' fee of 0.4% for 20-year loans and 0.375% for 10-year loans. The underwriters' fee is paid by the borrower to the underwriter. Underwriters are approved by the SBA to form debenture pools and arrange for the sale of certificates. <4.4.3. Fee Subsidies> As mentioned previously, the SBA was provided more than $1.1 billion in funding in 2009 and 2010 to subsidize the 504/CDC program's third-party participation fee and CDC processing fee, subsidize the SBA's 7(a) program's guaranty fee, and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans. The last extension, P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue the fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until funding provided by the Small Business Jobs Act of 2010 for this purpose was exhausted (which occurred on January 3, 2011). The Obama Administration argued that additional funding for the SBA's loan guaranty programs, including the 504/CDC program's fee subsidies, improved the small business lending environment, increased both the number and amount of SBA guaranteed loans, and supported "the retention and creation of hundreds of thousands of jobs." Critics contended that small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint are better means to assist small business economic growth and job creation. <5. Program Statistics> <5.1. Loan Volume> Table 2 shows the number and amount of 504/CDC loans that the SBA approved and the number and amount of 504/CDC loans after cancellations and other modifications are taken into account in FY2005-FY2018. Each year, 5% to 15% of SBA-approved 504/CDC loans are subsequently canceled for a variety of reasons, typically by the borrower (e.g., funds are no longer needed or there was a change in ownership). As the data indicate, the number and amount of 504/CDC loans declined in FY2008 and FY2009. The most likely causes for the decline were decreased small business demand for capital during the recession; difficulties in secondary credit markets, especially from October 2008 to February 2009; and a tightening of small business credit lending standards. The number and amount of 50 4/CDC loans increased during FY2010 and FY2011 and reached prerecession levels in FY2012. The SBA attributed the increase in FY2010 and FY2011 to the continuation of 504/CDC fee subsidies, which were in place through most of FY2010 and the first quarter of FY2011. The continuing economic recovery, which contributed to increased demand for small business loans generally, and the temporary two-year expansion of the types of projects eligible for 504/CDC program refinancing of existing commercial debt (through September 27, 2012) under P.L. 111-240 , the Small Business Jobs Act of 2010, most likely also contributed to the program's increased loan volume in FY2011 and FY2012. For example, the SBA approved 307 loans amounting to $255.3 million in 504/CDC refinancing under the temporary expansion in FY2011 and 2,424 loans amounting to $2.26 billion in 504/CDC refinancing under the temporary expansion in FY2012 (see Table 3 ). As expected, given the expiration of the temporary refinancing expansion, 504/CDC loan volume declined in FY2013 and FY2014. The program's loan volume has generally increased somewhat since then. <5.2. Appropriations for Subsidy Costs> The SBA's goal is to achieve a zero subsidy rate for its loan guaranty programs. A zero subsidy rate occurs when the SBA's loan guaranty programs generate sufficient revenue through fees and recoveries of collateral on purchased (defaulted) loans to not require appropriations to issue new loan guarantees. As indicated in Table 4 , fees and recoveries did not generate enough revenue to cover 7(a) loan losses from FY2010 through FY2013, and 504/CDC loan losses from FY2012 through FY2015. Appropriations were provided to address the shortfalls. <5.3. Use of Proceeds and Borrower Satisfaction> In FY2016, borrowers used 504/CDC loan proceeds to purchase land and existing building (51.56%), building (construction, remodeling, improvements, etc.) (21.10%), machinery and equipment (purchase, installation, etc.) (7.09%), make renovations to a building (4.90%), purchase land (5.18%), other expenses (eligible contingency expenses, interim interest, etc.) (2.84%), purchase improvements (2.30%), debt to be refinanced (1.51%), professional fees (appraiser, architect, legal, etc.) (1.41%), add an addition to a building (1.04%), purchase or install fixtures (0.55%), or make leasehold improvements to a building (0.52%). In 2008, the Urban Institute surveyed 504/CDC borrowers and found that two-thirds of the respondents rated their overall satisfaction with their 504/CDC loan and loan terms as either excellent (21%) or good (45%). About one out of every four borrowers (23%) rated their overall satisfaction with their loan and loan terms as fair, 8% rated their overall satisfaction as poor, and 4% reported that they did not know or did not respond. In addition, 87% of the survey's respondents reported that the 504/CDC loan was either very important (53%) or somewhat important (34%) to their business success (4% reported that it was somewhat unimportant, 4% reported very unimportant, and 6% reported that they did not know or did not respond). In March 2014, the Government Accountability Office (GAO) released a report examining the 504/CDC program. GAO reported that from FY2003 through March 31, 2013, the top four types of small businesses funded by 504/CDC loans were hotels (12%), restaurants (5%), doctor's offices (4%), and dentist's offices (3%). GAO also reported that 85% of approved 504/CDC loans and dollars went to existing small businesses and 15% went to new small businesses. <5.4. Borrower Demographics> In 2008, the Urban Institute found that about 9.9% of private-sector small business loans were issued to minority-owned small businesses and about 16% of those loans were issued to women-owned businesses. In FY2018, 28.7% of the total amount of 504/CDC approved loans went to minority-owned businesses (20.5% Asian, 6.6% Hispanic, 1.4% African American, and 0.1% Native American) and 10.6% went to women-owned businesses. Based on its comparative analysis of private-sector small business loans and the SBA's loan guaranty programs, the Urban Institute concluded that Overall, loans under the 7(a) and 504 programs were more likely to be made to minority-owned, women-owned, and start-up businesses (firms that have historically faced capital gaps) as compared to conventional small business loans. Moreover, the average amounts for loans made under the 7(a) and 504 programs to these types of firms were substantially greater than conventional small business loans to such firms. These findings suggest that the 7(a) and 504 programs are being used by lenders in a manner that is consistent with SBA's objective of making credit available to firms that face a capital opportunity gap. <6. Congressional Issues> <6.1. Fee Subsidies and the 7(a) Program's 90% Maximum Loan Guaranty Percentage> As mentioned previously, the SBA was provided more than $1.1 billion in funding in 2009 and 2010 to subsidize the 504/CDC program's third-party participation fee and CDC processing fee, subsidize the SBA's 7(a) program's guaranty fee, and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans. The Obama Administration argued that this additional funding improved the small business lending environment, increased both the number and amount of SBA guaranteed loans, and supported "the retention and creation of hundreds of thousands of jobs." Critics argued that small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint are a better means to assist small business economic growth and job creation. <6.2. Program Administration> The SBA's Office of Inspector General (OIG) and the GAO have independently reviewed the administration of SBA's loan guaranty programs. Both agencies have reported deficiencies that they argued needed to be addressed, including issues involving the oversight of 504/CDC lenders. On March 23, 2010, the SBA's OIG released the results of an audit of "25 of 100 statistically selected CDC/504 loans approved under Premier Certified Lender (PCL) authority that were disbursed during fiscal year (FY) 2008." The loans "had been approved by 3 of the most active of the 24 PCLs" operating in 2008. The audit was initiated "based on concerns that PCLs were engaging in risky underwriting practices and that five PCLs were paying their executives excessive compensation." The OIG determined that PCLs may not have used prudent practices in approving and disbursing 68% of the sampled loans, totaling nearly $8.9 million, due to poor loan underwriting, and eligibility or loan closing issues. Specifically, 40% of the loans had faulty underwriting repayment analyses, and 52% of the loans had eligibility and/or loan closing issues.... Projecting our sample results to the universe of CDC/504 loans disbursed in 2008 by these three PCLs, we estimate with 90% confidence that at least 572 loans, totaling nearly $254.9 million in CDC/504 loan proceeds, had weaknesses in the underwriting process, eligibility determinations or loan closing. Of this amount, we estimate that a minimum of 183 loans, totaling $56.4 million or more, were made to borrowers based on faulty repayment analyses. We also estimate that lenders disbursed $209 million or more to borrowers who had eligibility and/or loan closing issues. In terms of dollars paid for CDC executive compensation, the OIG found that 4 of the 5 CDCs reviewed were among the top 10 highest for executive compensation.... In terms of percentage of gross receipts spent on executive compensation, 3 of the 5 questioned CDCs ranked among the top 10 highest of the 56 CDCs that had gross receipts over $1 million. The OIG made several recommendations to address these issues, including changing the SBA's Standard Operating Procedures (SOP) to require lenders to use (1) the actual cash flow method to determine borrower repayment ability for businesses using accrual accounting, (2) historical salary levels to estimate salaries of the borrower's officers, and (3) historical sales data to make sales projections. It also recommended that the SBA develop a process "to ensure that corrective actions are taken in response to the Agency's onsite reviews to ensure these conditions do not continue, and/or guidance for these reviews should be modified, as appropriate, to ensure that reviewers properly assess lender determination of borrower repayment ability and eligibility." The OIG reported that the SBA disagreed that SOP 50 10 should be revised to strengthen lender repayment analyses by requiring the use of the actual cash flow method and historical salary and sales data. The Agency also did not believe an additional process was needed to ensure that corrective actions are taken to improve lender performance, but acknowledged that better use of onsite review results are needed to make more informed lender decisions and programmatic determinations. In 2009, GAO released an analysis of the SBA's oversight of the lending and risk management activities of lenders that extend 7(a) and 504/CDC loans to small businesses. GAO recommended that the SBA strengthen its oversight of these lenders and argued that although the SBA's "lender risk rating system has enabled the agency to conduct some off-site monitoring of lenders, the agency does not use the system to target lenders for on-site reviews or to inform the scope of the reviews." GAO also noted that the SBA targets for review those lenders with the largest SBA-guaranteed loan portfolios. As a result of this approach, 97% of the lenders that SBA's risk rating system identified as high risk in 2008 were not reviewed. Further, GAO found that the scope of the on-site reviews that SBA performs is not informed by the lenders' risk ratings, and the reviews do not include an assessment of lenders' credit decisions. GAO argued that although the SBA "has made improvements to its off-site monitoring of lenders, the agency will not be able to substantially improve its lender oversight efforts unless it improves its on-site review process." As mentioned previously, in recent years, both the number and amount of 504/CDC loans made through the PCLP has declined. In FY2009, 373 PCLP loans amounting to $185.4 million were disbursed. In FY2018, 27 PCLP loans totaling $23.8 million were dispersed. In addition, the SBA's Office of Credit Risk Management (OCRM) created new metrics in 2015 for monitoring 504/CDC lender loan performance called SMART (measuring the lender's solvency and financial condition, management and governance, asset quality and servicing, regulatory compliance, and technical issues and mission) and updated those metrics in 2016. SMART is designed to "assist OCRM in identifying high risk lenders and ensuring that lender oversight drives meaningful review activities, findings, and corrective actions that reduce risk to the SBA." OCRM also created a "detailed bench-marking analysis project that will serve to establish quantitative performance metrics and indicators of quality (Preferred, Acceptable and Less than Acceptable) to be incorporated into each area of risk assessment identified in the ... SMART protocol measurement attributes." <7. Legislative Activity During the 111th Congress> As mentioned previously, Congress approved legislation in 2009 (ARRA) that provided the SBA an additional $730 million, including $299 million to temporarily reduce fees in the SBA's 504/CDC loan guaranty and 7(a) programs and $76 million to temporarily increase the 7(a) program's loan guaranty from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000. Congress approved legislation in 2010 ( P.L. 111-240 , the Small Business Jobs Act of 2010) that was designed to enhance small business access to capital. Among other provisions, the act provided $510 million to extend the 504/CDC and 7(a) loan guaranty programs' fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010 (later extended to March 4, 2011) or until available funding was exhausted (which occurred on January 3, 2011); increased the 504/CDC program's loan limits from $1.5 million to $5 million for regular 504/CDC loans; from $2 million to $5 million if the loan proceeds are directed toward one or more of the program's specified public policy goals; from $4 million to $5.5 million for small manufacturers; from $4 million to $5.5 million for projects that reduce the borrower's energy consumption by at least 10%; and from $4 million to $5.5 million for projects for plant, equipment, and process upgrades of renewable energy sources, such as the small-scale production of energy for individual buildings or communities consumption (commonly known as micropower), or renewable fuel producers, including biodiesel and ethanol producers; temporarily expanded, for two years after enactment (through September 27, 2012), the types of projects eligible for 504/CDC program refinancing of existing commercial debt; and authorized the SBA to establish an alternative size standard for the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards and established an interim size standard of a maximum tangible net worth of not more than $15 million and an average net income after federal taxes (excluding any carryover losses) for the preceding two fiscal years of not more than $5 million. The Obama Administration argued that increasing maximum loan limit for SBA programs (including the 504/CDC program) would allow the SBA to "support larger projects," which would "allow the SBA to help America's small businesses drive long-term economic growth and the creation of jobs in communities across the country." The Administration also argued that increasing the maximum loan limits for these programs will be "budget neutral" over the long run and "help improve the availability of smaller loans." Critics of increasing the SBA's maximum loan limits argued that doing so might increase the risk of defaults, resulting in higher guaranty fees or the need to provide the SBA additional funding. Others advocated a more modest increase in the maximum loan limits to ensure that the 7(a) program "remains focused on startup and early-stage small firms, businesses that have historically encountered the greatest difficulties in accessing credit" and "avoids making small borrowers carry a disproportionate share of the risk associated with larger loans." Others contended that creating a small business direct lending program within the SBA would reduce paperwork requirements and be more efficient in providing small businesses access to capital than modifying existing SBA programs that rely on private lenders to determine if they will issue the loans. Also, as mentioned previously, others argued that providing additional resources to the SBA or modifying the SBA's loan programs as a means to augment small businesses' access to capital is ill-advised. In their view, the SBA has limited impact on small businesses' access to capital. They argued that the best means to assist small business economic growth and job creation is to focus on small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint. <8. Legislative Activity During the 112th Congress> As mentioned previously, Congress did not approve any changes to the 504/CDC program during the 112 th Congress. However, legislation was introduced during the 112 th Congress to change the program, including several proposals to extend the now-expired two-year temporary expansion of the eligibility of 504/CDC refinancing projects not involving expansions. Proponents of extending the 504/CDC refinancing expansion provision, initially enacted as part of P.L. 111-240 , the Small Business Jobs Act of 2010, argued that it would create jobs by enabling small business owners to lower their monthly payments "at no cost to taxpayers" and "is one of many things that we should be doing to put more capital in the hands of America's job creators." Opponents worried that the provision may require funding to cover loan losses in the future, arguing that "commercial refinancing may pose an undue risk at a time of significant budgetary constraints." Others opposed the expansion of 504/CDC refinancing on economic or ideological grounds, arguing that federal fiscal restraint, business tax reduction, and business regulatory relief would provide greater assistance to small businesses than expanding an existing SBA spending program. H.R. 2950 , the Small Business Administration 504 Loan Refinancing Extension Act of 2011, was introduced on September 15, 2011, and referred to the House Committee on Small Business. The bill would have allowed 504/CDC loans to be used to refinance projects not involving expansions as long as the financing did not exceed 90% of the value of the collateral for the financing for an additional year beyond the two years from the date of enactment that was authorized by the Small Business Jobs Act of 2010. S.Amdt. 1833 , the INVEST in America Act of 2012 an amendment in the nature of a substitute for H.R. 3606 , the Jumpstart Our Business Startups Act was introduced on March 15, 2012. It would have allowed 504/CDC loans to be used to refinance projects not involving expansions for an additional year beyond the two years from the date of enactment authorized by the Small Business Jobs Act of 2010. The amendment was ruled nongermane by the chair on March 21, 2012, and was not included in the final version of the bill that was approved by the Senate the following day. S. 3572 , the Restoring Tax and Regulatory Certainty to Small Businesses Act of 2012, was introduced on September 19, 2012, and referred to the Senate Committee on Small Business and Entrepreneurship and the Senate Committee on Finance. It would have allowed 504/CDC loans to be used to refinance projects not involving expansions for an additional year and a half beyond the two years from the date of enactment authorized by the Small Business Jobs Act of 2010. S. 1828 , a bill to increase small business lending, and for other purposes, was introduced on November 8, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship. The bill would have reinstated for a year following the date of its enactment the fee subsidies for the 504/CDC and 7(a) loan guaranty programs and the 90% loan guaranty percentage for the 7(a) program that were originally funded by ARRA. <9. Legislative Activity During the 113th Congress> Two bills were introduced during the 113 th Congress to reinstate the temporary two-year expansion of projects eligible for 504/CDC program refinancing of existing debt, which expired on September 27, 2012. H.R. 1240 , the Commercial Real Estate and Economic Development (CREED) Act of 2013, would have reinstated the temporary expansion of the projects eligible for 504/CDC program refinancing of existing debt for five years following the bill's enactment. It was referred to the House Committee on Small Business on March 18, 2013. Its companion bill in the Senate ( S. 289 ) was referred to the Senate Committee on Small Business and Entrepreneurship on February 12, 2013, and was ordered to be reported favorably, with an amendment, on June 17, 2013. As amended, S. 289 would have reinstated the temporary expansion of the projects eligible for 504/CDC program refinancing of existing debt during any fiscal year in which the 504/CDC program is operating at zero subsidy. In addition, H.R. 4652 , the Increasing Small Business Lending Act, would have authorized fee waivers for the 7(a) and 504/CDC programs. <10. Legislative Activity During the 114th Congress> As mentioned previously, P.L. 114-113 , the Consolidated Appropriations Act, 2016, reinstated the expansion of the types of projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs. The act requires each CDC to limit its refinancing so that, during any fiscal year, the new refinancings do not exceed 50% of the dollars it loaned under the 504/CDC program during the previous fiscal year. This limitation may be waived if the SBA determines that the refinance loan is needed for good cause. An interim final rule implementing the new refinancing program was issued by the SBA on May 25, 2016, effective June 24, 2016. The act also eliminated an alternative job retention goal provision that allowed borrowers that do not meet the 504/CDC program's job creation and retention goals to participate in the expanded refinancing program, but limited that participation to "not more than the product obtained by multiplying the number of employees of the borrower by $65,000." Previously, H.R. 2266 , the Commercial Real Estate and Economic Development Act of 2015, would have reinstated the temporary expansion of projects eligible for 504/CDC program refinancing of existing debt for five years following enactment. Its companion bill in the Senate ( S. 966 ), as amended in committee, would have reinstated the temporary expansion of the refinancing program during any fiscal year in which the 504/CDC program is operating at zero subsidy. Also, the Obama Administration had requested in its FY2016 budget request authority to reinstate the 504/CDC refinancing program (without a business expansion requirement) in FY2016 to support up to $7.5 billion in lending. <11. Legislative Activity During the 115th Congress> As mentioned previously, P.L. 115-371 , the Small Business Access to Capital and Efficiency (ACE) Act, increased the threshold amount for determining when a CDC is required to secure an independent real estate appraisal for a 504/CDC loan (from if the estimated value of the project property is greater than $250,000 to if the estimated value of the project property is greater than the federal banking regulator appraisal threshold, which was recently increased from $250,000 to $500,000). The act also increased the threshold amount for determining when a CDC may be required to secure an independent real estate appraisal for a 504/CDC loan (from if the estimated value of the project property is equal to or less than $250,000 and such appraisal is necessary for appropriate evaluation of creditworthiness to if the estimated value of the project property is equal to or less than the federal banking regulator appraisal threshold and such appraisal is necessary for appropriate evaluation of creditworthiness). The change was designed to "remove the uncertainty lenders now have juggling two different real estate appraisal thresholds." In addition, S. 347 , the Investing in America's Small Manufacturers Act, among other provisions, would have allowed CDCs to provide up to 50% of project costs instead of up to 40% if the borrower is a small manufacturer and the 504/CDC loan guarantee program's subsidy cost for that current fiscal year is not above zero. <12. Concluding Observations> During the 111 th Congress, congressional debate concerning proposed changes to the SBA's loan guaranty programs, including the 504/CDC program, centered on the likely impact the changes would have on small business access to capital, job retention, and job creation. As a general proposition, some, including President Obama, argued that economic conditions made it imperative that the SBA be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations, and create jobs. Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit and advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small business economic growth and job creation. In terms of specific program changes, continuing the 504/CDC program's temporary fee subsidies, increasing its loan limits, temporarily (and later permanently) expanding its refinancing options, and authorizing the SBA to establish an alternative size standard were designed to achieve the same goal: to enhance job creation and retention by increasing the ability of 504/CDC borrowers to obtain credit at affordable rates. Critics argued that these actions might increase the risk of defaults and result in higher guaranty fees or the need to provide the SBA additional funding to cover loan subsidy costs. Others advocated a more modest increase in the maximum loan limits to ensure that the programs focus on start-ups and early-stage small firms, "businesses that have historically encountered the greatest difficulties in accessing credit," and that they avoid "making small borrowers carry a disproportionate share of the risk associated with larger loans." During the 112 th -115 th Congresses, congressional oversight focused on the SBA's administration of the program changes enacted during the 111 th Congress, the impact of those changes on the SBA's lending, and ways to address and minimize increased costs associated with loan losses. Although there continues to be widespread congressional support for providing assistance to small businesses, federal fiscal constraints may impede efforts to further expand the 504/CDC program in the near future. Given existing fiscal constraints, it is likely that congressional oversight during the 116 th Congress will continue to focus on (1) the SBA's administration of the 504/CDC program to ensure that the program is as efficient as possible; and (2) the program's efficacy in job retention and creation.

The Small Business Administration (SBA) administers programs to support small businesses, including several loan guaranty programs designed to encourage lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions." The SBA's 504 Certified Development Company (504/CDC) loan guaranty program is administered through nonprofit Certified Development Companies (CDCs). It provides long-term fixed rate financing for major fixed assets, such as land, buildings, equipment, and machinery. Of the total project costs, a third-party lender must provide at least 50% of the financing, the CDC provides up to 40% of the financing through a 100% SBA-guaranteed debenture, and the applicant provides at least 10% of the financing. Its name is derived from Section 504 of the Small Business Investment Act of 1958 (P.L. 85-699, as amended), which provides the most recent authorization for the SBA's sale of 504/CDC debentures. In FY2018, the SBA approved 5,874 504/CDC loans amounting to nearly $4.8 billion. Congressional interest in the SBA's 504/CDC program has increased in recent years because of concern that small businesses might be prevented from accessing sufficient capital to enable them to grow and create jobs. For example, during the 111th Congress, P.L. 111-240, the Small Business Jobs Act of 2010 increased the 504/CDC program's loan guaranty limits from $1.5 million to $5 million for "regular" borrowers, from $2 million to $5 million if the loan proceeds are directed toward one or more specified public policy goals, and from $4 million to $5.5 million for manufacturers; temporarily expanded, for two years, the types of projects eligible for 504/CDC program refinancing of existing debt; created an alternative 504/CDC size standard to increase the number of businesses eligible for assistance; and provided $505 million (plus an additional $5 million for administrative expenses) to extend temporary fee subsidies for the 504/CDC and 7(a) loan guaranty programs and a temporary increase in the 7(a) program's maximum loan guaranty percentage to 90%. The temporary fee subsidies and 90% loan guaranty percentage ended on January 3, 2011, and the temporary expansion of the projects eligible for 504/CDC program refinancing of existing debt expired on September 27, 2012. During the 114th Congress, P.L. 114-113, the Consolidated Appropriations Act, 2016, reinstated the expansion of the types of projects eligible for refinancing under the 504/CDC loan guaranty program in any fiscal year in which the refinancing program and the 504/CDC program as a whole do not have credit subsidy costs. The act requires each CDC to limit its refinancing so that, during any fiscal year, the new refinancings do not exceed 50% of the dollars it loaned under the 504/CDC program during the previous fiscal year. This report examines the rationale provided for the 504/CDC program; its borrower and lender eligibility standards; operating requirements; and performance statistics, including loan volume, loss rates, proceeds usage, borrower satisfaction, and borrower demographics. This report also examines congressional action taken to help small businesses gain greater access to capital, including enactment of P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA); P.L. 111-240; P.L. 114-113; and issues related to the SBA's oversight of 504/CDC lenders.

crs_R46240

crs_R46240_0

<1. Introduction> <1.1. Evolution of the Framework for Budgetary Decisionmaking> Under the U.S. Constitution, Congress exercises the "power of the purse." This power is expressed through the application of several provisions. The power to lay and collect taxes and the power to borrow are among the enumerated powers of Congress under Article I, Section 8. Furthermore, Section 9 of Article I states that funds may be drawn from the Treasury only pursuant to appropriations made by law. By requiring the power of the purse to be exercised through the lawmaking process, the Constitution allows Congress to direct any budgetary actions that may be taken by the President and executive departments. The Constitution, however, does not prescribe how these legislative powers are to be exercised, nor does it expressly provide a specific role for the President with regard to budgetary matters. Instead, various statutes, congressional rules, practices, and precedents have been established over time to create a complex system in which multiple decisions and actions occur with varying degrees of coordination. As a consequence, there is no single "budget process" through which all budgetary decisions are made, and in any year there may be many budgetary measures necessary to establish or implement different aspects of federal fiscal policy. Under Article I, Section 5, "Each House may determine the Rules of its Proceedings," so it is left to the House and Senate to adapt and develop procedures and practices as needed to facilitate the consideration and enactment of legislation. Congress, however, is a dynamic institution that can, and does, change its rules, practices, and organization in order to achieve changing goals or overcome new obstacles. Since the early years of the Republic, there have been a number of notable milestones in the evolution of procedures and practices concerning the consideration, enactment, and execution of budgetary legislation. These milestones were often the result of congressional efforts to solve problems or promote outcomes and thus help to provide insight into when, how, or why current practices developed. Although early Congresses referred legislation to ad hoc committees, within a few years the House began to organize a system of standing committees with fixed jurisdictions and responsibility for different legislative issues. In the House, responsibility for revenue, spending, and debt were assigned to a standing Committee of Ways and Means beginning in the Fourth Congress (1795-1797). In the Senate, a Committee on Finance with jurisdiction over these matters was established as part of a standing committee system during the second session of the 14 th Congress (1815-1817). By creating a system in which legislation was categorized by its content, Congress laid the groundwork for establishing rules and practices to provide for the separate consideration of various budgetary measures. The House later created a separate standing Committee on Appropriations in 1865, and the Senate took similar action in 1867. The distinction between appropriations and general policy legislation appears to have been understood and practiced long before it was formally recognized in House or Senate rules, probably derived from earlier British and colonial practices. As congressional practices developed in the early 19 th century, this distinction was reflected in the designation of general appropriations measures as "supply bills," whose purpose was simply to supply funds to carry out government operations already defined in law. This distinction was also reinforced by the way in which they were considered by the House. Supply bills would be initially taken up as a list of objects of expenditure, with blanks rather than dollar amounts for associated expenditures, and the amounts filled in by action on the floor. Such bills were generally considered as little more than a matter of form, without extensive debate except for the purpose of filling in the blanks. The inclusion of substantial new legislative language in supply bills was generally believed to be inappropriate, as it might delay the provision of necessary funds or lead to the enactment of matters that might not otherwise become law. According to Hinds' Precedents , the origin of a formal rule mandating the separate consideration of policy legislation and appropriations can be traced to 1835, when the House discussed the increasing problem of delays in enacting appropriations. A significant part of this delay was attributed to the inclusion in such bills of "debatable matters of another character, new laws which created long debates," and a proposal was made to strip appropriation bills of "everything but were legitimate matters of appropriation, and such as were not made the subject of a separate bill." Although the proposal was not adopted at the time, at the beginning of the following Congress (25 th Congress, 1837-1839), language was added to the standing rules of the House that stated: No appropriation shall be reported in such general appropriation bill, or be in order as an amendment thereto, for any expenditure not previously authorized by law. By formulating the rule as a requirement that appropriations only be to provide funding to carry out activities for which previously enacted legislation had provided the statutory authority for an agency to act, the rule formally limited the scope of purposes for which appropriations could be provided. The House soon after developed a practice of striking provisions containing general legislation from appropriations bills. It was not until 1876, however, that the House adopted language in its rules formally restricting the inclusion of legislative language in appropriations bills. As adopted in 1876, the rule stated: No appropriation shall be reported in such general appropriation bills, or be in order as an amendment thereto, for any expenditure not previously authorized by law unless in continuation of appropriations for such public works and objects as are already in progress; nor shall any provision in any such bill or amendment thereto, changing existing law, be in order except such as, being germane to the subject matter of the bill, shall retrench expenditures. There were also important principles established in the 19 th century concerning the extent to which the actions of agencies to execute the budget could be directed or limited by Congress. Although the First Congress enacted all appropriations in 1789 in a single act divided into lump sums for broad categories of expenditure, within a few years, Congress began to exercise control over how federal agencies spent money by enacting increasingly more specific appropriations. An additional general statutory restriction on agency actions to allocate how funds were spent was imposed in 1809 by the enactment of the "purpose statute" which required that sums appropriated by law for each branch of expenditure in the several departments shall be solely applied to the objects for which they are respectively appropriated, and to no other. Agencies sometimes took actions that undermined congressional fiscal controls, however. In some instances, they obligated funds in anticipation of appropriations, thereby creating liabilities that Congress would feel compelled to ratify. In others, they would obligate appropriated funds at a rate that was likely to produce a need for additional funds before the end of the fiscal year, giving rise to what were termed "coercive deficiencies." As a result, Congress enacted the first "antideficiency" provision in 1870 stating that it shall not be lawful for any department of the government to expend in any one fiscal year any sum in excess of appropriations made by Congress for that fiscal year, or to involve the government in any contract for the future payment of money in excess of such appropriations. In addition to prohibiting agencies from obligating payments in the absence of appropriations, antideficiency laws also established the requirement that agencies establish plans to apportion available funds over the course of the fiscal year in order to avoid deficiencies. Although some Presidents made attempts to coordinate or limit agency budget estimates before they were communicated to Congress, such attempts were intermittent and uneven. This changed with the enactment of the Budget and Accounting Act of 1921. It created a statutory role for the President by requiring agencies to submit their budget requests to him and, in turn, for him to submit a consolidated request to Congress. The President's budget request became the center of a new relationship between the President and federal agencies and, consequently, of the agencies and Congress. The act also established the Bureau of the Budget (now the Office of Management and Budget [OMB]) to assist the President and the General Accounting Office (now the Government Accountability Office [GAO]) to serve as an independent auditor of government budgetary activities. Another significant change in federal budgeting in the 20 th century was the advent of direct (or mandatory) spending laws. Although there were 19 th century antecedents in which legislation was enacted to entitle an eligible class of recipients (such as veterans) to certain payments, such spending was not common. Beginning with Social Security in the 1930s, Congress began to enact broad-based spending legislation for which the level of spending was not controlled through the appropriations process. Instead, payments were required to be made to all eligible persons as prescribed in the law. In effect, such programs were designed to establish an expectation of stable payments for a class of individual recipients (even when the class or payments might change over time), rather than have the aggregate level of spending for the program subject to control through annual appropriations decisions. Such programs have grown to comprise the majority of all federal outlays. Until the 1970s, congressional consideration of the multiple budgetary measures considered in a given year as a whole lacked any formal coordination. Instead, Congress considered these various budgetary measures separately, sometimes informally comparing them to proposals in the President's budget. That was changed by the Congressional Budget Act of 1974 (CBA). The CBA provides for the adoption of a concurrent resolution on the budget that allows Congress to make decisions about overall fiscal policy and priorities and coordinate and establish guidelines for the consideration of various budget-related measures. Because a concurrent resolution is not a law the President cannot sign or veto it the budget resolution does not have statutory effect, so no money is raised or spent pursuant to it. Revenue and spending levels set in the budget resolution, however, do establish the basis for enforcement of congressional budget policies through points of order. The CBA also established the House and Senate Budget Committees as well as CBO to provide Congress with an independent source for budgetary information, particularly estimates concerning the cost of proposed legislation. Since 1985, budgetary decisionmaking has also been subject to various budget control statutes designed to restrict congressional budgetary actions or implement particular budgetary outcomes in order to reduce the budget deficit, limit spending, or prevent deficit increases. The mechanisms included in these acts sought to supplement and modify the existing budget process and also added statutory budget controls, in some cases seeking to require future deficit reduction legislation or limit future congressional budgetary actions and in some cases seeking to preserve deficit reduction achieved in accompanying legislation. Chief among the laws enacted were the Balanced Budget and Emergency Deficit Control Act of 1985 and the Budget Enforcement Act of 1990. The Balanced Budget and Emergency Deficit Control Act of 1985 did not include legislation that reduced the deficit but instead established a statutory requirement for the gradual reduction and elimination of budget deficits over a six-year period. The act specified annual deficit limits and set forth a specific process for the cancellation of spending by requiring the President to issue an order (termed a sequester order) to enforce the annual deficit limit in the event that compliance was not achieved through legislation. The deficit targets and timetable were modified and extended in the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987. With the Budget Enforcement Act of 1990, Congress changed the focus of budgetary control. While the 1985 Balanced Budget and Emergency Deficit Control Act had focused on enforcing deficit targets through unspecified future legislation, the Budget Enforcement Act was enacted as part of deficit reduction legislation and focused instead on inhibiting future legislation that would undo the savings. Budgetary enforcement under the Budget Enforcement Act was based on the implementation of pay-as-you-go (PAYGO) procedures to limit any increase in the deficit due to new direct spending or revenue legislation and limit discretionary spending through statutory spending caps. These budget control mechanisms sought to preserve the deficit reduction achieved in the accompanying legislation rather than force subsequent legislation. As originally enacted, these mechanisms were to be in force for a period of five years, but they were modified and extended twice. In 1993, they were extended through 1998 in the Omnibus Budget Reconciliation Act of 1993, and in 1997, they were extended through 2002 in the Budget Enforcement Act of 1997. In 2010, Congress reinstated PAYGO in the Statutory Pay-As-You-Go Act of 2010. In 2011, the Budget Control Act (BCA) reestablished statutory limits on discretionary spending, divided into separately enforceable defense and nondefense limits, for FY2012-FY2021. Several measures have subsequently been enacted that changed the spending limits or enforcement procedures included in the BCA. <1.2. Basic Concepts of Federal Budgeting> The federal budget is a compilation of numbers reflecting the receipts, spending, borrowing, and debt of the government. Receipts come largely from various taxes but are also derived from other sources as well (such as leases, licenses, and other fees). Spending involves such concepts as budget authority, obligations, outlays, and offsetting collections. Although the amounts are computed according to previously established rules and conventions, they do not always conform to the way receipts and spending might be accounted for in a different context. When Congress appropriates money, it provides budget authority , that is, statutory authority to enter into obligations for which payments will be made by the Treasury. Budget authority may also be provided in legislation that does not go through the annual appropriations process (such as direct spending legislation). The key congressional spending decisions relate to the obligations that agencies are authorized to incur during a fiscal year (amount, purpose, and timing), not to the outlays that result. Obligations occur when agencies enter into contracts, submit purchase orders, employ personnel, and so forth. Outlays occur when obligations are liquidated, primarily through the issuance of checks, electronic fund transfers, or the disbursement of cash. The provision of budget authority is the key point at which Congress exercises control over federal spending. Congress generally does not exercise direct control over outlays related to executive or judicial branch spending. The amount of outlays in a given year derive in part from new budget authority enacted in that year but also from "carryover" budget authority provided in prior years. The relation of budget authority to outlays varies from program to program and depends on the outlay or "spendout" rate, that is, the rate at which budget authority provided by Congress is obligated and payments are disbursed. Various factors can have an impact on the spendout rate for a particular program or activity. In a program with a high spendout rate, most new budget authority is expended during the fiscal year. If the spendout rate is low, however, most of the outlays occur in later years. Spendout rates are generally sensitive to program characteristics and vary over time for certain projects. The outlay levels associated with budget enforcement during the consideration of legislation reflect the projected amount that will be outlayed during the first year that budget authority is available. If actual payments turn out to be higher than the budget estimate, outlays can be above the projected level. The President and Congress can control outlays indirectly by deciding on the amount of budget authority provided by limiting the amount that can actually be obligated (termed an "obligation limit") or by limiting the period during which the funds may be obligated. The receipts of the federal government may be accounted for in the budget as revenues or as "offsets" against outlays. Revenues result from the exercise of the government's sovereign power to tax. In contrast, receipts from businesslike or market transactions, such as Medicare premiums or various fees collected by government agencies, are deducted from outlays. Similarly, income from the sale of certain assets is also treated as an offset to spending. These offsets may be classified as offsetting collections or offsetting receipts. In most cases, offsetting collections may be obligated without further legislative action, while offsetting receipts require an explicit appropriation to be available for obligation. Most such receipts are offsets against the outlays of the appropriation account for the agency that collects the money, but in the case of some activities (such as offshore oil leases), the receipts are offset against the total outlays of the government. <1.3. Scope of the Budget> The budget consists of two main groups of funds: federal funds and trust funds . Federal funds which comprise mainly the general fund largely derive from the general exercise of the taxing power and general borrowing. For the most part, these funds are not designated in law for any specific program or agency, although there are also special funds that are designated with respect to their source or purpose. Trust funds are established under the terms of statutes that specifically designate them as such and are available to fund only specific purposes. For example, the Social Security trust funds (the Old-Age and Survivors Insurance Fund and the Disability Insurance Fund), which are the largest of the trust funds, comprise revenues collected under a Social Security payroll tax and are used to pay for Social Security benefits and related purposes. The unified budget includes both the federal funds and the trust funds. In some circumstances, a trust fund may accumulate more funds in a given time period than are necessary to meet current obligations. Such balances are held in the form of federal debt, so that while a trust fund may be said to have a surplus, by holding it for future use in the form of federal debt, it is effectively borrowed by federal funds and counted as part of federal debt. Thus, a trust fund surplus can offset the overall budget deficit, but because it is included in the federal debt, the annual increase in the debt invariably exceeds the amount of the budget deficit. For the same reason, it is possible for the federal debt to rise even when the federal government has a budget surplus. Federal budgeting is mostly calculated based on cash flow so that capital and operating expenses are not segregated in the budget. Hence, expenditures for the operations of government agencies and expenditures for the acquisition of long-life assets (such as buildings, roads, and weapons systems) both appear in the budget in terms of their outlays. Proposals have been made from time to time to divide the budget into separate capital and operating accounts. While these proposals have not been adopted, the budget does provide information showing the investment and operating outlays of the government. One portion of the federal budget that is not based on cash flow is the budgeted levels for direct and guaranteed loans by the federal government. The Federal Credit Reform Act of 1990 made fundamental changes in the budgetary treatment of direct loans and guaranteed loans. The reform, which first became effective for FY1992, shifted the accounting basis for federally provided or guaranteed credit from the amount of cash flowing into or out of the Treasury to the estimated subsidy cost of the loans. Credit reform entails complex procedures for estimating these subsidy costs and new accounting mechanisms for recording various loan transactions. The changes have had only a modest impact on budget totals but a substantial impact on budgeting for particular loan programs. The budget totals do not include all the financial transactions of the federal government, however. The main exclusions fall into two categories off-budget entities and government-sponsored enterprises (GSEs). Off-budget entities are excluded by law from the budget totals. The receipts and disbursements of the Social Security trust funds, as well as spending for the Postal Service Fund, are presented separate from the budget totals. Thus, the budget reports two deficit (or surplus) amounts one excluding the Social Security trust funds and the Postal Service Fund and the other (the unified budget) including these entities. In most cases, the latter is the main focus of discussion in both the President's budget and the congressional budget process. The transactions of government-owned corporations (excluding the Postal Service), as well as revolving funds, are included in the budget on a net basis. That is, the amount shown in the budget is the difference between their receipts and outlays, not the total activity of the enterprise or revolving fund. If, for example, a revolving fund has annual income of $150 million and disbursements of $200 million, the budget would report $50 million as net outlays. The Federal Reserve System has never been subjected to the appropriations process, and aside from the recording of transfers of Federal Reserve earnings as budget receipts, its financial operations have always been excluded from the federal budget. It is funded by fees and the income generated by securities it owns. Annual appropriations approval of Federal Reserve spending plans is not required, a result of a provision of the Federal Reserve Act, which stipulates that the Federal Reserve Board's assessment "shall not be construed to be Government funds or appropriated moneys." If the Federal Reserve's income exceeds its expenses, its net earnings are transferred to the Treasury and recorded as "miscellaneous receipts." GSEs have historically been excluded from the budget because they were deemed to be non-governmental entities. Although they were established by the federal law, the federal government did not own any equity in these enterprises, most of which received their financing from private sources, and their budgets were not reviewed by the President or Congress in the same manner as other programs. Most of these enterprises engaged in credit activities. They borrowed funds in capital markets and lent money to homeowners, farmers, and others. Financial statements of the GSEs were published in the President's budget. Although some GSEs continue to operate on this basis, the economic downturn and credit instability that occurred in 2008 fundamentally changed the status of two GSEs that play a significant role in the home mortgage market: Fannie Mae and Freddie Mac. In September 2008, the Federal Housing Finance Agency placed the two entities in conservatorship, thereby subjecting them to control by the federal government until the conservatorship is brought to an end. <2. Debt Limit Legislation> When the receipts collected by the federal government are not sufficient to cover outlays, it is necessary for the Treasury to finance the shortfall through the sale of various types of debt instruments to the public and federal agencies. Federal borrowing is subject to a statutory limit on public debt (referred to as the debt limit or debt ceiling). When the federal government operates with a budget deficit, or otherwise increases the level of debt necessary (such as to allow federal trust funds to hold surpluses), the response has been for the public debt limit to be increased to meet that need. The frequency of congressional action to raise the debt limit has ranged in the past from several times in one year to once in several years. In recent years, Congress has chosen to suspend the debt limit for a set amount of time instead of raising the debt limit by a fixed dollar amount. When a suspension period ends, the debt limit is reestablished at a dollar level that accommodates the level of federal debt issued during the suspension period. Legislation to raise the public debt limit falls under the jurisdiction of the House Ways and Means Committee and the Senate Finance Committee. In some cases, Congress has combined other legislative provisions with changes in the debt limit. For example, the Senate amended a House-passed bill raising the debt limit to add the Balanced Budget and Emergency Deficit Control Act of 1985. The House added debt limit provisions (as well as other matters) to an unrelated Senate-passed measure to create the Budget Control Act of 2011. In addition, debt limit provisions may be included in reconciliation legislation (described in a separate section of this report). In the 96 th Congress (1979-1980), the House amended its rules to provide for the automatic engrossment of a measure increasing the debt limit upon final adoption of a budget resolution. The rule (commonly referred to as the Gephardt Rule after Representative Richard Gephardt of Missouri) was intended to facilitate quick action on debt limit increases by deeming such a measure as passed by the House by the same vote as the final adoption of the budget resolution, thereby avoiding the need for a separate vote on the debt limit. The engrossed measure would then be transmitted to the Senate for further action. The rule was repealed in the 107 th Congress, reinstated in the 108 th Congress, repealed again in the 112 th Congress, and reinstated in modified form in the 116 th Congress. As currently provided in House Rule XXVIII, the rule provides for a measure to automatically be engrossed and deemed to have been passed by the House by the same vote as the adoption by the House of the concurrent resolution on the budget if the resolution sets forth a level of the public debt that is different from the existing statutory limit. Rather than a specific level of debt, however, this measure would suspend the debt limit through the end of the budget year for the concurrent resolution on the budget (but not through the period covered by any outyears beyond the budget year). As with the earlier version of the rule, the engrossed measure would then be transmitted to the Senate for further action. The Senate has no special procedures concerning consideration of debt limit legislation. <3. Revenue Legislation> Article I, Section 8, of the Constitution gives Congress the power to levy "taxes, duties, imposts, and excises." Section 7 of this article, known as the Origination Clause, requires that all revenue measures originate in the House of Representatives. Legislation concerning taxes and tariffs falls under the jurisdiction of the House Ways and Means Committee and the Senate Finance Committee. Furthermore, House Rule XXI, clause 5, specifically bars the consideration of a tax or tariff measure reported from another committee (or an amendment containing a tax or tariff provision, including a Senate amendment, from being offered to a House measure reported by another committee). Neither the Origination Clause nor House Rule XXI, clause 5, applies to the consideration of legislation concerning receipts or collections, such as user fees, that are levied on a class that benefits from a particular service, program, or activity. Most revenues derive from existing provisions of the tax code or Social Security law, which continue in effect from year to year unless changed by Congress and are generally expected to produce increasing amounts of revenue in future years if the economy expands and incomes rise or the workforce grows. Nevertheless, Congress typically makes some changes in the tax laws each year, either to raise or lower revenues or to redistribute the tax burden. In enacting revenue legislation, Congress often includes provisions that establish or alter tax expenditures. The term tax expenditures is defined in the 1974 CBA to include revenue forgone due to deductions, exemptions, credits, and other exceptions to the basic tax structure. Tax expenditures are a means by which the federal government uses the tax code to pursue public policy objectives and can be regarded as alternatives to spending policy actions such as grants or loans. The Joint Committee on Taxation estimates the revenue effects of legislation changing tax expenditures, and it also publishes five-year projections of these provisions as an annual committee print. Congress may choose to act on revenue legislation pursuant to proposals in the President's budget. An early step in congressional work on revenue legislation is publication by CBO of its own estimates (developed in consultation with the Joint Committee on Taxation) of the revenue impact of the President's budget proposals. Revenue totals agreed to in a budget resolution can be used to establish the framework for subsequent action on revenue measures. A budget resolution, however, contains only revenue totals and total recommended changes; it does not allocate these totals among revenue sources, nor does it specify which provisions of the tax code are to be changed. The House and Senate may consider revenue measures under their regular legislative procedures, such as the chambers did for the Tax Reform Act of 1986. However, changes in revenue policy may also be made in the context of the reconciliation process (described in a separate section of this report), such as the Economic Growth and Tax Relief Reconciliation Act of 2001, the Jobs and Growth Tax Relief Reconciliation Act of 2003, and the Tax Cuts and Jobs Act of 2015. <4. Spending Legislation> Congressional budgetary procedures distinguish between two types of spending: discretionary spending (which is controlled through the annual appropriations process) and direct spending (also referred to as mandatory spending, for which the level of funding is controlled outside of the annual appropriations process). Discretionary and direct spending are both included in the President's budget and the congressional budget resolution, and they both provide statutory authority for agencies to enter into obligations for payments from the Treasury. The two forms of spending, however, are distinct in most other respects in terms of both their formulation and consideration. There are some notable exceptions to these distinctions, however, so that some procedures associated with direct spending are applied to particular discretionary spending programs and vice versa. Formulation. The basic unit for appropriations legislation is the spending account. In modern practice, regular appropriations legislation is drafted as unnumbered paragraphs that provide a lump-sum amount for each appropriations account. This lump sum provides a definite amount of budget authority that is available to finance activities or programs covered by that account for a certain period of availability for certain purposes consistent with statutory requirements or limitations. In many cases, appropriations for an agency may be provided in relatively few broad accounts, such as for "salaries and expenses," "operations," or "research." Direct spending, on the other hand, characteristically provides budget authority in the form of a requirement to make payments to eligible individual recipients according to a formula that establishes eligibility criteria and a program of benefits. The resulting overall level of outlays would be an aggregation of obligations for these individual benefits. In some cases (termed "appropriated entitlements"), appropriations legislation may be used to provide the means of financing, but, in practice, the requirements for funding such programs are determined through their authorizing legislation so that the Appropriations Committees have little or no discretion as to the amounts they provide. Committee j urisdiction. The Appropriations Committees have jurisdiction over discretionary spending for federal agencies and programs. In contrast, legislative committees (such as the Senate Committee on Health, Education, Labor and Pensions or the House Agriculture Committee), have jurisdiction over direct spending programs (including those funded in annual appropriations acts) through their jurisdiction over legislation concerning the structure of direct spending programs and their formulas regarding eligibility criteria and program of benefit payments. Frequency of d ecision m aking. Discretionary spending is provided in regular appropriations bills that are characteristically considered on an annual schedule. With some exceptions, budget authority provided in these measures is available for obligation only during a single fiscal year. Direct spending programs are typically established in permanent law that continues in effect until such time as it is revised or terminated, although in some cases (such as the Child Health Insurance Program and Temporary Assistance for Needy Families) the program may need periodic reauthorization. The scheduling for consideration of legislation making such changes is determined by congressional leadership through their agenda-setting authority rather than keyed to the beginning of the fiscal year. Enforcing s pending l evels in the b udget r esolution. The procedures Congress uses to enforce the policies set forth in the annual budget resolution differ somewhat for discretionary and direct spending programs. For both types of spending, Congress relies on allocations made under Section 302 of the 1974 CBA to ensure that new spending legislation reported by House and Senate committees conforms to parameters established in the budget resolution. Although this procedure is effective in limiting consideration of new legislation both annual appropriations measures and new entitlement legislation it is not an effective means for controlling direct spending that results from existing laws. Changes to the level of direct spending requires the enactment of new legislation that would change formulas regarding eligibility criteria and program of benefit payments, either through the regular legislative process or some expedited procedure such as reconciliation (described in a later section of this report). Statutory c ontrols. Discretionary spending for FY2012-FY2021 is subject to spending limits set in the Budget Control Act, as revised. These spending limits are divided into separately enforced amounts for defense and nondefense. Direct spending is not capped, but new direct spending (or revenue) legislation is subject to the Statutory Pay-as-You-Go Act of 2010. This act requires that the net effect of direct spending and revenue legislation enacted for a fiscal year not cause the deficit to rise or the surplus to decrease over specified periods of time. <5. The Budget Cycle> For any given fiscal year, federal budgeting is often viewed as a cyclical activity that begins with the formulation of the President's annual budget request and concludes with the audit and review of expenditures spreading over a multiyear period. The main stages are formulation and submission to Congress of the President's budget; congressional consideration of budgetary measures, including the budget resolution, appropriations legislation, and other measures as necessary to establish statutory spending and revenue requirements; budget execution; and finally audit and review. While the basic steps continue from year to year, particular procedures and timing can vary in accordance with the President or Congress, as well as various other economic and political considerations. The budget cycle can be discussed within the context of the calendar year, the congressional session, and the fiscal year. The calendar year and congressional sessions exist largely side by side. Since the Budget and Accounting Act of 1921, the President has been required to submit his budget request for the next fiscal year at the beginning of the calendar year. Furthermore, since the ratification of the Twentieth Amendment to the U.S. Constitution in 1933, congressional sessions have begun on January 3 (unless a law is enacted setting a different day). Together, these two factors mean that the consideration of budgetary matters by Congress for the upcoming fiscal year is generally expected to start near the beginning of the calendar year. Since FY1977, the federal fiscal year has been October 1 through September 30, as set by the CBA. Because appropriations legislation typically provides budget authority to be obligated over the course of a single fiscal year, the focus of congressional action in the budget cycle is the consideration and enactment of new annual appropriations legislation before the expiration of prior enacted appropriations (although this process often stretches beyond the beginning of the fiscal year). This focus on the upcoming fiscal year (referred to as the budget year) is reflected in the President's budget proposal and budget resolution as well. Direct spending or revenue legislation, however, may have effective dates that are different from the beginning of the fiscal year. In addition, Section 300 of the CBA establishes a timetable with respect to target dates for certain actions in the congressional budget process. The budget process, however, is not just about a single fiscal year. While the focus for Congress is legislation pertaining to the upcoming fiscal year, it may also need to address legislation, such as supplemental appropriations for disaster relief, affecting the fiscal year in progress or long-term budget planning. Federal agencies also typically deal with multiple fiscal years at the same time: auditing of completed fiscal years, implementing the budget for the current fiscal year, seeking funds from Congress for the upcoming fiscal year, and planning for fiscal years after that. Taken as a whole then, budgetary activities from planning to execution related to the funding for a fiscal year can actually stretch over an extended period of two-and-a-half calendar years (or longer). <6. The Executive Budget Process: Formulation and Content of the President's Budget> The Constitution does not assign a formal role to the President in the federal budget process. It was largely left for agencies to develop and submit their own budget estimates to Congress individually. Although some Presidents made attempts to coordinate or limit agency budget estimates before they were communicated to Congress, such attempts were intermittent and uneven. This was changed by the Budget and Accounting Act of 1921, which created a statutory role for the President in federal budgeting by establishing a framework for a consolidated federal budget proposal to be developed by the President and submitted to Congress prior to the start of each fiscal year. By barring agencies from submitting their budget requests directly to Congress, and making the President responsible for a consolidated budget request, the act altered the institutional responsibilities of the office. The President's budget submission reflects the President's policy priorities and offers a set of recommendations regarding federal programs, projects, and activities funded through appropriations acts as well as any proposed changes to revenue and mandatory spending laws. Under current law, the President is required to submit a budget to Congress no later than the first Monday in February prior to the start of the fiscal year, but preparation typically begins at least nine or 10 months prior to that, approximately 18 months before the start of the fiscal year. OMB coordinates the development of the President's budget by issuing various circulars, memoranda, and other guidance documents to the heads of executive agencies. In particular, OMB Circular No. A-11 is issued annually. It is an extensive document that provides agencies with an overview of applicable budgetary laws, policies for the preparation and submission of budgetary estimates, and information on financial management and budget data systems. Circular A-11 also provides agencies with directions for budget execution and guidance regarding agency interaction with Congress and the public. When agencies begin work on the budget for a forthcoming fiscal year, Congress has not yet made final determinations for the next year. Consequently, agencies must begin the process of developing their budget estimates with a great deal of uncertainty about future economic conditions, presidential policies, and congressional actions. Agency requests are typically submitted to OMB in late summer or early fall and are reviewed by OMB on behalf of the President. Under the Government Performance and Results Act, agencies are required to link the formulation of their budgets with government performance through strategic plans, annual performance plans, and annual performance reports. OMB notifies agencies of decisions regarding their budget and performance plans through what is known as the "passback" and are given an opportunity to make appeals to the OMB director and, in some cases, to the President. Once OMB and the President make final decisions, federal agencies and departments must revise their budget requests and performance plans to conform with these decisions. The content of the budget submission is partly determined by law, but Title 31 authorizes the President to set forth the budget "in such form and detail" as he may determine. Over the years, there has been an increase in the types of information and explanatory material presented in the budget documents. In most years, the budget is submitted as a multi-volume set consisting of a main document setting forth the President's message to Congress and an analysis and justification of his major proposals. Additional supplementary documents typically provide account and program level details (the "Budget Appendix"), historical information ("Historical Tables"), and special budgetary analyses ("Analytical Perspectives"). The latter volume includes multiyear budget estimates that project spending and revenues where current policies are continued (called the "current services baseline") as well as spending and revenues under the President's proposed policy changes, among other things. In support of the President's appropriations requests, agencies prepare additional materials, frequently referred to as congressional budget justifications. These materials provide more detail than is contained in the President's budget documents and are used in support of agency testimony during Appropriations subcommittee hearings on the President's budget. The President is also required to submit a supplemental summary of the budget, referred to as the Mid-Session Review, before July 16 of each year. The Mid-Session Review is required to include any substantial changes in estimates of expenditures or receipts, as well as any changes or additions to proposals made in the earlier budget submission. The President may also submit other supplemental requests or revisions to Congress at other times during the year. <7. The Congressional Budget Process> Until the 1970s, congressional consideration of the multiple budgetary measures considered every year lacked any formal coordination. Instead, Congress considered these various spending and revenue measures separately, sometimes informally comparing them to proposals in the President's budget. That was changed by the CBA of 1974. The CBA provides for the adoption of a concurrent resolution on the budget, allowing Congress to make decisions about overall fiscal policy and priorities as well as to coordinate and establish guidelines for the consideration of various budget-related measures. This budget resolution sets aggregate budget policies and functional priorities for the upcoming budget year and for at least four additional fiscal years. In recent practice, budget resolutions have often covered a 10-year period. Because a concurrent resolution is not a law, the President cannot sign or veto it, and it does not have statutory effect, so no money can be raised or spent pursuant to it. The main purpose of the budget resolution is to establish the framework within which Congress considers separate revenue, spending, and other budget-related legislation. Revenue and spending amounts set in the budget resolution establish the basis for the enforcement of congressional budget policies through points of order . The budget resolution may also be used to initiate the reconciliation process for conforming existing revenue and direct spending laws to congressional budget policies (described below). <7.1. The Budget Resolution: Formulation, Content, and Consideration> For each fiscal year covered in a budget resolution, Section 301(a) of the CBA requires that it include budget aggregates and spending levels for each functional category of the budget. The aggregates in the budget resolution include: total revenues (and the amount by which the total is to be changed by legislative action); total new budget authority and outlays; the surplus or deficit; and public debt. With regard to each of the functional categories, the budget resolution must indicate for each fiscal year the amounts of new budget authority and outlays, and they must add up to the corresponding spending aggregates. Because they are considered off-budget, the aggregate amounts in the budget resolution do not reflect the revenues or spending of the Social Security trust funds, although these amounts are set forth separately in the budget resolution for purposes of Senate enforcement procedures. Similarly, the off-budget status of the Postal Service means that only an appropriation to subsidize certain mail costs is included in the budget resolution. In addition, the CBA requires that the report accompanying the budget resolution in each chamber include the following information: a comparison of total new budget authority, total outlays, total revenues, and the surplus or deficit for each fiscal year set forth in the budget resolution with the amounts requested in the budget submitted by the President; the estimated levels of total new budget authority and total outlays, divided between discretionary and mandatory amounts, for each major functional category; the economic assumptions that underlie the matters set forth in the budget resolution and any alternative assumptions and objectives the Budget Committee considered; information, data, and comparisons indicating the manner in which, and the basis on which, the Budget Committee determined each of the matters set forth in the resolution; the estimated levels of tax expenditures by major items and functional categories for the President's budget and in the budget resolution; and the committee spending allocations (commonly referred to as Section 302(a) allocations after the applicable section of the CBA). The budget resolution does not allocate funds among specific programs or accounts, but allocations of total spending in the budget resolution are made to committees with spending jurisdiction under Section 302(a). Major program assumptions underlying the functional amounts are often discussed in the reports accompanying the resolution. While the allocation to a committee is enforceable, these assumptions are not binding. Finally, Section 301(b) identifies certain additional matters that may be included in the budget resolution. Perhaps the most significant optional feature of a budget resolution is reconciliation directives (discussed below). The House and Senate Budget Committees are responsible for marking up and reporting the budget resolution. In the course of developing the budget resolution, the Budget Committees hold hearings, receive "views and estimates" reports from other committees, and obtain information from CBO. These "views and estimates" reports of House and Senate committees provide the Budget Committees with information on the preferences and legislative plans of congressional committees regarding budgetary matters within their jurisdiction. The extent to which the Budget Committees (and the House and Senate) consider particular programs when they act on the budget resolution varies from year to year. Specific programmatic funding decisions remain the responsibility of the Appropriations Committees and the committees with direct spending jurisdiction, but there is a strong likelihood that major issues will be discussed in markup, in the Budget Committees' reports, and during floor consideration of the budget resolution. Although any programmatic assumptions generated in this process are not binding on the committees of jurisdiction, they often influence the final outcome. Floor consideration of the budget resolution is guided by the statutory provisions in the CBA and by House and Senate rules and practices. In the House, the Rules Committee usually reports a special rule, which, once approved, establishes the terms and conditions under which the budget resolution is considered. This special rule typically specifies which amendments may be considered and the sequence in which they are to be offered and voted on. It has been the practice of the House to allow consideration of a few amendments (as substitutes for the entire resolution) that present broad policy choices. In the Senate, the consideration is less structured, but there are some notable constraints that apply to consideration of budget resolutions that do not apply to the consideration of legislation generally. In particular, Section 305 of the CBA limits debate on the initial consideration of a budget resolution and all amendments, debatable motions, and appeals to not more than 50 hours with the time equally divided between, and controlled by, the majority and the minority. The effect of the limit on debate time is that a cloture process requiring three-fifths support is not necessary to reach a final vote on a budget resolution, so the question can be decided by a simple majority. In addition, all amendments offered must be germane. Although there is a limit on debate time, there is no limit on the number of amendments so that consideration of amendments (as well as other motions and appeals) may continue but without debate (sometimes referred to as a "vote-a-rama"). Although no further debate time is available, the Senate has sometimes agreed by unanimous consent to accelerated voting procedures, allowing a nominal amount of time to identify and explain an amendment before voting. The CBA imposes no procedural limit on the duration of a vote-a-rama. The CBA provides that a motion to proceed to consideration of a conference report on a budget resolution in the Senate may be made at any time and that all debate on the conference report (and any amendments, debatable motions, or appeals) is limited to 10 hours. As with the limit on debate time for initial consideration, this limit means that in the Senate a cloture process requiring three-fifths support is not necessary to reach a final vote, so the question can be decided by a simple majority. Although the CBA also provides for House consideration of a conference report on a budget resolution, the House routinely considers a conference report under a special rule, usually limiting debate to one hour. Achievement of the policies set forth in the annual budget resolution depends on the subsequent legislative actions taken by Congress (and their approval or disapproval by the President), the performance of the economy, and technical considerations. Many of the factors that determine whether budgetary goals will be met are beyond the direct control of Congress. If economic conditions growth, employment levels, inflation, and so forth vary significantly from projected levels, so too will actual levels of revenue and spending. Similarly, actual levels of spending or receipts may also differ substantially if the technical factors upon which estimates were based prove faulty, such as the number of participants who become eligible or apply for benefits under a direct spending program. <7.2. Deeming Resolutions and Other Alternatives to the Budget Resolution> If the House and Senate do not reach final agreement on a budget resolution it can complicate the budget process. In the absence of a budget resolution, the House and Senate often lack the basis for using points of order to limit the budgetary impact of legislation, and it may also be more difficult to coordinate consideration of the various measures with budgetary impact, both within each chamber and between the chambers, or to assess a measure's relationship to overall budgetary policies and goals. For example, Section 303 of the CBA prohibits consideration of budgetary legislation prior to adoption of the budget resolution. The House is permitted to consider regular appropriations bills after May 15 even if a budget resolution has not been adopted, but without a budget resolution there would be no enforceable upper limit on the overall level of appropriations. In the absence of a budget resolution, however, Congress may use alternative means to establish enforceable budget levels. When Congress has been late in reaching final agreement on a budget resolution or has not reached agreement at all, the House and Senate, often acting separately, have used legislative procedures to deal with enforcement issues on an ad hoc basis. These alternatives are typically referred to as "deeming resolutions," because they are deemed to serve in place of an agreement between the two chambers on an annual budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year (or multiple fiscal years). Often, a chamber initiates action on a deeming resolution so that it can subsequently begin consideration of appropriations measures with enforceable limits. Deeming resolutions have varied in terms of the legislative vehicle used to establish them, the timing and duration of their effect, and their content. Congress initially used simple resolutions in each chamber as the legislative vehicle for deeming resolutions (which is why they are referred to as resolutions). In the House, deeming resolutions have often been included in the same resolution providing for consideration of the first appropriations measure for the upcoming fiscal year. Deeming resolutions have also been included as provisions in lawmaking vehicles, such as appropriations bills or statutory budget enforcement legislation. For example, the Budget Control Act of 2011 included provisions for the purpose of budget enforcement for FY2012 and FY2013 to apply in the Senate only if Congress did not agree on a budget resolution for either of those years. These provisions allowed the Senate Budget Committee chair to file in the Congressional Record enforceable levels consistent with the statutory spending caps (for discretionary spending) and with baseline projections made by the CBO (for direct spending and revenues). Subsequent measures enacted to modify the spending limits included similar provisions for the House or Senate or both. Adopting a deeming resolution does not preclude later action to approve a budget resolution. In some cases when Congress has been late in reaching final agreement on a budget resolution, either or both chambers have chosen to use a deeming resolution in order to allow the appropriations process to move forward in a more timely and coordinated fashion and later superseded it through final adoption of a budget resolution. Deeming resolutions have typically included at least two things: (1) language setting forth or referencing specific enforceable budgetary levels (such as an aggregate spending limit or committee spending allocations) and (2) language stipulating that such levels are to be enforceable as if they had been included in a budget resolution. Even so, significant variations exist in their content, with some incorporating (either in their text or by reference) language mirroring everything in a budget resolution adopted in that chamber but not adopted in final form by both. <7.3. Budget Enforcement> Regardless of whether Congress establishes budgetary parameters in a budget resolution or some other legislative vehicle, in order for enforcement procedures to work, Congress must be able to relate the budgetary effect of an individual measure to these overall budget parameters to determine whether it would be consistent with those parameters. In order to do so, Congress has sought access to complete and up-to-date budgetary information. A baseline is a projection of federal spending and receipts during the current or future fiscal year under existing law. It provides a benchmark for measuring the impact of proposed changes to existing policies. Projections of the impact of proposed or pending legislation, referred to as scoring or scorekeeping , allow Congress to be informed about the budgetary consequences of its actions. When a measure with spending or revenue impact is under consideration, scoring information helps Members determine whether a bill or amendment would violate budgetary rules. Scoring also allows Congress to determine how best to achieve the budgetary goals. Section 312(a) of the CBA designates the House and Senate Budget Committees as the principal scorekeepers for Congress. They provide each chamber's presiding officer with the estimates needed to make decisions about points of order enforcing budgetary parameters. The Budget Committees also make periodic summary scorekeeping reports that are placed in the Congressional Record . CBO assists Congress in these activities by preparing cost estimates of legislation, which are included in committee reports, and scoring reports for the Budget Committees. The Joint Committee on Taxation also supports Congress by preparing estimates of the budgetary impact of revenue legislation. Although a budget resolution does not become law, Congress has a variety of tools that it may use for enforcing the decisions made in it. The CBA includes several provisions designed to encourage congressional compliance with the budget resolution. The House and Senate have also adopted other limits, as part of their standing rules, as procedural provisions in budget resolutions, or as a part of some other measure to establish other budgetary rules, limits, and requirements. In particular, the overall spending ceiling, revenue floor, and committee allocations of spending determined in a budget resolution are all enforceable by points of order in both the House and the Senate. In addition, Appropriations Committees are required to make subdivisions of their committee allocation, and these too are enforceable by points of order. Legislation breaching other budgetary limits or causing increases in the deficit would also generally be subject to points of order. Points of order are effectively prohibitions against certain types of legislation or other congressional actions being taken in the legislative process. Points of order are not self-enforcing, however. A point of order must be raised by a Member on the floor of the chamber before the presiding officer can rule on its application and thus for its enforcement. In the Senate, most points of order related to budget enforcement may be waived by a vote of three-fifths of all Senators duly chosen and sworn (60 votes if there are no vacancies). Although the presiding officer may rule on whether the point of order is well taken, in practice Senators will typically make a motion to waive the application of the rule. If the waiver motion fails, the presiding officer will then rule the provision or amendment out of order. As with other provisions of Senate rules, budget enforcement points of order may also be waived by unanimous consent. In the House, points of order, including those for budget enforcement, may be waived by the adoption of special rules, although other means (such as unanimous consent or suspension of the rules) may also be used. A waiver may be used to protect a bill, specified provision(s) in a bill, or an amendment from a point of order that could be raised against it. Waivers may be granted for one or more amendments even if they are not granted for the underlying bill. The House may waive the application of one or more specific points of order, or it may include a "blanket waiver," that is, a waiver that would protect a bill, provision, or amendment from any point of order. <7.4. The Reconciliation Process> Because a budget resolution is in the form of a concurrent resolution and is not enacted into law, any statutory changes concerning spending or revenues that are necessary to implement changes in budget policies must be enacted in separate legislation. Reconciliation is an optional legislative process that affords Congress an opportunity to use an expedited procedure to accomplish this. As provided in Section 310 of the CBA, reconciliation consists of several stages, beginning with congressional adoption of the budget resolution, that allow Congress to make policy changes within the jurisdiction of specified committees. The reconciliation process allows a certain measure (or measures) to be privileged for consideration and then allows Congress to use an expedited procedure when considering it. These procedures include directing committees to draft legislative language to fit specific desired budgetary outcomes, packaging language from multiple committees into omnibus legislation, limiting amending opportunities, and limiting the duration of debate on the Senate floor. If Congress intends to use the reconciliation process, reconciliation instructions to committees must first be included in the budget resolution. This feature alone places perhaps the most significant limitation on the use of reconciliation. A budget resolution can be adopted with a simple majority, but because bicameral agreement on the budget resolution is a necessary first step, the House and Senate must collectively agree on the need for reconciliation. If such an agreement can be achieved, reconciliation instructions can then trigger the second stage of the process by directing specific committees to develop and report legislation that would change laws within their respective jurisdictions related to spending, revenues, or the debt limit. If a committee is instructed to submit legislation reducing spending (or the deficit) by a specific amount, that amount is considered a minimum, meaning that a committee may report greater net savings. If a committee is instructed to submit legislation increasing revenues by a specific amount, that amount would also be considered a minimum. If a committee is instructed to decrease revenue, however, that amount would be considered a maximum. Although there is no procedural mechanism to ensure that legislation developed by a committee in response to reconciliation instructions will be in compliance with the instructed levels, if a committee does not report legislation or such legislation is not fully in compliance with the instructions, procedures are available that would allow either chamber to move forward with reconciliation nevertheless. For example, legislative language that falls within the jurisdiction of the noncompliant committee can be added to a reconciliation bill during floor consideration that will bring the bill into compliance. These methods vary by chamber. In the development of legislation in response to reconciliation instructions, the policy choices remain the prerogative of the committee. In some instances, reconciliation instructions have included particular policy options or assumptions regarding how an instructed committee might be expected to achieve its reconciliation target, but such language has not been considered binding or enforceable. Reconciliation instructions may further direct the committee to report the legislation for consideration in its respective chamber or to submit the legislation to the Budget Committee to be included in an omnibus reconciliation measure. If it will be included in an omnibus measure, the CBA requires that the Budget Committee report such a measure "without any substantive revision." Although reconciliation instructions may include target dates for committees to submit their legislative language, there is no requirement that the Budget Committee, in either chamber, report a reconciliation bill by that date. As a consequence, the target date included in reconciliation instructions is not necessarily indicative of a timetable for consideration of reconciliation legislation. In the House, floor consideration of reconciliation legislation has historically been governed by special rules reported from the House Rules Committee. These special rules have established the duration of a period of general debate as well as provided for a limited number of amendments (if any) that may be considered before the House votes on final passage. In the Senate, reconciliation legislation is eligible to be considered under expedited procedures. The Senate has interpreted the CBA to allow it to take up a reconciliation bill by agreeing to a nondebatable motion to proceed to its consideration. Because it is nondebatable, a majority can vote immediately to take it up so that a cloture process requiring three-fifth support is not necessary to reach a vote on the question of whether to take up a reconciliation bill. For a reconciliation bill, as with a budget resolution, a distinguishing feature is that there are limits on the consideration of the bill as well as any amendments. Section 310 of the CBA limits total debate time on a reconciliation measure including all amendments, motions, or appeals to 20 hours, equally divided and controlled by the majority and minority. As with a budget resolution, because the limit is on debate time (rather than all consideration), after the debate time has expired, Senators may continue to offer amendments (and make other motions or appeals) in a vote-a-rama although no further debate is allowed. Despite this, the limit on debate time has meant that, in practice, it has been unnecessary for a supermajority of the Senate to invoke cloture in order to reach a final vote on a reconciliation bill so that it can be passed by a simple majority. Perhaps the best-known limit on the content of reconciliation bills or amendments is the so-called Byrd Rule (Section 313 of the CBA). This rule prohibits including extraneous provisions in the measure or offering them as amendments. In general, this means that it prohibits the inclusion of nonbudgetary provisions in reconciliation legislation or provisions that are otherwise contrary to achieving the purposes established in reconciliation instructions. If a Byrd Rule point of order is sustained on the floor against a provision in the bill as reported by committee, the provision is stricken, but further consideration of the bill may continue. If the point of order is sustained against an amendment, the amendment's further consideration would not be in order. The CBA also places other limits on the content of reconciliation bill amendments. For example, all amendments must be germane to the bill, meaning that amendments generally cannot be used to expand the scope of a reconciliation bill beyond that of the provisions reported from an instructed committee (although a motion to commit or recommit that would bring a committee into compliance with its instructions would not be limited by this rule). Limits on amendments' budgetary impact also exist. Amendments, for example, may not increase the level of spending (or reduce the level of revenues) provided in the bill unless such effects are offset. Together, these rules have the effect of protecting the policy changes proposed by an instructed committee in ways that are not generally available under the Senate's regular procedures. In most cases, points of order related to limiting the content of reconciliation bills may be waived by a vote of three-fifths of all Senators. As with all legislation, any differences in the reconciliation legislation passed by the two chambers must be resolved before the bill can be sent to the President for approval or veto. Conference reports on a reconciliation bill, as for other legislation, are privileged for consideration by the Senate so that a majority can quickly vote to take up a conference report without first invoking cloture. The CBA, however, does provide that all debate on the conference report for a reconciliation bill (and any amendments, debatable motions, or appeals) is limited to 10 hours. In the House, the routine practice has been to consider a conference report under a special rule, usually limiting debate to one hour. Reconciliation first became a powerful legislative tool because reconciliation directives in a budget resolution could be used as a means to require specific legislative committees to make policy choices that would implement overall budgetary goals. Although there are constraints on the use of reconciliation, especially the need for bicameral agreement to initiate the procedure and points of order that limit the content of reconciliation bills, it has continued to be important because it has evolved to provide Congress with a procedure that has been employed to achieve a variety of budgetary and policy purposes. In particular, the limit on time for floor debate in the Senate has meant that major legislation can be enacted by majority vote without the need for a supermajority to first invoke cloture. <8. The Annual Appropriations Process> Discretionary spending is provided through a characteristically annual process in which Congress enacts regular appropriations measures. As an exercise of their constitutional authority to determine their rules of proceeding, both chambers have adopted rules that facilitate their ability to define and provide for consideration of these measures. One fundamental aspect of this has been to limit appropriations to purposes authorized by law. This requirement allows Congress to distinguish between legislation that addresses only questions of policy and that which addresses questions of funding and to provide for their separate consideration. In common usage, the terms used to describe these types of measures are authorizations and appropriations , respectively. An authorization may generally be described as a statutory provision that defines the authority of the government to act. It can establish or continue a federal agency, program, policy, project, or activity. Further, it may establish policies and restrictions and deal with organizational and administrative matters. It may also, explicitly or implicitly, authorize subsequent congressional action to provide appropriations. By itself, however, an authorization of discretionary spending does not provide funding for government activities. An appropriation may generally be described as a statutory provision that provides budget authority, thus permitting a federal agency to incur obligations and make payments from the Treasury for specified purposes, usually during a specified period of time. The authorizing and appropriating tasks are largely carried out by a division of labor within the committee system and preserved under House and Senate rules. Legislative committees such as the House Committee on Armed Services and the Senate Committee on Commerce, Science, and Transportation are responsible for authorizing legislation related to the agencies and programs under their jurisdiction. Most standing committees have authorizing responsibilities. The Appropriations Committees of the House and Senate have jurisdiction over appropriations measures, including annual appropriations bills, supplemental appropriations bills, and continuing resolutions. <8.1. Authorizing Legislation> The primary purpose of authorization statutes or provisions is to provide authority for an agency to administer a program or engage in an activity. These are sometimes referred to as "organic" or "enabling" authorizations. It is generally understood that such statutory authority to administer a program or engage in an activity also provides an implicit authorization for Congress to appropriate for such program or activity. Appropriations may also be authorized explicitly for definite or indefinite amounts (i.e., "such sums as may be necessary"), either through separate legislation or as part of an organic statute (that is, the legislation that establishes the agency mission or programmatic parameters). These are sometimes referred to as "authorizations of appropriations." If such an authorization of appropriations is present, it may have to be renewed annually or periodically, and it may expire even though the underlying authority in an organic statute to administer such a program or engage in such an activity does not. Most federal agencies operate under a patchwork of authorizing statutes that govern various requirements and duties. Furthermore, there is no requirement in either chamber that the structure of authorizations mirror the account structure in appropriations bills. As a consequence, the burden of proving the authorization for funding carried in an appropriations bill falls on the proponents and managers of the bill. The rules of the House and Senate establish a general expectation that agencies and programs be authorized in law before an appropriation is made to fund them. An appropriation in the absence of a current authorization, in excess of an authorization ceiling, or for purposes not previously authorized by law is commonly called an "unauthorized appropriation." Conversely, while authorizations can impose a procedural limit on appropriations, Congress is not required to provide appropriations for an authorized discretionary spending program. House and Senate rules also preserve the distinction between authorizations and appropriations by prohibiting the inclusion of general legislative language in appropriations measures. The division between an authorization and an appropriation, however, is a procedural construct of House and Senate rules created to apply to congressional consideration. Consequently, the term unauthorized appropriations does not convey a legal meaning with regard to subsequent funding. If unauthorized appropriations or legislation remain in an appropriations measure as enacted, either because no one raised a point of order or the House or Senate waived the rules, the provision will still have the force of law. Unauthorized appropriations, if enacted, are therefore generally available for obligation or expenditure. Similarly, any legislative provisions enacted in an annual appropriations act also generally have the force of law for the duration of that act unless otherwise specified. <8.2. Regular Appropriations Legislation> An appropriation is a law passed by Congress that provides federal agencies legal authority to incur obligations and the Treasury Department authority to make payments for designated purposes. The power of appropriation derives from the Constitution, which in Article I, Section 9, provides that "[n]o money shall be drawn from the Treasury but in consequence of appropriations made by law." The power to appropriate is exclusively a legislative power; it functions as a limitation on the executive branch. An agency may not spend more than the amount appropriated to it, and it may use available funds only for the purposes and according to the conditions provided by Congress. The Constitution does not require annual appropriations, but since the First Congress the practice has been to make appropriations for a single fiscal year. Appropriations must be used (obligated) in the fiscal year for which they are provided unless the law provides that they shall be available for a longer period of time. All provisions in an appropriations act, such as limitations on the use of funds, expire at the end of the fiscal year unless the language of the act extends their period of effectiveness. Congress passes three main types of appropriations measures. Regular appropriations acts provide budget authority to agencies for the next fiscal year. Supplemental appropriations acts provide additional budget authority during the current fiscal year when the regular appropriation is insufficient or to finance activities not provided for in the regular appropriation. Continuing appropriations acts provide interim (or full-year) funding for agencies that have not received a regular appropriation. In a typical session, Congress acts on 12 regular appropriations bills. In recent years, Congress has merged two or more of the regular appropriations acts (sometimes termed "minibus" or "omnibus" appropriations legislation) for a fiscal year at some point during their consideration. In current practice, there are both statutory and procedural limits on the level of discretionary spending. A statutory limit on discretionary spending was established under the BCA for each fiscal year from FY2012 through FY2021, divided into separate defense and nondefense categories. A procedural limit on total appropriations can be established under a budget resolution or some alternate measure (see sections on the budget resolution and deeming resolutions in this report). Once the amount is established, it is allocated to the Appropriations Committee in each chamber pursuant to Section 302(a) of the CBA. Section 302(b) further requires the Appropriations Committee in each chamber to subdivide the total allocation among its subcommittees. By long-standing custom, appropriations measures originate in the House of Representatives. In the House, appropriations measures are originated by the Appropriations Committee (when it marks up or reports the measure) rather than being introduced by a Member beforehand and referred to the committee. Before the full committee acts on the bill, it is drafted and considered in the relevant Appropriations subcommittee. The House and Senate Appropriations Committees currently have 12 parallel subcommittees. The House subcommittees typically hold extensive hearings on appropriations requests shortly after the President's budget is submitted. In marking up their appropriations bills, the various subcommittees are then guided by the discretionary spending limits and the subdivisions made to them by the full committee under Section 302(b) of the CBA. The Senate usually considers appropriations measures after they have been passed by the House. When House action on appropriations bills is delayed, however, the Senate may expedite its actions by considering a Senate-numbered bill up to the stage of final passage. In this scenario, upon receipt of the House-passed bill in the Senate, it is amended with the text that the Senate has already agreed to (as a single amendment) and then passed by the Senate. The basic unit of an appropriation bill is an account. A single unnumbered paragraph in an appropriations act comprises one account, and all provisions of that paragraph pertain to that account and to no other unless the text expressly gives them broader scope. Any provision limiting the use of funds enacted in that paragraph is a restriction on that account alone. Over the years, appropriations have been consolidated into a relatively small number of accounts. It is not uncommon for a federal agency to have a single account for all its expenses of operation and additional accounts for other purposes such as construction. Accordingly, most appropriation accounts encompass a number of activities or projects. The appropriation sometimes includes directives or provisos that allot specific amounts to particular activities within the account, but the more common practice is to provide detailed information on the amounts intended for each activity in other sources, principally the committee reports accompanying the measures. In addition to the substantive limitations (and other provisions) associated with each account, each appropriations act has "general provisions" that apply to all of the accounts in a title or in the whole act. These general provisions appear as numbered sections, usually at the end of the title or the act. If not otherwise specified, an appropriation is for a single fiscal year so that the funds have to be obligated during the fiscal year for which they are provided and that they lapse if not obligated by the end of that year. Congress can also specify that an appropriation remains available for obligation for another period or even that it remain available until expended (termed "no-year" funds). <8.3. Continuing Resolutions> The routine activities of most federal agencies are funded annually by one or more of the regular appropriations acts. When action on the regular appropriations acts is delayed, however, one or more continuing appropriations acts (also referred to as a continuing resolution, or CR) may be used to provide interim budget authority in order to prevent a funding gap or the need for a shutdown of government activities. This may occur if regular annual appropriations acts are not enacted by the beginning of the fiscal year (October 1), or upon the expiration of a prior CR, until action on the regular appropriations acts is completed. In providing temporary funding, CRs have typically addressed several issues: Coverage. CRs have provided funding for certain activities. In current practice, this is typically specified with reference to the prior fiscal year's appropriations acts. Duration. CRs have provided budget authority for a specified duration of time. In some cases this may be as short as a single day, although a CR can provide funding for the remainder of the fiscal year. CRs include language that provides that the CR may be superseded by a regular appropriations act if it is enacted prior to the expiration of the CR. Rate. Since CRs typically provide funds for a limited period, they generally provide those funds based on a rate rather than a set amount. This rate can be set at the rate of operations funded in the previous year, it can be the previous rate of operations adjusted by some percentage, or it can be based on some other amount. This is in contrast to regular and supplemental appropriations acts, which generally provide specific amounts for each account. Other factors may also have an impact on interpreting the rate of operations, such as historical spending patterns or provisions commonly included in CRs that would require funds be apportioned at the rate necessary to avoid furloughs or limit funds for programs with high initial rates of operation or complete distribution of appropriations at a set time during a fiscal year (that is, all or most of the funds would be used at a single set time during the fiscal year). For mandatory spending that is funded through appropriations acts, CRs normally provide for a rate of funding sufficient to maintain program levels under current law since the levels necessary to meet obligations are independent of prior year actions. Funds expended under a CR are considered a portion of the total amount subsequently provided for the entire fiscal year when a regular appropriation bill is later enacted into law. Limits on u sage. CRs typically include language carrying forward any terms and conditions on the obligation of such budget authority in the prior fiscal year. CRs have also included language specifying that funding provided in the CR should be implemented so that only the most limited action allowed by law be taken with respect to providing for continuation of projects and activities in order to preserve congressional prerogative to later determine the amount available. Another typical feature of CRs is language to prohibit "new starts" in order to limit agencies, particularly the Department of Defense, the authority to make long-term commitments while operating under temporary funding or to prevent agencies from initiating or resuming any project or activity for which appropriations were not available during the prior fiscal year. Specific a djustments. The duration and amount of funds in the CR and purposes for which they may be used may be adjusted for specified activities or programs for example, to provide that funds for a certain program be based on an amount different from the rate for the previous year. These adjustments are commonly termed "anomalies." <9. The Executive Budget Process: Budget Execution> After enactment of a particular appropriation into law, federal agencies must attempt to interpret and apply its terms in order to execute their budgetary responsibilities. Agencies may generally obligate and expend funds subject to any conditions addressed by appropriations statutes guided by three general principles: the purpose(s) for which particular funds are appropriated, which may be expressed in statute in more or less detail and, in some cases, with certain restrictions; the time period during which funds are available for obligation and expenditure sometimes referred to as the period of availability or duration of appropriations; and the amount of appropriated funds that may be obligated and expended. Within the contours of these statutory conditions on the availability of funds, agencies may nevertheless exercise some discretion regarding how funds are allocated and the pace at which funds are obligated and spent. <9.1. The Antideficiency Act and Apportionment> The so-called Antideficiency Act consists of a series of provisions and revisions incorporated into appropriations laws over the years relating to matters such as prohibited activities, the apportionment system, and budgetary reserves. These provisions, now codified in two locations in Title 31 of the United States Code , continue to play a pivotal role in the execution phase of the federal budget process, when the agencies actually spend the funds provided in appropriations laws. The origins of the Antideficiency Act date back to 1870, which provided: that it shall not be lawful for any department of the government to expend in any one fiscal year any sum in excess of appropriations made by Congress for that fiscal year, or to involve the government in any contract for the future payment of money in excess of such appropriations. Later modifications, particularly the Antideficiency Acts of 1905 and 1906, sought to strengthen the prohibitions of the 1870 law by expanding its provisions, adding restrictions on voluntary services for the government, and imposing criminal penalties for violations. These laws also established a new administrative process for budget execution, termed "apportionment," which requires that budget authority provided to federal agencies in appropriations acts be allocated in installments, rather than all at once. By apportioning funds, agencies can prevent operating at a rate that would expend all budget authority before the end of the fiscal year or end the year with substantial amounts unobligated. Four main types of prohibitions are contained in the Antideficiency Act, as amended: (1) making expenditures in excess of the appropriation; (2) making expenditures in advance of the appropriation; (3) accepting voluntary service for the United States, except in cases of emergency; and (4) making obligations or expenditures in excess of an apportionment or reapportionment or in excess of the amount permitted by agency regulation. One significant impact of the Antideficiency Act has been concern with the potential for a government shutdown as a response to a funding gap. In 1980 and early 1981, then-Attorney General Benjamin Civiletti issued opinions in two letters to the President. The "Civiletti Letters" have continued to have effect through guidance provided to federal agencies under various OMB circulars clarifying the limits of federal government activities upon the occurrence of a funding gap. The Civiletti Letters state that, in general, the Antideficiency Act requires that if Congress has enacted no appropriation beyond a specified period, the agency may make no contracts and obligate no further funds for activities associated with the lapsed appropriation except as "authorized by law." In addition, because no statute generally permits federal agencies to incur obligations without appropriations for the pay of employees, the Antideficiency Act does not, in general, authorize agencies to employ the services of their employees upon a lapse in appropriations, though it does permit agencies to fulfill certain legal obligations connected with the orderly termination of agency operations. The second letter, from January 1981, discusses the more complex issue of interpretation presented with respect to obligational authorities that are "authorized by law" but not manifested in appropriations acts. In a few cases, Congress has expressly authorized agencies to incur obligations without regard to available appropriations. More often, it is necessary to inquire under what circumstances statutes that vest particular functions in government agencies imply authority to create obligations for the execution of those functions despite a lack of current appropriations. It is under this guidance that exceptions may be made for activities involving "the safety of human life or the protection of property." As a consequence of these guidelines, when a funding gap occurs, executive agencies begin a shutdown of the affected projects and activities, including the furlough of non-excepted personnel. <9.2. Reprogramming and Transfers> The language by which funds are provided to federal agencies may vary in the level of discretion agencies have to determine how to spend the funds that have been provided. One type of discretion that commonly occurs is with respect to the purposes for which funds are available when appropriations are provided as a lump sum with little or no specificity in the appropriations statute. Even when the purpose of appropriations has been specified in detail, agencies have some flexibility to determine how they will use their available budgetary resources during the fiscal year. For example, agencies may shift funds from one purpose or object to another through reprogramming and transfers. Reprogramming is the shifting of funds within an appropriation account from one object class to another or from one program activity to another. Generally, agencies may make such shifts without additional statutory authority, but often they must provide some form of notification to the appropriations committees, authorizing committees, or both. A transfer is the shifting of budget authority from one appropriation account to another. Agencies may transfer budget authority only as specifically authorized by law. In most cases, transfers involve movement of funds within an agency or department, but they may also involve movement of funds between two or more agencies or departments. Transfer authority may be provided either in authorizing statutes or in appropriations acts. In addition, statutory provisions that provide transfer authority will require the agency to notify Congress. In general, both transferred and reprogrammed funds are subject to any limitations or conditions that were imposed by the appropriations act that originally made it available. All original restrictions remain in effect on transferred funds regardless of whether the funds in the receiving appropriations account have different restrictions or characteristics than the funds being transferred. In other words, limitations and restrictions follow the funds. Additional restrictions may be imposed by statutes to limit transfer or reprogramming authority in certain circumstances or with respect to certain agencies. Such restrictions may be specified in terms of an amount or a percentage. One example of a statutory restriction would be language that places a cap on the amounts that may be transferred. Such caps may be imposed on either the account from which funds are being transferred or the account receiving the transferred funds. These restrictions are commonly referred to as "not-to-exceed" limits. <9.3. Impoundment> Although an appropriation limits the amounts that can be spent, it also establishes the expectation that the available funds will be used to carry out authorized activities. Therefore, when an agency declines to use all or part of an appropriation, it deviates from the intentions of Congress. Although Presidents have sometimes asserted that they are not obligated to spend appropriated funds, Supreme Court decisions especially Train v. City of New York (420 U.S. 35 [1975]) and the Impoundment Control Act of 1974 (ICA) limit their authority to reduce or withhold agency funding, by action or inaction, that prevents the obligation and expenditure of budget authority. An impoundment is an action or inaction by the President or a federal agency that delays or withholds the obligation or expenditure of budget authority provided in law. The ICA divides impoundments into two categories and establishes distinct procedures for each: A deferral delays the use of funds; a rescission is a presidential request that Congress rescind (cancel) an appropriation or other form of budget authority. Deferral and rescission are exclusive and comprehensive categories. That is, an impoundment is either a rescission or a deferral it cannot be both or something else. As originally enacted, the ICA also created a process through which the President could propose a deferral of budget authority (meaning to delay its availability), and either the House or Senate could prevent the deferral by adopting a resolution disapproving it. The process by which a single chamber could prevent the exercise of authority delegated to the executive branch (known as a "legislative veto") was later found unconstitutional, however. Specifically, after the Supreme Court invalidated an unrelated one-house legislative veto in INS v. Chadha , 462 U.S. 919 (1983), the Court of Appeals for the D.C. Circuit applied the reasoning of Chadha to invalidate the deferral provisions in the ICA. This decision in City of New Haven v. United States (809 F.2d 900 [D.C. Cir. 1987]), also struck down the statutory authority of the President to make deferrals for policy reasons as inseverable from the unconstitutional legislative veto. After the court decisions, as well as GAO administrative interpretations of the issue, Congress amended the ICA in 1987 to eliminate the one-house disapproval and specify that deferrals be "permissible only: (1) to provide for contingencies; (2) to achieve savings made possible by or through changes in requirements for greater efficiency of operations; or (3) as specifically provided by law." In addition, deferrals could not be proposed for any period extending beyond the end of the fiscal year for which the proposal was reported. Prior to the enactment of the ICA, when the President withheld appropriated funds from obligation, there was no explicit statutory limit on the length of time that funds could be withheld. Under the ICA, however, whenever the President seeks to withhold funds from obligation, he must submit a special rescission message to Congress. The funds can be withheld only for the 45-day period specified in the act after the receipt of the special presidential message. The special presidential message to Congress must specify the amount to be rescinded, the accounts and programs involved, the estimated fiscal and program effects, and the reasons for the rescission. Multiple rescissions can be grouped in a single message. After the message has been received, Congress can choose to consider and pass a rescission bill that includes all, part, or none of the amount proposed by the President. The funds reserved pursuant to a rescission request must be released after the 45-day period unless Congress has completed action on a bill to rescind the budget authority. GAO is granted responsibilities to oversee and enforce executive branch compliance with the act. The ICA also created legislative procedures for the House and Senate to facilitate congressional review of presidential rescission requests. These procedures can effectively place a time limit on committee consideration and restrict floor debate in both chambers. The procedures discourage a filibuster in the Senate and eliminate the need for three-fifths support in the Senate to reach a final vote on the bill. These expedited procedures are available only during the 45-day period during which funds are withheld. The President can also propose cancellations of budget authority in ways other than the method described in the ICA for requesting rescissions. Funds requested for cancellation, however, may not be withheld from obligation pending congressional action. Although the Trump Administration has submitted rescission requests to Congress, during the two prior presidential Administrations, the President chose not to send rescission proposals pursuant to the ICA. Both President Barack Obama and President George W. Bush proposed cancellations of budget authority, but they chose not to do so by submitting a special message under the terms prescribed by the ICA. Conversely, Congress can, and often does, initiate the rescission of funds on its own and may choose to consider legislation rescinding funds using the regular legislative process. Rescissions are regularly included in appropriations bills, for example. <9.4. Sequestration> Sequestration was the principal means used to enforce statutory budget enforcement policies in place from 1985 through 2002, and it is the principal means used to enforce the requirements of the Statutory PAYGO Act and the statutory limits on discretionary spending under the BCA. In addition, sequestration is used to achieve a portion of the spending reductions required when deficit reduction legislation tied to the Joint Committee on Deficit Reduction was not enacted as provided by the BCA. Sequestration involves the issuance of a presidential order that permanently cancels non-exempt budgetary resources (except for revolving funds, special funds, trust funds, and certain offsetting collections) for the purpose of achieving a required amount of outlay savings to reduce the deficit. Once sequestration is triggered, spending reductions are made automatically. A sequestration order by the President is triggered by a report from the OMB director determining that a breach has occurred. To enforce the statutory discretionary spending caps, OMB first provides a preview report at the beginning of the calendar year, including calculations of any necessary adjustments to the existing limits for the upcoming fiscal year. Once discretionary spending is enacted, OMB evaluates that spending relative to the spending limits and determines whether sequestration is required. OMB is required to issue the final report within 15 calendar days after the congressional session adjourns sine die. For discretionary spending that becomes law after the session ends (e.g., the enactment of a supplemental appropriations measure), the OMB evaluation and any sequester order to enforce the limits would occur 15 days after enactment. For enforcement of the Statutory PAYGO Act, OMB records the budgetary effects of revenue and direct spending provisions enacted into law, including both costs and savings, on two PAYGO scorecards covering rolling five-year and 10-year periods (i.e., in each new session, the periods covered by the scorecards roll forward one fiscal year). OMB must issue an annual PAYGO report not later than 14 days (excluding weekends and holidays) after Congress adjourns to end a session. Once OMB finalizes the two PAYGO scorecards, it determines whether a violation of the PAYGO requirement has occurred (i.e., if a debit has been recorded for the budget year on either scorecard). If a breach occurs, the President issues a sequestration order that implements largely across-the-board cuts in nonexempt direct spending programs sufficient to remedy the violation. Spending for many programs is exempt from sequestration, and reductions in certain programs are limited by statutory provisions. Appendix A. Glossary of Budget Process Terms 302. The section of the Congressional Budget Act of 1974 that pertains to the distribution to House and Senate committees of new budget authority, entitlement authority, and outlays agreed to in a budget resolution. The allocation is usually included in the joint explanatory statement that accompanies the conference report on a budget resolution. Section 302(a) requires the allocation of the total spending in the budget resolution among the committees having jurisdiction over either direct or discretionary spending. When a budget resolution has not been adopted, the House and Senate (separately or jointly) may use some other means to establish committee allocations. Section 302(b) further requires the Appropriations Committee in each chamber to subdivide this total allocation among their subcommittees. Section 302(f) establishes a point of order against the consideration of a bill, amendment thereto, or conference thereon that would breach the appropriate 302(a) (or 302(b)) amount for the committee (or subcommittee). Apportionment . The action by which federal agencies, working with the Office of Management and Budget, establish a plan for budget authority made available by spending laws to be obligated over the course of a fiscal year consistent with all legal requirements. Apportionment is required under the Antideficiency Act in order to prevent the premature exhaustion of funds, and for certain kinds of budget authority, to achieve the most effective and economical use of those funds. Appropriation. Legislation that provides budget authority to allow federal agencies to incur obligations and to make payments out of the Treasury for specified purposes, usually during a specified period of time. Discretionary appropriations measures are under the jurisdiction of the House and Senate Committees on Appropriations. Authorization . A statutory provision that establishes or continues a federal agency, activity, or program. It may also establish policies and restrictions and deal with organizational and administrative matters. Authorizations may implicitly or explicitly authorize congressional action to provide appropriations for an agency, activity, or program. An explicit authorization of appropriations may apply to a single fiscal year, several fiscal years, or an indefinite period of time, and it may be for a specific level of funding or an indefinite amount. An authorization of appropriations does not provide budget authority, however, which must be provided in subsequent appropriations legislation. Furthermore, under House and Senate rules, an authorization is construed as a ceiling on the amounts that may be appropriated but not a minimum. Baseline . A projection of the levels of federal spending, revenues, and the resulting budgetary surpluses or deficits for the upcoming and subsequent fiscal years, taking into account laws enacted to date but not assuming any new policies. It provides a benchmark for measuring the budgetary effects of proposed changes in federal revenues or spending, assuming certain economic conditions. Baseline projections are prepared by the Congressional Budget Office. Budget a uthority . Authority provided by federal law to enter into financial obligations that will result in immediate or future outlays involving federal government funds. The main forms of budget authority are appropriations, entitlement authority, borrowing authority, and contract authority. It also includes authority to obligate and expend the proceeds of offsetting receipts and collections. Congress may make budget authority available for one year, several years, or an indefinite period, and it may specify definite or indefinite amounts. Budget r esolution . A concurrent resolution, provided under the Congressional Budget Act, that allows Congress to make decisions about overall fiscal policy and priorities, as well as coordinate and establish guidelines for the consideration of various budget related measures. Because a concurrent resolution is not a law, it cannot be signed or vetoed by the President. It therefore does not have statutory effect, so no money can be raised or spent pursuant to it. Revenue and spending amounts set in the budget resolution, however, establish the basis for the enforcement of congressional budget policies through points of order. Continuing r esolution (CR) . When annual appropriations acts are not enacted by the beginning of the fiscal year (October 1), one or more continuing appropriations acts may be enacted to provide temporary continued funding for covered programs and activities until action on regular appropriations acts is completed. Such funding is provided for a specified period of time, which may be extended through the enactment of subsequent CRs. Rather than providing a specific amount of funding, CRs typically allow agencies to operate at a specified rate. A continuing appropriations act is commonly referred to as a continuing resolution or CR because historically it has been in the form of a joint resolution rather than a bill, but there is no procedural requirement as to its form. In some cases, CRs have provided appropriations for an entire fiscal year. Deeming r esolution . An informal term that refers to a resolution or bill passed by one or both houses of Congress that provides an alternate means to establish the basis for budgetary enforcement actions in the absence of a budget resolution. Direct s pending . Direct spending is defined in the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, as consisting of entitlement authority (including appropriated entitlements), the Supplemental Nutrition Assistance Program, and any other budget authority (and resulting outlays) provided in laws other than appropriations acts. The term direct spending is often used interchangeably with the terms mandatory or entitlement spending . Examples include Social Security, Medicare, Medicaid, unemployment insurance, and military and federal civilian pensions. Discretionary s pending . The Balanced Budget and Emergency Deficit Control Act of 1985, as amended, defines discretionary spending as budget authority provided in annual appropriation acts and the outlays derived from that authority. Discretionary spending encompasses appropriations not mandated by existing law and therefore made available in appropriation acts in such amounts as Congress chooses. Discretionary spending for FY2012-FY2021 is limited by statutory spending limits enacted in the Budget Control Act of 2011, as revised. Fiscal y ear . The fiscal year for the federal government begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends: For example, FY2020 began on October 1, 2019, and ends on September 30, 2020. Functional c ategory. The President's budget and the congressional budget resolution classify federal budgetary activities (including budget authority, outlays, tax expenditures, and credit authority) into functional categories that represent major purposes or national needs being addressed (such as national defense, health, or general science, space, and technology). A functional category may be divided into two or more subfunctions, depending upon its scope or complexity. As a whole, functional categories provide a broad statement of budget priorities and facilitate an understanding of trends in related programs regardless of the agency administering them or type of financial transaction involved. The amounts in particular functional categories in the budget resolution are used as informational guidelines and are not enforced by points of order in the congressional budget process. Obligation . A commitment that creates a legal liability of the government to pay for goods and services and results in outlays either immediately or in the future. An agency incurs an obligation, for example, when it places an order, signs a contract, or awards a grant. When a payment is made, it liquidates the obligation. Appropriation laws usually make funds available for obligation for one or more fiscal years, but outlays may actually occur at some later time so that an agency's outlays in a particular year can come from obligations entered into in previous years as well as from its current appropriation. Offsetting r eceipts/ c ollections . Funds collected from the public primarily as a result of business-like activities (such as user fees or royalties paid to the government) that are levied on a class directly availing itself of, or directly subject to, a governmental service, program, or activity rather than on the general public. Such receipts and collections are recorded as negative amounts of spending rather than as revenues. In most cases, offsetting receipts require an explicit appropriation, while offsetting collections may be obligated without further legislative action. Outlays . The actual amount of payments from the Treasury that result from obligations entered into by executing provisions in appropriations and direct spending legislation that provides budget authority. Outlays consist of payments, usually by check, by electronic fund transfer or cash to liquidate obligations incurred in prior fiscal years as well as in the current fiscal year. Pay-as-you-go ( PAYGO ) . A budgetary enforcement mechanism originally set forth in the Budget Enforcement Act of 1990. It generally requires that any projected increase in the deficit due to changes in direct spending or revenues resulting from legislation must be offset by an equivalent amount of direct spending cuts or revenue increases to eliminate the net increase over either a six-year period covering the current fiscal year plus the ensuing five fiscal years or over an 11-year period covering the current fiscal year plus the ensuing 10 fiscal years. The statutory PAYGO mechanism currently in place was established under the Statutory Pay-As-You-Go Act of 2010. In the event that the net impact of changes to direct spending and revenue laws over the course of a session of Congress is projected to increase the deficit in either of these time periods, the President is required to issue a sequester order to eliminate it. In addition, there are currently PAYGO procedures in the House and Senate enforced by points of order on the floor to prevent the consideration of legislation that does not meet the requirement. Reconciliation. An expedited procedure, provided under Section 310 of the Congressional Budget Act, for changing existing revenue or direct spending laws to implement budgetary policies established in a budget resolution. Reconciliation must begin with language in a budget resolution instructing specific committees to report legislation adjusting revenues or spending within their respective jurisdictions by specified amounts, usually by a specified deadline. The Budget Act provides for expedited consideration of reconciliation bills in the Senate by limiting debate to 20 hours and limiting the content of amendments. Reprogramming. Shifting funds within an appropriation account from one object class to another or from one program activity to another. Generally, agencies may make such shifts without additional statutory authority, but often they must provide some form of notification to the appropriations committees, authorizing committees, or both. Rescission. A provision of law that repeals previously enacted budget authority. Under the Impoundment Control Act of 1974, the President may send a message to Congress requesting one or more rescissions and the reasons for doing so. If the President makes such a request, he may withhold the funds from obligation, but if Congress does not pass legislation approving the rescission within 45 days of continuous session after receiving the message, the funds must be made available for obligation. Congress may rescind all, part, or none of an amount proposed by the President and may also initiate rescission of funds not requested in a presidential message. Revenues. Funds collected from the public primarily as a result of the federal government's exercise of its sovereign powers. They include individual and corporate income taxes, excise taxes, customs duties, estate and gift taxes, fees and fines, payroll taxes for social insurance programs, and miscellaneous receipts. Scorekeeping. The process of both estimating the budgetary effects of pending legislation and comparing those effects to a baseline. The Congressional Budget Office prepares estimates of the budgetary effects of legislation, including both spending and revenue effects. The Budget Committees in the House and Senate act as official scorekeepers by providing the presiding officers in their respective chambers with the estimates needed to make decisions about points of order enforcing budgetary parameters. The Budget Committees also make periodic summary scorekeeping reports that are placed in the Congressional Record . Sequestration . A procedure in which the President is required to issue an order canceling budgetary resources that is, money available for obligation or spending to enforce a statutory budget requirement. Sequestered funds are no longer available for obligation or expenditure. The statutory PAYGO requirement and the statutory limits on discretionary spending are enforced by sequestration. In addition, the automatic spending reductions required by the Budget Control Act of 2011 are partially achieved through sequestration. Transfer. Shifting budget authority between two appropriation accounts. Agencies may transfer budget authority only as specifically authorized by law. Appendix B. Congressional Budget Process Actions

Under the U.S. Constitution, Congress exercises the "power of the purse." This power is expressed through the application of several provisions. The power to lay and collect taxes and the power to borrow are among the enumerated powers of Congress under Article I, Section 8. Furthermore, Section 9 of Article I states that funds may be drawn from the Treasury only pursuant to appropriations made by law. The Constitution, however, does not prescribe how these legislative powers are to be exercised, nor does it expressly provide a specific role for the President with regard to budgetary matters. Instead, various statutes, congressional rules, practices, and precedents have been established over time to create a complex system in which multiple decisions and actions occur with varying degrees of coordination. As a consequence, there is no single "budget process" through which all budgetary decisions are made, and in any year there may be many budgetary measures necessary to establish or implement different aspects of federal fiscal policy. This report describes the development and operation of the framework for budgetary decisionmaking that occurs today and also includes appendices that provide a glossary of budget-process-related terms and a flowchart of congressional budget process actions. Since the early years of the Republic, procedures and practices concerning the consideration, enactment, and execution of budgetary legislation have evolved to meet changing needs and circumstances. Many aspects of the framework for budgetary decisionmaking were established in the early years, including the idea that appropriations be considered separate from general policy legislation. The 19 th century also saw Congress take action in several ways to exercise control over how federal agencies spent money. One approach involved enacting increasingly specific appropriations legislation to direct the use of funds. General restrictions on agency discretion were also imposed by statute. For example, beginning in 1870, antideficiency acts were enacted to prevent agencies from exceeding appropriations made by Congress for any fiscal year or obligating payments in anticipation of future appropriations. In the 20 th century, the Budget and Accounting Act of 1921 created a statutory role for the President by requiring agencies to submit their budget requests to him and, in turn, for him to submit a consolidated request to Congress. Other important changes included the advent of direct (mandatory) spending and the enactment of the Congressional Budget and Impoundment Control Act of 1974, which provided Congress with a vehicle for making decisions about overall fiscal policy and priorities and also established the House and Senate Budget Committees and the Congressional Budget Office. Since 1985, budgetary decisionmaking has also been subject to various budget control statutes designed to restrict congressional budgetary actions or implement particular budgetary outcomes. Altogether, this evolution has resulted in the framework in which budgetary decisionmaking occurs today. Many budgetary actions result from permanent or long-term statutes, but the cycle for decisionmaking remains based on a characteristically annual timetable. The President is required to submit a budget request to Congress early in the legislative session. The President's budget is only a request to Congress, but it establishes the President's wishes regarding the direction of national policies and priorities and often influences the direction of congressional revenue and spending decisions. Congress can coordinate various budget-related actions (such as consideration of revenue and spending measures) through the adoption of a concurrent resolution on the budget to set aggregate budget policies and functional spending priorities for at least the next five fiscal years. Because a concurrent resolution is not a law—the President cannot sign or veto it—the budget resolution does not have statutory effect, so no money is raised or spent pursuant to it. Revenue and spending levels set in the budget resolution, however, do establish the basis for enforcement of congressional budget policies through points of order. In recent years, the use of a budget resolution has often been supplanted by the use of various deeming provisions that use alternate means to establish the basis for budgetary enforcement actions. Budget policies are subsequently implemented through action on individual revenue and debt limit measures, annual appropriations acts, and direct spending legislation. If Congress agrees to a budget resolution, it may later consider reconciliation legislation pursuant to reconciliation instructions included in the budget resolution. Reconciliation legislation is subject to expedited procedures that can be used to bring existing revenue and direct spending laws into conformity with policies established in the budget resolution. Action on annual appropriations measures allows Congress to set the level of discretionary spending annually. Congress passes three main types of appropriations measures: regular appropriations to provide budget authority to fund programs and agency activities for the next fiscal year, s upplemental appropriations to provide additional budget authority during the current fiscal year if the regular appropriation is insufficient or to finance activities not provided for in the regular appropriation, and c ontinuing appropriations (often referred to as continuing resolutions or CRs) to provide interim (or sometimes full-year) funding to agencies for activities or programs not yet covered by a regular appropriation.

crs_R46193

crs_R46193_0

<1. Introduction> The federal tax treatment of the family is affected by several major structural elements of the income tax code applicable to all taxpayers: deductions such as the standard deduction, personal exemptions, and itemized deductions; the marginal tax rate structure (which varies by filing status); the earned income credit and the child credit; and the alternative minimum tax. Some of these provisions affect only high-income families and some only low-income families, but they are the tax code's fundamental structural features. They lead to varying tax burdens on families depending on whether the family is headed by a married couple or a single individual, whether children are in the family, and the number of children if so. The 2017 tax revision ( P.L. 115-97 , popularly known as the Tax Cuts and Jobs Act, or TCJA) changed many of these fundamental provisions, although those changes are scheduled to expire after 2025. This report examines these temporary changes and how they affect families. The prior provisions (and ones that will return absent legislative changes) are discussed in a previous CRS report, which also includes the historical development of family-related provisions and some of the justifications for differentiating across families, especially with respect to the number of children. This report does not consider other, more narrowly focused tax code provisions, such as those that apply only to certain types of income (e.g., special treatment for certain types of capital income or self-employment income) or particular additional benefits (e.g., benefits for the blind and elderly or for child care expenses). The first section discusses the structural changes made in the TCJA, and the following sections discuss equity issues and the marriage penalty. <2. Structural Changes Made in the TCJA> Taxes are determined by first subtracting deductions (either the standard deduction or the sum of itemized deductions) and personal exemptions (for the taxpayer, their spouse [if married filing jointly], and any dependents) from income to arrive at taxable income. Then the marginal rate structure is applied to this measure of taxable income. Finally, tax credits are subtracted from this amount to determine tax liability. Two of the major credits claimed by families are the earned income tax credit (EITC) and the child tax credit. The new law expanded the child credit for many taxpayers, although it did not change the earned income tax credit. In addition to these provisions, the law changed the exemption levels for the alternative minimum tax (a tax aimed at broadening the overall tax base and applying flat rates with a large fixed exemption), which is imposed if it is larger than the regular tax. All amounts in this discussion are for 2018, the year the tax changes were first implemented. Some amounts will change in the future as they are indexed for inflation. The revision also changed the measure used to index for inflation to the chained consumer price index (CPI) rather than the basic CPI. The chained CPI takes into account changes in the mix of spending, and because spending tends to increase for goods with smaller price increases, the chained CPI is smaller than the basic CPI. For 2018, it only affected the EITC (in a minor way), as the other provisions (such as standard deductions and the rate structure) were stated explicitly in the tax revision. <2.1. Standard Deduction, Itemized Deductions, and Personal Exemption and Child Credits> In calculating their taxable income, taxpayers may subtract either the standard deduction or the sum of their itemized deductions. The standard deduction varies by the taxpayer's filing status: single (an unmarried individual with no dependents), joint (a married couple), and head of household (a single parent). The standard deduction is beneficial that is, it results in a lower tax liability when itemized deductions (such as for state and local taxes, mortgage interest, and charitable contributions) are smaller than the standard deduction amount. The standard deduction is annually adjusted for inflation. Under prior law, taxpayers could claim a personal exemption for themselves and each family member. In addition, a child credit was allowed for children under the age of 17. The child credit was (and still is) partially refundable, so that taxpayers with no tax liability can receive some or all of the child credit as a refund greater than taxes owed. The refundable portion of the credit was limited to 15% of earned income in excess of $3,000. (The refundable portion of the child credit is sometimes referred to as the additional child tax credit or ACTC. The lowest-income taxpayers generally receive all of the child credit in the form of the ACTC.) Personal exemptions and child credits were phased out under prior law. Personal exemptions were indexed for inflation, but the child credit was not. As shown in Table 1 , the 2017 tax revision substantially increased the standard deduction and the maximum amount of the child credit while eliminating the personal exemption. It also increased the refundable portion of the child credit, both by increasing the maximum amount of the ACTC and by reducing the earned income amount used to calculate the ACTC. It also substantially increased the level at which the child credit is phased out. For many taxpayers, the amount of income exempt from tax (i.e., the amount subtracted before applying tax rates) has increased under the 2017 tax revision. For example, prior to P.L. 115-97 , a married couple with no children that claimed the standard deduction would have $21,300 in tax-exempt income (the combination of a standard deduction of $13,000 and two personal exemptions for the taxpayers of $4,150). Under current law, their first $24,000 would not be subject to tax. In general, the loss of personal exemptions for children was more than offset by increases in the maximum child credit from $1,000 per child to $2,000 per child. The act also provided a $500 credit for dependents that did not qualify for the child credit. Higher-income families with children also benefited from the increase in the new child credit's phaseout level, which was higher than the previous personal exemption and significantly higher than the prior-law child credit's phaseout range (see Table 1 ). As under prior law, the standard deduction will be annually adjusted for inflation and the child credit (or family credit) will not be adjusted for inflation (with the exception of the $1,400 limit on refundability, which is indexed). The prior-law personal exemption was indexed annually for inflation. Were these provisions to be continued over a long period, the child credit would continually decline in real value, whereas the prior-law personal exemption would not. Moreover, the new inflation index is less generous than the prior one. The tax change also restricted itemized deductions. Although it retained the major itemized deductions for mortgage interest, state and local taxes, and charitable contributions, it limited the deduction for state and local taxes to $10,000, reduced the cap on mortgages with interest eligible for the deduction from $1 million to $750,000, and eliminated a number of other minor itemized deductions. These amounts are not indexed for inflation. As a result of increases in the standard deduction and restrictions on itemized deductions, about 13% of taxpayers are expected to itemize deductions, compared to 30% under prior law. Analysis suggests most of those who continue to itemize are higher income. <2.2. Earned Income Tax Credit> The other major tax credit for families under current law is the earned income tax credit (EITC). This credit is aimed at helping lower-income workers and is fully refundable, meaning that those with little to no income tax liability can receive the credit's full amount. While the credit is generally available to all low-income workers, the credit formula is much more generous for families with children, and the majority of benefits go to families with children. The EITC varies based on a recipient's earnings: the credit equals a fixed percentage (the credit rate ) of earned income until it reaches its maximum level. The EITC then remains at its maximum level over a subsequent range of earned income, between the earned income amount and the phaseout amount threshold . Finally, the credit gradually phases out to zero at a fixed rate (the phaseout rate ) for each additional dollar of adjusted gross income (AGI) (or earned income, whichever is greater) above the phaseout amount threshold. The credit rate, earned income amount, maximum credit, and phaseout amount threshold all vary by number of children, and are more generous for families with more children, as illustrated in Figure 1 . In 2018, the maximum credit amounts were $519, $3,461, $5,716, and $6,431 for families with zero, one, two, or three or more children, respectively. In addition, the phaseout amount threshold is higher for married couples than for unmarried recipients. Hence, the income level at which the credit begins to phase out is slightly more than $5,000 greater for married joint filers than it is for unmarried filers (heads of households and singles). The 2017 revision made no explicit changes to the EITC, but the change in the inflation indexing formula slightly lowered the credit's value. For example, the credit's maximum value for a family with three or more children under prior law would have been $6,444, rather than $6,431 for a family with three or more children under the revision. A taxpayer with no qualifying children must be between 25 and 64 years of age to be eligible for the EITC. <2.3. Rate Structure and Alternative Minimum Tax> The 2017 tax revision also altered the statutory marginal tax rates that apply to taxable income. There are currently seven marginal tax rates, and the income ranges over which they apply ( tax brackets ) differ based on the taxpayer's filing status, with brackets at the lower rates half the width for singles as those of married couples (who file jointly) and heads of household in between. The width of the bracket determines how much income is taxed at a given rate and the wider the brackets the more income is taxed at lower rates. That means singles (and to a lesser extent heads of households) are subject to higher tax rates at lower levels of income than married couples. Under prior law, most taxpayers were subject to tax rates of 10% and 15%. The 10% rate applied for the first $19,050 of taxable income for joint returns, the first $13,600 for head of household returns, and the first $9,525 for single returns. The 15% bracket ended at $77,400 of taxable income for joint returns, $51,850 for heads of households, and $38,700 for singles. The tax revision retained the 10% rate, but reduced the 15% rate to 12%. Above those income levels, rates of 25%, 28%, 33%, 35%, and 39.6% applied, and single bracket widths were less than half as wide as the equivalent married brackets. The 2017 revisions reduced those rates by amounts ranging from 3 to 9 percentage points, with new rates of 22%, 24%, 32%, 35%, and 37%. Under prior law, the top rate of 39.6% applied to taxable income over $480,050 for joint returns. The new law reduced the top rate to 37% and applied it to taxable income over $600,000; the remaining taxable income that had been subject to a 39.6% rate is taxed at 35%. Under prior law, the 39.6% top rate was reached at $426,700 for singles; under the revision, the new top rate of 37% applies to taxable income over $500,000 for singles. The law also revised the alternative minimum tax. Under prior law, the alternative minimum tax imposed a 26% tax rate on alternative minimum taxable income above $86,000 for married couples and $55,400 for unmarried tax filers. The exemption began to phase out at $164,100 for married couples and $123,100 for singles. A higher rate of 28% applied to AMT taxable income above $191,500 for joint returns and $95,750 for single returns. AMT income begins with ordinary taxable income and adds back the standard deduction, personal exemptions, and state and local tax deductions for itemizers, as well as some other tax preferences (such as tax-exempt interest from private activity bonds and accelerated depreciation). The tax revision left the AMT's basic structure unchanged, but increased the exemption amounts to $109,400 for married couples and $70,300 for single returns. It also increased the phaseout point for the exemption to $1,000,000 for joint returns and $500,000 for singles. Other elements of the 2017 tax revision affected whether a taxpayer would be subject to the AMT. Whether the AMT applies depends on deductions from the regular tax compared to the AMT exemption, as well as the tax rates. Lower regular tax rates and a higher standard deduction increase the chance a taxpayer is subject to the AMT, whereas higher AMT exemptions, elimination of personal exemptions, and the limit on the deduction for state and local taxes decrease the chance a taxpayer is subject to the AMT. The rate brackets and AMT amounts are indexed annually for inflation. At higher income levels (up to slightly over $300,000 of taxable income for joint returns and about half that amount for other returns), several factors contribute to lower tax liabilities under the 2017 tax revision, primarily the relatively large reduction in marginal tax rates, as shown in the tax rates in Table 2 , Table 3 , and Table 4 . As indicated in those tables, as a result of P.L. 115-97 , marginal rates increase somewhat over narrow bands of higher income levels, particularly for heads of households and to a lesser extent single returns, before declining again. The changes in tax rates are only one factor determining tax liabilities, as other tax code features including broadly applicable features discussed in this report and others that apply to a narrower range of taxpayers can affect tax liability. <3. Treatment of Families with Different Incomes: Equity Issues> The new income tax code (as well as the income tax under prior law) is progressive: as income increases and taxpayers have an increased ability to pay, tax rates rise. Studies generally suggest, however, that after taking all of the 2017 tax revision's provisions into account, higher-income groups tend to have the largest percentage increase in after-tax income. Hence, while still progressive, the new income tax is less progressive in comparison to the prior-law income tax. In addition, as time goes on, the relative tax burden on low-income families is expected to increase. This increase at the lower end of the income distribution is partially due to the new inflation indexing provision, which will reduce the earned income credit's value for low-income working families. The increased tax burden also reflects the loss of health care subsidies due to the elimination of the penalty for not purchasing health insurance. The decreased tax burdens (relative to prior law) for high-income individuals also reflect, in this distributional estimate, lower taxes' effects on capital income (including lower corporate tax rates and the pass-through deduction for business income), which affect higher-income individuals, who own most of the capital. <3.1. Effects on Burdens at the Lower End of the Income Distribution> The tax change had no effect on after-tax income in 2018 for low-income families that already had effectively no or negative tax liability and did not have enough income to be eligible for the maximum child credit. In future years, the inflation indexing could eventually reduce the earned income credit's value. As incomes rise, families with children will tend to benefit more than families without children, primarily due to the expanded child credit. These effects can be illustrated by comparing the prior- and current-law breakeven levels. The breakeven level is the amount of income at which a taxpayer begins to owe income taxes (i.e., the level at which tax liability turns from negative or zero to positive). Table 5 shows these levels for married and single-headed families with zero to three children. The smallest increase in the income level at which taxes begin to be owed is for singles with no children. These taxpayers began to owe taxes when income was $12,669 under prior law, but begin to owe at $13,419 under current law, an increase of $750. Under prior law, this income level was in part a result of the standard deduction and personal exemption (a combined $10,650 that was exempt from tax) and in part a result of a reduced EITC (the taxpayer's income resulted in a partially phased out credit). Under current law, a greater amount of income is exempt from tax $12,000 compared to $10,650 and the EITC is slightly reduced as a result of the new inflation adjustment. A married couple without children begins to pay taxes when their income is $24,000 under current law, compared with $21,300 under prior law, a $2,700 increase entirely driven by the changes in the personal exemptions and the standard deduction. For these taxpayers, under prior law their first $21,300 was exempt from tax as a result of the standard deduction and personal exemptions, and they were ineligible for the EITC at this income level because the credit was entirely phased out. Under current law, their first $24,000 is exempt from tax as a result of the increased standard deduction (and they remain ineligible for the EITC). The breakeven point for families with children is greater than the standard deduction (or under prior law, the standard deduction and personal exemptions) as a result of the EITC (although it is phased out from its maximum level) and the child credit. Although the increased standard deduction increases exempt levels and the additional $1,000 of the child credit is the equivalent of a $8,333 deduction for each child at the new tax bracket these income levels fall into ($1,000/.12), these income levels are mostly still in the earned income credit's phaseout range. Thus, although taxpayers gain from the increased deductions and child credits as income rises, they lose earned income tax credits, making the increase in the exemption level smaller. The benefit increases when the increased income levels tend to be largely out of the EITC's phaseout range (which is largely the case for families with three children). Lower-income families either receive a negligible benefit (for those without children) or a significant benefit (for those with children) because the new child credit is more generous than the prior personal exemption in terms of tax savings. As income rises, the child credit continues to contribute to lower taxes. It is not until marginal tax rates reach 24% (which occurs at $165,000 of taxable income for a joint return) that the increased child credit has the same value as the prior personal exemption in terms of tax savings. The moderate income levels also benefit from lower tax rates, as the 15% rate that applies to taxable income from $19,050 to $77,000 is reduced to 12%. <3.2. Effects on Burdens at the Higher End of the Income Distribution> At higher income levels, lower tax rates (which are quite large for taxable incomes of slightly more than $300,000 for joint returns and about half that amount for other returns) account for lower taxes, as shown in the tax rates in Table 2 , Table 3 , and Table 4 . As indicated in those tables, rates increase at somewhat higher levels particularly for head of household and, to a lesser extent, single returns before declining again. For joint returns, the larger rate reductions occur between $156,150 and $316,000 of taxable income, as well at incomes of $480,050 to $600,000, while these reductions appear at lower income levels for head of household and single returns. Taxpayers are also less likely to pay the alternative minimum tax. Although regular tax rates are lowered, two factors reduce the AMT's scope. One is the significant increase in the AMT exemption. In addition, taxpayers at the upper end of the distribution have smaller itemized deductions for state and local taxes, which are a preference item for the AMT. Larger families also have a reduction in the difference between the regular and AMT base, as personal exemptions and standard deductions were part of that base under prior law, but child credits were not. Replacing personal exemptions for children with the child credit reduces the difference between the AMT and the regular base. At higher income levels, losing the full state and local tax deduction can increase tax burdens. The average state and local tax deduction is about 5% of income; evaluated at a 35% or 37% tax rate, the loss is equivalent to a two percentage point change in marginal tax rates. For high-income families with children, the increase in the phaseout levels lowers burdens, particularly as compared to the phaseout for the preexisting tax credit, although the benefit relative to income diminishes as income rises because of the fixed dollar amount. Overall data on distributional effects show significantly larger effects at high income levels, but some of the estimated relatively larger benefit to high-income taxpayers is due to reductions in the tax burden on capital income, including the pass-through deduction (which allows a 20% reduction in capital income for some earnings from unincorporated business) and the lower corporate tax rate, which benefits higher-income individuals, who receive most of the capital income. The effect of structural features at high income levels is ambiguous because the tax change raised tax rates for certain portions of taxable income and lowered them for others, and also capped the state and local tax deduction. <3.3. Treatment of Families with Different Incomes> This section examines the patterns of both vertical equity (how tax rates change as incomes rise) and horizontal equity (how tax rates change across different types of families with the same ability to pay using effective tax rate calculations [taxes as a percentage of income]). These rates can also be compared to those calculated for prior law in a previous CRS report. With respect to horizontal equity, this report uses an equivalency scale similar to the one used to calculate variations in poverty lines by family size. An equivalency scale estimates how much income families of different sizes and compositions need to achieve the same standard of living. In defining families that have the same ability to pay, CRS used an adjustment based on a research study that reviewed a broad range of equivalency studies and is similar to that used for adjusting official poverty levels for different family sizes. The scale has a smaller adjustment for children than for adults. The equivalency scale also accounts for the common use of resources (such as a kitchen or bathroom) in a family, which means increases in required income are not proportional to family size. Under this standard, a single person requires about 62% of the income of a married couple; a couple with four children requires about three times the income. Thus, compared to a married couple with no children with $20,000 of income, an equivalent single person would need slightly over $12,000, and a married couple with four children would need $60,000 to have the same standard of living. Provisions included in the calculations are the rate structure, the larger of the standard deduction or itemized deductions (the latter are assumed to be 12.7% of income, with 5.3% of income reflecting the state and local tax deduction included in the alternative minimum tax base, based on the latest tax data), personal exemptions, the earned income credit, the child credit, and the alternative minimum tax. Table 6 reports the 2018 effective tax rates for low- and middle-income taxpayers at different levels of income, for family sizes of up to seven individuals, and for the three basic types of returns single, joint, and head of household. Table 7 reports the tax rates for higher-income families. The column heading indicates the income level for married couples. Effective tax rates in each column reflect the effective tax rates of families with the same standard of living. The rates for different families should be compared by looking down the columns. For example, in Table 6 , a married couple with no children (the reference family) and $25,000 in income pays 0.4% of their income in taxes, but a married couple with one child with the same ability to pay (i.e., same standard of living at about $30,844 of income) receives a subsidy (i.e., on net they get a refund greater than taxes owed) of 12.1% of their income, whereas a single with an equivalent before-tax standard of living pays 2.2% of income in taxes. Overall, these effective tax rates indicate that low-income families with children receive significant benefits from the income tax, compared to those with similar abilities to pay but without children. These numbers assume that taxpayers (and their children) are eligible for both the child credit and the EITC. These are illustrative calculations that do not account for any other tax preferences and are designed to show how the tax law's basic structural, family-related features affect burdens. Across each family type, effective tax rates are progressive, increasing as income increases. Compared to prior law, tax rates change relatively little at the lowest income level due to the lack of change in the earned income credit and because the child credit increases by a limited amount (about $75) for many of the poorest families. As incomes rise into the lower-middle, middle-, and upper-middle-income levels, rates fall slightly for families without children, whereas families with children have significant reductions in effective tax rates due to the increase in the maximum child credit and the increases in the child credit phaseout levels. At the highest income levels, effects range from small rate cuts to small rate increases, which reflect the trade-off between the changes in rates and the reductions in itemized deductions. In contrast with prior law, none of the examples in these tables are subject to the AMT. These tables suggest that the pattern of tax burden by family size varies across the income scale, and reflects the interactions of the earned income credit, the child credit, and graduated rates, including phaseout effects. Moreover, the variation across families that have the same ability to pay is substantial. At low incomes, families with children, whether headed by a married couple or a single parent, are favored (i.e., receive significant subsidies from the tax code) because of the EITC and the child credit. The largest negative tax rates tend to accrue to returns with around two or three children, because the largest EITCs are available for three or more children and the child credits increase with the number of children. The rate increases (or rather, negative rates decline in absolute value) because larger families need more income, which may begin to phase them out of the EITC. As incomes rise, families with children are still favored, but the largest families have the largest subsidies or the smallest tax rates, because the child credit lowers taxes more for these families. Eventually, large families begin to be penalized because the value of the child credit and personal exemptions relative to income declines and larger families that require more income are pushed up through the rate brackets. As incomes reach very high levels, however, the rates converge as the tax approaches a flat tax. Note that itemized deductions are assumed to be a constant fraction of income, and thus a proportional exclusion, except when the $10,000 limit on state and local tax deductions is binding. Compared to prior law, the new system retains and expands the favorable treatment of families with children through most of the income spectrum. This effect occurs partly because the EITC rate is much lower for single taxpayers or two-member joint returns with no qualifying children than it is for families with children. Also, if one accepts the ability-to-pay standard, the EITC has an inappropriate adjustment for family size. To achieve equal tax rates based on the ability-to-pay standard, the amount on which the EITC applies and the income at which the phaseout begins should be tied to family size but the EITC credit rate should be the same for all families. Changing the rate, as was done in 1990 and retained when the EITC was expanded in 1993, does not accomplish equal treatment across families of different sizes, providing too much adjustment for some families and not enough for others. The child credit also contributes to the favorable treatment of families with children, including in the middle- and upper-middle-income levels, where it is not phased out. The greater refundability level, the increased size of the credit beyond that needed to replace the personal exemption at most income levels, and the significantly increased phaseout levels all make the child credit a significant factor in increasing the favorable treatment for families with children. Tax rates also differ for families without children (singles and married couples). At most income levels, childless singles have higher effective tax rates than childless married couples. This effect reflects efforts to eliminate marriage penalties, which in turn result in a tax penalty for single individuals. Other aspects of the tax system should also be considered, such as the child care credit and the treatment of married couples where only one individual works outside the home. These families are better off because the spouse not employed outside the home can perform services at home that result in cost savings, perform household tasks that increase leisure time for the rest of the family, or enjoy leisure. The value of this time, which is not counted in the measured transactions of the economy, is referred to as imputed income . This imputed income is not taxed, and it would probably be impractical to tax it. Nevertheless, the tax burden as a percentage of cash plus imputed income is lower for such a family. <4. Marriage Penalties and Bonuses> Because of the progressive rate structure, taxes can be affected by marriage, introducing either a penalty or a bonus when two individuals get married. Concerns about the marriage penalty reflect a reluctance to penalize marriage in a society that upholds such traditions. As the tax law shifted in the past to reduce the marriage penalty, it also expanded marriage bonuses. Studies of this issue indicate that the tax system favors marriage, conferring significant bonuses on married couples (or penalties on singles). The new law retains many of the elements that affect marriage penalties and bonuses, including wider tax brackets for joint returns (which eliminate marriage penalties and produce bonuses for those without children in the middle-income brackets), the more generous rate structure for head of household (which affects penalties and bonuses for families with children), and marriage penalties embedded in the alternative minimum tax. Under the new rate structure, the income levels at which marriage penalties are precluded because of the doubling of the brackets are higher. At the same time, the law also introduces a new potential source of a marriage penalty at high income levels by retaining the same dollar cap on state and local tax deductions for both joint and single returns. These choices have consequences not only for incentives but for equitable treatment of singles and married couples. As shown above in Table 6 and Table 7 , in the middle-income brackets, where the marriage penalty was largely eliminated, singles with the same ability to pay are subject to higher taxes than married couples. Singles benefit at lower income levels because their lower required incomes do not phase them out of the earned income credit. In contrast, lower-income married taxpayers are more likely to be subject to marriage penalties because of the EITC's structure. Under prior law, at very high incomes, married couples may have paid a larger share of their income because of marriage penalties that remained in the AMT and the upper brackets of the rate structure, but these effects do not appear in any of the current-law examples, in part because the AMT does not apply. This section explores the treatment of married couples and singles in an additional dimension by assuming that singles live together and share the same economies of scale that married couples do. These individuals could be roommates, but they could also be partners who differ from married couples only in that they are not legally married. Single individuals who live together in the same fashion as married couples have the same ability to pay with the same income. However, remaining single can alter their tax liability, causing it to either rise or fall, depending on the split of income between the two individuals. If one individual earns most of the income, tax burdens will be higher for two individuals who are not married than for a married couple with the same total income, because the standard deductions are smaller and the rate brackets narrower (up to the 35% tax rate, tax brackets for singles are half those of joint returns). If income is evenly split between the two individuals, there can be a benefit from remaining single. Married individuals have to combine their income, and the rate brackets for joint returns in the higher-income brackets, although wider than those for single individuals, are not twice as wide. At all levels they are not twice as wide as for heads of household. In addition, the earned income credit contains marriage penalties and bonuses. The marriage penalty or bonus might, in the context of the measures of household ability to pay, also be described as a singles bonus or penalty. In any case, in considering this issue's incentive and equity dimensions, these families' tax rates should be compared across family marital status at each income level. Table 8 and Table 9 show the average effective tax rates for married couples and for unmarried couples with the same combined income, both where income is evenly split and where all income is received by one person. In one case there is no child and in the other one child. These income splits represent the extremes of the marriage penalty and the marriage bonus. The same reference income classes and equivalency scales as in Table 6 and Table 7 are used. Note that uneven income splits in the case of a family with a child can yield different results depending on whether the individual with the income can claim the child and therefore receive the benefits of the head-of-household rate structure, the higher earned income credit, the dependency exemption, and the child credit. If not, that individual files as a single. The tables indicate that both marriage penalties and bonuses persist. In the case of families without children, however, penalties do not exist in the middle-income ranges, only bonuses. In this case, singles who live together and have uneven incomes would see their tax rates fall if they got married. Both bonuses and penalties exist at the lower income levels because of the earned income tax credit. If income is evenly split, the phaseout ranges are not reached as quickly for singles because each of the partners has only half the income. If all of the income is earned by one of the singles in the single partnership, phaseout of the credit still occurs and the individual also has a smaller standard deduction, and thus pays a higher tax. The smaller deductions and narrower rate brackets also cause the higher tax rates through the middle-income brackets. At very high income levels, marriage penalties can also occur. The penalty is due to not doubling the rate brackets after the 12% bracket. In addition, the dollar limit on the deduction of state and local taxes is the same for married couples and individual taxpayers, so that if two singles with high incomes and high state and local taxes marry, they can lose $10,000 in deductions. At the same time, taxpayers tend not to be subject to the AMT, which retains marriage penalties (by having an exemption for joint returns that is less than twice that for single returns). As compared to prior law, marriage penalties at higher income levels are mixed. In some cases penalties are lower, presumably due to the extension of the reach of the double width of rate brackets for singles versus joint returns, as well as lower tax rates in general and the AMT's more limited reach. In some cases penalties are higher due to the state and local tax deduction limit. Matters are more complex for families with children. Table 8 and Table 9 illustrate this effect for a family with one child. At the lowest income level, and a 50/50 split, one of the singles files a single return with a very small negative rate because of the small earned income credit for those without children, whereas the other claims a child and has a much higher negative tax rate than a married couple because there is no phaseout of benefits. The combination also involves a smaller child credit because it is not completely refundable. The combined result is a lower benefit than that of a married couple, and thus there is a marriage bonus. This income split eventually leads to a marriage penalty because of the favorable head-of-household standard deduction and rate structure, as well as the state and local tax deduction cap. With one of the pair earning all of the income, the results depend on whether the partner with the income can claim the child. If that person cannot, the tax burden is higher throughout the income scale, reflecting the loss of benefits from the child via credits and the rate structure. If the person with the income can claim the child (thus using the more favorable head-of-household schedule and receiving a child credit), joint returns are still favored (except at the lowest income levels), but not by nearly as much. Which of these last two assumptions seems more likely depends on the circumstances. When couples divorce, they typically move to different residences, and the most usual outcome is that the mother, who typically has lower earnings, has the child. According to the Census Bureau, 83% of children who live with one parent live with their mother. In that case, there would likely be a marriage bonus. If the couple divorce but live together, presumably the higher-income spouse would claim the child. However, if a couple never married and the child is only related to one parent, that person, more likely the mother and more likely to have low income, would claim the child. If such a couple married and had low incomes, they could obtain the earned income credit, and a study of low-income families indicates that this latter effect, the bonus, is the EITC's most common effect. Which circumstances are more characteristic of the economy? Note first that, although people refer to the marriage penalty for a particular family situation or the aggregate size of the marriage penalty, it is really not possible, in many cases, to determine the size of the penalty or bonus. The effect of the assignment of a child is demonstrated in Table 8 and Table 9 , but other features matter. Only when a married couple has only earned income, no dependent children, and no itemized deductions or other special characteristics, and only if it is assumed that their behavior would not have been different if their marital status had been different, can one actually measure the size of the marriage penalty or bonus. There is no way to know which of the partners would have custody of the children and therefore be eligible for head-of-household status and the accompanying personal exemptions and child credits. If the marriage bonus is viewed instead as a singles penalty on cohabitating partners, the share of the population affected is limited to less than 10% of households. About a third of those have children. Cohabitating partners are more likely than roommates to fully enjoy the consumption of joint goods that would equate them to married couples. <5. Conclusion> The 2017 tax revision continued, and in some cases expanded, the favorable treatment of families with children in the lower and middle income levels on an ability-to-pay basis. At the lowest incomes, this treatment was maintained largely due to the EITC's preexisting effects, although increasing the refundable child tax credit added to this favorable treatment. More favorable treatment was increased and extended up through the income classes because of the increase in the child tax credit amount and the increase in the income level at which the credit is phased out. At the highest income levels, rate changes tended to favor joint returns over singles and heads of household, largely due to the rate structure. As was the case with prior law, marriage bonuses occur through most income brackets, but penalties can exist at the lower end of the income distribution, particularly for families with children in which the lower income earner has custody of children, due to the earned income credit and the child credit. The rate structure continues to lead to a potential marriage penalty at high income levels. The 2017 revisions also introduced a new provision that could contribute to the marriage penalty at high incomes: the $10,000 limit on itemized deductions for state and local taxes, which is the same amount for married and single individuals.

The federal income tax treatment of the family is affected by several major structural elements applicable to all taxpayers: amounts deductible from taxable income through standard deductions, personal exemptions, and itemized deductions; the rate structure (which varies across taxpayer types); the earned income credit and the child credit; and the alternative minimum tax. Some of these provisions only affect high-income families and some only low-income families, but they are the tax code's fundamental structural features. They lead to varying tax burdens on families depending on whether the family is headed by a married couple or a single individual, whether children are in the family, and the number of children if so. These provisions also affect the degree to which taxes change when a couple marries or divorces. The 2017 tax revision ( P.L. 115-97 , popularly known as the Tax Cuts and Jobs Act) changed many of these fundamental provisions, although those changes are scheduled to expire after 2025. This report examines these temporary changes and how they affect families. The prior provisions (which will return absent legislative changes) are discussed in CRS Report RL33755, Feder a l Income Tax Treatment of the Family , by Jane G. Gravelle, which also includes the historical development of family-related provisions and some of the justifications for differentiating across families, especially with respect to the number of children. The 2017 tax revision effectively eliminated personal exemptions claimed for the taxpayer, their spouse (if married), and any dependent (often referred to as the dependent exemption ). However, the increased standard deduction more than offset these losses for taxpayers (and their spouses, if married). In addition, for many taxpayers, the increased child credit more than offset the losses from the eliminated dependent exemption. The tax revision also lowered rates for all three types of tax returns (joint, single, and head of household), although the effects were more pronounced for joint returns. In general, the changes retain significant aspects of prior law. The income tax code after the 2017 tax revision remains progressive across income levels for any given type of family, although effective tax rates are slightly lower. Among families with the same ability to pay (using a measure that estimates how much additional income families need to attain the same standard of living as their size increases), families with children are still favored at the lower end of the income scale, whereas families with children are still penalized at the higher end of the scale. This favorable treatment toward families with children is extended further up into the middle-income level under the 2017 revisions due to the changes in the child credit. The tax system is largely characterized by marriage bonuses (lower taxes when a couple marries than their combined tax bill as singles) through most of the income distribution, although marriage penalties still exist at the bottom (due to the earned income credit) and top (due to the rate structure) of the income distribution. The penalties at the top appear to be somewhat smaller in the new law due to changes in the rate structure and lower tax rates.

crs_R45196

crs_R45196_0

<1. Introduction> The present structure of congressional oversight of the Intelligence Community (IC) largely resulted from investigations by two congressional committees in the 1970s in the Senate, chaired by Idaho Senator Frank Church, and in the House, chaired by Representative Otis Pike that suggested a need for permanent committees in each chamber: today's Senate Select Committee on Intelligence (SSCI) and the House Permanent Select Committee on Intelligence (HPSCI). It is important to note, however, that oversight of intelligence is a function of more than just the two congressional intelligence committees. Ten other committees the Armed Services, Foreign Affairs/Foreign Relations, Homeland Security, Judiciary, and Appropriations committees of both chambers exercise oversight responsibility to varying degrees over intelligence programs or IC elements that fall under their jurisdiction. The Church and Pike committees' oversight focused primarily on two themes: investigation of past abuses and IC organizational reform. Over the succeeding years those efforts have been both beneficial and occasionally burdensome. In protecting against the IC's abuse of its authorities, Congress has helped ensure intelligence activities were legal, ethical and consistent with American values. Congress's influence in IC organizational reform has resulted in improved performance and accountability. On other occasions, however, congressional oversight has tended toward micromanagement resulting in strains in the relationship with the IC. This report posits a potential framework for congressional oversight of intelligence-related programs and activities using the existing committee structure and notification standards for the most sensitive intelligence activities: covert action and clandestine intelligence collection. The framework may assist Congress in assessing the premises justifying each of these activities, their impact on national security, operational viability, funding requirements, and possible long-term or unintended consequences. Unlike areas with a broad public following, such as health care, veterans' services, and agriculture, intelligence programs and activities are generally classified, receive little public exposure, and have no natural public constituency. Highly classified covert action and clandestine intelligence programs do not often have visibility outside of Congress. Congressional oversight, therefore, provides one of the few meaningful checks on the President's execution of intelligence policy and programs that may have significant bearing on U.S. foreign relations and national security. <2. Background> Among the recommendations of the National Commission on Terrorist Attacks upon the United States (the "9/11 Commission") were those aimed at strengthening intelligence oversight. Since the Church and Pike committees of the 1970s, Congress occasionally has been able to refine its oversight of the IC. However, it has not been able to sustain its early momentum. As the Final Report of the 9/11 Commission put it, "...the oversight function of the Congress diminished over time. In recent years, traditional review of the administration of programs and implementation of laws has been replaced by 'a focus on personal investigations, possible scandals, and issues designed to generate media attention.' The unglamorous but essential work of oversight has been neglected, and few members past or present believe it is performed well....[T]he executive branch needed help from Congress in addressing the questions of counterterrorism strategy and policy, looking past day-to-day concerns....Congress...often missed the big questions as did the executive branch." Since 9/11, the Senate especially has made progress toward following through with organizational reform of the oversight process, following through on several of the 9/11 Commission's recommendations. S.Res. 445 (108 th Congress) amended Senate rules governing intelligence oversight ( S.Res. 400 ) aimed at increasing the authority of the SSCI relative to the standing committees, promoting bipartisanship, and building expertise. However, a number of factors have complicated Congress's efforts to improve oversight. This poses risks to national security when involving the most sensitive aspects of intelligence covert action and clandestine activities due to their potential impact on U.S. foreign relations. Moreover, greater integration of military operations and intelligence activities has resulted in some confusion over the proper congressional jurisdiction for exercising oversight on Capitol Hill. Congress has expressed concern that the Department of Defense's (DOD) overuse of terms that are not defined in statute, such as operational preparation of the environment (OPE), to describe operations that may resemble intelligence activities allows DOD to circumvent the more stringent oversight requirements of the congressional intelligence committees. Despite these challenges, congressional oversight remains an important check on policy and decisions of the executive branch, to insure intelligence programs and activities are ethical, legal and properly aligned with U.S. national security and foreign policy objectives. Congressional oversight of covert action can be organized around a framework of five issue areas: (1) the activity's statutory parameters, (2) U.S. national security interests, (3) U.S. foreign policy objectives, (4) funding and implementation, and (5) risk assessment. These categories enable Congress to analyze and assess the specific elements of each activity from a strategic point of view. By extension, Congressional oversight of anticipated clandestine intelligence activities that might also shape the political, economic or military environment abroad can apply the same framework and, as with oversight of covert action, address the risk of compromise, unintended consequences, and loss of life. A conceptual framework for congressional oversight of covert action begins with its statutory definition: Covert action is codified as "an activity or activities of the United States Government to influence political, economic, or military conditions abroad, where it is intended that the role of the United States Government will not be apparent or acknowledged publicly." There are a number of exceptions in the statutory definition of covert action; these include some activities that could use clandestine methodology. Exceptions include activities primarily intended to collect intelligence; traditional counterintelligence activities; traditional military activities, or support to traditional military activities; traditional law enforcement activities, or routine support to law enforcement; and traditional diplomatic activities. How these exceptions are defined and applied to actual practice is not always straightforward and can complicate congressional oversight. For example, Congress has expressed concern that DOD too frequently applies the term traditional military activities to describe operations that in many respects resemble covert action. This is important insofar as it results in different committees being informed of the activity and different standards for the timeliness of notification. Oversight also requires a solid grasp of the U.S. national security interests and foreign policy objectives that each administration details its National Security Strategy, National Defense Strategy, and other strategy and policy documents. Covert action statutorily must support "identifiable foreign policy interests of the United States." Although not required by statute, it would be logical for clandestine intelligence (and military) activities that do not constitute covert action but have in common a high risk of compromise of sources and methods, a high impact on U.S. foreign relations, and a potential for the loss of life also to support identifiable (clearly articulated, documented) foreign policy objectives expressly. Moreover, congressional overseers may wish to identify or have expressly identified for them, the executive branch's assumptions about the international environment since these assumptions influence policy that in turn, influences decisions on covert action and clandestine activities. <3. A Framework for Oversight; Lines of Inquiry for Congress> Although Congress has no statutory prerogative to veto covert action when informed through a presidential finding, it can influence conduct of an operation through the exercise of congressional constitutional authority and responsibilities to authorize war, legislate, appropriate funds, and otherwise interact with the executive branch. As former CIA Inspector General L. Britt Snider wrote, If the committees do not support a particular operation or have concerns about aspects of it, an administration would have to think twice about proceeding with it as planned. If it is disclosed or ends in disaster, the administration will want to have had Congress on board. If it is going to last more than a year, the committees' support will be needed for continued funding. The committees are also likely to be better indicators of how the public would react if the program were disclosed than the administration's in-house pundits. As congressional oversight committees assess each impending covert action from a strategic point of view, Congress may wish to organize its review using the following five issue areas: 1. the activity's statutory parameters; 2. U.S. national security interests; 3. U.S. foreign policy objectives; 4. funding and implementation; and 5. risk of compromise, failure, loss of life, and unintended consequences. By extension, oversight of anticipated clandestine intelligence activities that might also shape the political, economic, or military environment abroad can apply the same framework, and, like oversight of covert action, address the risk of compromise, unintended consequences, and loss of life. <3.1. Statutory Parameters of the Activity> Section 3093(a)(5) of Title 50, U. S. Code specifies that "a finding [for a covert action] may not authorize any action that would violate the Constitution or any statute of the United States." Congressional oversight, then, ensures a covert action does not violate the law, to include any domestic law enacted to fulfill the terms of a non-self-executing treaty. <3.1.1. Questions for Congress> Does the covert action or clandestine intelligence activity violate domestic U.S. law? Does the activity violate any domestic law connected to a non-self-executing treaty? Is the activity likely to violate international law? What are the national security implications of conducting a covert action that may violate international law? Is the risk justified by the operation's importance to U.S. national security? Would Congress likely choose to provide limitations on the covert action through legislation? Does the covert action or clandestine activity, if conducted during hostilities, comply with the laws of armed conflict in accordance with DOD policy? <3.2. National Security Interests> Congressional oversight of covert action is generally recognized to be especially important to ensuring proper checks and balances, particularly under circumstances in which it is likely that no one outside of a small number of authorized intelligence professionals will know anything about the covert action or clandestine activity. Yet, the 9/11 Commission observed, Congress had a distinct tendency to push questions of emerging national security threats off its own plate, leaving them for others to consider. Congress asked outside commissions to do the work that arguably was at the heart of its own oversight responsibilities. Oversight, in accordance with notification requirements of Title 50, enables Congress to provide a timely check on the development of a covert action or clandestine intelligence activity that might have serious flaws. Maintaining necessarily tight security surrounding planning for intelligence activities may present a challenge, because the few individuals outside the intelligence community with access may offer only limited perspective, overlook essential details, and too easily accept premises that might not bear up against broader scrutiny. <3.2.1. Questions for Congress> What are the underlying premises of the threat and the international or regional environment that justify the covert action or clandestine activity? Is there any precedent for the particular covert action outlined in the presidential finding? If so, what were the similarities and differences with the covert action described in the current finding that may give perspective regarding the risk to U.S. personnel, unintended consequences, and implications for U.S. national security? What are the implications of involving third parties or countries in the covert action? Does the covert action or clandestine activity conform to American and democratic values, and promote free and fair elections? What are plausible long-term unintended consequences of the covert action? Do these possible long-term effects challenge the premises for conducting the covert action in the first place? What might be some plausible second/third order effects of not conducting the covert action? <3.3. Foreign Policy Objectives> Section 3093(a) of Title 50, U. S. Code specifies "[T]he President may not authorize the conduct of a covert action by departments, agencies, or entities of the United States Government unless the President determines such an action is necessary to support identifiable foreign policy objectives of the United States and is important to the national security of the United States." <3.3.1. Questions for Congress> Is the covert action being initiated as an instrument of policy in support of "identifiable" foreign policy objectives elaborated in the National Security Strategy? Is covert action a viable means of achieving these objectives? Are there other means by which the United States might achieve the same objectives involving less risk? Is the covert action consistent with American values to the extent that it is something the American people would support (if the activity were known to the public)? <3.4. Funding and Implementation> Congress can provide another level of review to ensure important details for successfully implementing the activity are not overlooked. Moreover, Congress's constitutional responsibility for appropriating funds extends to its oversight of sensitive intelligence activities like covert action. As former CIA Director and former Member of Congress Leon Panetta once remarked, "I do believe in the responsibility of the Congress not only to oversee our operations but to share in the responsibility of making sure that we have the resources and capability to help protect this country." <3.4.1. Questions for Congress> Is the department or agency named in the presidential finding as the lead agency for the covert action best suited to achieve the objectives? Are the operational elements planned for the covert action comprehensive and developed to achieve tactical success? Is the covert action or clandestine activity sufficiently funded over its projected duration to achieve the objectives? <3.5. Risk Assessment> "The executive branch is chiefly concerned with achieving the objectives of the president, whatever they might be. Because of this, it is sometimes tempted to downplay the risk and accentuate the gain." Congress's relative distance from conceiving and planning the activity may enable it to provide more dispassionate risk assessment and more tempered analysis of likely outcomes. <3.5.1. Questions for Congress> Does the covert action involve an unacceptable risk of escalating into a broader conflict or war? In the event of an unauthorized or untimely disclosure or a popular perception of U.S. involvement what are the risks to U.S. national security, U.S. personnel, or relations with states in the region? What are the consequences of failure of the covert action or clandestine intelligence activity to U.S. lives, U.S. national security, and relations with states in the region? If U.S. Armed Forces are involved, is the covert action or clandestine activity being conducted such that U.S. Armed Forces retain full protection under the terms of the Geneva Conventions? Is it plausible for the U.S. role to remain secret and deniable? Or is there substantial or unacceptable risk of compromising U.S. sponsorship to the detriment of U.S. national security? What risks does the covert action or clandestine activity pose to uninvolved American citizens who might be in the vicinity? <4. An Iterative Process> Statute requires the President update Congress with notifications of changes in conditions from those described in the original notification of a covert action. Congressional oversight consequently extends to periodically reviewing changes in the operational environment on the ground that may suggest a different outcome, a change in strategy, a shift in U.S. interests, or the development of unintended consequences. Along these lines, 3093(d)(1) and (2) of Title 50 U. S. Code includes the following provision: The President shall ensure that the congressional intelligence committees, or, if applicable, [the Gang of Eight], are notified in writing of any significant change in a previously approved covert action, or any significant undertaking pursuant to a previously approved finding, in the same manner as findings are reported pursuant to subsection (c). In determining whether an activity constitutes a significant undertaking for these purposes, the President shall consider whether the activity- involves significant risk of loss of life; requires an expansion of existing authorities, including authorities relating to research, development, or operations; results in the expenditure of significant funds or other resources; requires notification; gives rise to a significant risk of disclosing intelligence sources or methods; or presents a reasonably foreseeable risk of serious damage to the diplomatic relations of the United States if such activity were disclosed without authorization. Former CIA Inspector General L. Britt Snider has suggested that Congress, in carrying out its oversight responsibility, might be vulnerable to failure to review the premises and conditions for the covert action that may have changed, perhaps significantly, subsequent to the initial notification. The risk, as articulated by Snider is that "If members are satisfied with what they hear from administration witnesses [during the initial notification], not only will they acquiesce in the implementation of the operation, they are apt to devote less attention to it down the road." To guard against this outcome, this provision of the covert action statute underscores the importance of being alert to the possible tactical, political, and environment changes that warrant continued oversight to ensure the activity continues to be in the U.S. national interest. <4.1. Questions for Congress> Do the original premises or environmental conditions justifying the activity remain valid? Have there been any outcomes to suggest the intelligence activity is achieving its intended result? Does the activity continue to have the funding necessary to be effective? Have there been any changes in conditions on the ground that might influence a significant change in how the activity is executed? Is there an increase in the risk of premature or unauthorized disclosure? Do American citizens face a greater threat of exposure? Does the risk involved remain acceptable? Does the activity still conform to the statutory guidelines on the conduct of covert action or significant clandestine intelligence activities?

Since the mid-1970s, Congress's oversight of the Intelligence Community (IC) has been a fundamental component of ensuring that the IC's seventeen diverse elements are held accountable for the effectiveness of their programs supporting United States national security. This has been especially true for covert action and clandestine intelligence activities because of their significant risk of compromise and potential long-term impact on U.S. foreign relations. Yet, by their very nature, these and other intelligence programs and activities are classified and shielded from the public. Congressional oversight of intelligence, therefore, is unlike its oversight of more transparent government activities with a broad public following. In the case of the Intelligence Community, congressional oversight is one of the few means by which the public can have confidence that intelligence activities are being conducted effectively, legally, and in line with American values. Covert action is defined in statute (50 U.S.C. §3093(e)) as "an activity or activities of the United States Government to influence political, economic, or military conditions abroad, where it is intended that the role of the United States Government will not be apparent or acknowledged publicly." When informed of covert actions through Presidential findings prior to their execution—as is most often the case—Congress has a number of options: to provide additional unbiased perspective on how these activities can best support U.S. policy objectives; to express reservations about the plan and request changes; or withhold funding. Although Congress does not have the authority to approve or disapprove covert actions, it can have (and has had) influence on the President's decision. The term c landestine describes a methodology for a range of activities wherein both the role of the United States and the activity itself are secret. Clandestine activities can involve traditional intelligence or unconventional military assets. Like covert action, their impact can be strategic even though a specific activity may be tactical in scope. Their secret character suggests the potential harm to sources and methods in the event of an unauthorized or unanticipated public disclosure. Congressional oversight of covert action can be organized around a framework of five issue areas: (1) the activity's statutory parameters, (2) U.S. national security interests, (3) U.S. foreign policy objectives, (4) funding and implementation, and (5) risk assessment. These categories enable Congress to analyze and assess the specific elements of each activity from a strategic point of view. By extension, Congressional oversight of anticipated clandestine intelligence activities that might also shape the political, economic or military environment abroad can apply the same framework and, as with covert action oversight, address the risk of compromise, unintended consequences, and loss of life. This report is accompanied by two related reports: CRS Report R45175, Covert Action and Clandestine Activities of the Intelligence Community: Selected Definitions in Brief , by Michael E. DeVine, and CRS Report R45191, Covert Action and Clandestine Activities of the Intelligence Community: Selected Congressional Notification Requirements in Brief , by Michael E. DeVine.

crs_R46291

crs_R46291_0

<1. Introduction> The United States currently has a population of almost 1 million lawfully present foreign workers and accompanying family members who have been approved for, but have not yet received, a green card or lawful permanent resident (LPR) status. This queue of prospective immigrants the employment-based backlog is dominated by Indian nationals. It has been growing for decades and is projected to double in less than 10 years. The employment-based immigrant backlog exists because the annual number of foreign workers whom U.S. employers hire and then sponsor to enter the employment-based immigration pipeline has regularly exceeded the annual statutory allocation of green cards. The Immigration and Nationality Act (INA) that governs U.S. immigration policy limits the total annual number of employment-based green cards to 140,000 individuals. This worldwide limit is split among five employment-based categories the first three of which each receive 40,040 green cards, and the other two receive 9,940 each. (See Appendix A for more detailed category information.) Apart from these numerical limits, the INA also imposes a 7% per-country cap or ceiling that applies to each of the five categories. The 7% ceiling is not an allocation to individual countries but an upper limit established to prevent the monopolization of employment-based green cards by a small number of countries. This percentage limit is breached frequently for the countries that send the largest number of prospective employment-based immigrants, due to reallocations from other categories and countries. For nationals from most immigrant-sending countries, the employment-based backlog does not pose a major obstacle to obtaining a green card. Current wait times to receive a green card for those individuals are relatively short, often under a year. This is particularly the case for nationals from countries that send relatively few employment-based immigrants to the United States. However, for nationals from India, and to a lesser extent China and the Philippines three countries that send large numbers of foreign workers to the United States the combination of the numerical limits and the 7% per-country ceiling has created inordinately long waits to receive employment-based green cards and exacerbated the backlog. New prospective immigrants currently entering the backlog (beneficiaries) are double the available number of green cards. Many Indian nationals can expect to wait decades to receive a green card. For some, the waits will exceed their lifetimes. For these prospective immigrants, many of whom already reside in the United States, the backlog can impose significant hardships. Prospective employment-based immigrants who lack LPR status cannot switch jobs, potentially subjecting them to exploitative work conditions. While waiting in the United States, backlogged workers often develop community ties, purchase homes and have children. Yet with a petition pending approval and no green card, they cannot easily travel overseas to see their families, and their spouses may have difficulty obtaining legal permission to work. Any noncitizen children who reach age 21 before their parents acquire a green card risk aging out of legal status. In effect, a large part of these prospective immigrants' lives and those of their family members are on hold. If a prospective immigrant in the backlog dies while waiting for a green card, the individual's spouse and family lose their place in the queue, and in some cases their legal status to reside in the United States. For some U.S. employers, the backlog can act as a competitive disadvantage for attracting highly trained workers relative to other countries with more accessible systems for acquiring permanent residence. U.S. universities educate a sizable number of foreign-born graduates in science, technology, engineering, and mathematics, among other fields, many of whom may be desirable candidates to U.S. employers. In the face of the substantial wait times for LPR status, however, growing numbers of such workers are reportedly migrating to countries other than the United States for education, employment, or both. In recent years, some Members of Congress have proposed solutions for addressing the employment-based backlog, ranging from changing the existing system's numerical limits to restructuring the entire employment-based immigration system. The latter approach is widely viewed as legislatively and politically formidable. On the other hand, legislative proposals to alter the numerical limits and to remove the per-country ceiling in particular for employment-based immigrants have been introduced more regularly. One proposal currently under consideration in the Senate following its passage in the House is the Fairness for High-Skilled Immigrants Act ( H.R. 1044 ; S. 386 , as amended), which would eliminate the 7% per-country ceiling for employment-based immigration, among other provisions. Supporters of the bill assert that it would improve the current employment-based immigration system, initially by granting more green cards to Indian nationals who generally have longer wait times under the current system compared with nationals from other countries. Ultimately, the bill would convert the per-country system into what some consider a more equitable first- come, first served system. Supporters of this approach argue that the existing 7% per-country ceiling unfairly discriminates against foreign workers on the basis of their country of origin. They contend that the current backlog incentivizes some employers to hire and exploit Indian foreign workers, knowing that these workers will be unable to leave their jobs for many years without losing their place in the queue. Those opposed to removing the per-country ceiling maintain that it fulfills its original purpose of preventing a few countries from dominating employment-based immigration. They contend that removing the ceiling merely shuffles the deck by changing who receives employment-based green cards, benefiting Indian and Chinese nationals at the expense of immigrants from all other countries. Because Indian employment-based immigrants are employed largely in the information technology sector, such a change may benefit that sector at the expense of other industrial sectors that are also critical to the United States. Opponents argue that legislative proposals such as S. 386 do not address the more fundamental issue of too few employment-based green cards for an economy that has doubled in size since the law establishing their current statutory limits was passed in 1990. If the 7% per-country ceiling were eliminated, some observers expect that Indian and Chinese nationals would initially receive most or all employment-based green cards for some years at the expense of nationals from all other countries. Once current backlogs were eliminated, however, country of origin would no longer directly affect the allocation of employment-based green cards, an outcome that some consider more equitable to Indian and Chinese prospective immigrants, and that others consider disadvantageous to prospective immigrants from all other countries. This report analyzes how removing the per-country ceiling would impact the employment-based immigrant backlog over the next decade, using the provisions of S. 386 , as amended, as a case study. While certain provisions analyzed are specific to only this bill, the broader objective of eliminating the per-country ceiling has appeared in numerous legislative proposals in past Congresses. The report reviews the employment-based immigration system, discusses the key provisions of S. 386 affecting the backlog, and presents results from a Congressional Research Service (CRS) analysis that projects, under current conditions, how the backlog would change over the decade following enactment. The report ends with concluding observations and some potential legislative options. <2. Overview of the Permanent Employment-Based Immigration System> Each year, the United States grants LPR status to roughly 1 million foreign nationals, which allows them to live and work permanently in this country. The provisions that mandate LPR eligibility criteria the pathways by which foreign nationals may acquire LPR status and their annual numerical limits are established in the INA, found in Title 8 of the U.S. Code. Among those granted LPR status are employment-based immigrants who serve the national interest by providing needed skills to the U.S. labor force. The INA specifies five preference categories of employment-based immigrants: 1. persons of extraordinary ability; 2. professionals with advanced degrees; 3. skilled and unskilled "shortage" workers for in-demand occupations (e.g., nursing); 4. assorted categories of "special immigrants"; and 5. immigrant investors (see Appendix A for more detail). Each category has specific eligibility criteria, numerical limits, and, in some cases, application processes. The INA allocates 140,000 green cards annually for employment-based LPRs. In FY2018, employment-based LPRs accounted for about 13% of the almost 1.1 million LPRs admitted. The INA further limits each immigrant-sending country to an annual maximum of 7% of all employment-based LPR admissions, known as the 7% per-country ceiling. The ceiling serves as an upper limit for all countries, not a quota set aside for individual countries. As noted earlier, this percentage limit is breached frequently for the highest immigrant-sending countries, due to reallocations from other categories and countries. The INA also contains provisions that allow countries to exceed the numerical limits set for each preference category and the per-country ceiling. First, unused green cards for each of the preference categories can roll down to be utilized in the next preference category. Second, in any given quarter, if the number of available green cards exceeds the number of applicants, the per-country ceiling does not apply for the remainder of green cards for that quarter. Third, any unused family-based preference immigrant green cards can be used for employment-based green cards in the next fiscal year. Such provisions regularly permit individuals from certain countries to receive far more employment-based green cards than the limits would imply. For example, the numerical limit for each of the first three employment-based categories is 40,040, which combined with the 7% per-country ceiling, would limit the annual number of green cards issued to Indian nationals to 2,803 per category. However, in FY2019, Indian nationals received 9,008 category 1 (EB1), 2,908 category 2 (EB2), and 5,083 category 3 (EB3) green cards. Among prospective immigrants, the INA distinguishes between principal prospective immigrants (principal beneficiaries), who meet the qualifications of the employment-based preference category, and derivative prospective immigrants (derivative beneficiaries), who include the principals' spouses and minor children. Derivatives appear on the same petition as principals and are entitled to the same status and order of consideration as long as they are accompanying or following to join principal immigrants. Both principals and derivatives count against the annual numerical limits, and currently less than half of employment-based green cards issued in any given year go to the principals. While some prospective employment-based immigrants can self-petition, most require U.S. employers to petition on their behalf. How prospective immigrants apply for employment-based LPR status depends on where they reside. If they live abroad, they may apply as new immigrant arrivals. If they reside in the United States, they may apply to adjust st atus from a temporary (nonimmigrant) status (e.g., H-1B skilled temporary worker, F-1 student) to LPR status. Employment-based immigration involves multiple steps and federal agencies. The Department of Labor (DOL) must initially provide labor certification for most preference category 2 and 3 immigrants. U.S. Citizenship and Immigration Services (USCIS) within the Department of Homeland Security (DHS) processes and adjudicates petitions for employment-based immigrants. USCIS assigns to each principal beneficiary and any derivative beneficiaries a priority date (the earlier of the labor certification or immigrant petition filing date), representing the prospective immigrant's place in the backlog. USCIS sends processed and approved immigrant petitions to the Department of State's (DOS's) National Visa Center , which allocates visa numbers or immigrant slots according to the INA's numerical limits and per-country ceilings. Individuals must wait for their priority date to become current before they can continue the process to receive a green card. <3. Key Provisions of S. 386> The discussion below of S. 386 , as amended, and the subsequent analysis are focused solely on the first three employment-based immigrant preference categories. These categories account for 120,120 or 86% of the 140,000 total employment-based green cards available annually. The EB4 category, which comprises special immigrants, and the EB5 category, which comprises immigrant investors, are statutorily included within the employment-based immigration system. Those categories, however, represent distinct types of immigrants that fall outside of S. 386 's provisions, as well as much of the debate over the per-country ceiling. The Fairness for High-Skilled Immigrants Act (currently S. 386 , as amended) has been introduced in Congress in different versions since 2011. In the 116 th Congress, the bill was introduced in the House as H.R. 1044 by Representative Zoe Lofgren in February 2019 and was passed by the House on July 10, 2019, by a vote of 365 to 65. The bill was introduced in the Senate as S. 386 by Senator Mike Lee in February 2019. There have been negotiated proposed amendments since then, and the bill's provisions may change further. In its current proposed form, S. 386 contains the following provisions found in prior versions of the Fairness for High-Skilled Immigrants Act: 1. Eliminating the per-country ceiling for employment-based immigrants; 2. Raising the per-country ceiling for family-based preference category immigrants from 7% to 15%; and 3. Allowing a three-year transition period for phasing out the employment-based per-country ceiling. Eliminating the per-country ceiling for employment-based immigrants would convert the current system into a first-come, first-served system, with the earliest approved petitions receiving green cards before those filed subsequently, regardless of country of origin. S. 386 , as amended, also contains the following additional provisions intended to address issues and concerns raised by stakeholders: 1. A Hold Harmless provision that would ensure no person with a petition approved before enactment would have to wait longer for their visa as the result of the bill's passage; 2. Allocating up to 5.75% of the 40,040 EB2 and EB3 categories (2,302 per category) for derivative and principal immigrants applying from overseas, who otherwise would wait in the backlog much longer once the per-country ceiling was removed, either to reunite with their principal immigrant parents/spouses or to be employed in the United States; and 3. Within the EB3 category, allocating up to 4,400 of the 40,040 slots for Schedule A occupations (professional nurses and physical therapists). It would also allocate slots for these immigrants' accompanying family members. <4. Analysis of the Employment-Based Backlog> The following analysis projects what the employment-based backlog would look like in 10 years under current law and compares that outcome with the projected outcome if S. 386 were passed. As noted above, the analysis is limited to the EB1, EB2, and EB3 categories, which together account for 120,120 (86%) of the 140,000 employment-based green cards permitted annually under the INA. <4.1. Analytical Approach> The projection of the impact of S. 386 assumes the bill is passed in FY2020, and its provisions take effect in FY2021. As such, the analysis begins with the FY2020 employment-based backlog for the EB1, EB2, and EB3 categories and projects how the bill's provisions alter these backlogs over the 10 years from FY2021 through FY2030. For each category, the analysis estimates the number of new prospective immigrants whose petitions would be approved each year (thereby added to the backlog), as well as the number of backlogged approved petition holders who would receive a green card each year (thereby removed from the backlog). Within each category, the analysis projects the resulting backlog for India, China, the Philippines (for EB3 only), and all other countries or the "rest of the world" (RoW). Projected annual additions to the employment-based backlog in the analysis are based on FY2018 USCIS data on approved employment-based immigrant petitions. The analysis holds that number constant through the 10-year period examined. Projected annual reductions to the employment-based backlog are based on green card issuances to approved petitioners and their derivatives. Because S. 386 does not increase the INA's annual worldwide limit of 140,000 green cards issued each year, annual green card issuances in the EB1, EB2, and EB3 categories sum to 40,040 under both scenarios. Projected issuances are based on current DOS data on the number of individuals, by country, who receive EB1, EB2, and EB3 green cards. Under S. 386 , issuances occur from overseas petitioners (the 5.75% set-aside), Schedule A petitioners (nursing and physical therapy occupations), and the remaining individuals with approved petitions according to their priority date or place in the queue. In the analysis, the Hold Harmless provisions alter issuances for FY2021 only, and the three-year Transition Year provisions impact issuances for FY2022 and FY2023. The 5.75% set-aside expires in nine years (FY2029), and the Schedule A set-aside expires in six years (FY2026). (For more detailed methodology information, see Appendix B .) As such, the analysis that follows is an arithmetic exercise beginning with the current EB1, EB2, and EB3 approved petition backlogs, each broken out for India, China, the Philippines (only for EB3), and RoW. For each subsequent year, new petition approvals for prospective employment-based immigrants increase the backlog, and green card issuances to those individuals and their family members reduce the backlog. Because the INA treats derivative immigrants and principal immigrants equally for reaching the annual worldwide limit and maintaining the per-country ceiling, the analysis necessarily includes dependent family members of principal immigrants. Each year's ending backlog balance equals the following year's starting balance. The following sections describe the results of the analysis. <4.2. First Employment-Based Category (EB1)> Table 1 presents the projected change in the current EB1 backlog after 10 years, as well as current and projected green card wait times. All figures are estimates. Status quo projections are compared to those that model the impact of S. 386 . All figures are estimates. In both scenarios, total annual EB1 green cards issued and total new beneficiaries entering the EB1 queue are assumed to remain the same a conservative assumption (see Figure 1 , below). Since the number of new beneficiaries exceeds the number of green cards issued each year, the total backlog under both scenarios is projected to more than double from 119,732 in FY2020 to 268,246 in FY2030. S. 386 would alter how the backlog grows by country of origin over this period. For Indian nationals, the backlog would increase by only 21% under the bill's provisions, instead of 118% under current law. Chinese nationals would experience a 115% backlog increase, instead of a 215% increase. Nationals from all other countries would bear the impact of these reductions. Their backlog would increase by more than five times over this period, from 21,425 to 125,852. Projected years to receive a green card for those waiting in the EB1 backlog reflect these shifts. Currently, backlogged EB1 Indian nationals can expect to wait up to eight years before receiving a green card. This also means that the current queue of 73,482 Indian nationals would require eight years to disappear. Under S. 386 , this time would decrease to three years, and the number of years required to eliminate the backlog for Chinese nationals would decrease from five to three years. The backlog for RoW nationals would benefit from the Hold Harmless provisions in S. 386 and thus would disappear after one year under both scenarios. In FY2030, however, RoW nationals would experience projected wait times of seven years for a green card under S. 386 , instead of one year under current law. In contrast, by FY2030, projected wait times for Indian and Chinese nationals would decline from 18 and 15 years, respectively, under current law, to seven years for each group. Although rates of backlog increase and wait times diverge among country-of-origin groups, the common theme illustrated in Table 1 is the sizeable increase in the number of foreign workers and their dependents, largely residing in the United States, who would wait extended periods to obtain LPR status. Under this projection, the annual number of foreign workers sponsored for EB1 petitions continues to exceed (by an amount fixed at the FY2018 level) the number of statutorily mandated EB1 green cards. Table 1 shows all EB1 foreign nationals in FY2030 facing the same seven-year wait to receive a green card. This demonstrates how eliminating the per-country ceiling under the provisions of S. 386 would convert the current employment-based system from one constrained by country-of-origin limits into one that functions on a first-come, first-served basis. <4.3. Second Employment-Based Category (EB2)> Table 2 presents projected changes to the current EB2 backlog after 10 years, as well as current and projected wait times for a green card. All figures are estimates. Projections are conducted for the status quo under current law and for if the current version of S. 386 were enacted. All figures are estimates. Outcomes for the EB2 petition backlog would diverge considerably from those of the projected EB1 backlog because of the sizable difference between the current EB1 and EB2 backlogs. At 627,448 petitions, the current EB2 backlog is more than five times the size of the EB1 backlog (119,732 petitions) and is dominated overwhelmingly (91%) by Indian nationals. Chinese nationals make up the remaining 9% of the EB2 backlog. No EB2 backlog currently exists for nationals from any other country. Total annual new beneficiaries entering the EB2 backlog and total EB2 green cards issued each year are the same under both scenarios. Since new entering beneficiaries always exceed green cards issued, the total backlog under either scenario is projected to more than double from 627,448 in FY2020 to 1,471,360 in FY2030. As with EB1 petitions, S. 386 would alter how the backlog grows by country of origin over this period. For Indian nationals, the backlog would increase by a smaller percentage 77% under the bill's provisions compared with 123% under current law. Chinese nationals, in contrast, would see their backlog increase by a greater percentage under the bill's provisions 217% versus 194% under current law. Nationals from all other countries, however, would experience the most notable difference in FY2030. Instead of a relatively small backlog of 30,051 that would disappear after a year under current law, RoW nationals would face a backlog nine times its current size (278,333). The differential outcomes that S. 386 provides to Indian and Chinese nationals is also seen in the number of years they would have to wait for a green card by FY2030. Table 2 shows that under either scenario, green card wait times would increase for all groups in FY2030 compared to FY2020. Under current law, and owing to a limited number of green card issuances, the current backlog of 568,414 Indian nationals would require an estimated 195 years to disappear. By FY2030, this estimated wait time would more than double. Under S. 386 , the estimated wait time for newly approved EB2 petition holders would shrink to 17 years, and in FY2030, the wait time would be 37 years, the same as for all other foreign nationals. The significant drop in FY2030 green card wait times for Indian and Chinese nationals under S. 386 would come at the expense of nationals from all other countries. RoW nationals would see their EB2 backlog and wait times increase substantially. Currently, no backlog exists for persons with approved EB2 petitions from RoW countries. Under the current system, EB2 petition approval for anyone from other than India or China generally leads to a green card with no wait time. By removing the per-country ceiling, however, S. 386 would create a new RoW backlog by FY2030 that would be nine times its projected size under current conditions <4.4. Third Employment-Based Category (EB3)> Table 3 presents projected changes to the current EB3 backlog and green card wait times for both current law and following the potential enactment of S. 386 . All figures are estimates. The EB3 analysis also includes projections for Filipino nationals, who represent relatively large numbers of foreign-trained nurses. As with the EB1 and EB2 categories, Indian nationals dominate the backlog, with 81% (137,161) of the total queue of 168,317 approved petitions. Chinese nationals represent 12% and Filipino nationals the remaining 7%. No backlog currently exists for nationals from all other countries. The annual number of new beneficiaries entering the EB3 backlog and total EB3 green cards issued are the same each year under both scenarios, increasing almost all backlogs between FY2020 and FY2030. As with EB1 and EB2 petitions, S. 386 would alter how the backlog grows by country of origin over this period. For Indian nationals, the backlog is projected to decline by 8% under the bill's provisions compared with a 79% increase under current law. Chinese nationals, in contrast, would see almost no change in their backlog under the bill's provisions compared to current law. Filipino nationals would see a 25% increase in their relatively small backlog. RoW nationals would experience the most notable difference in FY2030, with the backlog increasing to roughly double the size under S. 386 (251,171) compared to the projected backlog under current law (136,783). Projected years to receive a green card for those waiting in the EB3 queue reflect these changes in backlog size. Currently, new Indian beneficiaries entering the EB3 backlog can expect to wait 27 years before receiving a green card. Under S. 386 , this wait time would shorten to seven years, and the wait time for Chinese nationals would increase from five to seven years. For Filipino and RoW nationals, FY2020 wait times would not change. By FY2030, however, wait times under S. 386 would equalize the substantial differences in green card wait times under current law, with RoW nationals waiting an estimated 11 years to receive a green card. <5. Concluding Observations> This analysis projects the impact of eliminating the 7% per-country ceiling on the first three employment-based immigration categories over a 10-year period. It models outcomes under current law, as well as under the provisions of S. 386 , as amended. The bill would phase out the per-country ceiling over three years and reserve green cards for certain foreign workers, among other provisions. S. 386 would not increase the total number of employment-based green cards, which equals 120,120 for the first three employment-based categories under current law. The analyses of the EB1, EB2, and EB3 categories all project similar outcomes: Indian nationals, and to a lesser extent Chinese nationals, who are currently in the employment-based backlog would benefit from shorter waiting times under S. 386 compared with current law. The bill would eliminate all current EB1, EB2, and EB3 backlogs in 3, 17, and 7 years, respectively, with some modest differences by country of origin. Once current backlogs are eliminated under the Hold Harmless provision of S. 386 , persons with approved employment-based petitions would receive green cards on a first-come, first-served basis, with equal wait times within each category, regardless of country of origin. In FY2030, foreign nationals with approved EB1, EB2, and EB3 petitions could expect to wait 7, 37, and 11 years, respectively, regardless of country of origin. By contrast, maintaining the 7% per-country ceiling would, over 10 years, substantially increase the long wait times to receive a green card for Indian and Chinese nationals, but it would also continue to allow nationals from all other countries to receive their green cards relatively quickly. S. 386 would not alter the growth of future backlogs compared to current law. This analysis projects that, by FY2030, the EB1 backlog would grow from an estimated 119,732 individuals to an estimated 268,246 individuals; the EB2 backlog, from 627,448 individuals to 1,471,360 individuals; and the EB3 backlog, from 168,317 individuals to 456,190 individuals. In sum, the total backlog for all three employment-based categories would increase from an estimated 915,497 individuals currently to an estimated 2,195,795 by FY2030. If the current number of new beneficiaries each year continues, these outcomes would occur whether or not S. 386 is enacted, as the bill contains no provisions to change the number of green cards issued. As noted throughout this report, all figures from this analysis are estimates. They are based largely on the assumption that current immigration flows of newly approved employment-based immigrant petitions added to the backlog and of employment-based green card issuances by country of origin re moved from the backlog remain constant over 10 years. As such, results from the analysis are subject to change, depending on how numbers of future petition approvals and green card issuances deviate from current levels. In one respect, the analysis yields conservative estimates it assumes that the number of new beneficiaries entering the employment-based immigration system will remain at their FY2018 levels. USCIS data for the past decade, however, show a consistent upward trend in the number of approved I-140 employment-based immigrant petitions ( Figure 1 ). Regarding green card issuances, the analysis is not subject to future variation because under current law or the provisions of S. 386 , the number of employment-based green cards issued each year remains fixed by statute. In FY2018, the former exceeded 262,000, while the latter remained at 120,120. The number of employment-based immigrants who are sponsored by U.S. employers and who enter the immigration pipeline with the aspiration of acquiring U.S. lawful permanent residence far exceeds the number of LPR slots available to them. Removing the 7% per-country ceiling would initially reduce wait times considerably for Indian and Chinese nationals in the years following enactment of S. 386 , but it would do so at the expense of nationals from all other countries, as well as of the enterprises in which the latter are employed. In a decade, wait times would equalize among all nationals within each category, regardless of country of origin. This outcome may appear more equitable to some because prospective immigrants from all countries would have to wait the same period to receive a green card. However, it may appear less equitable to others because it would make backlog-related waiting times apply to nationals from all countries rather than just nationals from a few prominent immigrant-sending countries. S. 386 would not address the imbalance between the number of foreign nationals who enter the employment-based pipeline and the number who emerge with LPR status. <6. Legislative Options> Four options Congress could consider related to the current employment-based immigration backlog include maintaining current law by leaving the 7% per-country cap as is; removing the 7% per-country cap for employment-based immigrants as is proposed under S. 386 ; increasing the number of employment-based LPRs permitted under the current system; or reducing the number of prospective immigrants entering the employment-based pipeline. These options are not necessarily mutually exclusive and could be considered in combination with others. Some Members of Congress have also introduced legislation that would offer more substantial structural changes to the employment-based system. Maintain C urrent L aw . Supporters of the per-country ceiling cite the current law's original purpose of this provision: to prevent nationals from a few countries from monopolizing the limited number of employment-based green cards. This 7% threshold allows prospective immigrants from other countries to acquire LPR status in a relatively short time, diversifying the skilled pool of workers from which U.S. employers may draw. To the extent that prospective immigrants from high immigrant-sending countries such as India and China concentrate in particular industrial sectors, the per-country ceiling imposes constraints on some industries and allows others to access that worker pool. Because Indian nationals, in particular, have entered the employment-based backlog in relatively large numbers over the past two decades, they experience the most pronounced impact of the per-country ceiling. Some Indian nationals currently wait for decades to receive green cards and in the case of new EB2 petition holders, centuries. Some Indian nationals consider this provision of the law discriminatory and unfair. Remove A nnual P er- C ountry C eiling for E mployment- B ased I mmigrants . Supporters of removing the per-country ceiling emphasize the inordinately long wait times which, as shown above, require Indian nationals who enter the employment-based backlog to wait an estimated 8, 195, and 27 years, respectively, for green cards in the EB1, EB2, and EB3 categories. This analysis estimates that, holding current conditions constant, these wait times could increase to 18, 436, and 48 years, respectively, by FY2030. Long wait times call into question the legitimate functioning of the employment-based pathway to lawful permanent residence when large numbers of current and prospective backlogged workers remain in temporary status most, if not all, of their working lives. Opponents of removing the per-country ceiling maintain that it currently functions as intended. They point to the concentration of Indian and Chinese nationals in the U.S. information technology sector and argue that prospective employment-based immigrants from other countries benefit far more segments of the U.S. economy. Increase N umber of E mployment- B ased LPR s under C urrent S ystem. The number of green cards for employment-based immigrants could be increased by altering current numerical limits for specific categories or the total worldwide limit. Some have proposed exempting accompanying family members to achieve this goal. Other proposals would increase employment-based immigrants in exchange for reducing the number of other immigrant types, such as family-based preference or diversity immigrants. Such legislation would alleviate current and future employment-based backlogs more expediently than under the current system. Supporters of expanding the number of green cards point out that the current limit of 140,000 for all five employment-based preference categories (120,120 for the first three) was established 30 years ago when the U.S. economy was half its current size. They contend that the larger U.S. economy and the shifting economic importance of technological innovation reinforces the need to find the "best and brightest" workers, including from overseas, who can contribute to U.S. economic growth. Opponents of increasing the number of employment-based green cards point to the lack of evidence indicating labor shortages in technology sectors. They contend that the green card backlog harms U.S. workers by forcing them to compete in some industries with foreign workers who may accept more onerous working conditions and lower wages in exchange for LPR status. Some also argue that current immigration levels are too high. Legislation increasing the number of green cards may face resistance from the Trump Administration and some Members of Congress who oppose increasing immigration levels. Reduce N umber of P rospective I mmigrants E ntering E mployment- B ased P ipeline . A primary pathway to acquire an employment-based green card is by working in the United States on an H-1B visa for specialty occupation workers, getting sponsored for a green card by a U.S. employer, and then adjusting status when a green card becomes available. When first established in 1990, the H-1B program was limited to 65,000 visas per year. Current limits have since been expanded by excluding H-1B visa renewals and H-1B visa holders employed by nonprofit organizations and institutions of higher education, as well as 20,000 aliens holding a master's or higher degree (from a U.S. institution of higher education). In FY2019, for example, 188,123 individuals received or renewed an H-1B visa, far more than the original 65,000 annual limit. Although some other nonimmigrant visas allow foreign nationals to work in the United States, the INA permits only H-1B and L visa holders to be "intending immigrants" who can then renew their status indefinitely while waiting to adjust to LPR status. Eliminating this "dual intent" classification or otherwise reducing the number of prospective immigrants entering the employment-based backlog would reduce the growth of the backlog and shorten wait times. Arguments against reducing skilled migration emphasize the impacts on economic growth in certain industrial sectors. Reform S tructure of E mployment- B ased I mmigration S ystem. Some recent legislative proposals have taken broader approaches toward restructuring the employment-based immigration system. The Trump Administration and some Members of Congress have proposed changing the current system from one that relies on employer sponsorship to a merit-based system that would rank and admit potential immigrants based on labor market attributes and expected contributions to the U.S. economy. Other Members of Congress have introduced proposals establishing place-based immigration systems that would let each state determine the number and type of temporary workers it needs. All of these approaches exceed the scope of the more narrow discussion of the numerical and per-country limits addressed in this analysis. Appendix A. Employment-Based Preference Categories Within permanent employment-based immigration, the Immigration and Nationality Act (INA) outlines five distinct employment-based preference categories. Each of the five categories is constrained by its own eligibility requirements and numerical limit ( Table A-1 ). Appendix B. Methodological Notes The results presented in this report are based on an arithmetic projection of the employment-based backlog under current law and under the provisions of S. 386 , as amended. Each element of the projection is described below. Current Backlog Balance . The current backlog balance consists of individuals who possess approved employment-based petitions and who are waiting for a statutorily limited green card. For this analysis, CRS obtained unpublished data from U.S. Citizenship and Immigration Services (USCIS) indicating, for each of the countries within the three employment-based categories analyzed herein, the number of people with approved I-140 petitions. The USCIS data are further broken down by year of priority date, indicating the numerical order in which approved petitions in the backlog are to receive green cards. New Petition Approvals . To estimate newly approved petitions of prospective employment-based immigrants, the analysis relies on unpublished USCIS figures of EB1, EB2, and EB3 petitions approved in FY2018. The figures are further divided by country, for India and China only. These figures include only principal immigrants and do not account for derivative immigrant family members who accompany or follow to join the principal immigrants and who are included within the same statutory numerical limits. Derivative immigrants are estimated by multiplying the number of principal immigrants by the average derivative-to-principal immigrant ratios ( derivative multipliers ). Hold Harmless Issuances . As noted above, S. 386 contains a provision ensuring that no one holding an approved petition waits additional time in the backlog as the result of the bill's passage. This provision applies to EB1, EB2, and EB3 categories. To approximate the Hold Harmless provision's impact, this analysis assumes that requirements for this provision would be met with one year's worth of issuances under current law, or current issuances, as recorded by the most recent FY2019 U.S. Department of State (DOS) annual visa report. Overseas Petitioner Issuances . As noted above, S. 386 contains a provision that would reserve up to 5.75% (2,302) of the 40,040 EB2 and EB3 green cards for foreign nationals petitioning from overseas. Most prospective employment-based immigrants in the backlog already reside in the United States. When notified by DOS that a visa number is available for them, they can apply with USCIS to adjust status from a nonimmigrant status (e.g., possessing an H-1B visa) to LPR status. However, some backlogged prospective immigrants reside abroad in their home countries. Employers seeking to hire these individuals face a competitive disadvantage because they are not already employing them. Individuals based overseas who face long wait times are likely to advance their careers elsewhere rather than wait abroad for years to receive an employment-based green card in the United States. This analysis assumes that green cards reserved under this provision would be used mostly by RoW country nationals who currently face no wait times. Schedule A Issuances . S. 386 contains a provision that would reserve up to 4,400 green cards for Schedule A occupations (professional nurses and physical therapists). Under the most recent version of the bill, this set-aside would last for six years following enactment. The set-aside includes 4,400 principal immigrants, as well as their family members, effectively doubling the provision's impact. To estimate the number of family members, the analysis assumes that Schedule A principal immigrants brought with them an average of 1.06 derivative immigrants. As such, the total set-aside under this provision is 4,400 principal immigrants plus 4,664 derivative immigrants, for a total set-aside of 9,064 immigrants. Because of the Hold Harmless provisions, Schedule A issuances are projected to start in Year 2 of the analysis (FY2022). Issuances are distributed between nationals from the Philippines, which send the majority of foreign-trained immigrant nurses to the United States, and nationals from all other countries. Transition Year Issuance s. S. 386 contains provisions that would allow a transition from the current 7% per-country ceiling to its elimination in the first three years following enactment. The transition would affect issuances in the first three years following enactment. Because all of the issuance provisions described above overlap during the first few years, this analysis gives precedence to the Hold Harmless, Overseas Petition, and Schedule A issuances over the Transition Year issuances. Consequently the 40,040 green cards allocated by S. 386 to the EB1, EB2, and EB3 categories according to Table B-1 are first reduced by the Overseas Petition and Schedule A issuances before being allocated according to the Transition Year provisions. In addition, Year 1 (FY2021) Transition Year issuance limits are preempted by the higher priority Hold Harmless issuances for that year . Backlog Reduction Methodology . Backlogged employment-based petition holders are issued green cards in the analysis according to the year in which they entered the backlog. Although the issuance limits described above quantify the number of issuances for each country in each of the three employment-based preference categories, the elimination of the current existing backlog is based on how many backlogged petitions can be processed within annual green card limits and on which country's nationals have the oldest petitions. In FY2018, USCIS approved 22,799 EB1, 66,904 EB2, and 34,964 EB3 petitions, per the November 2019 report cited above. Factoring in family members using the derivative multipliers for each EB category described above 1.48 for EB1, 1.00 for EB2, and 1.06 for EB3 yields an estimated 56,542 new additions to the EB1 backlog, 133,808 new additions to the EB2 backlog, and 72,026 new additions to the EB3 backlog. Given that 40,040 statutorily mandated green cards can reduce these backlogs each year, the net result is an estimated increase in the EB1, EB2, and EB3 backlogs each year by 16,502, 93,768, and 31,986 petitions, respectively (i.e., approved principal immigrant green card petitions, increased by their dependents and reduced by green card issuances). As a result, the estimated total EB1 backlog at the start of FY2020 of 119,732 ( Table 1 ) increases by a projected 148,518 individuals over nine years (16,502 x 9), resulting in an estimated EB1 backlog at the start of FY2030 of 268,260. The estimated total EB2 backlog at the start of FY2020 of 627,448 ( Table 2 ) increases by a projected 843,912 individuals over nine years (93,768 x 9), resulting in an estimated EB2 backlog at the start of FY2030 of 1,471,360. The estimated total EB3 backlog at the start of FY2020 of 168,317 ( Table 3 ) increases by a projected 287,874 individuals over nine years (31,986 x 9), resulting in an estimated EB3 backlog at the start of FY2030 of 456,191. These totals are further broken down in the analysis by the provisions of S. 386 that allocate the 40,040 annual green card issuances according to the provisions described above. Those provisions alter the number of green cards that nationals from individual countries would otherwise receive under current law. The overall projected impact on the total backlog remains the same whether or not S. 386 is enacted.

Currently in the United States, almost 1 million lawfully present foreign workers and their family members have been approved for, and are waiting to receive, lawful permanent resident (LPR) status (a green card ). This employment-based backlog is projected to double by FY2030. It exists because the number of foreign workers whom U.S. employers sponsor for green cards each year exceeds the annual statutory green card allocation. In addition to this numerical limit, a statutory 7% per-country ceiling prevents the monopolization of employment-based green cards by a few countries. For nationals from large migrant-sending countries—India and China—the numerical limit and per-country ceiling have created inordinately long waits for employment-based green cards. New prospective immigrants entering the backlog (beneficiaries) outnumber available green cards by more than two to one. Many Indian nationals will have to wait decades to receive a green card. The backlog can impose significant hardship on these prospective immigrants, many of whom already reside in the United States. It can also disadvantage U.S. employers, relative to other countries' employers, for attracting highly trained workers. Solutions for addressing the employment-based backlog have been introduced in Congress. In July 2019, the House passed H.R. 1044 , the Fairness for High-Skilled Immigrants Act. Currently under consideration by the Senate ( S. 386 , as amended), the bill would eliminate the 7% per-country ceiling. Supporters of the bill argue it would ultimately treat all prospective immigrants more equitably regardless of origin country. Opponents contend it would allow nationals from a few countries, and their U.S. employers, to dominate most employment-based immigration. They argue that S. 386 ignores the fundamental issue of too few employment-based green cards for an economy that has doubled in size since Congress established the current limits in 1990. This report describes the results of a CRS analysis that projects the 10-year impact of eliminating the 7% per-country ceiling on the first three employment-based immigration categories: EB1, EB2, and EB3. It models outcomes under current law and under the provisions of S. 386 , as amended. The bill would phase out the per-country ceiling over three years and reserve green cards for certain foreign workers, but it would not increase the current limit of 120,120 green cards for the three employment-based immigration categories. The analysis projects similar outcomes for all three employment-based categories: Indian, and to a lesser extent Chinese, nationals in the backlog would experience shorter wait times under S. 386 compared with current law. The bill would eliminate current EB1, EB2, and EB3 backlogs in 3, 17, and 7 years, respectively, with modest differences by country of origin. Subsequently, new prospective immigrants would receive green cards on a first-come, first-served basis with equal wait times within each category, regardless of origin country. By FY2030, EB1, EB2, and EB3 petition holders could expect to wait 7, 37, and 11 years, respectively. Maintaining the 7% per-country ceiling, by contrast would substantially increase the already long wait times for Indian and Chinese nationals, but it would continue to allow those from elsewhere to receive green cards relatively quickly. S. 386 would not reduce future backlogs compared to current law. Given current trends, the analysis projects that by FY2030, the EB1 backlog would grow from an estimated 119,732 individuals to an estimated 268,246 individuals; the EB2 backlog would grow from 627,448 to 1,471,360 individuals; and the EB3 backlog, from 168,317 to 456,190 individuals. The total backlog for all three categories would increase from an estimated 915,497 individuals currently to an estimated 2,195,795 individuals by FY2030. These outcomes would occur whether or not S. 386 is enacted, because the bill maintains the current limit on number of green cards issued. Some legislative options include one or more of the following: maintaining current law, removing the per-country ceiling, increasing the number of employment-based green cards, and reducing the number of workers entering the employment-based immigration pipeline. Broadly restructuring the entire employment-based immigration system could involve merit-based or place-based approaches.

crs_R45911

crs_R45911_0

<1. Introduction> Household debt among older Americans including mainly residential debt, auto loans, student loans, and credit cards has grown substantially from 1989 to 2016. The proportion of households headed by individuals aged 65 and older (hereinafter referred to as elderly households ) who held any debt increased from 37.8% to 61.1%, and the real median household debt among elderly households with debt increased from $7,463 to $31,050 (in 2016 dollars). The increase in debt among older Americans has raised concerns about financial security for people near or during retirement for several reasons. First, Americans aged 65 and older represent a large and growing proportion of the U.S. population. Over the next 20 years, the share of the U.S. population aged 65 and older is expected to increase from about 17% to 22%. The increase in debt, together with the aging population, suggests that a large group of older Americans are not retiring debt free. Second, many older Americans, especially low-income people, rely on Social Security or other government-sponsored income transfers as their major sources of income. Increases in household debt might require retirees to devote a larger share of their fixed income and savings toward paying debt. Excessive debt payments may put more seniors, especially those living on limited incomes, at greater risk of financial insecurity. Third, researchers have shown that higher levels of debt may increase psychological stress and decrease physical health. These effects may be exacerbated for older people, as they usually have fixed income and limited ability to offset higher monthly debt obligations by working more. This report presents evidence of the increase in debt from 1989 to 2016 among households headed by those aged 65 and older, using Survey of Consumer Finances (SCF) data. The discussion focuses on changes in the percentage of households holding debt; in median and average household debts; in selected types of debt; and in relative measures, such as the debt payments-to-income ratio and the total debt-to-asset ratio. This report also analyzes how household debt among older Americans varies across different age groups and asset distributions, and it explores various groups of elderly households with the largest debt burdens. Major types of debt discussed in this report mainly include residential debt, auto loans, student loans, and credit card balances. Nonloan debt such as medical debt, past-due utility and other bills, and government-assessed fines and fees is not covered in this report, because the population with those debts tends to be underrepresented in the SCF. <2. Household Debt by Age> Traditional life-cycle theories predict that people tend to borrow in young adulthood when incomes are low but some costs such as education and housing are high, continue to borrow but at a slower pace during middle age as income and expenses converge, and then slowly deleverage through old age as they pay down debt. The SCF data show that Americans' debt experiences have generally conformed to life-cycle theories' predictions. During 1989 to 2016, the share of households who held any debt and the median and average level of household debts were highest among those headed by Americans aged 35 to 54 and lower among younger and older ages. In the past three decades, debt among households headed by individuals aged 65 and older grew faster than that among households headed by those aged 64 and younger. In 2016, average household debt increased from $59,134 in 1989 to $110,204 (in 2016 dollars) for households whose head was between the ages of 20 and 64, an increase of 86%, whereas the average household debt grew from $11,278 to $53,269 (in 2016 dollars) for households headed by those aged 65 and older, an increase of 3 72%. The average household debt nearly doubled for households in age groups younger than age 60, but it increased by about 4 times for the age groups 60-64, 65-69, and 70-74; by about 7 times for the age group 75-79; and by more than 10 times for the age group 80 and older (see Figure 1 ). <3. Trends in Household Debt Among Older Americans> From 1989 to 2016, debt increased among households whose head was aged 65 and older. Both the share of elderly households with any debt and the median and average levels of debt have increased. Household debt includes mortgages, auto loans, student loans, and credit cards, as well as other debt products. <3.1. Share of Elderly Households Holding Debt and Median and Average Debt> From 1989 to 2016, the share of households headed by individuals aged 65 and older who held debt increased, as did median and average household debt among elderly households with debt (see Figure 2 ). In 1989, about 37.8% of elderly households held debt, whereas in 2016 the share increased to 61.1%. The median debt of those elderly households with debt increased from $7,463 to $31,050 (in 2016 dollars) during the same time, and the real average debt increased from $29,918 to $86,797. The median debt lies at the middle of the debt distribution, and the average debt is generally higher than the median debt because a relatively small percentage of people have very high debt. The share of elderly households holding any debt has generally trended upward from 1989 to 2016. However, median and average debt peaked in 2010, the year after the 2007-2009 economic recession, and declined from 2010 to 2016. In 2016, the median amount of debt was about the same as in 2007, before the economic recession, and the average amount of debt was at about the midpoint of the averages in 2004 and 2007. The financial crisis might have had a profound effect on the older population for several reasons. First, older people are likely to have been affected by employment instability. Research suggests that when the elderly lose jobs, it takes them significantly longer to find new ones, and their new jobs, if any, typically pay less than their previous jobs. Second, defined contribution (DC) retirement plans have replaced defined benefit (DB) plans, and they have become an important source of income for older Americans. Unlike DB plans, which provide a steady stream of income during retirement, DC plans fluctuate in value with the financial market, and their value depends in part on employees' investment skills. Employees generally bear the risk in DC plans. A recent study indicates that individuals' retirement account mismanagement and the large drop in the stock market during the financial crisis reduced potential retirement income for many older Americans during the past decade. <3.2. Components of Debt> The growth in average household debt between 1989 and 2016 largely came from mortgages (see Figure 3 ), including both debt secured by a primary residence (from $12,970 to $57,943 in 2016 dollars) and debt for other residential properties (from $2,970 to $11,446 in 2016 dollars). In addition, the increase in auto loans (from $2,437 to $5,262) may explain part of the growth in household debt among elderly households. In 2016, primary residential mortgages accounted for 66.8% of overall elderly household debt on average, other residential debt for 13.2%, auto loans for 6.1%, student loans for 1.5%, credit card balances for 3.5%, and other debts for 8.9%. Residential loans are usually considered long-term wealth builders, as the residence's market value may increase over time, which is generally not true for auto loans or credit card debt. Researchers have found that both residential and nonresidential debt may contribute to debt-related stress for older households, but residential debt is much less stressful than other debt, such as credit card debt. <3.2.1. Selected Components of Debt> The share of elderly households who held certain selected types of debt, such as debt on a primary and other residences, auto loans, student loans, and credit card balances, increased from 1989 to 2016. The median amounts of those types of debt have also increased among elderly households with those debts. <3.2.1.1. Debt Secured by Residential Properties19> The share of elderly households who held debt secured by a primary residence increased from 15.4% in 1989 to 33.4% in 2016 (see Table 1 ). During the same time, the median primary residential debt among those households with residential debt increased from $16,793 to $72,000 in real 2016 dollars (see Table 2 ). Studies suggest that much of the growth through 2007 might have resulted from the increased availability of mortgage credit during the build-up to the financial crisis. Some research indicates that millions of older Americans are carrying more mortgage debt than ever before, and recent cohorts have taken on more mortgage debt mostly because they purchased more expensive homes with smaller down payments. Since 2010, some scholars argue that tightening mortgage underwriting standards have made it more difficult for young borrowers to qualify for mortgages. Consequently, this trend has resulted in a shift of new mortgage originations toward older borrowers and an increase in the ages of borrowers with existing debt. A small proportion of elderly households held debt secured by other residential properties, such as a second house or a vacation property. The share of elderly households who held other residential debt slightly increased from 2.7% to 4.4% between 1989 and 2016, and the median debt on other residences increased from $23,323 to $98,000. Those types of debt were primarily concentrated among relatively higher-income elderly households. <3.2.1.2. Auto Loans> Auto loans also increased among households headed by individuals aged 65 and older from 1989 to 2016. The share of elderly households who held any auto loan increased from 10.3% to 21.2%, and the median auto loan grew from $7,463 to $11,000 (in 2016 dollars) for those households with auto debt. Rising auto loan debt among elderly households may have partly resulted from rising vehicle costs and longer auto loan maturities. <3.2.1.3. Student Loans> A small share of elderly households held student loans, but the proportion increased over time. About 0.5% of elderly households held some student loans in 1989, and this share increased to 2.4% in 2016. Among those elderly households who held student loans, the median amount in 2016 dollars was $7,463 in 1989, which increased to $12,000 in 2016. Although the number of student loan borrowers aged 65 and older is much smaller than the younger population, elderly borrowers are more likely to default than their nonelderly counterparts. Student loan debt can be especially problematic for older Americans because, in the event of default on federal student loans, a portion of the borrower's Social Security benefits can be claimed to pay off the loans. The number of individuals aged 65 and older whose Social Security benefits were offset to pay student loans increased from about 6,000 in FY2002 to 38,000 in FY2015. Most of these federal student loans were incurred primarily for older Americans' own education rather than for their dependents' education. <3.2.1.4. Credit Card Balances> Credit card balances among elderly households increased from 1989 to 2016, and they were the most common type of debt for elderly households in 2016. From 1989 to 2016, the share of elderly households who held some credit card debt increased from 10.0% to 35.1%, and the median credit card balance increased from $952 to $2,400 (in 2016 dollars) among those with credit card debt. Studies suggest that credit card and other noncollateralized debt tends to carry higher interest rates than other types of credit, so with rising credit card debt, older Americans may need to dedicate more of their income to servicing their debt. Credit card debt is a leading reason for bankruptcy filings among older consumers. One study shows that elderly debtors in bankruptcy carried 50% more credit card debt than younger debtors, and the elderly cited credit card interest and fees as the main reason for filing bankruptcy. <3.3. Relative Measures Related to Debt> Measures of outstanding household debt say little about how much of a burden the debt is or how much risk it poses to the population's financial health. The debt payment-to-income ratio and the debt-to-asset ratio are relative measures commonly used to address the degree of debt burden on households. <3.3.1. The Debt Payment-to-Income Ratio> One measure of debt burden is calculated by comparing required debt payments to the income available to make those payments the debt payment-to-income ratio. The ratio can measure the effects of interest rate changes and loan sizes on a household's liquidity. The debt payment-to-income ratio among elderly households who had some debt increased from 8.7% in 1989 to 16.7% in 2010, and then it declined to 12.4% in 2016 (see Figure 4 ). This ratio among elderly households was much lower than that for nonelderly households in 1989 (8.7% for elderly households compared with 16.1% for nonelderly households), but the difference in the ratio between elderly households and nonelderly households decreased over time. In 2016, the debt payment-to-income ratio for nonelderly households was 13.8%, compared with 12.4% for elderly households. Delinquency on loan payments (e.g., the percentage of debtors with debt payment past due 60 days or more) can also suggest trouble meeting debt obligations. About 3.9% of households headed by individuals aged 65 and older with any debt had some payments past due 60 days or more in 2016 (see Figure 4 ). The share fluctuated between 1% and 5% from 1989 to 2016, and it did not show an increasing trend over time for older Americans. The share is generally higher for young households (around 10% for households headed by those aged between 18 and 34) and decreases as the head of household ages. These data suggest that although the debt payment-to-income ratio for elderly households is rising, this pattern might not indicate trouble meeting debt obligations. <3.3.2. The Debt-to-Asset Ratio> Another measure of debt burden is the debt-to-asset ratio. In addition to income, households can use assets to guard against financial risks. In general, the more assets a household has, the less likely it is to default on its debt. As predicted by the life-cycle model, the debt-to-asset ratio is generally lower for elderly households than for nonelderly households, but from 1989 to 2016, the ratio grew more quickly for elderly households than for nonelderly households. According to the SCF, the debt-to-asset ratio increased from 5.1% in 1989 to 9.0% in 2016 for elderly households with debt (see Figure 5 ), whereas the ratio remained relatively stable for nonelderly households, at around 20%, during the same time. Among all debt types, the residential debt-to-asset ratio, which increased from 2.7% in 1989 to 7.4% in 2016, contributed to a large proportion of the growth in the debt-to-asset ratio for elderly households. The debt-to-asset ratio reached 11.7% in 2010, including a residential debt-to-asset ratio of 10.0%, which might have resulted from the increased availability of mortgage credit through 2007. In addition to the rise in the debt-to-asset ratio, the proportion of elderly households whose debt-to-asset ratio was greater than 50% increased from 7.4% in 1989 to 11.2% in 2016. <3.4. Bankruptcy Among Older Americans> In addition to the increase in the debt-to-asset ratio, researchers have found a rise in the percentage of older Americans filing for relief under the bankruptcy code. Individuals may file for bankruptcy when they cannot meet their debt obligations. Scholars find that the proportion of bankruptcy filers aged 65 and older increased from 2.1% in 1991 to 12.2% in 2013-2016 (approximately 97,600 households), and the elderly cohort is the fastest-growing age demographic even after adjusting for the aging of the population. Those studies also suggest that although both younger (under age 65) and older (age 65 and older) bankruptcy debtors are financially struggling, older filers overall are in worse financial shape than younger filers in terms of secured and unsecured debt, income, assets, and the debt-to-income ratio. Bankruptcy can be even more problematic for older debtors than younger debtors because it is generally harder for them to accumulate assets postbankruptcy. For example, compared with younger debtors, elderly debtors are less likely to find well-paying jobs because of perceptions of decreasing productivity and are less likely to build retirement savings because they have less time to accumulate wealth. Scholars argue that if the debtors filed bankruptcy as a result of chronic illness, bankruptcy does not improve their health or access to affordable healthcare or prescriptions. For this and other reasons, research suggests that older bankruptcy filers are significantly more likely to continue to struggle financially than younger filers. <4. Increased Debt Among Elderly Households by Age Groups> Although household debt rose over the past three decades for elderly households overall and on average, the oldest Americans experienced the largest increase in debt. Among all elderly households, those headed by people aged 80 and older saw the fastest growth in the share of households with any debt, the median household debt, and the debt-to-asset ratio. <4.1. Share of Elderly Households Holding Debt and Median Debt> Figure 6 displays the share of elderly households who held any debt among four age groups from 1989 to 2016. In general, the proportion of elderly households with any debt declined with age for most survey years. For example, in 2016, about 70% of households headed by individuals aged 65-74 held debt, but the proportion was 61% for households in the 75-79 age group and 42% for those in the age group 80 and older. Over time, the proportion of elderly households with any debt increased for all age groups. In 2016, the share of households headed by those aged 65-69 with debt increased from 54.0% in 1989 to 69.8%, from 44.6% to 70.7% for the age group 70-74, from 27.6% to 60.7% for the age group 75-79, and from 12.5% to 41.5% for the age group 80 and older. Among all age groups, the largest growth was for the oldest age groups, aged 75-79 and aged 80 and older. Figure 7 shows median household debt among elderly households who had some debt by age groups from 1989 to 2016. Median household debt generally increased over time for each age group and peaked around the financial crisis. For households headed by those aged 80 and older, real median debt (in 2016 dollars) was $933 in 1989 and increased to $20,000 in 2016, almost 20 times greater. <4.2. Average Debt and Components of Debt> On average, elderly households in all age groups hold more debt today than did similar households three decades ago in real dollars (see Table 3 ). Among all types of debt, primary residential debt experienced the largest growth, increasing by between 315% and 536% within the four elderly age groups. Following primary residential debt, elderly households experienced growth in other residential debt, auto loans, credit card balances, and student loans. Elderly households held almost no student loans in 1989, but the average amount in 2016 increased to more than $2,000 for households headed by those aged 65 to 69 and more than $1,000 for households headed by those aged 70 to 79. <4.3. The Debt-to-Asset Ratio> The debt-to-asset ratio increased for all age groups among elderly households from 1989 to 2016, and the ratio increased the most among households headed by people aged 80 and older (see Figure 8 ). The debt-to-asset ratio among elderly households with any debt increased from 4.0% to 9.9% for households headed by those aged 65 to 69, from 7.1% to 9.8% for the age group 70-74, from 5.3% to 8.2% for the age group 75-79, and from 2.4% to 7.2% for the age group 80 and older. Residential debt explains the majority of the growth in total debt for every elderly household age group. <5. Increased Debt Among Elderly Households by Quintile of Total Assets> This section discusses changes in debt from 1989 to 2016 for elderly households with different asset levels. It is important to analyze changes in debt across the household asset distribution for several reasons. First, a small group of wealthy households hold high levels of assets and debt; thus, average measures may not accurately reflect less wealthy households' financial situations. Second, elderly households are more likely than their nonelderly counterparts to draw down existing assets, such as withdrawing from retirement savings accounts and other investment accounts. Asset measurement may provide an important view of an elderly household's ability to afford debt obligations. The change in household debt among elderly households from 1989 to 2016 varies widely across the household asset distribution. During this time period, elderly households in the middle of the asset distribution had a relatively larger growth in the probability of holding any debt, and those in the middle and the top of the asset distribution had the largest growth in median and average household debt. Elderly households in the bottom of the asset distribution usually held the least debt, but had the largest debt burden as reflected in the debt-to-asset ratio, whereas elderly households in the top of the asset distribution held the most debt, but had the smallest debt-to-asset ratio. <5.1. Share of Elderly Households Holding Debt and Median Debt> Table 4 presents data on household debt by quintile of the total asset distribution among the elderly household population. Each quintile represents 20% of the elderly household population. The first quintile depicts the 20% of the elderly household population with the least assets, and the fifth quintile depicts the 20% of elderly households with the most assets. The share of elderly households that held some debt generally increased from 1989 to 2016 for all asset quintiles. Elderly households in the first asset quintile were generally least likely to hold debt, and the share of those households who held any debt increased from 36.2% to 49.5%. Elderly households in the second, third, and fourth quintiles of total assets had the largest growth in the probability of holding any debt, with an increase of about 30 percentage points. The share of elderly households in the highest 20% of the asset distribution that held debt also increased from 37.3% in 1989 to 54.9% in 2016, but the increase was not as large as that among households in the middle of the asset distribution. Table 5 presents median debt among elderly households with any debt by quintile of total assets from 1989 to 2016. Median debt generally increased for elderly households in all asset quintiles, with a larger percentage increase for elderly households in the middle of the asset distribution. Real median debt (in 2016 dollars) increased by about three times for elderly households in the first and the fifth asset quintiles, and it increased by about four times or more for elderly households in the second, third, and fourth quintiles. <5.2. Average Debt and Components of Debt> Average debt generally increased from 1989 to 2016 for elderly households across the asset distribution, but the magnitude of growth differed among asset quintiles (see Table 6 ). Real average debt (in 2016 dollars) for elderly households in the lowest asset quintile was approximately twice as much in 2016 compared to 1989, whereas average debt for elderly households in the second through the fourth asset quintiles was generally three times as much in 2016 as in 1989. Average debt for households in the highest asset quintile also doubled, with the largest real increase of about $135,000. For households in the lowest asset quintile, the growth in average debt mainly resulted from growth in primary residential debt, credit card debt, and auto loans. From 1989 to 2016, the increase in average primary residential debt contributed to 54% of the growth in average debt. The increase in average credit card debt explained about 30% of the growth in average debt among elderly households in the bottom asset quintile, and the increase in average auto loans explained almost 20% of the growth in average debt among those households. The growth in debt among middle- and high-asset elderly households also mainly resulted from growth in residential debt. For higher-asset households, mortgage debt for second homes was also a part of this increase in debt. For households in the second through the fourth quintiles of total assets, growth in debt secured by primary residences generally accounted for about 80% of the growth in average debt. For households in the top asset quintile, growth in primary residential debt explained almost 70% of the growth in average debt, and the remaining 30% came mostly from other residential debt. In addition, elderly households in the bottom asset quintile were more likely to have a higher proportion of debt held in other debt, including lines of credit, installment loans, loans against pensions or life insurance, margin loans, and miscellaneous, but the proportion decreased from 1989 to 2016. Elderly households in the first asset quintile on average held about 45% of their debt in other debt in 1989, and this proportion has declined to 20% in 2016. <5.3. The Debt-to Asset-Ratio> Figure 9 displays the debt-to-asset ratio among elderly households with debt by total asset quintiles in 1989 and 2016, decomposed into residential and nonresidential debt-to-asset ratios. The debt-to-asset ratios for households in the lowest asset quintile decreased during this time, although the residential debt-to-asset ratio slightly increased. In 2016, however, elderly households in the bottom 20% of the asset distribution still had a 43% debt-to-asset ratio, and most of the debt was based on nonresidential loans, such as credit card debt, auto loans, and student loans, which are usually considered as less effective long-term wealth builders than residential loans. Among households in the second through the fourth asset quintiles, the debt-to-asset ratio generally increased by around 10 percentage points from 1989 to 2016, with most of the increase in the residential debt-to-asset ratio. The debt-to-asset ratio increased slightly for elderly households in the top asset quintile, primarily because of growth in the residential debt-to-asset ratio, including debt on both the primary residence and other residences. <6. Conclusion> Debt among households headed by individuals aged 65 and older has increased substantially over the past 30 years. The share of elderly households who held any debt almost doubled, and median debt among households with debt increased by about four times. Much of the rise in debt among older Americans is not necessarily associated with financial insecurity in retirement. Much of the change in debt among elderly households, across some age groups and through most of the asset distribution, is well balanced by their assets. As shown earlier, from 1989 to 2016, the debt-to-asset ratio among elderly households with debt increased from 5.1% to 9.0%. Individuals may also adjust behavior to meet their debt obligations. For instance, one study finds that both the presence and the level of debt increase the likelihood that older adults work and reduce the likelihood that they are retired. Data from the SCF also show that the percentage of elderly households with either the head of the household or a spouse working increased from 19.8% in 1989 to 29.7% in 2016. Rising debt among certain elderly households, however, has shown signs of an increase in debt burden. For example, the debt-to-asset ratio among households headed by individuals aged 80 and older increased by 5 percentage points between 1989 and 2016, and the ratio among elderly households with middle asset levels increased by more than 10 percentage points during the same time. Rising debt might be more problematic for persons aged 80 and older because they might be more vulnerable to income risks, as they are more likely to have lower or no earnings (as they phase out of the labor force), exhaust existing retirement resources, have reduced purchasing power in certain defined benefit pensions, and incur higher medical expenses. In addition, older Americans now hold historically high levels of housing debt, which might make them more vulnerable to housing market swings than previous cohorts of retirees. Therefore, in addition to retirement income and saving adequacy, debt management may also be an important determinant of retirement security.

In the past three decades, debt has grown substantially among older Americans. The increase in debt among older Americans has raised concerns about financial security for people near or during retirement, not only because Americans aged 65 and older represent a large and growing proportion of the U.S. population, but also because increases in household debt might require retirees to devote a larger share of their fixed income from Social Security, pensions, or government subsidies toward paying debt. Older people also tend to have limited ability to adjust their labor supply to offset higher monthly debt obligations. Excessive debt payments may put more seniors, especially those living on limited incomes, at greater risk of financial insecurity. According to the Survey of Consumer Finances (SCF), the percentage of elderly households (i.e., those headed by individuals aged 65 and older) who held any debt increased from 37.8% in 1989 to 61.1% in 2016. During the same time, the median debt among elderly households with debt increased from $7,463 to $31,050 (in 2016 dollars), and the real average debt increased from $29,918 to $86,797 (in 2016 dollars). The median debt lies at the middle of the debt distribution, and the average debt is generally higher than the median debt because a relatively small percentage of people have very high debt. Between 1989 and 2016, growth in average household debt among elderly households with any debt largely resulted from mortgages, including growth in average debt secured by a residence (from $12,970 to $57,943 in 2016 dollars) and average debt for other residential properties (from $2,970 to $11,446 in 2016 dollars). Some researchers speculate that much of the growth in debt among elderly households through 2007 might have resulted from the increased availability of mortgage credit, whereas others argue that tightening underwriting standards on mortgage debt in the wake of the financial crisis have slowed mortgage originations among young borrowers, which consequently resulted in a shift of new mortgage originations toward older borrowers. Residential loans are usually considered to be long-term wealth builders, as the residence's market value may increase over time, and some researchers find that they are much less stressful to older people than other debt, such as credit card debt. However, some others also argue that households headed by individuals aged 65 and older held historically high levels of housing debt in 2016, which might expose them to greater vulnerability to housing market shocks than elderly households in previous cohorts. The change in debt among elderly households from 1989 to 2016 varied by age groups and asset levels. For example, the largest growth in the share of elderly households who have any debt was for those headed by individuals aged 75 and older. In terms of asset levels, households in the middle of the total asset distribution had the largest growth in the holding of any debt. Much of the change in debt among elderly households on average was well balanced by their assets. To measure the extent to which a household is burdened by debt, researchers and policymakers usually refer to the debt payments-to-income ratio and the total debt-to-asset ratio. Among elderly households with debt, the debt payment-to-income ratio increased from 8.7% in 1989 to 12.4% in 2016, and the debt-to-asset ratio increased from 5.1% to 9.0% during the same time. Both ratios peaked in 2010, the year after the recent economic recession, and then decreased from 2010 to 2016. The debt burden increased more rapidly for certain types of elderly households between 1989 and 2016. The debt-to-asset ratio among households headed by individuals aged 80 and older increased by 5 percentage points during this time. Likewise, the ratio among elderly households in the middle of the total asset distribution increased by more than 10 percentage points during the same time.

crs_R46200

crs_R46200_0

<1. Introduction: Recent Growth Trends> Economic growth (the percentage change in real gross domestic product [GDP]) is a core measure of economic progress and well-being. Over time, the rates of job growth and average income growth closely track economic growth. A notable feature of the current economic expansion, which started in June 2009 and is now the longest expansion on record, has been its relatively modest economic growth rate. Whereas growth has averaged 4.3% in the previous 10 economic expansions, it has averaged 2.3% in this expansion. Some analysts thought a turning point had been achieved when growth accelerated to 3.1% from the third quarter of 2017 through the third quarter of 2018. This was the second-fastest period of sustained growth achieved in this expansion, second only to the 3.8% growth achieved from the second quarter of 2014 through the second quarter of 2015. However, in both of those cases, growth slowed in the following quarters. It has averaged 2.1% over the next four quarters, from the fourth quarter of 2018 to the present nearly identical to the growth rate in this expansion before the third quarter of 2017. Growth is volatile, difficult to measure, and revised several times after it is initially released. Nevertheless, the pace of activity appears to have noticeably slowed. Growth in three of the past four quarters was 2.1% or lower, and private forecasters expect this slower pace to continue in the fourth quarter of 2019 and through 2020. The slower growth has been widespread throughout the country. The only regions not affected by the slowdown were the Southwest, Rocky Mountains, and New England. Although economic growth has slowed recently, it has not been negative or close to zero in any quarter since the fourth quarter of 2015. (The lowest growth rate since then was 1.1% in the fourth quarter of 2018.) Thus, the recent story so far is one of a transition to a soft landing (a more moderate rate of growth), not a recession or cessation of growth. In fact, for reasons discussed in this report, it is more likely that the fast-growth period was the aberration. Economic growth is only one measure of economic performance, and not all measures move in lockstep over short periods of time. The recent slowdown in economic growth was much more pronounced than the slowdown in employment growth monthly job growth was only slightly lower (191,000) from October 2018 to November 2019 than from July 2017 to September 2018 (203,000). The average monthly job growth rate from October 2010 to the present has been 199,000. In other words, to date, the economic growth slowdown has not made employers significantly less willing to take on additional workers. Although it is not unusual for economic growth to rise and fall within an expansion, it is nevertheless potentially useful for Congress to consider the reasons why growth rose from the third quarter of 2017 through the third quarter of 2018 (hereinafter, the faster-growth period ) and declined since the fourth quarter of 2018 (hereinafter, the slower-growth period ) when considering policy options to address growth going forward. These periods are chosen because quarterly growth rates are closely clustered together within those two periods. This report analyzes the most commonly discussed reasons. <2. Growth by Sector> Table 1 breaks GDP down into its component parts to highlight where the growth slowdown has been concentrated. Comparing the faster-growth period from the third quarter of 2017 to the third quarter of 2018 with the slower-growth period from the fourth quarter of 2018 to the third quarter of 2019, the slowdown has been concentrated in fixed business investment spending (specifically, private structures and equipment) and exports. Investment spending on structures, which include office buildings, factories, and power and communication infrastructure, fell from a growth rate of 3.7% in the former period to a 6.5% contraction in the latter period. The decline in structures has been widespread, but has been particularly notable in the category of mining exploration, shafts, and wells a category of spending that is highly sensitive to commodity prices. The slowdown in equipment spending has been most notable in transportation equipment. Other components of GDP have not grown rapidly recently, but nevertheless do not explain the slowdown. Growth in personal consumption spending (specifically, services) has slowed, but by less than overall growth has slowed. Residential investment (new house construction) shrank by about 1% in both periods, having no effect on the overall difference between the two. Growth in government purchases was a little higher thereby boosting growth in the latter period. Import growth was lower in the latter period, which, in national accounting, increased growth. <3. Actual Growth Rates and Potential Growth Rates> Although growth fluctuates considerably from quarter to quarter, economists believe that the economy can grow no faster than its internal speed limit called the potential or trend growth rate over longer periods of time. Over shorter periods of time, the primary determinant of growth is the business cycle. The business cycle refers to the repeated pattern of recessions (contractions in economic activity) followed by (longer) expansions, which are then followed by another recession, and so on. Average growth over an entire business cycle of normal length would be expected to be close to the potential growth rate. After recessions, in which output has fallen considerably, there is scope for a period of rapid catch-up growth that brings unused labor and capital resources back into use. The current economic expansion is already the longest recorded expansion in U.S. history, so at this point it would not be expected that the economy could grow faster than its potential growth rate for a sustained period because there is no scope for catch-up growth the economy's labor and capital inputs are close to fully employed. In these conditions, growth may temporarily exceed trend growth, but it would be expected to return to trend growth fairly quickly. At this point, the main debates are what the trend growth rate is and whether it can be raised through structural policy changes. Growth can rise or fall over a period of time for cyclical or structural reasons. Cyclical contributions to growth are mainly demand driven they are a function of how fast spending in the economy is growing. The government can temporarily influence spending through fiscal and monetary policy. Cyclical effects can have a large influence on growth over a few quarters, but are, by their nature, temporary. Structural contributions to trend growth are mainly supply driven they are a function of how quickly the labor force (both its quantity and quality), the capital stock, and productivity (i.e., how much output can be generated with a given set of inputs) are growing. The reason average growth has been low over the course of the expansion is because all three have grown at a slower pace compared to the 1950 to 2007 average, according to the Congressional Budget Office (CBO), as seen in Figure 1 . The labor force has grown more slowly because of the decline in labor force participation and the aging of the workforce, as the baby boomers have begun to transition to retirement. After stripping out cyclical factors, CBO projects that the labor force grew by 1.4% annually from 1950 to 2018, but will grow by 0.4% annually over the next 10 years close to the 0.6% growth rate recorded from 2008 to 2018. Average productivity growth declined by more than one-half and investment growth fell by more than one-third in the 2008-2018 period compared to 1950-2007. The reasons for the slowdown in the growth of investment and productivity are less clear and more debated. The recent faster-growth period was comparable to CBO's estimate of the trend growth rate from 1974 to 2001. If the faster-growth period was driven by an increase in trend growth, it could potentially continue indefinitely. CBO and other economic forecasters do not view this growth acceleration as having been driven by a structural acceleration in trend growth, however. CBO expects some improvement in productivity growth over the next 10 years, but projects that overall trend growth will continue to be held back by low growth in the labor force and capital stock. If CBO is correct, the current growth slowdown was inevitable at some point, as it represented growth reverting to trend. The next section describes some of the major economic developments since 2017 that might have boosted growth temporarily above trend, and some subsequent developments that may have contributed to the slowdown. <4. Factors Affecting Growth Since 2017> Several explanations have been offered as to why growth accelerated beginning in 2017, including fiscal stimulus, regulatory relief, favorable financial conditions, and higher consumer and business confidence. Although these explanations seem to match the growth acceleration well, they have more trouble explaining why growth subsequently slowed, and they do not always match the exact timing of the acceleration. Several explanations have been offered for why growth decelerated beginning in 2018. The factors discussed below in more detail are a fading of fiscal stimulus, monetary policy tightening, trade policy uncertainty, and a slowdown in global growth. The timing of these factors does not match the timing of the slowdown precisely, which points to the possibility that a return to the trend growth rate was inevitable. The factors discussed below are not comprehensive; other factors that have likely contributed to slower growth in at least one quarter since the fourth quarter of 2018 include the FY2018 government shutdown, the rise in oil prices in 2018 (they have since declined), problems that slowed Boeing's production of the 737 MAX airplane, and the GM-United Auto Workers strike. However, these factors are not discussed at length because they were one-off occurrences that were temporary in nature and may have limited implications for policy going forward. <4.1. Fiscal Policy> Fiscal stimulus can boost aggregate demand (i.e., total spending) in the short run through higher government spending or lower taxes that are deficit financed. Increases in deficit-financed government spending on goods and services boost total spending in the economy directly because government spending is a component of GDP. Deficit-financed tax cuts increase total spending to the extent that they are spent by their recipients. The effect of fiscal stimulus on growth is temporary because, by nature, total spending cannot exceed total potential output for long especially when the economy is already close to full employment, as it is today. In addition, certain types of tax cuts alter incentives to work, save, and invest. These changes could affect potential output ( supply-side effects ) in addition to total spending ( demand-side effects ). Policy changes on both the tax and spending sides of the budget enlarged the deficit in FY2018 relative to the current-law baseline for that year. Notably, the tax cuts in the 2017 act, P.L. 115-97 , began in calendar year 2018, with the budgetary effects peaking in FY2019. The Bipartisan Budget Act of 2018 ( P.L. 115-123 ) increased the Budget Control Act's ( P.L. 112-25 's) discretionary spending caps, and those increases combined with increases in discretionary spending not subject to the caps increased discretionary spending relative to the CBO baseline by $94 billion in FY2018. These discretionary spending changes provided fiscal stimulus compared to current law but not compared to recent policy discretionary spending was a steady 6.2% of GDP in both FY2017 and FY2018. In other words, compared to the previous year, the legislative changes to boost discretionary spending prevented contractionary fiscal policy from occurring. Mandatory spending fell because spending on health programs and automatic stabilizers (benefits where spending levels are sensitive to economic conditions) grew more slowly in dollar terms than GDP. Statutory changes to mandatory spending levels in FY2018 were minimal, and thus were not responsible for the decline. CBO projected that the tax cuts would boost GDP growth relative to the baseline by 0.3 percentage points in both FY2018 and FY2019. This estimate included demand-side and supply-side effects. Thus, based on CBO's projections, the tax cuts can help explain why growth accelerated in the faster-growth period, but cannot explain why growth subsequently slowed, because fiscal stimulus from the tax cuts left growth unchanged in FY2019 from the previous year. Relative to the baseline, the boost to growth from the tax cuts is projected to gradually fade beginning in FY2020 and eventually reduce growth beginning in FY2025. The federal budget deficit rose from 3.5% of GDP in FY2017 to 3.9% of GDP in FY2018. The increase was caused by the decline in revenues from 17.2% of GDP in FY2017 to 16.5% of GDP in FY2018. By contrast, spending fell as a percentage of GDP between FY2017 and FY2018, which would reduce the deficit as a share of GDP, all else equal. The federal budget deficit as a percentage of GDP rose in FY2019 from 3.9% to 4.5%, which would seem to indicate additional fiscal stimulus to the economy. However, a closer look at the data reveals that the stimulus is more limited than the increase in the deficit would indicate. Part of the increase in the deficit is attributable to a rise in mandatory spending and net interest payments as a share of GDP, but the increase is not caused by policy changes in either of these cases. Instead, spending in these categories increased as economic conditions and programs' take-up rates changed. Part of the increase in the deficit is attributable to a further decrease in revenues as a percentage of GDP, but this is also not due to additional policy changes. Instead, it is primarily because this was the first full fiscal year in which P.L. 115-97 's tax cuts were in place. The main fiscal stimulus was a small boost to discretionary spending, from 6.2% of GDP in FY2018 to 6.3% in FY2019. Fiscal stimulus works by changing policy to increase spending or reduce revenue from year to year. With policy changes having a modest effect on spending and revenue as a share of GDP, additional stimulus compared to the previous year was modest in FY2019. In other words, fiscal policy was not projected to cause growth to slow, but neither was it projected to provide a further boost to growth from what had been provided the previous year. <4.2. Monetary Policy> The Federal Reserve (Fed) can temporarily influence growth through its control of short-term interest rates. The Fed tightened monetary policy from December 2016 to December 2018, with short-term interest rates gradually increased from a range of 0.25%-0.5% to a range of 2.25%-2.5%. This reduced the amount of monetary stimulus that the Federal Reserve was providing to the economy in response to higher growth by decreasing demand for interest-sensitive goods and services, such as business investment and consumer durables. This tightening mostly occurred during the higher-growth period, but because monetary policy affects the economy with a lag, the full economic effects of this tightening were not felt until after the last rate increase in December 2018. In 2019, the Fed changed course, reducing interest rates three times between August and October in response to slower growth and fears of a potential recession. After the last rate cut in October, interest rates were lower than the inflation rate again, marking a more stimulative (expansionary) course. Because of the lags in effectiveness, these reductions should provide a stimulative boost to the economy in the coming quarters. <4.3. Regulatory Relief> Throughout the Trump Administration, agencies have emphasized regulatory relief for businesses through legislation and the rulemaking process. On January 30, 2017, the Administration issued an executive order that required all agencies to identify at least two existing regulations to be repealed for each new regulation they proposed. To support this executive order, the Office of Information and Regulatory Affairs (OIRA) has published regulatory reform reports each year. Although not all of the regulatory changes reported provide relief for business, these reports provide a comprehensive list of regulatory actions that increase costs (which they classify as regulatory actions ) or reduce costs (which they classify as deregulatory actions ) on net and an estimate of net cost savings since FY2017. The reports do not include agencies defined as independent in 44 U.S.C. 3502, however, so deregulatory actions by independent agencies that promulgate economic rules, such as financial regulators, are omitted. For this reason, the table undercounts total regulatory and deregulatory actions. As shown in Table 2 , agencies have undertaken 393 deregulatory actions and 52 significant regulatory actions since FY2017, at a net benefit totaling $50.9 billion, based on agency estimates. Quantitative estimates of how regulations affect economic growth vary widely, and a comprehensive tally is difficult because of differences in methodology between estimates and the possibility that separate regulations may have interactive effects when considered jointly. The $50.9 billion estimate in Table 2 is not an estimate of the effect on GDP. Regulatory changes can have a broad array of costs and benefits that can be assigned monetary values (subject to a high degree of uncertainty), but not all of those costs and benefits affect the production of goods and services. Examples include effects on health, safety, and the environment. The fact that deregulatory actions have continued at a similar pace in the slower-growth period suggests the limits that these actions may have on overall growth. Deregulatory actions that affect single industries (or a subset of firms within an industry) can be important for output growth within that industry, but any given industry individually makes up a small share of the overall economy. Moreover, regulatory changes are likely to have one-off effects on GDP growth (i.e., they raise the level of output once), as opposed to permanently increasing growth rates (which would require output to continually grow more rapidly each year in the future). In other words, companies may respond to a regulatory change that lowers their costs by boosting output, but once that transition is complete, output will likely stay at the higher level and growth will likely revert to its previous pace. <4.4. Stock Market and the Wealth Effect> The stock market's performance may have contributed to faster growth. The S&P 500 index (an index of large stock prices) rose by 38% between November 4, 2016, and January 26, 2018, with relatively little volatility by historical standards. Higher equity prices can temporarily boost economic growth through their effects on companies and stockholders. When a stock rises in value, it improves the stock-issuing company's financial condition, which may induce more physical investment spending. As shown in Table 1 , business investment spending was noticeably higher in the faster-growth period than in the slower-growth period. For holders of stocks and other assets, a rise in their assets' value may also induce a wealth effect , whereby their consumption spending increases in response to their improved net worth. In terms of overall wealth, the ratio of household net worth to income is now higher than it was before the 2007-2009 financial crisis or the dotcom bubble, which burst in 2000. The exact size of the wealth effect is uncertain, however, because the direction of causation is unclear using stock prices as an example, more consumption could raise the value of firms producing the goods and services being consumed or higher stock prices could induce stockholders to consume more. The period of faster economic growth outlasted the period of the stock market's best performance, but the stock market did not perform poorly after January 2018. The S&P 500's value in August 2019 was about the same as in January 2018, with significant volatility over that period, featuring several steep and sudden declines followed by rebounds. Since October 2019, the stock market has steadily risen again. <4.5. Consumer and Business Confidence> Surveys on consumer sentiment showed an increase in confidence in December 2016 before growth accelerated. Confidence remained high through 2018, but was more volatile in 2019 (although it remained high compared to levels registered in the past two recessions). All else equal, higher consumer confidence may help explain why consumption growth was strong. Business confidence was high in 2018, but volatile in 2017 and the first half of 2019 and lower in the second half of 2019, according to surveys. All else equal, greater business confidence may lead firms to hire more workers and undertake more physical investment spending. As shown in Table 1 , physical investment spending grew much more quickly in the faster-growth period than the slower-growth period. In interpreting these developments, it is important to note that the direction of causation is unclear greater consumer and business confidence may be a reaction to higher economic growth, rather than a driver of economic growth. <4.6. Trade Policy Uncertainty> Since 2017, the Administration has proposed a series of escalating tariffs and other import restrictions on major trading partners, such as China and the European Union. In response, affected countries have often proposed retaliatory trade restrictions on U.S. exports. Collectively, these proposed and implemented trade restrictions have popularly been referred to as a trade war to denote the broader scope of trade restrictions undertaken compared to the past. This section considers the joint economic impact of restrictions on U.S. imports and retaliatory foreign restrictions on U.S. exports. In the short term, changes in trade policy disrupt the production of goods and services that are exported or imported, or that rely on exports and imports as intermediate goods. In national accounting, exports are part of GDP and imports are subtracted from GDP (because they are not goods and services produced in the United States). Thus, trade restrictions negatively affect GDP through their effects on U.S. exports and U.S. goods reliant on imports, but positively affect GDP through their effects on U.S. imports and U.S. import-competing goods in the short run. The data bear this out: although many factors affect trade, export and import growth have both declined to close to zero since overall growth has slowed. Export growth fell from an average of 3.0% from the third quarter of 2017 to the third quarter of 2018 to 0.2% from the fourth quarter of 2018 to the third quarter of 2019, and import growth fell from an average of 5.0% to 0.9% over the same periods. Besides the direct mixed effect that trade restrictions have had on growth through their effect on exports and imports, they are viewed as having a negative indirect effect on growth through their effect on real income (because U.S. consumers face higher prices on imports, their overall purchasing power falls), financial conditions (if trade restrictions cause asset prices to fall or interest rates to rise), and business investment (because firms might hesitate to undertake large capital purchases if their business outlook is uncertain due to trade policy uncertainty). Although uncertainty is an inherently subjective measure, the International Monetary Fund (IMF) has attempted to quantify trade policy uncertainty, and finds that it was far higher in 2019 than at any point since the start of its index (1995). Finally, to the extent that trade uncertainty explains the appreciation of the dollar (discussed in the next section), this could partly or wholly offset any increase in net exports (exports less imports) that would be caused by U.S. tariffs. The trade dispute's precise effects on growth are uncertain because they mostly depend on second-order effects that are hard to measure, but they are generally thought to have been negative on net thus far. Goldman Sachs economists estimate that the trade dispute with China has reduced quarterly growth by between 0.2 and 0.4 percentage points each quarter from the second quarter of 2018 through the fourth quarter of 2019 (and could continue to reduce growth in future quarters, depending on what happens to trade policy in the future). They estimate that the trade restrictions' direct effects have positively affected growth, but that this has been more than offset by the negative indirect effects outlined above. CBO estimates that the direct effects of tariffs implemented to date will reduce the level of real GDP by 0.3% by 2020 (assuming the tariffs remain in place until then) a somewhat smaller effect than Goldman Sachs estimated, partly because Goldman Sachs's estimate includes more recent trade policy developments. CBO projects the effect on GDP will wane over time, assuming the tariffs remain in place until 2029. The Organisation for Economic Co-operation and Development (OECD) estimates that trade restrictions, if unchanged, will reduce GDP growth by 0.5% by 2021. The timing of trade policy uncertainty's effects on business confidence and investment is hard to pinpoint, but the effects have likely increased over time. Announcements of trade policy changes began in the higher-growth period, but were phased in and ratcheted up over time. Further, confidence depends partly on how individuals believe the trade disputes will ultimately be resolved. Perceptions of whether trade disputes would be resolved or escalate are likely to have varied over time as U.S. and foreign policymakers' rhetoric on intentions and progress has fluctuated. One source of trade policy uncertainty was removed when the new U.S.-Mexico-Canada Agreement ( H.R. 5430 ) was signed into law, assuming all parties to the agreement ratify it. Other sources of uncertainty, such as trade relations with China, remain outstanding, albeit arguably diminished by the signing of the Phase 1 bilateral agreement on January 15, 2020. When the myriad of trade disputes are eventually resolved, uncertainty will no longer weigh on growth. However, if trade becomes radically more open or closed, that could affect long-term productivity, as it would affect the efficient use of economic resources through, respectively, more or less scope for comparative advantage. <4.7. Slowdown in Global Growth and Strong Dollar> According to the IMF, global growth fell from 3.8% in 2017 to 3.6% in 2018 to a projected 3.0% in 2019, which would be its slowest growth rate since the 2007-2009 financial crisis. It attributes half of the slowdown to the economic crises in Argentina, Iran, Turkey, and Venezuela, but the slowdown was widespread and included important U.S. trading partners such as the eurozone and China. For countries where exports are an important source of growth, such as China, trade policy uncertainty (discussed above) likely contributed to the slowdown. Slower global growth reduces demand for U.S. exports, which reduces U.S. growth, all else equal. As shown in Table 1 , U.S. export growth fell from an average of 3.0% from the third quarter of 2017 to the third quarter of 2018 to 0.2% from the fourth quarter of 2018 to the third quarter of 2019. U.S. interest rates have been higher than those of major trading partners for several years, and this difference widened during the period when the Fed was raising rates. Relatively higher economic growth and interest rates in the United States compared to the rest of the world contributed to a strengthening of the dollar exchange rate, as capital flowed into the United States to take advantage of relatively higher rates of return. When foreigners invest in U.S. assets, they must first buy U.S. dollars, which increases the value of the dollar, all else equal. In the flexible exchange rate era (beginning in the 1970s), the dollar's real value against a broad trade-weighted index reached its highest level since 2003 in December 2016, and it has remained relatively high since then. The mid-1980s and late 1990s were the only other periods when the dollar's value was comparably high. Trade policy uncertainty may also help explain why the dollar has appreciated, although the direction of the exchange rate effect is uncertain, theoretically. Trade restrictions on U.S. imports reduce the relative demand for foreign currency, boosting the value of the dollar. However, retaliatory tariffs on U.S. exports reduce the relative demand for the U.S. dollar, potentially offsetting some or all of the upward pressure on the dollar. If tariffs reduce growth in importing countries relative to U.S. growth, this could further reduce the demand for their currency relative to the dollar. Finally, the dollar is traditionally a safe haven currency that investors flock to when uncertainty rises even in cases where the uncertainty has emanated from the United States. When the dollar's value rises, U.S. exports are relatively more expensive in the rest of the world and U.S. imports are less expensive, all else equal. The fact that the dollar's value was high during the higher-growth period was largely a reflection of the strength of the U.S. economy, and one of the natural equilibration mechanisms that prevents economic overheating. A weaker dollar could potentially have supported growth through higher exports and lower imports during the slower-growth period, but this did not occur because growth in many major trading partners was relatively weaker than in the United States. <5. Future Prospects and Policy Implications> The consensus forecast is for the economy to continue growing at its recent moderate pace in the coming quarters. However, the current economic expansion is already the longest recorded expansion in U.S. history, so it is natural to wonder if the recent slowdown will turn into a recession in the near term. As noted above, the slowdown has returned the growth rate to the average for the overall expansion. A return to trend means growth has less room to decline in the future before it turns negative, which has been a feature of all previous recessions. Some recessions are caused by external shocks to the economy idiosyncratic changes that reduce output, such as a spike in energy prices. Any given shock is less likely to result in negative growth if the economy is growing rapidly when the shock occurs than if it is growing slowly. However, a return to trend growth could counterintuitively make it less likely that the economy enters a recession because there is less of a risk that the economy will overheat. Some recessions are caused by the economy growing unsustainably quickly when it is already at full employment, which leads to higher inflation and, ultimately, a corrective crash in economic activity. By contrast, absent external shocks, growth at the trend rate could theoretically continue indefinitely. For this reason, fiscal and monetary stimulus may have helped prevent growth from slowing further in 2018, but additional stimulus to attempt to increase growth above trend could potentially be counterproductive. It is unusual for fiscal and monetary policy to still be easy (i.e., for the budget deficit to be high and interest rates to be low), as they are now, when the economy has already returned to full employment. Furthermore, growth during this expansion has been strong only during periods in which fiscal policy has been more stimulative. This raises questions about whether growth could remain sufficiently strong if fiscal and monetary stimulus were withdrawn a problem that has not arisen in previous expansions since after the Great Depression, but one that many advanced economies have grappled with in this expansion. If growth were to slow further, the stimulus available to counteract it may be limited. As a result of fiscal and monetary policy remaining stimulative throughout the long economic expansion, policymakers have less headroom to respond to a future downturn. In the case of monetary policy, short-term interest rates are already relatively close to zero, limiting how much additional stimulus the Fed can provide through its conventional tool of cutting short-term rates. The Fed may find that this tool is quickly exhausted in the next recession, in which case it could be required to turn to unconventional tools such as large-scale asset purchases (popularly known as quantitative easing ) or negative interest rates to fight the recession. In the case of fiscal policy, the publicly held federal debt is the highest it has been as a share of GDP since World War II and is projected to continue to increase under current policy. The budget deficit is already larger than its historical average as a share of GDP and will automatically increase in a recession with no change in policy because of the budget's automatic stabilizers. Unprecedentedly high debt may make policymakers feel constrained to provide enough additional fiscal stimulus to counteract the recession. Or high debt may cause debt holders to refuse to finance enough stimulus, particularly because of the reliance on foreigners to finance the federal debt. Foreigners have held 40%-50% of the publicly held debt in recent decades. There are competing schools of thought on the best way to address this limited fiscal and monetary headroom. One school of thought argues for fiscal and monetary policy to be tightened now (by reducing deficits and raising interest rates, respectively) to gain additional headroom to be used in the next recession, and make it less likely that the economy will overheat at full employment. This strategy would be successful as long as the economy could withstand the withdrawal of stimulus and continue growing at a moderate pace. The other school of thought believes that fiscal and monetary stimulus should be used aggressively in response to any slowdown to avert a recession since the limited headroom would make a recession more likely to be deep and prolonged. This school of thought has been cited by Fed Chairman Jerome Powell as a justification for the Fed's decision to reduce interest rates three times in 2019. But this strategy could backfire if the economy nevertheless enters a recession at some point when headroom is still highly limited. Monetary and fiscal policy primarily influence short-term growth. Other policies can influence the long-term trend growth rate, but more indirectly, slowly, and imprecisely. Long-term growth is determined by growth in the labor force, changes in the quality of the labor force, growth in the capital stock, and productivity growth. Multiple policy areas influence each of those factors. For example, education and training influence the quality of the labor force; infrastructure spending contributes directly to the capital stock; health policy influences hours worked; and trade and technology policies influence productivity growth.

The current economic expansion is the longest in recorded U.S. history, but it has not been characterized by rapid economic growth. From the beginning of the current economic expansion in the third quarter of 2009 to the second quarter of 2017, this expansion had the lowest economic growth rate of any expansion since World War II, averaging 2.2%. For the next five quarters, growth accelerated to 3.1%. However, growth has slowed since, averaging 2.1% over the next four quarters beginning in the fourth quarter of 2018. The slower growth rate has been widespread, but has been particularly concentrated in business investment and exports. Private forecasters expect this slower pace to continue in 2020. A similar growth pattern has not been observed in labor markets, as monthly employment growth was only slightly lower in the slower-growth period than in the faster-growth period. A number of developments have influenced growth since 2017: Fiscal policy . The federal budget deficit rose from 3.5% of gross domestic product (GDP) in FY2017 to 3.9% in FY2018. Deficit-financed tax or spending policy changes stimulate overall economic activity in the short run, but stimulus fades over time. The deficit increased partly as a result of P.L. 115-97 , which cut taxes beginning in calendar year 2018, with the budgetary effects peaking in FY2019. Monetary policy. The Federal Reserve raised short-term interest rates gradually from a range of 0.25%-0.5% in December 2016 to a range of 2.25%-2.5% in December 2018. Higher interest rates reduce interest-sensitive spending, such as business investment and consumer durables. Rates were then cut in 2019 to a range of 1.5%-1.75%. Regulatory policy . The Administration reported that agencies have undertaken 393 deregulatory actions and 52 significant regulatory actions since FY2017, at a net benefit totaling $50.9 billion, based on agency estimates. Deregulatory actions that reduced costs for businesses could boost their output levels. Trade policy . Since 2017, the Administration has proposed a series of escalating tariffs and other import restrictions on major trading partners, such as China. In response, affected countries have often proposed retaliatory trade restrictions on U.S. exports. Trade restrictions have a mixed direct effect on growth through their impact on U.S. exports and imports. However, they are generally thought to have a negative indirect effect on growth through their impact on real income, financial conditions, and business investment. Stock market . Stock prices (as measured by the S&P 500 index) rose by 38% between November 4, 2016, and January 26, 2018, with little volatility by historical standards. Since then, volatility has risen. Favorable financial conditions make it easier for firms to finance investment and may lead asset holders to consume more through a wealth effect . Global growth . Global growth fell from 3.8% in 2017 to 3.6% in 2018 to a projected 3.0% in 2019. This reduces foreign demand for U.S. exports, all else equal. Over time, economists believe that the economy cannot grow faster than its trend or potential growth rate, which is determined by how quickly labor, the capital stock, and productivity grow. It appears that the growth rate has reverted to its trend growth rate since the fourth quarter of 20s18. Regulatory policy changes and fiscal stimulus may have contributed to the temporary increase in growth, but do not appear to have led to a permanent acceleration in trend growth. This slower rate of growth would be problematic if growth continued to decelerate toward zero, but most forecasters do not expect this to happen. On the contrary, this slower rate of growth could make a recession less likely because it reduces the probability that the economy will overheat, which has been the cause of some past recessions. It is unusual for fiscal and monetary policy to remain stimulative when the economy has fully recovered from a recession. As a result, there is less remaining headroom than usual for the Federal Reserve to reduce interest rates (monetary stimulus) or Congress to increase the deficit (fiscal stimulus) going forward. Policymakers face a choice between maintaining existing fiscal and monetary stimulus to maintain growth and removing stimulus so that there is more scope to employ stimulus in the next recession.

crs_R46360

crs_R46360_0

<1. Introduction> Credit unions are nonprofit depository financial institutions that are owned and operated entirely by their members. In other words, na tural person credit unions, also known as retail credit unions, are financial cooperatives that return profits to their memberships. For this reason, member deposits are referred to as shares , which may be used to provide loans to members, other credit unions, and credit union organizations; and the interest earned by members is referred to as share d ividends , which are comparable to shareholder profit distributions. Credit unions (and banks) engage in financial intermediation , or facilitating transfers of funds back and forth between savers (via accepting deposits) and borrowers (via loans). The National Credit Union Administration (NCUA), an independent federal agency, is the primary federal regulator and share deposit insurer for credit unions. There are three federal bank prudential regulators: the Office of the Comptroller of the Currency (OCC) charters and supervises national depository (commercial) banks; the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance by collecting insurance premiums from member banks and places the proceeds in its Deposit Insurance Fund (DIF), which are subsequently used to reimburse depositors when acting as the receiver of a failed bank; and the Federal Reserve provides lender-of-last-resort liquidity to solvent banks via its discount window. The NCUA, by comparison, serves all three functions for federally regulated credit unions. The NCUA also manages the National Credit Union Share Insurance Fund (NCUSIF), which is the federal deposit insurance fund for credit unions. Although scholars are unable to pinpoint the precise origin of the credit union movement, the organization of membership-owned cooperatives to raise funds for members lacking sufficient collateral or wealth necessary to qualify for bank loans dates back to colonial times. During their infancy stages, credit cooperatives basically emerged as a form of microlending in financially underserved localities to provide unsecured small-dollar loans. Small group cooperatives initially relied on pooled funds, donations, and subsidies to make loans (allocated via lotteries or auctions) until evolving into self-sufficient systems more reliant on deposits. The advantage of small memberships for group credit cooperatives allow members to know each other, which facilitates peer monitoring of the lending decisions and borrowers' repayment behavior. The original concept of a credit union stemmed from cooperatives formed to promote thrift among its members and to provide them with a low-cost source of credit. Following numerous bank failures and runs during the Great Depression that resulted in an extensive contraction of credit, Congress sought to enhance cooperative organizations' ability to meet their members' credit needs. Congress passed the Federal Credit Union Act of 1934 (FCU Act; 48 Stat. 1216) to create a class of federally chartered financial institutions for "promoting thrift among its members and creating a source of credit for provident or productive purposes." Over time, Congress expanded credit unions' permissible activities because the original concept of a credit union arguably needed to evolve with the marketplace. According to the NCUA, When Congress amended the FCU Act in 1977 to add an extensive array of savings, lending and investment powers, it intended to "allow credit unions to continue to attract and retain the savings of their members by providing essential and contemporary services," and acknowledged that credit unions are entitled to "updated and more flexible authority granting them the opportunity to better serve their members in a highly-competitive and ever-changing financial environment." H.R. Rep. 95 23 at 7 (1977), reprinted in 1977 U.S.C.C.A.N. 105, 110. Congress acknowledged the difficulty in "regulating contemporary financial institutions within the framework of an Act that has on a continuing basis required major updating by means of regulation." Although small memberships may be more advantageous for informal microlending systems, advanced intermediation systems such as banking and the modern credit union industry benefit from economies of scale . In other words, more assets (loans), greater access to deposits, and increased transactions volumes provide greater risk diversification and lower average cost per transaction, thus reducing vulnerability to financial disruptions that would be confined to a particular small group. On April 19, 1977, P.L. 95-22 (the Mini Bill of 1977) substantially amended the FCU Act. It authorized the credit union industry to provide many financial products (e.g., loans, checking and savings deposit services) similar to those offered by the commercial banking system. Today, modern credit unions primarily engage in consumer and residential lending, and some originate commercial business loans for members. The lending and investment powers of the credit union industry, however, are still more restrictive than those of commercial banks. Credit unions can make loans only to their members, other credit unions, and credit union organizations, thus limiting who they can serve. A statutory interest rate cap for credit union loans exists (with exceptions that allow for sufficient earnings necessary to maintain credit availability). Loans made by federally insured credit unions are generally limited to 15 years (except for residential mortgages). Federal credit unions' investment authority is limited by statute to loans, government securities, deposits in other financial institutions, and certain other limited investments given their origins to promote thrift rather than be long-term investors. Business lending restrictions include an aggregate limit on an individual credit union's member business loan balances and on the amount that can be loaned to one member. If some or all of these restrictions are relaxed to allow the credit union system's lending powers to expand and become more comparable to the banking system, the prudential regulatory regimes arguably may require greater harmonization to protect against comparable financial risk exposures. This report focuses on policy developments pertaining to the credit union system. It begins with an overview of recent efforts to further expand system lending capacities. Next, it describes how the system's exposure to mortgage credit (default) risk grew after credit unions were given greater intermediation authorities in the mortgage lending space. It then discusses the system's financial distress and recovery resulting from the 2008 financial crisis, and updates the progress made to improve the system's resiliency to credit and insolvency risks. This discussion will use the balance sheet terminology defined in the box below. <2. Expanding Permissible Lending Activities> Congress has passed legislation, and the NCUA has implemented and proposed rules, supporting the expansion of lending activities that would increase financial transactions volumes (economies of scale). The expansion of lending activities, as discussed in this section, is likely to generate greater cash flows and revenues for the credit union system. <2.1. Field of Membership and Common Bonds> A credit union's "field of membership" is the legal definition of who is eligible to join. Federal or state governments grant credit union charters on the basis of a "common bond." There are three types of charters: a (1) single common bond (occupation or association based); (2) multiple common bond (more than one group each having a common bond of occupation or association); and (3) community-based (geographically defined) common bond. Individual credit unions are owned by their memberships. Credit union members elect a board of directors from their institution's membership (one member, one vote). Credit unions can make loans only to their members, other credit unions, and credit union organizations. Field of membership restrictions may limit an intermediary's ability to collect deposits, which are used to fund loans. Common bond requirements on credit unions can be considered analogous to U.S. restrictions on interstate and branch banking, which are no longer in place. By limiting access to supplementary sources of funds, a credit union (or bank) becomes more vulnerable to cash flow disruptions (e.g., increases in loan defaults, substantial deposit withdrawals) following adverse events particularly those that would directly affect its field of membership. Despite field of membership restrictions, some of the larger credit unions may still be able to achieve a sufficiently large and diversified depositor base, allowing them to enjoy greater economies of scale. Nevertheless, all intermediaries of all sizes are still vulnerable to a sudden need for liquid funds following some unexpected or adverse interest rate movements or a national recession, discussed in the section entitled "Increased Exposure to Mortgage Credit Risk and Recent NCUSIF Management Initiatives." For this reason, access to more sources of depositors arguably enhances liquidity management for credit unions and banks, which typically have assets (portfolio loans) that are less liquid than their liabilities (deposits). On December 7, 2016, the NCUA published a final rule comprehensively amending its chartering and field of membership rules to maximize access to federal credit union services to the extent permitted by law. Although NCUA cannot change the three initial statutory field of membership categories, it revised certain terms such as local community , rural district , underserved area , and multiple common-bond credit union , among other things to broaden access to federal credit unions. Competitors of credit unions, however, legally challenged the revisions, arguing that an associational charter may limit the ability of a credit union to add underserved areas (e.g., local urban or rural underserved areas as determined by the NCUA) to its field of membership unless it also has a multiple common-bond charter. On August 20, 2019, the D.C. Circuit Court of Appeals upheld the rule but remanded two provisions of the NCUA's revised field of membership rule. One provision, to satisfy a community-based common bond charter, would have allowed a combined statistical area with fewer than 2.5 million people to qualify as a local community; arguably, this provision could have had a discriminatory impact on poor and minority urban residents. The second remanded provision would have raised the population limit for rural districts from the greater of 250,000 or 3% of the relevant state's population to 1 million people; some geographical areas arguably could have been defined to extend beyond the state borders of a credit union's headquarters. The NCUA proposed to clarify its authority to reject fields of membership applications that would want to exclude low- or moderate-income individuals. On November, 7, 2019, the NCUA proposed to re-adopt the provision pertaining to the combined statistical area to clarify existing requirements and add an explicit provision to the rule to address potential discriminatory concerns. <2.2. Member Business and Commercial Lending> Lending caps on member business (commercial) loans offered by credit unions did not exist until 1998. Congress included provisions in the Credit Union Membership Access Act of 1998 (CUMAA; P.L. 105-219 ) that established a commercial lending cap that limits most credit unions to lending no more than 12.25% of their assets to small businesses, among other provisions. The following passages from the Senate's CUMAA report explain the rationale for establishing the member business loan (MBL) cap. "The purpose of H.R. 1151, the CUMAA, as reported from the Committee, is to amend existing law with regard to the field of membership of federal credit unions, to preserve the integrity and purpose of federal credit unions and to enhance supervisory oversight of federally insured credit unions.... The bill significantly strengthens the prudential safeguards applicable to federally insured credit unions and makes the credit union system safer, sounder and more resilient." " Section 203. Limitation on member business loans . In new section 107A(a), the Committee has imposed substantial new restrictions on commercial business lending by insured credit unions. Those restrictions are intended to ensure that credit unions continue to fulfill their specified mission of meeting the credit and savings needs of consumers, especially persons of modest means, through an emphasis on consumer rather than business loans. The Committee action will prevent significant amounts of credit union resources from being allocated in the future to large commercial loans that may present additional safety and soundness concerns for credit unions, and that could potentially increase the risk of taxpayer losses through the National Credit Union Share Insurance Fund ('Fund')." The CUMAA contained the following provisions: The MBL definition was codified and defined as "any loan, line of credit, or letter of credit, the proceeds of which will be used for a commercial, corporate or other business investment property or venture, or agricultural purpose," but it does not include an extension of credit that is fully secured by a lien on a one-to-four-family dwelling that is a member's primary residence. The aggregate amount of MBLs that can be made by an individual credit union was limited to the lesser of 1.75 times the credit union's actual net worth or 1.75 times the minimum net worth amount required to be well-capitalized under the prompt corrective action supervisory framework, typically calculated to be 12.25%. Three exceptions to the aggregate MBL limit were authorized for credit unions (1) that have low-income designations or participate in the Community Development Financial Institutions program; (2) chartered for the purpose of making business loans (as determined by the NCUA); and (3) with a history of primarily making such loans (as determined by the NCUA). In addition to the statute, a NCUA regulation limits the aggregate amount of a business loan that can be made to one member or group of associated members at 15% of the credit union's net worth or $100,000, whichever is greater. <2.2.1. MBL Definition and Requirement Updates> On March 14, 2016, the NCUA implemented final MBL rules to replace the prescriptive requirements (and limitations) with a broad principles-based regulatory approach, which became effective on January 1, 2017. The prescriptive approach, for example, required credit unions to request MBL origination waivers for NCUA approval, among other requirements. According to the NCUA, the prescriptive approach took significant time and resources from both credit unions and NCUA, resulting in delays in processing MBL applications. The principles approach, by contrast, streamlines the MBL underwriting process by granting credit unions more flexibility and individual autonomy to best fit their members' needs. Credit unions are still expected to comply with prudential underwriting practices and commensurate net worth requirements. To facilitate the streamlined underwriting approach, the NCUA updated various MBL exemptions, resulting in several new definitions. For example, a commercial loan is a business loan (1) that is fully guaranteed by a federal or state agency or provides an advance commitment to purchase in full or (2) made to a nonmember or part of a joint lending arrangement with an entity that is not a member of the credit union system. Commercial loans do not count toward the MBL cap. On May 24, 2018, Section 105 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA; P.L. 115-174 ) amended the statutory MBL definition (i.e., it removed the words ''that is the primary residence of a member'') to address a disparity in the treatment of certain residential real estate loans made by credit unions and banks. The NCUA has since revised the MBL definition to exclude all extensions of credit that are fully secured by a lien on a one-to-four-family dwelling regardless of the borrower's occupancy status. For this reason, non-owner occupied real estate (e.g., rental property) loans are no longer considered MBLs and do not count toward the aggregate MBL cap. In addition to amending the MBL definition, EGRRCPA Section 103 amended the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA; P.L. 101-73 ) to exempt from appraisal requirements certain federally related, rural real estate transactions valued at or below $400,000 if no state-certified or state-licensed appraiser is available. The NCUA implemented this provision in a July 2019 final rule. Depository institution lending typically requires appraised collateral as backing for the loans. The rise in home prices (since the $250,000 appraisal threshold was set in 1994) along with the innovation of less expensive automated appraisal valuations arguably has reduced the need for manual appraisals on less expensive homes, thereby lowering borrowers' closing costs. The NCUA also increased the appraisal threshold to $1 million for commercial real estate and qualified MBLs. The $1 million commercial appraisal threshold is higher than the current $500,000 for banks. The NCUA board, however, did not unanimously agree on the $1 million commercial appraisal threshold because, despite the system's low exposure to commercial real estate risks, the banking system still has more expertise evaluating and managing commercial lending risks than does the credit union system. <2.2.2. Policy Options Related to an MBL Cap Increase> The credit union industry has generally supported efforts to increase or eliminate the MBL cap. At the end of 2018, the NCUA reported that the credit union system originated 4.7% in MBLs relative to its assets. If MBL capacity were increased, some larger credit unions could become more competitive with small community banks as well as with some midsize and regional banks. Credit unions that currently enjoy a presence in the commercial lending market, have a sufficiently large asset base, or already operating close to the existing statutory limit would be more likely to increase their presence in the commercial market if the cap were raised. In addition, the credit union system as a whole can support increased member business lending by increasing its use of participation loans . Financial institutions use loan participations to provide credit jointly. The loan originator, that often structures the loan participation arrangement, typically retains the largest share of the loan and sells smaller portions to other institutions. This practice allows the originator to maintain control of the customer relationship (including the loan servicing) and overcome funding limitations. In addition, all of the institutions involved in the participation loan use their individual portions of the loan to diversify their asset (loan) portfolios, which can be a cost-effective financial risk management tool. The credit union system could, therefore, become a more prominent competitor in the commercial lending market with the banking system, which also uses participation lending arrangements to diversify risks. Nevertheless, because all lending entails exposure to financial risks, having multiple credit unions involved in participations would still pose risk to the NCUSIF. From an economics perspective, a lending cap imposes an arbitrary limit that may be too high for some credit unions and too low for others, thus resulting in MBL shortages in the latter situations. For those credit unions that provide very few or no MBLs, a cap is irrelevant. Credit unions facing an active MBL market must abruptly cease this type of lending when activity volume reaches the cap, which some may argue is set "too low," given that they can no longer satisfy their memberships' financial needs. Hence, a lending cap is arguably a blunt instrument to the extent that it imposes the same requirement on all institutions without taking into account differences in asset size and market purview. Alternatively, a policy tool with a greater focus on the costs to originate MBLs specifically subjecting the net income derived from MBL activities to a type of tax would impose financial costs on credit unions without directly capping their lending ability. For example, the unrelated business income tax (UBIT) for tax-exempt organizations could be applied to MBLs. At the entity level, credit unions are exempt from federal income tax because they are not-for-profit financial cooperatives. If, for example, a credit union were to provide financial services (e.g., check-cashing) to nonmembers, any revenue generated from those activities would be subject to UBIT. Likewise, implementing the UBIT for MBLs would allow costs to grow in proportion to the amount of MBL activity while minimizing an abrupt discontinuation of the activity for those credit unions nearing an established policy cap. Another policy option, also with similarities to a tax, would be to adopt capitalization requirements comparable to those implemented for the banking system. The CUMAA established the MBL cap and a capital-based supervisory framework as tools to enhance prudential safety and soundness, ultimately providing more protection for the share deposit insurance fund. Enhanced capitalization (net worth) requirements arguably could substitute for an MBL cap. In short, policy tools operating via cost disincentives rather than quantity restrictions may still allow the credit union system to restrain MBL activity but with more flexibility for certain circumstances. <2.3. Greater Flexibility in Lending Terms> As previously discussed, the credit union system has evolved to a formal intermediation system that provides a range of financial services; however, it still has not acquired all of the lending powers comparable to those of banks. In addition, some of the system's current lending authorities are temporary and must be regularly renewed. This section reviews some of the temporary or limited lending authorities that the credit union industry and some policymakers argue could be enhanced. <2.3.1. Interest Rate Ceilings and Temporary Exemptions> The FCU Act sets an annual 12% interest rate ceiling (or cap) for loans made by federally chartered credit unions and federally insured state-chartered credit unions. The statutory loan interest rate ceiling was raised to 15% per annum after the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA; P.L. 96-221 ) was passed. The DIDMCA also authorized the NCUA to set a ceiling above the 15% cap for up to an 18-month period after consulting with Congress, the U.S. Department of the Treasury, and other federal financial agencies. The credit union interest rate ceiling is currently set at 18%. According to NCUA notices, its interest rate ceiling is an annual percentage rate (APR) rather than a pure interest rate. The APR represents the total annual borrowing costs of a loan expressed as a percentage, meaning that it is calculated using both interest rates and origination fees. The text-box below explains more about how to calculate and interpret the APR. In December 1980, the NCUA board raised the ceiling to 21%. In May 1987, the board reduced the rate ceiling and has since maintained it at 18%. When setting the interest rate above 15%, the NCUA must (1) review money market interest rate trends and (2) assess how prevailing interest rate movements (volatility) might threaten credit unions' safety and soundness in terms of the ability to sustain their lending activities, the effect on their net-interest income (earnings), and the effect on their liquidity. In July 2018, for example, the board expressed concern that a ceiling below 18% could result in lower net interest income, considered to be the key driver of credit union earnings, thus reducing credit union profitability and limiting borrowers' access to credit. On January 23, 2020, the board retained the current 18% rate ceiling for federally insured credit union loans, from March 11, 2020, through September 10, 2021, after (1) observing rising money market rates over the preceding six-month period; (2) observing adverse liquidity, capital, earnings, and growth trends; and (3) consulting with the relevant federal agencies. The Military Lending Act of 2006 (MLA; P.L. 109-364 ) was passed to protect active duty military personnel and their eligible family members from predatory lending. The MLA limits the Military Annual Percentage Rate (MAPR) to 36% for small-dollar loans and credit products, such as credit cards, deposit advances, overdraft lines of credits, and certain types of installment loans. The MLA, however, does not apply to mortgages, automobile loans, and secured loans. A credit union borrower typically receives an APR below the MAPR ceiling for covered transactions. Hence, the credit union interest rate ceiling is currently below the federal MLA cap on consumer loans offered to military personnel. The NCUA, however, permits the credit union system to make payday alternative loans (PALs) to its membership with certain restrictions. Under the existing permissible framework, PAL amounts may range from $200 to $1,000; they must have fully amortizing payments; the term length must range from 46 days to 180 days; and the application fee must be $20 or less. If the borrower cannot repay the initial PAL, a credit union may allow for a rollover into a new PAL of the same initial maturity as long as no additional fees are charged or no additional credit is extended. No more than three PALs can be made to a single borrower in a rolling six-month period. This specific loan product, referred to as a PALs I, requires a one-month membership before it can be offered. The PALs program has a 28% ceiling, meaning that it is exempt from the 18% interest rate ceiling that covers other loan originations made by federally insured credit unions and from the 36% MAPR ceiling. The MAPR ceiling includes the origination fees, but the NCUA PALs ceiling excludes the $20 origination fee. The PAL loan APR when including the $20 origination fee, in many cases, exceeds the 36% MAPR ceiling. To avoid lending reductions by credit unions to military service customers, the NCUA requested and was granted a PAL exemption from the MAPR so that the PAL application fee is not included in the APR computation. The higher PAL ceiling also does not include an initial origination fee of up to $20 in the APR calculation. On October 1, 2019, the NCUA broadened the PALs framework to allow credit unions to offer additional short-term, small-dollar products. A new PALs II product may have an amount up to $2000 and have fully amortizing payments over a 1-to-12-month term. Furthermore, there is no minimum membership length requirement to be eligible for a PALs II, which may allow borrowers to quickly consolidate multiple non-credit union payday loans into one PALs loan. Credit unions may not charge any overdraft or insufficient funds fees for any PALs II drawn against a member's account, which may reduce the likelihood of creating a negative balance in the account while still allowing credit unions to make sufficient (as opposed to maximum) profit in this line of business. <2.3.2. Loan Maturity Length and Exemption Caps> When the FCU Act was initially passed, credit unions were allowed to make loans not to exceed two years. Congress has since increased system-originated loan maturity lengths. On September 22, 1959, Section 8 of P.L. 86-354 amended the FCU Act to increase credit union loan maturities for up to 5 years. On July 5, 1968, Section 1 of P.L. 90-375 amended the FCU Act to allow credit unions to make unsecured loans with maturities not to exceed 5 years and secured loans with maturities not to exceed 10 years. The Mini Bill of 1977 allowed loan maturities not to exceed 12 years. It also allowed credit unions to make residential real estate loans with maturities up to 30 years; home improvement loans and mobile home loans (for principal residence) were allowed for up to 15 years. The Garn-St. Germain Depository Institutions Act of 1982 (Garn-St. Germain Act; P.L. 97-320 , 96 Stat. 1469) permitted mortgage loan refinancing, and extended the maturity limit to 15 years for all second mortgages. The Competitive Equality Banking Act of 1987 (CEBA; P.L. 100-86 ) amended the FCU Act to authorize the NCUA to allow second-mortgage, home-improvement, and mobile home loans beyond 15 years. On October 1989, the NCUA finalized the rule to extend the maturity limit to 20 years. On October 13, 2006, Section 502 of P.L. 109-351 amended the FCU Act to set a 15-year maximum maturity on credit union loans, with some exceptions. For example, residential one-to-four family mortgages may exceed the 15-year maturity term as long as the property is the borrower's primary residence. In the 116 th Congress, H.R. 1661 was introduced on March 8, 2019, and referred to the House Committee on Financial Services. H.R. 1661 , if enacted, would amend Section 107(5) of the FCU Act to allow NCUA the flexibility to extend maturities for all loans, including MBLs and student loans. <3. Developments in the Credit Union System's Prudential Risk Management> Congress created the NCUSIF in 1970 to be the insurance fund for all federally regulated credit unions. The NCUA manages the NCUSIF, which is completely funded by insured credit unions. The NCUSIF's primary income source is the premiums collected from credit unions, which pay the fund's operating expenses, cover losses, and build reserves. Premiums were originally set at one-twelfth of 1% of the total amount of member share accounts, but P.L. 98-369 required each federally insured credit union to maintain a fund deposit equal to 1% of its insured share accounts. Examination fees and any penalties NCUA collects from insured institutions are also deposited into the NCUSIF. Fund portions not applied to current operations can be invested in government securities, and the earnings also generate fund income. The NCUSIF's reserves consist of the 1% deposit, plus the fund's accumulated insurance premiums, fees, and interest earnings. Prudential safety and soundness regulation, which includes holding sufficient capital reserves, may reduce the financial institutions' insolvency (failure) risk and promote public confidence in the financial system. Although higher capital requirements may not prevent adverse financial risk events from occurring, more capital enhances the financial firms' ability to absorb greater losses associated with potential loan defaults. The enhanced absorption capacity may strengthen public confidence in the soundness of these financial institutions and increase their ability to function during periods of financial stress. For this reason, the NCUA has proposed enhanced net worth (capitalization) requirements for credit unions, which is intended to increase the credit union system's resilience to insolvency risk and to minimize possible losses to the NCUSIF and ultimately to taxpayers. These prudential issues are discussed in this section. <3.1. Increased Exposure to Mortgage Credit Risk and Recent NCUSIF Management Initiatives> Credit unions were granted the authority to increase their participation in the mortgage market during the late 1970s and 1980s. In light of the savings and loan (S&L) crisis, discussed in the text box below, the credit union system was also granted more powers to mitigate interest rate risk stemming from exposure to mortgage market risk. The following list highlights some of these authorities: After the Mini Bill of 1977 was passed, the NCUA adopted regulations on August 7, 1978, permitting credit unions to sell mortgage loans in the secondary market specifically to Fannie Mae, Freddie Mac, and Ginnie Mae (government-sponsored enterprises, or GSEs) as well as to federal, state, and local housing authorities. On August 16, 1978, federal credit unions were also granted the authority to sell their members' federally guaranteed student loans. The Garn-St. Germain Act, as mentioned, eliminated limits on the size and maturity of first lien mortgages, permitted refinancing of mortgage loans, and extended the maturity limit to 15 years for all second mortgages. The CEBA amended the FCU Act to authorize the NCUA to allow second-mortgage, home-improvement, and mobile home loans beyond 15 years. The Garn-St. Germain Act also amended the FCU Act to allow credit unions to issue and sell securities, which are guaranteed pursuant to Section 306(g) of the National Housing Act. In other words, federal credit unions were given the authority to participate in activities that would allow them to securitize assets. In 1988, the NCUA allowed credit unions to invest in mortgage-backed securities (MBS). Rather than hold, for example, 30-year mortgages, the ability to hold MBS of shorter (e.g., 10 year) maturities reduces asset duration risk (discussed in the text box below). In 1989, credit unions were allowed to use financial derivatives to purchase insurance against declines in GSE-issued MBS values that would occur after a rise in interest rates, thus protecting the overall value of their asset (loan) portfolios. (NCUA noted that the credit union system had experienced a 48% increase in real estate lending in 1987.) Consequently, as credit unions and other financial intermediaries increased their participation in the mortgage market, they also grew more susceptible to the financial risks linked to this market. Rising interest rates was a major risk factor in the S&L crisis during the 1980s, whereas rising mortgage defaults or credit risk was a major factor in the financial crisis that occurred in 2008. Because of the greater exposure to mortgage credit risk, the credit union system along with numerous financial entities in 2008 experienced distress after a sharp rise in the percentage of seriously delinquent mortgage loans in the United States. According to the NCUA chairman, corporate credit unions faced increasing liquidity pressures during 2008 after a significant portion of their MBSs following a deterioration of the underlying real estate collateral lost value and were subsequently downgraded below investment grade. Corporate credit unions operate as wholesale credit unions, meaning that they provide financing, investment, and clearing services for the retail credit unions that interface directly with customers. The corporates accept deposits from, as well as provide liquidity and correspondent lending services to, retail credit unions. This reduces the costs that smaller institutions would bear individually to perform various financial transactions for members. Given that retail credit unions are cooperative owners of corporate credit unions, they are also federally insured by the NCUSIF. The NCUA placed two corporate credit unions into conservatorship in March 2009 and three additional corporates in September 2010. The five corporates under conservatorship at the time had represented approximately 70% of the entire corporate system's assets and 98.6% of the investment losses within the system. The share equity ratio the ratio of total funds in the NCUSIF relative to the estimated amount of share deposits held by credit unions is an indicator that represents the adequacy of reserves available to protect share depositors and maintain public confidence. The NCUA annually determines the normal operating level for the share equity ratio, which statutorily must fall between 1.2% and 1.5%. The 2006 equity ratio was 1.30% and fell below the statutory minimum to 1.18% by August 2010. The NCUA board may assess a premium when the ratio falls between 1.2% and the declared operating level; however, it is required to assess a premium if the equity ratio falls below 1.2%. Similarly, the NCUA board may declare a dividend if, at the end of the calendar year, the equity level exceeds the normal operating level; it is required to do so if the equity ratio exceeds 1.5%. Rather than deplete the NCUSIF, Congress in May 2009 established a Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to accrue and recover losses from the corporates. The TCCUSF borrowed from Treasury to help cover conservatorship costs, and the NCUA also raised assessments on all federally insured credit unions, including those that did not avail themselves of corporate credit union services. The premium assessment reflected a plan to restore the NCUSIF equity ratio to 1.3%, which happened by December 2011. After achieving a positive net position of $1.9 billion as of May 2017, the NCUA, in July 2017, proposed closing the TCCUSF and providing credit unions with a Share Insurance Fund distribution in 2018, estimated to be between $600 million and $800 million. The TCCUSF officially closed on October 1, 2017; its assets and obligations were transferred to the NCUSIF. The NCUA reduced the share equity ratio from 1.39, which had previously been set in September 2017, to 1.38, administering an equity distribution (rebate) of $160.1 million to member institutions. <3.2. The Risk-Based Capital Rule> On January 23, 2014, the NCUA announced increases in capital requirements for a subset of natural person credit unions designated as complex . NCUA initially defined a complex credit union to have at least $50 million in assets. On January 27, 2015, the NCUA revised the initial proposed rule, amending the definition as having at least $100 million in assets. On October 29, 2015, the NCUA finalized the risk-based capital rule. Some of the rule's specific requirements included the following: A new asset risk-weighting system was introduced that would apply to complex credit unions, which would be more consistent with the methodology used for U.S. federally insured banking institutions. A new risk-based capital ratio (defined using the narrower risk-based capital measure in the numerator and total risk-weighted assets, which are computed using the new risk-weighting system, in the denominator) of 10% would be required for complex credit unions to be well-capitalized under the prompt corrective action supervisory framework. The risk-based capital ratio was designed to be more consistent with the capital adequacy requirements commonly applied to depository (banking) institutions worldwide. Compliance of complex credit unions with the risk-based capital ratio requirements as well as the existing statutory 7% net-worth asset ratio would have been effective by January 1, 2019, to avoid NCUA supervisory enforcement actions. Non-complex credit unions with assets below $100 million would not have been required to comply with the new risk-weighting system, and they would no longer be required to risk-weight their assets. Instead, non-complex credit unions must comply with the existing statutory 7% net-worth asset ratio. Credit unions with a concentration in commercial lending in excess of 50% of their total assets would be required to hold higher amounts of net worth to abate the higher levels of concentration risk. On December 17, 2019, the NCUA issued a final rule to move the effective date to January 1, 2022. The NCUA also amended the complex credit union's definition by increasing the asset threshold level from $100 million to $500 million. The NCUA also wanted more time to consider the feasibility of adopting a capital framework for the credit union system that would be similar to the community bank leverage ratio framework. Under this framework, banks with less than $10 billion in average total consolidated assets may elect to maintain a leverage ratio of greater than 9% to satisfy both the risk-based and leverage capital requirements to be well-capitalized. Nevertheless, the delays have prompted some Members of Congress to monitor the implementation progress of the risk-based capital rule for credit unions. <3.3. Supplemental Capital> Because credit unions do not issue common stock equity, they do not have access to capital sources beyond retained earnings. If alternative sources of capital, referred to as supplemental capital, were to be used in addition to net worth, then credit unions would be able to increase their lending while remaining in compliance with their safety and soundness net worth requirements. The proposal discussed below to adopt supplemental capital requirements would enhance the credit union system's lending capacity and introduce a new prudential risk management tool. An NCUA working group has developed three general sources of supplemental capital, all of which would be repaid after reimbursement of the NCUSIF following liquidation of an insolvent credit union. Credit unions could raise voluntary patronage capital (VPC) if (noninstitutional) members were to purchase "equity shares" in the organization. VPC equity shares would pay dividends; however, a VPC investor would not obtain any additional voting rights, and no investment would be allowed to exceed 5% of a credit union's net worth. mandatory membership capital (MMC) if a member pays what may be conceptually analogous to a membership fee. MMC capital would still be considered equity for the credit union but, unlike VPC, it would not accrue any dividends. subordinate debt (SD) from external and institutional investors. SD investors would have no voting rights or involvement in a credit union's managerial affairs. SD would function as a hybrid debt-equity instrument, meaning the investor would simply be a creditor with no equity share in the credit union while it is solvent and would not be repaid principal or interest should the credit union become insolvent. SD investors must make a minimum five-year investment with no option for early redemption. A credit union 's net worth is defined in statute; therefore, congressional legislative action would be required to permit other forms of supplemental capital to count toward their net worth prudential requirements. <4. Conclusion> Credit union industry advocates argue that lifting lending restrictions to make the system more comparable with the banking system would increase borrowers' available pools of credit. Community banks, which often compete with credit unions, argue that policies such as raising the business lending cap, for example, would allow credit unions to expand beyond their congressionally mandated mission and could pose a threat to financial stability. By amending the FCU Act several times to expand permissible lending activities, Congress arguably had recognized that the credit union system has evolved into a more sophisticated financial intermediation system. Congress has also emphasized prudential safety and soundness concerns. Following the 2008 financial crisis, the federal bank prudential regulators implemented prudential requirements to enhance the U.S. banking system's resiliency to systemic risk events. The NCUA initially proposed in 2014 to increase capital requirements particularly for large credit unions (those with $500 million or more in assets); however, the proposal has been revised, delayed, and is currently scheduled to become effective in January 2022. In the meantime, the NCUA has implemented and proposed rules to support expanding lending activities that would increase financial transactions volumes (economies of scale), thus possibly generating greater cash flows and profitability for the credit union system. The adoption of enhanced prudential net worth requirements for the credit union system, however, arguably may facilitate mitigating the financial risks that typically accompany increases in lending.

Credit unions make loans to their members, other credit unions, and corporate credit unions that provide financial services to individual credit unions. Historically, credit unions have faced statutory restrictions on their lending activities, including restricting lending activities to their members. Other lending restrictions include a 15% statutory loan interest rate ceiling, with some authority to operate above the cap under certain circumstances; a 15-year maturity limit on most loans (with some exceptions, such as residential mortgages); and an aggregate limit on an individual credit union's member business loan (MBL) activity (in the form of outstanding loan balances) and on the amount that can be loaned to any one member. Congress passed the Federal Credit Union Act of 1934 (FCU Act; 48 Stat. 1216) to create a class of federally chartered financial institutions to "promote thrift among its members and create a source of credit for provident or productive purposes." The original concept of a credit union stemmed from small lending cooperatives that not only provided a low-cost source of credit for but also promoted thriftiness among their members. Since their inception, credit unions have been granted additional lending authorities as the marketplace has evolved. Nevertheless, the credit union system still faces more restrictions than the commercial banking system. Credit union industry advocates argue that lifting lending restrictions to make the system more comparable with the banking system would increase borrowers' available pools of credit. Community banks, which often compete with credit unions, argue that policies such as raising the business lending cap, for example, would allow credit unions to expand beyond their congressionally mandated mission and could pose a threat to financial stability. By amending the FCU Act several times to expand permissible lending activities, Congress arguably recognizes that the credit union system has evolved into a more sophisticated financial intermediation system. In addition to various FCU Act amendments over the past several decades, Congress has recently passed various legislation that would allow credit unions to expand their lending activities. For example, P.L. 115-174 revised the MBL definition, allowing credit unions to extend loans to one-to-four family dwellings regardless of whether the dwellings are primary residences. In the 116 th Congress, H.R. 1661 has been introduced and, if enacted, would amend the FCU Act to allow the National Credit Union Administration (NCUA)—the primary regulator of federally insured credit unions—the flexibility to extend loan maturities for all loans, including MBLs and student loans. Recognizing credit unions' primary mission as meeting consumers' credit and savings needs, Congress emphasized prudential safety and soundness concerns when it established the statutory cap on MBLs and a capital supervisory framework for the credit union system. Following the 2008 financial crisis, the federal bank prudential regulators (i.e., the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation) enhanced their prudential capital requirements to increase the U.S. banking system's resilience to systemic risk events. Likewise, the NCUA initially proposed in 2014 to increase capital (net worth) requirements particularly for large credit unions (those with $500 million or more in assets); however, the proposal has been revised and delayed and is currently scheduled to become effective in January 2022. In the meantime, the NCUA has implemented and proposed rules to support expanding lending activities that would increase financial transactions volumes (economies of scale), thus increasing the array of loan product offerings for members and potential revenues for the credit union system. Likewise, Congress has been monitoring the extent to which the adoption of enhanced prudential capital requirements for the credit union system has kept pace with the bank prudential regulatory regime.

crs_98-988

crs_98-988_0

<1. Introduction> The rules and practices of the House of Representatives governing quorums and voting on the floor are closely intertwined, and derive from two provisions of Article I of the Constitution. Regarding quorums, clause 1 of Section 5 states in part that "a Majority of each [House] shall constitute a Quorum to do Business; but a smaller Number may adjourn from day to day, and may be authorized to compel the Attendance of absent Members, in such Manner, and under such Penalties as each House may provide." Regarding voting, clause 3 of the same section provides in part that "the Yeas and Nays of the Members of either House on any question shall, at the Desire of one fifth of those present, be entered on the Journal." This report discusses how the House now interprets and implements these two constitutional provisions. It focuses on the most important rules and the most common practices; it does not attempt to cover all the precedents the House has established or all the procedures that may be invoked for example, the procedures for calling the roll instead of using the electronic voting system to decide a question or establish the presence of a quorum. This report also assumes a familiarity with some other aspects of the House's floor procedures. <2. The Quorum Requirement in Theory and Practice> The Constitution's quorum requirement quoted above seems to make it necessary for a simple majority of the House's members, or a minimum of 218 Representatives if there are no vacancies in the House, to be present on the floor whenever the House conducts business. As any observer of the House soon notices, however, sometimes only a handful of Members are present during House debates. In fact, it is rather unusual for as many as 218 Members to be present on the floor at the same time unless a vote or quorum call is being conducted using the House's electronic voting system. There appears to be an inconsistency, therefore, between an apparently unambiguous constitutional requirement and the well-established and well-accepted practices of the House. How is this inconsistency to be explained? First, the House transacts much of its business on the floor by resolving itself into the Committee of the Whole formally, the Committee of the Whole House on the State of the Union. The primary reason for doing so is that the rules governing debate and amendment in Committee of the Whole are more flexible than those that apply when the House is meeting "in the House." Resolving into Committee of the Whole is also convenient for another reason. The Committee of the Whole is a committee that the House has created in its rules, just as the House has created various standing committees. Although the Committee of the Whole differs from other House committees in that all Representatives are members of it and it meets on the House floor, it still remains a committee of the House. Therefore, a meeting of the Committee of the Whole is not a meeting of the House itself, so the constitutional quorum requirement for the House does not apply in Committee of the Whole. Instead, the House is free to set in its rules whatever quorum requirement it chooses for meetings of the Committee of the Whole. Clause 6(a) of House Rule XVIII provides that a "quorum of a Committee of the Whole House on the state of the Union is 100 Members," not the majority of House Members that constitutes a quorum of the House. Second, whether the House is meeting as the House or in Committee of the Whole, a quorum is always presumed to be present unless and until its absence is demonstrated. Reasonably enough, the House presumes that it is complying with the Constitution or its own rules, as the case may be. Furthermore, neither the Speaker nor the chair of the Committee of the Whole is empowered to take the initiative to ensure that this presumption is correct. At no time may the Speaker or the chair interrupt the proceedings on the floor because he or she observes that the necessary quorum is not present or because he or she decides to count those present to determine whether the applicable quorum requirement is being met. Instead, the Speaker or chair responds to an assertion that a Member makes from the floor that a quorum is not present (or less often, when a Member is recognized to move a call of the House). A quorum is always presumed to be present unless a Member challenges this presumption from the floor, and the House's standing rules severely limit when he or she may do so. Many of the details of these rules are discussed later in this report. To summarize them here, there is a critical linkage between the House's quorum and voting procedures: About the only times that a Member has a right to make a point of order that a quorum is not present is when a vote is taking place. In a sense, the House in its rules has adopted a definition of business for purposes of the constitutional quorum requirement that is limited to voting. If a majority of all Representatives actually had to be in the chamber from the opening gavel to the adjournment of each daily session, it would become practically impossible for Members to satisfy all their various responsibilities and for the House to do its work in a timely fashion. <3. Conducting Voice and Division Votes> Either the Constitution or the House's rules require that certain kinds of questions be decided by record votes that are almost always conducted by use of the House's electronic voting system. First, the Constitution mandates that any vote to override a presidential veto "shall be determined by Yeas and Nays" (Article I, Section 7, clause 2). Second, under clause 10 of Rule XX, the "yeas and nays shall be considered as ordered when the Speaker puts the question on passage of a bill or joint resolution, or on adoption of a conference report, making general appropriations, or on final adoption of a concurrent resolution on the budget or conference report thereon." And third, clause 12(a)(2) of Rule XXII provides for a record vote on any motion to authorize House managers to close the meetings of any conference committee. In all other cases, the basic procedures for voting in the House are laid out in House Rules I and XX. The manner in which questions are put to a vote is governed by clause 6 of Rule I, on the duties of the Speaker: The Speaker shall put a question in this form: "Those in favor (of the question), say 'Aye.'"; and after the affirmative voice is expressed, "Those opposed, say 'No.'". After a vote by voice under this clause, the Speaker may use such voting procedures as may be invoked under rule XX. Clause 1 of Rule XX then lays out the basic procedures for securing division and record votes: (a) The House shall divide after the Speaker has put a question to a vote by voice as provided in clause 6 of rule I if the Speaker is in doubt or division is demanded. Those in favor of the question shall first rise from their seats to be counted, and then those opposed. (b) If a Member, Delegate, or Resident Commissioner requests a recorded vote, and that request is supported by at least one-fifth of a quorum, the vote shall be taken by electronic device unless the Speaker invokes another procedure for recording votes provided in this rule. A recorded vote taken in the House under this paragraph shall be considered a vote by the yeas and nays. (c) In case of a tie vote, a question shall be lost. Whether in the House or in Committee of the Whole, every question, except the few noted above, is first put to a voice vote. The chair instructs those who favor the question to call out "aye," and then those who oppose it to call out "no." The chair then is expected to state that, in his or her opinion, "the ayes [or the noes] appear to have it," and to pause before banging the gavel and announcing that "the ayes [or noes] do have it and the bill is [or is not] passed" (or the motion is agreed to, or whatever the case may be). If no one challenges the chair's statement, his or her announcement is conclusive, and the question is decided. Furthermore, the vote is considered valid even if only a few Members actually voted. A quorum is presumed to have been present, regardless of how many may have actually participated in the voice vote. After the chair announces his or her opinion as to the outcome of a voice vote, any Member, Delegate, or Resident Commissioner has a right to demand a division vote, although they rarely do this in practice. Even less common, the chair may call for a division vote when a voice vote leaves him or her in doubt. When a division vote is demanded, the chair directs all those in favor of the question to stand and to remain standing until he or she counts them; then in like manner, the chair counts those who stand in opposition to the question. The chair then announces the result, and the question is decided. As is true of a voice vote, the positions of individual Members in a division vote are not recorded, and a division vote is valid even if less than a quorum was present to participate in it, unless the vote is challenged for that reason. Again, the presumption is that a quorum is present on the floor when the vote takes place even if not all of those Members choose to take part in the vote. Both voice votes and division votes involve only the Members who happen to be on or very near the floor at the time a vote takes place. No time is provided for Members to come to the floor from their offices or committee rooms. As a result, a small number of Members can determine the outcome of either kind of vote, and that outcome may not be the same as it would be if most or all Members participated. Before the final result of either a voice vote or a division vote is announced, therefore, any Member, Delegate, or Resident Commissioner may request a record vote using the House's electronic voting system. During this kind of vote, Members usually have 15 minutes or more to come to the floor and record their votes, and the vote of each Member is recorded individually and printed in the Congressional Record . <4. Seeking an Electronic Vote> The House uses its electronic voting system for taking what are actually several different kinds of votes. They are indistinguishable from each other in how they are conducted, but not in how they are ordered. <4.1. In the House> There are three ways to secure an electronic vote in the House. According to the former Parliamentarian On any vote in the House, (1) the vote may be objected to (for lack of a quorum) under Rule XV clause 4 [now clause 6 of Rule XX], thereby precipitating an automatic ordering of the yeas-and-nays; (2) a recorded vote may be ordered by one-fifth of a quorum; or (3) the yeas and nays may be ordered by one-fifth of those present. Recall that the Constitution provides that "the Yeas and Nays of the Members of either House on any question shall, at the Desire of one fifth of those present, be entered on the Journal." A vote by the yeas and nays is what has traditionally been called a roll call vote, though today it is also known as a kind of record vote and is taken by use of the House's electronic voting system unless that system were to break down. In that case, the clerk of the House would actually call the roll of Members, following clause 3 of Rule XX as was done before the electronic system was installed to implement the Legislative Reorganization Act of 1970. Clause 2(a) of Rule XX now provides that all record votes and quorum calls in the House are to be conducted electronically unless the Speaker exercises the discretion to have the clerk call the names of Members instead. In practice, the electronic voting system is always used unless it is temporarily inoperative. (For this reason, all references in this report to roll call and record votes should be understood to be references to votes taken "by electronic device.") As noted earlier, there is an important linkage between the House's quorum requirements and its procedures for ordering electronic votes. In the House, a yea-and-nay vote can be ordered, as a matter of constitutional right, by one-fifth of the Members present, but this number need not constitute a quorum. One-fifth of however many Members happen to be present may order the yeas and nays. However, there is an alternative that is even less demanding: Any Member can usually compel an electronic vote on any question on which the House is voting by invoking clause 6(a) of Rule XX, which provides for an electronic vote that also establishes the presence of a quorum. That rule states in part When a quorum fails to vote on a question, a quorum is not present, and objection is made for that cause (unless the House shall adjourn) (1) there shall be a call of the House; (2) the Sergeant-at-Arms shall proceed forthwith to bring in absent Members; and (3) the yeas and nays on the pending question shall at the same time be considered as ordered . (Emphasis added.) Clause 6(b) goes on to provide in part If those voting on the question and those who are present and decline to vote together make a majority of the House, the Speaker shall declare that a quorum is constituted, and the pending question shall be decided as the requisite majority of those voting shall have determined. Thereupon further proceedings under the call shall be considered as dispensed with. When the Speaker announces the result of a voice vote or a division vote in the House, a Member may take advantage of the rules just quoted by rising and saying: Mr./Madam Speaker, I object to the vote on the ground that a quorum is not present and I make a point of order that a quorum is not present. The Member making this statement is invoking the constitutional quorum requirement and challenging the validity of the voice or division vote by asserting that it does not comply with the Constitution because a quorum of the House was not present at the time. In response, the Speaker counts to determine whether, in fact, a quorum (218 Members if there is no more than one vacancy) is present on the floor. If a quorum is present, the Speaker overrules the point of order. If the Representative still wants an electronically recorded vote, he or she may ask for the yeas and nays, and hope that one-fifth of the Members present rise to indicate their support for the request. Alternatively, the Member may ask for a recorded vote, invoking clause 1(b) of Rule XX which states, "If a Member, Delegate, or Resident Commissioner requests a recorded vote, and that request is supported by at least one-fifth of a quorum, the vote shall be taken by electronic device" unless the Speaker orders otherwise. Notice that it takes 44 Members (one-fifth of a quorum) to order a recorded vote under this rule, compared to one-fifth of those present to order the yeas-and-nays. When a quorum is present on the floor, it may be easier to obtain sufficient support for a recorded vote than for a yea-and-nay vote, because the number of Members present will probably exceed the minimal quorum of 218 (in which case one-fifth of the number present will exceed 44). In either event, the vote will be taken by using the electronic voting system, regardless of whether it is technically a yea-and-nay vote or a recorded vote ordered under clause 1(b) of Rule XX. If the Speaker discovers that a quorum is not present, the Speaker announces that fact and also states that, under clause 6(a) of Rule XX, an electronic vote is ordered on the question before the House. This vote accomplishes two purposes at once. First, it decides the question (for example, "Will a bill pass?"). Second, at the same time, it demonstrates the presence of a quorum (as Members use the 15 or more minutes given them to come to the floor and vote). If a quorum participates in the vote, the presence of a quorum is established, and the House can continue to transact business. (It is rarely necessary for the Sergeant at Arms to "bring in absent Members," because Members usually want to be recorded on all electronic votes.) More often than not, however, the Speaker does not respond to such a point of order by counting for a quorum but instead by postponing further proceedings. As discussed fully in the section below, the Speaker has the authority to postpone votes on many questions under clause 8(a)(1) of Rule XX. When the Speaker postpones a vote after an objection to the lack of a quorum, the point of order is considered withdrawn. This is because the Speaker is effectively no longer putting the question to a vote, and it is therefore not in order to make a point of order that a quorum is not present. When proceedings are resumed on the question, the Speaker will put the question again, first by voice vote. In practice, the Speaker resumes proceedings at a time that a quorum is present on the floor. A Member, Delegate, or Resident Commissioner can, at that time, request either a recorded vote or a yea-and-nay vote, and if there is a sufficient second, the vote will be taken by electronic device. <4.2. In Committee of the Whole> The constitutional right to demand "the Yeas and Nays" applies to both the House and the Senate, but it does not extend to the Committee of the Whole. There is no constitutional right for one-fifth of the Members present to insist on a vote in Committee of the Whole by call of the roll or by use of the electronic voting system. In fact, before 1970, the votes of individual Members were never recorded on any question that was decided in Committee of the Whole, including all the votes on amendments to bills. As part of the same 1970 Legislative Reorganization Act that authorized the electronic voting system, the House amended its rules to provide for recorded votes in Committee of the Whole. Especially with the installation of the new voting system, these votes became the functional equivalent of yea-and-nay votes in the House. However, the requirements and procedures for securing a record vote in Committee of the Whole are somewhat different from those used to obtain comparable votes in the House, even though all these votes are almost always conducted by use of the same electronic system. Under clause 6(e) of House Rule XVIII, "In the Committee of the Whole House on the state of the Union, the chair shall order a recorded vote on a request supported by at least 25 Members, Delegates, and the Resident Commissioner." So before the final result of a voice or division vote is announced, all a Member need do is rise and request a recorded vote so long as he or she is confident that at least 24 others will rise to support the request. Even when the floor is not crowded, Members typically request a recorded vote on an amendment in this fashion because the chair can postpone the request for a recorded vote on an amendment. The chair is likely to do this and resume proceedings at a time when more Members are present and a sufficient second is likely to support the request. Another option for Members if a quorum is not present is to state Mr./Madam Chair, I request a recorded vote and, pending that, I make a point of order that a quorum is not present. When the Member requests a recorded vote and, at the same time, makes a point of order that the House rule governing quorums in Committee of the Whole is being violated, the chair is required to act first on the point of order that a quorum is not present (sometimes called a point of no quorum). He or she counts to ascertain the presence of a quorum, which is 100 members of the Committee of the Whole (which includes the Delegates and the Resident Commissioner). If a quorum is present, a recorded vote is ordered only if 25 members of the Committee of the Whole have risen to support the request. If a quorum is not present, the chair could order an immediate quorum call. If the request is for a recorded vote on an amendment, however, the chair will likely instead postpone the vote. If the vote is postponed, the point of order of no quorum is considered withdrawn. If the chair orders a quorum call instead of postponing the vote, members of the Committee of the Whole then come to the floor to record their presence, giving the member who is seeking a recorded vote the chance to convince 24 or more allies to remain on the floor. When the quorum call is concluded and the presence of a quorum has been established, the chair returns to the pending request for a recorded vote. At this time, presumably, there are at least 25 members of the Committee of the Whole standing to support this request; if so, a recorded vote is ordered. The key difference between these steps and those that occur in the House proper is that, under the rules, in the House, the quorum call and the electronically recorded vote are combined; the outcome of the automatic record vote demonstrates the presence of a quorum. In Committee of the Whole, on the other hand, there may be a quorum call that is soon followed by a recorded vote on the amendment or motion in question. In current practice, however, typically the chair of the Committee of the Whole postpones further proceedings when a point of no quorum is made, akin to the case when a point of no quorum is made in the House. <5. Time Allowed for Electronic Votes and Quorum Calls> <5.1. "Not Less Than Fifteen Minutes"> When an electronic vote or quorum call is ordered, either in the House or in Committee of the Whole, Representatives usually have at least 15 minutes to reach the floor and vote or record their presence. Clause 2(a) of Rule XX so provides "the minimum time for a record vote or quorum call by electronic device shall be 15 minutes." Note that 15 minutes is "the minimum time"; it is not a fixed or maximum time. In practice, the time allowed is often extended to allow as many Members as possible to be recorded. Although the Speaker or chair of the Committee of the Whole may close a vote at any time after the 15 minutes have elapsed, he or she will sometimes allow at least several more minutes for any Members who are en route to the floor. For this reason, electronic votes frequently consume 20 minutes or longer. The chair's discretion to decide how long to leave a vote open after 15 minutes has elapsed could be used to the majority party's advantage. In the case of a very close vote, the Speaker or chair may close the vote after 15 minutes as soon as his or her side enjoys a majority, especially when the outcome might be reversed if the vote were left open long enough for other Members to reach the floor. However, Speakers have announced that they would not close electronic votes when Members are in the chamber seeking to be recorded. Alternatively, the chair could leave a vote open for much more than 15 minutes if his or her side is losing a close vote and more time is needed to reverse that outcome by persuading Members to change their votes or by waiting for more Members to arrive and vote. During an electronic vote or quorum call, Members may change their votes or record their presence at any time before the chair announces the result. However, a Member's vote or presence may not be recorded thereafter. The House Parliamentarian states, "Requests to correct the Congressional Record and the Journal on votes taken by electronic device are not entertained, it being the responsibility of each Member to utilize the safeguards of electronic system and to verify the proper recording of his vote." Also, "Following the announcement of the result of a call of the House conducted by electronic device ..., the Speaker declined to entertain requests by Members to record their presence." A Member who misses an electronic vote may announce from the floor how he or she would have voted and, by unanimous consent, have that statement inserted in the Record in proximity to the vote tally. Alternatively, Members can submit a signed statement stating how they would have voted, and if it is submitted the same day as the vote, it will appear in the Congressional Record right after the vote result in a distinctive type. Whether announced on the floor or submitted in writing, the statements can include explanations for why the Member was unavoidably detained. <5.2. Reducing the Time to Five Minutes in the House> Members may be allowed less than 15 minutes to vote by electronic device when one such vote follows shortly after another or when an electronically recorded vote immediately follows a quorum call. In such circumstances, Members do not need 15 minutes to participate in the second or subsequent vote because they are already on the floor. Clause 9 of Rule XX grants the Speaker the discretion to reduce the time for an electronic vote in the House from not less than 15 minutes to not less than five minutes 1. on any question that follows another vote by electronic device; and 2. on any question that follows a report from the Committee of the Whole. The Speaker can only reduce the time for such votes if, in his or her discretion, Members "would be afforded an adequate opportunity to vote." The Speaker announces in advance the intention to exercise this discretion in any of these circumstances. The Speaker states that the first electronic vote will be a 15-minute vote and the second one, if ordered, will be a five-minute vote. For example, he or she may announce that the vote on adopting a resolution will be a five-minute vote if the House agrees by record vote to order the previous question on the resolution. In this way, Members coming to the floor for the first vote are alerted to remain for the second. Clause 9(b) of Rule XX directs that notice of five-minute voting shall be issued prior to the first vote in a series "to the maximum extent practicable." <5.3. Postponing and Clustering Votes in the House> Clause 8 of Rule XX gives the Speaker the discretion to defer votes on some questions when an electronic vote has been ordered or when a point of order has been made against a voice or division vote on the grounds that a quorum was not present. The Speaker's authority applies to votes on (1) adopting a resolution or passing a bill, (2) agreeing to a conference report or a motion to instruct conferees, (3) agreeing to an amendment, (4) adopting a motion to recommit a bill, (5) adopting a motion to concur in a Senate amendment, with or without amendment, (6) ordering the previous question on any of the questions described in (1)-(5), (7) agreeing to the Speaker's approval of the Journal , (8) agreeing to a motion to suspend the rules, and (9) agreeing to a motion to reconsider or to lay on the table a motion to reconsider. When an electronic vote is ordered on any one of these questions, the Speaker may announce that he or she is postponing the vote to a time he or she designates later on the same legislative day, in case of a Journal vote, or within two legislative days, in case of any of the other votes. The vote or votes are postponed to a certain point in the legislative schedule (for example, after disposition of another bill that is scheduled for consideration). When the House reaches that point, Members vote on the questions in the order in which the votes on them had been postponed. The first of these votes must be a regular 15-minute vote; before it begins, however, the Speaker may announce that each of the succeeding votes will be five-minute votes if no business intervenes. This authority is regularly invoked when, on the same day, the House considers a series of motions to suspend the rules. If the Speaker was not able to postpone and cluster votes on these motions, there might be a series of electronic votes at no more than 40-minute intervals (the time allowed for debating each motion) on a Monday or Tuesday, when many Members are in the process of returning to Washington from their districts. The Speaker's authority under clause 8 allows votes to be scheduled later on Monday or "rolled over" until Tuesday or Wednesday, when they take place back-to-back with only the first vote in the series consuming at least 15 minutes. In similar fashion, the Speaker can postpone and cluster electronic votes that are ordered on suspension motions on Tuesdays and Wednesdays. <5.4. Postponing Requests for Recorded Votes and Reducing the Time to Two Minutes in the Committee of the Whole> There are four circumstances in which the time for completing an electronic vote in Committee of the Whole may be reduced to a minimum of two minutes. They involve a vote occurring immediately after another vote or after a quorum call, or other circumstances when, in the discretion of the chair, two minutes will provide an adequate opportunity to vote. First, clause 6(g) of Rule XVIII empowers the chair of the Committee of the Whole to postpone requests for a record votes on separate amendments to a bill until later during consideration of the bill, and also to cluster the votes on those amendments. That is, the Committee would vote on the amendments later, one right after the other. When the Committee of the Whole resumes proceedings at a time of the chair's choosing, the request for a recorded vote is made again, and a vote by electronic device will be taken if supported by a sufficient second (24 additional Members, Delegates, and the Resident Commissioner). In such cases, the chair may reduce the time for the second and each subsequent vote to no less than two minutes. Second, if votes will occur in Committee of the Whole on two or more pending amendments, the chair may announce that there will be at least 15 minutes for the first vote but at least five minutes for each of the succeeding votes, so long as no business or debate intervenes between each vote (clause 6(f) of Rule XVIII). Suppose, for example, that a substitute for a first degree amendment has been offered. The Committee of the Whole will first vote on the substitute and then on the first degree amendment (as amended, if amended by the substitute). The chair may state that there will be a 15-minute vote on the substitute to be followed by a five-minute vote on the first degree amendment as long as no debate occurs and no other motions or amendments are offered between the two votes. Third, if votes on amendments have been postponed, when the House resolves into the Committee of the Whole to resume proceedings, time for the votes can be reduced to two minutes if Members, Delegates, and the Resident Commissioner "would be afforded an adequate opportunity to vote." This provision of Rule XVIII, clause 6(g)(2), accounts for circumstances when, for example, the Committee of the Whole rises briefly during a series of votes. It also allows two-minute votes when amendments are postponed and scheduled for a time later in the day or the next day, perhaps after a vote series that begins with questions voted on in the House. In such a situation, a 15-minute vote might occur in the House and then, after the House resolves into the Committee of the Whole, the first amendment vote could be two minutes. Fourth, as discussed above, a Member, Delegate, or Resident Commissioner may request a recorded vote in Committee of the Whole on an amendment and, pending that request, make a point of order that a quorum is not present. If the chair determines that a quorum is not present and orders a quorum call, he or she may also announce at that time that, if a recorded vote on the amendment is ordered after the completion of the 15-minute quorum call, the time for the amendment vote itself will be reduced to not less than two minutes (clause 6(b)(3) of Rule XVIII). As noted above, clause 2(a) of Rule XX also provides not less than 15 minutes for Members to respond to quorum calls in the House, but this time may be reduced for quorum calls ordered in Committee of the Whole. The device is what is known informally as a "notice quorum." Clause 6(c) of Rule XVIII gives the chair the discretion to announce, before a quorum call begins, that he or she will declare that a quorum is constituted as soon as 100 members of the Committee of the Whole (which includes the Delegates and Resident Commissioner) have recorded their presence: When ordering a quorum call in the Committee of the Whole House on the state of the Union, the Chair may announce an intention to declare that a quorum is constituted at any time during the quorum call when he determines that a quorum has appeared. If the Chair interrupts the quorum call by declaring that a quorum is constituted, proceedings under the quorum call shall be considered as vacated, and the Committee of the Whole shall continue its sitting and resume its business. Notice quorums are now uncommon. Quorum calls in Committee of the Whole do not usually take place, because if a recorded vote is requested on an amendment, further proceedings are typically postponed until a time when a series of amendment votes is expected, and a quorum is present. <6. Securing Quorum Calls and Calls of the House> The key rule governing attempts to secure the presence of a majority of Representatives on the floor during a meeting of the House is clause 7 of Rule XX, which states (a) The Speaker may not entertain a point of order that a quorum is not present unless a question has been put to a vote. (b) Subject to subparagraph (c) the Speaker may recognize a Member, Delegate, or Resident Commissioner to move a call of the House at any time. When a quorum is established pursuant to a call of the House, further proceedings under the call shall be considered as dispensed with unless the Speaker recognizes for a motion to compel attendance of Members under clause 5(b). (c) A call of the House shall not be in order after the previous question is ordered unless the Speaker determines by actual count that a quorum is not present. Under subparagraph (a), a Member only has the right to invoke the constitutional quorum requirement when a vote is taking place. At that time, any Representative "may object to the vote on the ground that a quorum is not present and make a point of order that a quorum is not present." At any other time, the equivalent of a quorum call may take place only at the discretion of the Speaker, when he or she recognizes a Member "to move a call of the House." In the former case, the Speaker responds to the point of order by counting to determine whether a quorum is present. If it is, the point of order is overruled and no quorum call ensues; if it is not, the point of order is sustained, and an automatic roll call vote is ordered, taken by electronic device. In the latter case (subparagraph (b)), a Member makes a motion for a call of the House, prompting what is in effect a quorum call to secure the presence of Members, regardless of whether or not a quorum was present when it began. Note that the purpose of a quorum call under subparagraph (a), or a call of the House under subparagraph (b), is to secure the presence of a quorum, not to require the attendance of all the Members of the House. Subparagraph (b) provides that, once a quorum responds to a call of the House, "further proceedings under the call" which would be efforts by the Sergeant at Arms to secure the attendance of all the remaining Members "shall be considered as dispensed with" unless the Speaker decides to entertain a motion for that purpose. Similarly, clause 6(b) of Rule XX, quoted earlier, provides for the same "further proceedings" to be dispensed with after a quorum call pursuant to subparagraph (a). The corresponding rule governing quorums and quorum calls in Committee of the Whole is clause 6 of Rule XVIII. It is this rule that (1) sets the quorum in Committee of the Whole at 100 Members, Delegates, and the Resident Commissioner; (2) authorizes notice quorum calls at the discretion of the chair; and (3) provides for two-minute votes on amendments following regular quorum calls, again at the chair's discretion. In addition, the same rule controls when a point of order that a quorum is not present can be made in Committee of the Whole. (Calls of the House are not permitted in Committee of the Whole.) In brief, the rule states that the chair need not permit a point of order of no quorum to be made during general debate, and once a quorum in Committee of the Whole has been established on any day, a point of order of no quorum may be made only when "the Chair has put the pending proposition to a vote." In other words, no Member has a right to insist on the presence of a quorum during general debate. There is a right to make one point of order of no quorum if it is made during the amending process that follows general debate but only (1) if there was no quorum call during general debate and (2) if this point of order is made before there has been a recorded vote on an amendment or motion during that day's sitting. Once a quorum call or recorded vote has taken place in Committee of the Whole on any day, a Member has the right to make a point of order that a quorum is not present only when the Committee is in the process of voting. <7. In the Absence of a Quorum> In the unlikely event that a majority of the House fails either to respond to a quorum call or to participate in an electronic vote, the House's failure to comply with the constitutional quorum requirement is demonstrated. Consequently, the House cannot resume legislative business until the presence of a quorum is recorded. The House has only two options: one is to adjourn; the other is to take steps necessary to secure the attendance of a quorum. In most cases, the House can be expected to adopt the second of these options by invoking clause 5(a) of Rule XX. This clause provides in part that, "in the absence of a quorum, a majority comprising at least 15 Members, which may include the Speaker, may compel the attendance of absent Members." In this instance, the House can act without a quorum being present because the constitutional provision quoted at the beginning of this report authorizes it to do so. That provision states that, in the absence of a quorum, "a smaller Number may adjourn from day to day, and may be authorized to compel the Attendance of absent Members, in such Manner, and under such Penalties as each House may provide." The situation and options in Committee of the Whole are comparable. "Where the Chair has announced the absence of a quorum in Committee of the Whole, no further business may be conducted until a quorum is established or the Committee rises." For much the same reason that the Constitution authorizes the House to adjourn without a quorum being present, clause 6(d) of House Rule XVIII states that "a quorum is not required in the Committee of the Whole House on the state of the Union for adoption of a motion that the Committee rise." However, a quorum is necessary to adopt a motion that the Committee rise and report a measure for final passage in the House. <8. Quorum in the Case of Catastrophic Circumstances24> Article I, Section 5, clause 1 of the Constitution states that "a Majority of each [House] shall constitute a Quorum to do Business." A quorum has long been defined as a majority of the whole number of the House, and the whole number of the House has long been viewed as the number of Members elected, sworn, and living. Whenever the death, resignation, disqualification, or expulsion of a Member results in a vacancy, the whole number of the House is adjusted. In the event of a catastrophe, however, it may not be immediately known whether a Member is alive or dead, thereby making it impossible to adjust the whole number of Members. Furthermore, if a Member is incapacitated but living, or unharmed but unable to attend the proceedings of the House, he or she would still count toward the whole number used to determine a quorum. Missing, injured, and stranded Members are still "elected, sworn, and living." If many such Members are affected, and the Congress needs to act, this situation could prove problematic because it may be impossible to establish a quorum. In order to address this issue, in 2005 the House modified clause 5 of Rule XX to prepare for a catastrophic event that leaves a large number of Members missing, incapacitated, or incapable of attending the proceedings of the House. The rule establishes a method for establishing a "provisional quorum" in the case of a catastrophic event. This method did not provide a new means for determining the whole number of the House; on the contrary, it is a method to be used provisionally until a quorum can be constituted by a majority of the whole number of the House. Under the rule, if the House is without a majority of Members elected, sworn, and living due to catastrophic circumstances, then a quorum shall be a majority of the "provisional number" of the House. <8.1. Steps Required to Establish the House Is Without a Quorum Due to Catastrophic Circumstances> The rule requires four steps to be taken in order, and without intervening adjournment, to establish that the House is without a quorum due to catastrophic circumstances. Only after the steps described below are taken will a new number required for a quorum be determined based on the provisional number of the House. A majority of Members present may terminate the proceedings by adopting the motion to adjourn. <8.1.1. First, Dispose of a Motion to Compel the Attendance of Absent Members> If the absence of a quorum is demonstrated, then under a House rule (dating to 1789) a Member can make a motion to compel the attendance of absent Members. This motion, described in House Rule XX, clause 5(a), must first be disposed of, either favorably or unfavorably, before any other steps are taken to establish that the House is without a quorum due to catastrophic circumstances. The motion to compel the attendance of absent Members requires a majority vote for adoption, and that majority must comprise at least 15 Members. If the motion is adopted, then the call of the House occurs through Members presenting themselves, perhaps after receiving notification from the Sergeant at Arms and having their presence recorded by the Clerk. If the motion is not adopted, either because it failed to garner support from a majority of Members present or because the majority supporting it is fewer than 15 Members, then the motion is still considered "disposed of" and the other steps necessary to establish that the House is without a quorum due to catastrophic circumstances can occur. <8.1.2. Second, Conduct a 72-Hour Call of the House That Does Not Produce a Quorum> After disposing of the motion to compel the attendance of absent Members, the House must have a call (or series of calls) of the House over a period of 72 hours, excluding time spent in recess. The call could be the one that was ordered by adoption of the motion to compel the attendance of absent Members. The Speaker could also entertain a motion for a call of the House under clause 7(b) of Rule XX. However ordered, if the call failed to produce a quorum based on the existing whole number of the House after 72 hours, then the call could be closed, and additional steps to establish that the House is without a quorum due to catastrophic circumstances could be taken. <8.1.3. Third, the Speaker Must Receive a "Catastrophic Quorum Failure Report" and Announce Its Contents to the House> After the call of the House is closed, the Speaker, with the majority and minority leaders, can then receive from the Sergeant at Arms (or designee) a "catastrophic quorum failure report" that states that the House cannot establish a quorum because of catastrophic circumstances such as an attack, natural disaster, or contagion. According to the rule, a catastrophic quorum failure report must contain the number of known vacancies, a list of former Representatives whose seats are vacant (this list would include any known dead Representatives as well as any Representatives who resigned or who were removed by action of the House if their seats had not yet been filled), a list of Representatives considered incapacitated, a list of Representatives not incapacitated but still incapable of attending the proceedings of the House, and a list of Representatives not accounted for. The Sergeant at Arms is directed by the rule to prepare the report in consultation with the Attending Physician to the Congress (or a designee), the Clerk of the House (or a designee), and public health and law enforcement officials. The Speaker, after consultation with the two party leaders, is required to announce the content of the report to the House. This announcement is not subject to appeal. <8.1.4. Fourth, Conduct a 24-Hour Call of the House That Does Not Produce a Quorum> Even after the Speaker's announcement, the House is not considered to be without a quorum due to catastrophic circumstances until the completion of a second extended call of the House. This call of the House can be ordered under the procedures described in clause 5(a) of Rule XX or by a motion for the call under clause 7(b). This second call of the House, or series of calls, could be closed after 24 hours, excluding the time spent in recess, if it does not produce a majority of the whole number of the House. <8.2. The Provisional Number of the House> If all four of these steps are completed, then the House has established that it is without a quorum due to catastrophic circumstances. A quorum for conducting business can then be determined based on the "provisional number of the House." The number of Members who respond to the 24-hour call of the House will be the provisional number of the House, and a majority of the provisional number will constitute a quorum for doing business. If Members arrive after the call of the House, the provisional number is increased accordingly. If any Member counted under the 24-hour call of the House to determine the provisional number later ceases to be a Representative due to death, resignation, or action by the House, then the provisional number of the House would also be reduced accordingly. The catastrophic quorum failure report must be updated each legislative day; in other words, it must be updated each time the House reconvenes after an adjournment. The Speaker is required to make these updates available to the House. If at any time a sufficient number of Members arrive to constitute a quorum of the whole number of the House, then the provisional number would no longer be in effect. <8.3. Constitutionality of the Provisional Quorum> Some Members expressed concern that the catastrophic quorum rule was unconstitutional. When H.Res. 5 was called up for consideration, a Representative made a constitutional point of order. The Speaker declined to entertain the constitutional point of order, citing numerous earlier precedents barring the Speaker from ruling on the constitutionality of a pending proposal. Instead, typically, the House determines for itself the constitutionality of a proposition either by voting to consider it or voting to adopt it. The Representative then raised the question of consideration, and the House by a vote of 224-192 agreed to consider H.Res. 5 and the provisions in it dealing with the new quorum procedure. Thereafter, H.Res. 5 was agreed to by a vote of 220-195. Whether an attempt will be made to challenge in court the constitutionality of the rule is not yet certain. Neither is it certain that a Member has legal standing to bring such a suit without the new quorum rule ever having been implemented. <9. Individual Votes and Extraordinary Majorities> <9.1. The Right and Responsibility to Vote> In general, every Representative is expected to vote on every question, but House rules make an exception for the Speaker. Under clause 7 of Rule I, the Speaker "is not required to vote in ordinary legislative proceedings, except when such vote would be decisive or when the House is engaged in voting by ballot." Although this rule does not prevent Speakers from voting, they usually do not. Every other Member "shall vote on each question put, unless having a direct personal or pecuniary interest in the event of such question" (Rule III, clause 1). Each Representative is expected to apply this clause to himself or herself. The House Parliamentarian observes that "it has been found impracticable to enforce the provision requiring every Member to vote." Also, in recent practice, "the Speaker has held that the Member and not the Chair should determine" whether a Representative has "a direct personal or pecuniary interest" in the outcome of a vote; "the Speaker has denied the Speaker's own power to deprive a Member of the constitutional right to vote." In the same vein, clause 10 of Rule XXIII, the Code of Official Conduct, states that a Member, Delegate, or Resident Commissioner who has been convicted of a crime for which he or she may be sentenced to two years or more in prison "should refrain" from voting in the House or in Committee of the Whole. Voting is an individual right and responsibility that cannot be delegated or exercised by anyone else. In response to concerns about the possibility of "ghost voting," in which a Member would be recorded as having voted even when there was evidence that he or she could not have done so, the House voted in 1981 to add what is now clause 2 of Rule III: (a) A Member may not authorize any other person to cast the vote of such Member or record the presence of such Member in the House or the Committee of the Whole House on the state of the Union. (b) No other person may cast a Member's vote or record a Member's presence in the House or the Committee of the Whole House on the state of the Union. <9.2. Simple and Extraordinary Majorities> All questions are to be decided on the House floor by simple majority vote unless some constitutional provision or House rule provides otherwise. A simple majority vote is defined as at least one-half-plus-one of the Members voting, provided that a quorum is present; clause 1(c) of Rule XX provides that "in case of a tie vote, a question shall be lost." The Constitution requires a two-thirds vote of the Members voting for various purposes: to expel a Member, to override a presidential veto, to propose a constitutional amendment, to remove political disabilities (now obsolete), and to determine that a President remains disabled. In addition, for other purposes House rules require the support of either two-thirds or three-fifths of the Members voting: Two-thirds: to agree to a motion to suspend the rules (clause 1(a) of Rule XV), Two-thirds: to agree to a motion to dispense with the call of the Private Calendar (clause 5(a) of Rule XV), and Two-thirds: to consider a special rule on the same day the Rules Committee reports it (clause 6(a) of Rule XIII).

The Constitution requires that a quorum, defined as a majority of the House, be present on the floor when the House transacts business. The House, however, always presumes that a quorum is present unless and until its absence is demonstrated conclusively. The rules of the House strictly limit the occasions on which a Representative may make a point of order that a quorum is not present. In current practice, Members usually make such a point of order only when a vote is taking place. If a majority of the Members fails to respond to a quorum call or participate in an electronically recorded vote conducted in the House, the House must adjourn or take steps necessary to secure the attendance of enough Members to constitute a quorum. Questions to be decided on the floor are usually first put to a voice vote. Such votes—in which those present on the floor respond by answering together "aye" (after the presiding officer asks how many are in favor) or "no" (after the presiding officer asks how many are opposed)—are very common in the House. For such votes, no public record shows how individual Members voted. In practice, such votes might be taken with few Members present on the floor. Before the final result of a voice vote is announced, however, any Member may demand a division vote or seek an electronically recorded vote. Members' positions on these votes are publicly recorded. During a vote using the House's electronic voting system, Members have at least 15 minutes to come to the floor and cast their votes. The time for a vote by electronic device immediately following another vote by electronic device can be reduced to five minutes if the Speaker determines that Members will have an adequate opportunity to vote. The Speaker also has the authority to postpone record votes on certain questions identified in House Rules, including to approve a bill or resolution and to suspend the rules to pass a bill. Most postponed votes must be scheduled within two additional legislative days. The procedures for securing a vote by electronic device differ based on whether the House is meeting as the House proper or instead in the Committee of the Whole (a parliamentary forum that the House, in current practice, uses to consider amendments to legislation). In the House proper, an electronic vote can be secured in one of three ways. First, one-fifth of the number of Members present on the floor can invoke their constitutional right to demand "the yeas and nays." Second, one-fifth of a quorum (usually 44 Members), can demand a "recorded vote" under House rules. Third, if a quorum is not present, a Member can make a point of order that a quorum is not present and object to a voice vote on the grounds that a quorum is not present. Most often, after such a point of order is made, the Speaker postpones further proceedings on the question being voted on. When the House resumes consideration of the question at a time designated by the Speaker, a quorum is typically present, and an electronic vote can be secured using one of the other two methods. (If, instead, the Speaker sustained a point of order against a voice vote on the grounds that a quorum was not present, an electronic vote would take place automatically to decide the question and establish the presence of a quorum.) To be clear, these three procedures result in votes that are indistinguishable from each other in how they are conducted; they differ in how they are ordered. When instead the House is meeting in the Committee of the Whole, 25 members can secure an electronic vote on a pending amendment or motion. The chair has the authority to postpone a request for a recorded vote on an amendment, and usually does. This allows the request to be renewed at a time the floor is crowded and a member can likely receive the support of a sufficient second to take the vote by electronic device. In addition, if a quorum (100 members of the Committee of the Whole) is not present, a member first can require that a quorum call take place before the chair counts to determine if there is sufficient support to order an electronically recorded vote. This option is less frequently utilized, and proceedings can be postponed in this case as well. In order to prepare for a catastrophic event, in 2005 the House created a procedure to determine a how many Members constitute a quorum when a large number are missing, incapacitated, or incapable of attending House proceedings. The House must hold two lengthy quorum calls and receive a report from the Sergeant at Arms before a quorum will be determined based on the "provisional number of the House." At the time the rule was approved, a Member raised a point of order that the provisional quorum mechanism was unconstitutional. The Speaker does not rule on constitutional questions; instead, the House determines the constitutionality of a proposition by voting to consider it or by adopting it. In this case, a question of consideration was raised, and the House voted to consider the resolution. Thereafter, the resolution was agreed to.

crs_R45877

crs_R45877_0

<1. Overview> The final status of the former princedom of Kashmir has remained unsettled since 1947. On August 5, 2019, the Indian government announced that it was formally ending the "special status" of its Muslim-majority Jammu and Kashmir (J&K) state, the two-thirds of Kashmir under New Delhi's control, specifically by abrogating certain provisions of the Indian Constitution that granted the state autonomy with regard to most internal administrative issues. The legal changes went into effect on November 1, 2019, when New Delhi also bifurcated the state into two "union territories," each with lesser indigenous administrative powers than Indian states. Indian officials explain the moves as matters of internal domestic politics, taken for the purpose of properly integrating J&K and facilitating its economic development. The process by which India's government has undertaken the effort has come under strident criticism for its alleged reliance on repressive force in J&K and for questionable legal and constitutional arguments that are likely to come before India's Supreme Court. Internationally, the move sparked controversy as a "unilateral" Indian effort to alter the status of a territory that is considered disputed by neighboring Pakistan and China, as well as by the United Nations. New Delhi's heavy-handed security crackdown in the remote state also raised ongoing human rights concerns. To date, but for a brief January visit by the U.S. Ambassador to India, U.S. government officials and foreign journalists have not been permitted to visit the Kashmir Valley. The long-standing U.S. position on Kashmir is that the territory's status should be settled through negotiations between India and Pakistan while taking into consideration the wishes of the Kashmiri people. Since 1972, India's government has generally shunned third-party involvement on Kashmir, while Pakistan's government has continued efforts to internationalize it, especially through U.N. Security Council (UNSC) actions. China, a close ally of Pakistan, is also a minor party to the dispute. There are international concerns about potential for increased civil unrest and violence in the Kashmir Valley, and the cascade effect this could have on regional stability. To date, the Trump Administration has limited its public statements to calls for maintaining peace and stability, and respecting human rights. The UNSC likewise calls for restraint by all parties; an "informal" August 16 UNSC meeting resulted in no ensuing official U.N. statement. Numerous Members of the U.S. Congress have expressed concern about reported human rights abuses in Kashmir and about the potential for further international conflict between India and Pakistan. New Delhi's August moves enraged Pakistan's leaders, who openly warned of further escalation between South Asia's two nuclear-armed powers, which nearly came to war after a February 2019 suicide bombing in the Kashmir Valley and retaliatory Indian airstrikes. The actions may also have implications for democracy and human rights in India; many analysts argue these have been undermined both in recent years and through Article 370's repeal. Moreover, Indian Prime Minister Narendra Modi and his Hindu nationalist Bharatiya Janata Party (BJP) empowered by a strong electoral mandate in May and increasingly pursuing Hindu majoritarian policies may be undermining the country's secular, pluralist traditions. The United States seeks to balance pursuit of broader U.S.-India partnership while upholding human rights protections and maintaining cooperative relations with Pakistan. <2. Recent Developments> <2.1. Status and Impact of India's Crackdown> As of early January 2020, five months after the crackdown in J&K began, most internet service and roughly half of mobile phone users in the densely-populated Kashmir Valley remain blocked; and hundreds of Kashmiris remain in detention, including key political figures. According to India's Home Ministry, as of December 3, more than 5,100 people had been taken into "preventive custody" in J&K after August 4, of whom 609 remained in "preventive detention," including 218 alleged "stone-pelters" who assaulted police in street protests. New Delhi justifies ongoing restrictions as necessary in a fraught security environment. The U.S. government has long acknowledged a general threat; as stated by the lead U.S. diplomat for the region, Principal Deputy Assistant Secretary of State for South and Central Asia Alice Wells, in October, "There are terrorist groups who operate in Kashmir and who try to take advantage of political and social disaffection." In early December, the Indian Home Ministry informed Parliament that incidents of "terrorist violence" in J&K during the 115 days following August 5 were down 17% from the 115 days preceding that date, from 106 to 88. However, the Ministry stated that attempts by militants to infiltrate into the Valley across the Line of Control from Pakistan have increased, from 53 attempts in the 88 days preceding August 5 to 84 in the 88 days following (in contrast, in October 2019, Wells stated before a House panel that, "I think we've observed a decline in infiltrations across the Line of Control"). Senior Indian officials say their key goal is to avoid violence and bloodshed, arguing that "lots of the reports about shortages are fictitious" and that, "Some of our detractors are spreading false rumors, including through the U.S. media and it is malicious in nature." Indian authorities continue to insist that, with regard to street protests, "There has been no incident of major violence. Not even a single live bullet has been fired. There has been no loss of life in police action" (however, at least one teenaged protester's death reportedly was caused by shotgun pellets and a tear gas canister ). They add, however, that "terrorists and their proxies are trying to create an atmosphere of fear and intimidation in Kashmir." Because of this, "Some remaining restrictions on the communications and preventive detentions remain with a view to maintain public law and order." A September New York Times report described a "punishing blockade" ongoing in the Kashmir Valley, with sporadic protests breaking out, and dozens of demonstrators suffering serious injuries from shotgun pellets and tear gas canisters, leaving Kashmiris "feeling unsettled, demoralized, and furious." An October Press Trust of India report found some signs of normalcy returning, but said government efforts to reopen schools had failed, with parents and students choosing to stay away, main markets remaining shuttered, and mobile phone service remaining suspended in most of the Valley, where there continued to be extremely limited internet service. Since mid-October, the New Delhi and J&K governments have claimed that availability of "essential supplies," including medicines and cooking gas, is being ensured; that all hospitals, medical facilities, schools, banks, and ATMs are functioning normally; that there are no restrictions on movement by auto, rail, or air; and that there are no restrictions on the Indian media or journalists (foreign officials and foreign journalists continue to be denied access). On October 9, curtailment of tourism in the region was withdrawn. On October 14, the government lifted restrictions on post-paid mobile telephone service, while pre-paid service, aka via "burner phones," along with internet and messaging services, remains widely blocked. Public schools have reopened, but parents generally have not wanted their children out in a still-unstable setting. According to Indian authorities, "terrorists are also preventing the normal functioning of schools." On November 1, citizens of the former J&K state awoke to a new status as residents of either the Jammu and Kashmir Union Territory (UT) or the Union Territory of Ladakh (the latter populated by less than 300,000 residents; see Figure 1 ). While the J&K UT will be able to elect its own legislature, all administrative districts are now controlled by India's federal government, and J&K no longer has its own constitution or flag. The chief executives of each new UT are lieutenant governors who report directly to India's Home Ministry. More than 100 federal laws are now applicable to J&K, including the Indian Penal Code, and more than 150 laws made by the former state legislature are being repealed, including long-standing prohibitions on leasing land to non-residents. The new J&K assembly will be unable to make any laws on policing or public order, thus ceding all security issues to New Delhi's purview. <2.2. The U.S.-India "2+2" Summit and Other Recent Developments> On December 18, India's external affairs and defense ministers were in Washington, DC, for the second "2+2" summit meeting with their American counterparts, where "The two sides reaffirmed the growing strategic partnership between the United States and India, which is grounded in democratic values, shared strategic objectives, strong people-to-people ties, and a common commitment to the prosperity of their citizens." In the midst of the session, an unnamed senior State Department official met the press and was asked about the situation in J&K. She responded that the key U.S. government concern is "a return to economic and political normalcy there," saying, "[W]hat has concerned us about the actions in Kashmir are the prolonged detentions of political leaders as well as other residents of the valley, in addition to the restrictions that continue to exist on cell phone coverage and internet." While visiting Capitol Hill at the time of the summit, Indian External Affairs Minister Subrahmanyam Jaishankar "abruptly" withdrew from a scheduled meeting with senior House Members, reportedly because the House delegation was to include Representative Pramila Jayapal, the original sponsor of H.Res. 745 , which urges the Indian government to "end the restrictions on communications and mass detentions in Jammu and Kashmir as swiftly as possible and preserve religious freedom for all residents" (see "The U.S. Congress, Hearings, and Relevant Legislation" section below). Some observers saw in Jaishankar's action a shortsighted expression of India's considerable sensitivity about the Kashmir issue and a missed opportunity to engage concerned U.S. officials. Two months earlier, in October, two notable developments took place in India. Local Block Development Council elections were held in J&K that month. With all major regional parties and the national opposition Congress Party boycotting the polls, Independents overwhelmed the BJP, winning 71% of the total 317 blocks to the BJP's 26%, including 85% in the Kashmir division. The results suggested widespread disenchantment with New Delhi's ruling party in J&K. Also in October, India allowed a delegation of European parliamentarians to visit the Kashmir Valley, the first such travel by foreign officials since July. The composition of the delegation and questions surrounding its funding and official or private status added to international critiques of India's recent Kashmir policies. On January 9, New Delhi allowed a U.S. official to visit J&K for the first time since August, when 15 ambassadors, including U.S. Ambassador Ken Juster, were given a two-day "guided tour" of the Srinagar area. EU envoys declined to participate, apparently because the visit did not include meetings with detained Kashmiri political leaders. An External Affairs Ministry spokesman said the objective of the visit was for the envoys to view government efforts to "normalize the situation" firsthand, but the orchestrated visit attracted criticism from opposition parties and it is unclear if international opprobrium will be reduced as a result. On January 10, India's Supreme Court issued a ruling that an open-ended internet shutdown (as exists in parts of J&K) was a violation of free speech and expression granted by the country's constitution, calling indefinite restrictions "impermissible." The court gave J&K authorities a one-week deadline to provide a detailed review all orders related to internet restrictions. <3. Background> <3.1. Setting> India's former J&K state was about the size of Utah and encompassed three culturally distinct regions: Kashmir, Jammu, and Ladakh (see Figure 1 ). More than half of the mostly mountainous area's nearly 13 million residents live in the fertile Kashmir Valley, a region slightly larger than Connecticut (7% of the former state's land area was home to 55% of its population). Srinagar, in the Valley, was the state's (and current UT's) summer capital and by far its largest city with some 1.3 million residents. Jammu city, the winter capital, has roughly half that population, and the Jammu district is home to more than 40% of the former state's residents. About a quarter-million people live in remote Ladakh, abutting China. Just under 1% of India's total population lives in the former state of J&K. Roughly 80% of Indians are Hindu and about 14% are Muslim. At the time of India's 2011 national census, J&K's population was about 68% Muslim, 28% Hindu, 2% Sikh, and 1% Buddhist. At least 97% of the Kashmir Valley's residents are Muslim; the vast majority of the district's Hindus fled the region after 1989 (see " Human Rights and India's International Reputation " below). The Jammu district is about two-thirds Hindu, with the remainder mostly Muslim. Ladakh's population is about evenly split between Buddhists and Muslims. Upon the 1947 partition of British India based on religion, the princely state of J&K's population had unique status: a Muslim majority ruled by a Hindu king. Many historians find pluralist values in pre-1947 Kashmir, with a general tolerance of multiple religions. The state's economy had been agriculture-based; horticulture and floriculture account for the bulk of income. Historically, the region's natural beauty made tourism a major aspect of commerce this sector was devastated by decades of conflict, but had seemed to be making a comeback in recent years. Kashmir's remoteness has been a major impediment to transportation and communication networks, and thus to overall development. In mid-2019, India's Ambassador to the United States claimed that India's central government has provided about $40 billion to the former J&K state since 2004. <3.2. J&K's Status, Article 370, and India-Pakistan Conflict> <3.2.1. Accession to India> Since Britain's 1947 withdrawal and the partition and independence of India and Pakistan, the final status of the princely state of J&K has remained unsettled, especially because Pakistan rejected the process through which J&K's then-ruler had acceded to India. A dyadic war over Kashmiri sovereignty ended in 1949 with a U.N.-brokered cease-fire that left the two countries separated by a 460-mile-long military "Line of Control" (LOC). The Indian-administered side became the state of Jammu and Kashmir. The Pakistani-administered side became Azad ["Free"] Jammu and Kashmir (AJK) and the "Northern Areas," later called Gilgit-Baltistan. <3.2.2. Article 370 and Article 35A of the Indian Constitution, and J&K Integration> In 1949, J&K's interim government and India's Constituent Assembly negotiated "special status" for the new state, leading to Article 370 of the Indian Constitution in 1950, the same year the document went into effect. The Article formalized the terms of Jammu and Kashmir's accession to the Indian Union, generally requiring the concurrence of the state government before the central government could make administrative changes beyond the areas of defense, foreign affairs, and communications. A 1954 Presidential Order empowered the state government to regulate the rights of permanent residents, and these became defined in Article 35A of the Constitution's Appendix, which prohibited nonresidents from working, attending college, or owning property in the state, among other provisions. Within a decade of India's independence, however, most national constitutional provisions were extended to the J&K state via Presidential Order with the concurrence of the J&K assembly (and with the Indian Supreme Court's assent). The state assembly arguably had over decades become pliant to New Delhi's influence, and critical observers contend that J&K's special status has long been hollowed out: while Article 370 provided special status constitutionally , the state suffered from inferior status politically through what amounted to "constitutional abuse." Repeal of Article 370 became among the leading policy goals of the BJP and its Hindu nationalist antecedents on the principle of national unity. <3.2.3. Further India-Pakistan Wars> The J&K state's legal integration into India progressed and prospects for a U.N.-recommended plebiscite on its final status correspondingly faded in the 1950s and 1960s. Three more India-Pakistan wars in 1965, 1971, and 1999; two of which were fought over Kashmir itself left territorial control largely unchanged, although a brief 1962 India-China war ended with the high-altitude and sparsely populated desert region of Ladakh's Aksai Chin under Chinese control, making China a third, if lesser, party to the Kashmir dispute. In 1965, Pakistan infiltrated troops into Indian-held Kashmir in an apparent effort to incite a local separatist uprising; India responded with a full-scale military operation against Pakistan. A furious, 17-day war caused more than 6,000 battle deaths and ended with Pakistan failing to alter the regional status quo. The 1971 war saw Pakistan lose more than half of its population and much territory when East Pakistan became independent Bangladesh, the mere existence of which undermined Pakistan's professed status as a homeland for the Muslims of Asia's Subcontinent. In summer 1999, one year after India and Pakistan tested nuclear weapons, Pakistani troops again infiltrated J&K state, this time to seize strategic high ground near Kargil. Indian ground and air forces ejected the Pakistanis after three months of combat and 1,000 or more battle deaths. <3.3. Third-Party Involvement> In 1947, Pakistan had immediately and formally disputed the accession process by which J&K had joined India at the United Nations. New Delhi also initially welcomed U.N. mediation. Over ensuing decades, the U.N. Security Council issued a total of 18 Resolutions (UNSCRs) relevant to the Kashmir dispute. The third and central one, UNSCR 47 of April 1948, recommended a three-step process for restoring peace and order, and "to create proper conditions for a free and impartial plebiscite" in the state, but the conditions were never met and no referendum was held. Sporadic attempts by the United States to intercede in Kashmir have been unsuccessful. A short-lived mediation effort by the United States and Britain included six rounds of talks in 1961 and 1962, but ended when India indicated that it would not relinquish control of the Kashmir Valley. Although President Bill Clinton's personal diplomatic engagement was credited with averting a wider war and potential nuclear exchange in 1999, Kashmir's disputed status went unchanged. After 2001, some analysts argued that resolution of the Kashmir issue would improve the prospects for U.S. success in Afghanistan a perspective championed by the Pakistani government yet U.S. Presidents ultimately were dissuaded from making this argument an overt aspect of U.S. policy. In more recent decades, India generally has demurred from mediation in Kashmir out of (1) a combination of suspicion about the motives of foreign powers and the international organizations they influence; (2) India's self-image as a regional leader in no need of assistance; and (3) an underlying assumption that mediation tends to empower the weaker and revisionist party (in this case, Pakistan). According to New Delhi, prospects for third-party mediation were fully precluded by the 1972 Shimla Agreement, in which India and Pakistan "resolved to settle their differences by peaceful means through bilateral negotiations or by any other peaceful means mutually agreed upon between them." The 1999 Lahore Declaration reaffirmed the bilateral nature of the issue. <3.4. Separatist Conflict and President's Rule From 2018> <3.4.1. Three Decades of Separatist Conflict> A widespread perception that J&K's 1987 state elections were illicitly manipulated to favor the central government led to pervasive disaffection among residents of the Kashmir Valley and the outbreak of an Islamist-based separatist insurgency in 1989. The decades-long conflict has pitted the Indian government against Kashmiri militants who seek independence or Kashmir's merger with neighboring Pakistan, a country widely believed to have provided arms, training, and safe haven to militants over the decades. Violence peaked in the 1990s and early 2000s, mainly affecting the Valley and the LOC (see Figure 2 ). Lethal exchanges of small arms and mortar fire at the LOC remain common, killing soldiers and civilians alike, despite a formal cease-fire agreement in place since 2003. The Indian government says the conflict has killed at least 42,000 civilians, militants, and security personnel since 1989; independent analyses count 70,000 or more related deaths. India maintains a security presence of at least 500,000 army and paramilitary soldiers in the former J&K state. A bilateral India-Pakistan peace plan for Kashmir was nearly finalized in 2007, when Indian and Pakistani negotiators had agreed to make the LOC a "soft border" with free movement and trade across it; prospects faded due largely to unrelated Pakistani domestic issues. India has blamed conventionally weaker Pakistan for perpetuating the conflict as part of an effort to "bleed India with a thousand cuts." Pakistan denies materially supporting Kashmiri militants and has sought to highlight Indian human rights abuses in the Kashmir Valley. Separatist militants have commonly targeted civilians, leading India and most Indians (as well as independent analysts) to label them as terrorists and thus decry Pakistan as a "terrorist-supporting state." The U.S. government issues ongoing criticisms of Islamabad for taking insufficient action to neutralize anti-India terrorists groups operating on and from Pakistani soil. Still, many analysts argue that blanket characterizations of the Kashmir conflict as an externally-fomented terrorist effort obscure the legitimate grievances of the indigenous Muslim-majority populace, while (often implicitly) endorsing a "harsh counterinsurgency strategy" that, they contend, has only further alienated successive generations in the Valley. For these observers, Kashmir's turmoil is, at its roots, a clash between the Indian government and the Kashmiri people, leading some to decry New Delhi's claims that Pakistan perpetuates the conflict. Today, pro-independence political parties on both sides of the LOC are given little room to operate, and many Kashmiris have become deeply alienated. Critics of the Modi government's Hindu nationalist agenda argue that its policies entail bringing the patriotism of Indian Muslims into question and portraying Pakistan as a relentless threat that manipulates willing Kashmiri separatists, and so is responsible for violence in Kashmir. Arguments locating the conflict's cause in the interplay between Kashmir and New Delhi are firmly rejected by Indian officials and many Indian analysts who contend that there is no "freedom struggle" in Kashmir, rather a war "foisted" on India by a neighbor (Pakistan) that will maintain perpetual animosity toward India. In this view, talking to Pakistan cannot resolve the situation, nor can negotiations with Kashmiri separatist groups and parties, which are seen to represent Pakistan's interests rather than those of the Kashmiri people. Even before 2019 indications were mounting that Kashmiri militancy was on the rise for the first time in nearly two decades. Figure 3 shows that, in the first five years after Modi took office, the number of "terrorist incidents" and conflict-related deaths was on the rise. Mass street protests in the valley were sparked by the 2016 killing of a young militant commander in a shootout with security forces. Existing data on rates of separatist violence indicate that levels in 2019 decreased over the previous year, perhaps in large part due to the post-July security crackdown. <3.4.2. 2018 J&K Assembly Dissolution and President's Rule> J&K's lack of a state assembly in early 2019 appears to have facilitated New Delhi's constitutional changes. In June 2018, the J&K state government formed in 2015 a coalition of the BJP and the Kashmir-based Peoples Democratic Party collapsed after the BJP withdrew its support, triggering direct federal control through the center-appointed governor. BJP officials called the coalition untenable due to differences over the use of force to address a deteriorating security situation (the BJP sought greater use of force). In December 2018, J&K came under "President's Rule" for the first time since 1996, with the state legislature's power under Parliament's authority. <4. Developments in 2019> <4.1. The February Pulwama Crisis> On February 14, 2019, an explosives-laden SUV rammed into a convoy carrying paramilitary police in the Kashmir Valley city of Pulwama. At least 40 personnel were killed in the explosion. The suicide attacker was said to be a member of Jaish-e-Mohammad (JeM), a Pakistan-based, U.S.-designated terrorist group that claimed responsibility for the bombing. On February 26, Indian jets reportedly bombed a JeM facility in Balakot, Pakistan, the first such Indian attack on Pakistan proper since 1971 (see Figure 4 ). Pakistan launched its own air strike in response, and aerial combat led to the downing of an Indian jet. When Pakistan repatriated the captured Indian pilot on March 1, 2019, the crisis subsided, but tensions have remained high. The episode fueled new fears of war between South Asia's two nuclear-armed powers and put a damper on prospects for renewed dialogue between New Delhi and Islamabad, or between New Delhi and J&K. A White House statement on the day of the Pulwama bombing called on Pakistan to "end immediately the support and safe haven provided to all terrorist groups operating on its soil" and indicated that the incident "only strengthens our resolve" to bolster U.S.-India counterterrorism cooperation. Numerous Members of Congress expressed condemnation and condolences on social media. However, during the crisis, the Trump Administration was seen by some as unhelpfully absent diplomatically, described by one former senior U.S. official as "mostly a bystander" to the most serious South Asia crisis in decades, demonstrating "a lack of focus" and diminished capacity due to vacancies in key State Department positions. <4.2. President Trump's July "Mediation" Offer> In July 2019, while taking questions from the press alongside visiting Pakistani Prime Minister Imran Khan, President Trump claimed that Indian Prime Minister Modi had earlier in the month asked the United States to play a mediator role in the Kashmir dispute. As noted above, such a request would represent a dramatic policy reversal for India. The U.S. President's statement provoked an uproar in India's Parliament, with opposition members staging a walkout and demanding explanation. Quickly following Trump's claim, Indian External Affairs Minister Jaishankar assured parliamentarians that no such request had been made, and he reiterated India's position that "all outstanding issues with Pakistan are discussed only bilaterally" and that future engagement with Islamabad "would require an end to cross border terrorism." In an apparent effort to reduce confusion, a same-day social media post from the State Department clarified the U.S. position that "Kashmir is a bilateral issue for both parties to discuss" and the Trump Administration "stands ready to assist." A release from the Chairman of the House Foreign Affairs Committee, Representative Engel, reiterated support for "the long-standing U.S. position" on Kashmir, affirmed that the pace and scope of India-Pakistan dialogue is a bilateral determination, and called on Pakistan to facilitate such dialogue by taking "concrete and irreversible steps to dismantle the terrorist infrastructure on Pakistan's soil." An August 2 meeting of Secretary of State Mike Pompeo and Jaishankar in Thailand saw the Indian official directly convey to his American counterpart that any discussion on Kashmir, "if at all warranted," would be strictly between India and Pakistan. President Trump's seemingly warm reception of Pakistan's leader, his desire that Pakistan help the United States "extricate itself" from Afghanistan, and recent U.S. support for an International Monetary Fund bailout of Pakistan elicited disquiet among many Indian analysts. They said Washington was again conceptually linking India and Pakistan, "wooing" the latter in ways that harm the former's interests. Trump's Kashmir mediation claims were especially jarring for many Indian observers, some of whom began questioning the wisdom of Modi's confidence in the United States as a partner. The episode may have contributed to India's August moves. <4.3. August Abrogation of Article 370 and J&K Reorganization> In late July and during the first days of August, India moved an additional 45,000 troops into the Kashmir region in apparent preparation for announcing Article 370's repeal. On August 2, the J&K government of New Delhi-appointed governor Satya Pal Malik issued an unprecedented order cancelling a major annual religious pilgrimage in the state and requiring tourists to leave the region, purportedly due to intelligence inputs of terror threats. The developments reportedly elicited panic among those Kashmiris fearful that their state's constitutional protections would be removed. Two days later, the state's senior political leaders including former chief ministers Omar Abdullah (2009-2015) and Mehbooba Mufti (2016-2018) were placed under house arrest, schools were closed, and all telecommunications, including internet and landline telephone service, were curtailed. Internet shutdowns are common in Kashmir one press report said there had been 52 earlier in 2019 alone but this appears to have been the first-ever shutdown of landline phones there. Pakistan's government denounced these actions as "destabilizing." On August 5, with J&K state in "lockdown," Indian Home Minister Amit Shah introduced in Parliament legislation to abrogate Article 370 and reorganize the J&K state by bifurcating it into two Union Territories, Jammu & Kashmir and Ladakh, with only the former having a legislative assembly. In a floor speech, Shah called Article 370 "discriminatory on the basis of gender, class, caste, and place or origin," and contended that its repeal would spark investment and job creation in J&K. On August 6, after the key legislation had passed both of Parliament's chambers by large majorities and with limited debate, Prime Minister Modi lauded the legislation, declaring, "J&K is now free from their shackles," and predicting that the changes "will ensure integration and empowerment." All of his party's National Democratic Alliance coalition partners supported the legislation, as did many opposition parties (the main opposition Congress Party was opposed). The move also appears to have been popular among the Indian public, possibly in part due to a post-Pulwama, post-election wave of nationalism that has been amplified by the country's mainstream media. Proponents view the move as a long-overdue, "master stroke" righting of a historic wrong that left J&K underdeveloped and contributed to conflict there. Notwithstanding Indian authorities' claims that J&K's special status hobbled its economic and social development, numerous indicators show that the former state was far from the poorest rankings in this regard. For example, in FY2014-FY2015, J&K's per capita income was about Rs63,000 (roughly $882 in current U.S. dollars), higher than seven other states, and more than double that of Bihar and 50% above Uttar Pradesh. While the state's economy typically grew at the slowest annual rates among all Indian states in the current decade, its FY2017-FY2018 expansion of 6.8% was greater than that of eight states and only moderately lagged the national expansion of 7.2% that year. According to 2011 census data, J&K's literacy rate of nearly 69% ranked it higher than five Indian states, including Andhra Pradesh and Rajasthan. At 73.5 years, J&K ranked 3 rd of 22 states in life expectancy, nearly five years longer than the national average of 68.7. The state also ranked 8 th in poverty rate and 10 th in infant mortality. The year 2019 saw negative economic news for India and increasing criticism of the government on these grounds, leading some analysts to suspect that Modi and his lieutenants were eager to play to the BJP's Hindu nationalist base and shift the national conversation. In addition, some analysts allege that President Trump's relevant July comments may have convinced Indian officials that a window of opportunity in Kashmir might soon close, and that they could deprive Pakistan of the "negotiating ploy" of seeking U.S. pressure on India as a price for Pakistan's cooperation with Afghanistan. <5. Responses and Concerns> <5.1. International Reaction> <5.1.1. The Trump Administration> Indian press reports claimed that External Affairs Minister Jaishankar had "sensitized" Secretary of State Pompeo to the coming Kashmir moves at an in-person meeting on August 2 so that Washington would not be taken by surprise. However, a social media post from the State Department's relevant bureau asserted that New Delhi "did not consult or inform the U.S. government" before moving to revoke J&K's special status. On August 5, a State Department spokeswoman said about developments in Kashmir, "We are concerned about reports of detentions and urge respect for individual rights and discussion with those in affected communities. We call on all parties to maintain peace and stability along the Line of Control." Three days later, she addressed the issue more substantively, saying, We want to maintain peace and stability, and we, of course, support direct dialogue between India and Pakistan on Kashmir and other issues of concern.... [W]henever it comes to any region in the world where there are tensions, we ask for people to observe the rule of law, respect for human rights, respect for international norms. We ask people to maintain peace and security and direct dialogue. The spokeswoman also flatly denied any change in U.S. policy. The Chairman of the House Foreign Affairs Committee and Ranking Member of the Senate Foreign Relations Committee also responded in a joint August 7 statement expressing hope that New Delhi would abide by democratic and human rights principles and calling on Islamabad to refrain from retaliating while taking action against terrorism. The government's heavy-handed security measures in J&K elicited newly intense criticisms of India on human rights grounds. In late September, Ambassador Wells said, The United States is concerned by widespread detentions, including those of politicians and business leaders, and the restrictions on the residents of Jammu and Kashmir. We look forward to the Indian Government's resumption of political engagement with local leaders and the scheduling of the promised elections at the earliest opportunity. During an October 22 House Foreign Affairs subcommittee hearing on human rights in South Asia, Ambassador Wells testified that, "the Department [of State] has closely monitored the situation" in Kashmir and, "We deeply appreciate the concerns expressed by many Members about the situation" there. She reviewed ongoing concerns about a lack of normalcy in the Valley, especially, citing continued detentions and "security restrictions," including those on communication, and calling on Indian authorities to restore everyday services "as swiftly as possible." Wells also welcomed Pakistani Prime Minister Imran Khan's recent statements abjuring external support for Kashmiri militancy: We believe the foundation for any successful dialogue between India and Pakistan is based on Pakistan taking sustained and irreversible steps against militants and terrorists on its territory. We believe that direct dialogue between India and Pakistan, as outlined in the 1972 Shimla Agreement, holds the most potential for reducing tensions. Some Indian observers saw the hearing as a public relations loss for India, with one opining that "India got a drubbing and Pakistan got away scot-free." However, for some analysts, the Trump Administration's broad embrace of Modi and its relatively mild criticisms on Kashmir embolden illiberal forces in India. <5.1.2. The U.S. Congress, Hearings, and Relevant Legislation> In August and September, numerous of Members of Congress went on record in support of Kashmiri human rights. During October travel to India, Senator Chris Van Hollen was denied permission to visit J&K. Days later, Senator Mark Warner, a cochair of the Senate India Caucus, tweeted, "While I understand India has legitimate security concerns, I am disturbed by its restrictions on communications and movement in Jammu and Kashmir." In October, the House Foreign Affairs Subcommittee on Asia, the Pacific, and Nonproliferation held a hearing on human rights in South Asia, where discussion was dominated by the Kashmir issue. In attendance was full committee Chairman Representative Engel, who opined that, "The Trump administration is giving a free pass when countries violate human rights or democratic norms. We saw this sentiment reflected in the State Department's public statements in response to India's revocation of Article 370 of its constitution." Then-Subcommittee Chairman Representative Brad Sherman said, "I regard [Kashmir] as the most dangerous geopolitical flash-point in the world. It is, after all, the only geopolitical flash-point that has involved wars between two nuclear powers." Also during the hearing, one Administration witness, Assistant Secretary of State for Democracy, Human Rights, and Labor Robert Destro, affirmed that the situation in Kashmir was "a humanitarian crisis." Congress's Tom Lantos Human Rights Commission held a mid-November hearing entitled "Jammu and Kashmir in Context," during which numerous House Members reiterated concerns about reports of ongoing human rights violations in the Kashmir Valley. Among the seven witnesses was U.S. Commission on International Religious Freedom (USCIRF) Commissioner Anurima Bhargava, who discussed restrictions of religious freedom in India, and noted that USCIRF researchers have been barred from visiting India since 2004. In S.Rept. 116-126 of September 26, 2019, accompanying the then-pending State and Foreign Operations Appropriations bill for FY2020 ( S. 2583 ), the Senate Appropriations Committee noted with concern the current humanitarian crisis in Kashmir and called on the government of India to (1) fully restore telecommunications and Internet services; (2) lift its lockdown and curfew; and (3) release individuals detained pursuant to the Indian government's revocation of Article 370 of the Indian constitution. H.Res. 724 , introduced on November 21, 2019, would condemn "the human rights violations taking place in Jammu and Kashmir" and support "Kashmiri self-determination." H.Res. 745 , introduced on December 6, 2019, and currently with 40 cosponsors, would recognize the security challenges faced by Indian authorities in Jammu and Kashmir, including from cross-border terrorism; reject arbitrary detention, use of excessive force against civilians, and suppression of peaceful expression of dissent as proportional responses to security challenges; urge the Indian government to ensure that any actions taken in pursuit of legitimate security priorities respect the human rights of all people and adhere to international human rights law; and urge that government to lift remaining restrictions on telecommunications and internet, release all persons "arbitrarily detained," and allow international human rights observers and journalists to access Jammu and Kashmir, among other provisions. <5.1.3. Pakistan> Islamabad issued a "strong demarche" in response to New Delhi's moves, deeming them "illegal actions ... in breach of international law and several UN Security Council resolutions." Pakistan downgraded diplomatic ties, halted trade with India, and suspended cross-border transport services. Pakistan's prime minister warned that, "With an approach of this nature, incidents like Pulwama are bound to happen again" and he later penned an op-ed in which he warned, "If the world does nothing to stop the Indian assault on Kashmir and its people, there will be consequences for the whole world as two nuclear-armed states get ever closer to a direct military confrontation." Pakistan appeared diplomatically isolated in August, with Turkey being the only country to offer solid and explicit support for Islamabad's position. Pakistan called for a UNSC session and, with China's support, the Council met on August 16 to discuss Kashmir for the first time in more than five decades, albeit in a closed-door session that produced no formal statement. Pakistani officials also suggested that Afghanistan's peace process could be negatively affected. Many analysts view Islamabad as having little credibility on Kashmir, given its long history of covertly supporting militant groups there. Pakistan's leadership has limited options to respond to India's actions, and renewed Pakistani support for Kashmiri militancy likely would be costly internationally. Pakistan's ability to alter the status quo through military action has been reduced in recent years, meaning that Islamabad likely must rely primarily on diplomacy. Given also that Pakistan and its primary ally, China, enjoy limited international credibility on human rights issues, Islamabad may stand by and hope that self-inflicted damage caused by New Delhi's own policies in Kashmir and, more recently, on citizenship laws, will harm India's reputation and perhaps undercut its recent diplomatic gains with Arab states such as Saudi Arabia and the UAE. In late 2019, Pakistan accused India of taking escalatory steps in the LOC region, including by deploying medium-range Brahmos cruise missiles there. <5.1.4. China> Pakistan and China have enjoyed an "all-weather" friendship for decades. On August 6, China's foreign ministry expressed "serious concern" about India's actions in Kashmir, focusing especially on the "unacceptable" changed status for Ladakh, parts of which Beijing claims as Chinese territory (Aksai Chin). A Foreign Ministry spokesman called on India to "stop unilaterally changing the status quo" and urged India and Pakistan to exercise restraint. China's foreign minister reportedly vowed to "uphold justice for Pakistan on the international arena," and Beijing has supported Pakistan's efforts to bring the Kashmir issue before the U.N. Security Council. One editorial published in China's state-run media warned that India "will incur risks" for its "reckless and arrogant" actions. <5.1.5. The United Nations> On August 8, the U.N. Secretary-General called for "maximum restraint" and expressed concern that restrictions in place on the Indian side of Kashmir "could exacerbate the human rights situation in the region." He reaffirmed that, "The position of the United Nations on this region is governed by the Charter ... and applicable Security Council resolutions." Beijing's support of Pakistan's request for U.N. involvement led to "informal and closed-door consultations" among UNSC members on August 16, a session that included the Russian government. No ensuing statement was issued, but Pakistan's U.N. Ambassador declared that the fact of the meeting itself demonstrated Kashmir's disputed status, while India's Ambassador held to New Delhi's view that Article 370's abrogation was a strictly internal matter. No UNSC member other than China spoke publicly about the August meeting, leading some to conclude the issue was not gaining traction. In mid-December, Beijing reportedly echoed Islamabad's request that the U.N. Security Council hold another closed-door meeting on Kashmir, but no such meeting has taken place. In a September speech to the U.N. Human Rights Council, High Commissioner for Human Rights Michelle Bachelet expressed being "deeply concerned" about the human rights situation in Kashmir. In October, a spokesman for the Council said, "We are extremely concerned that the population of Indian-administered Kashmir continues to be deprived of a wide range of human rights and we urge the Indian authorities to unlock the situation and fully restore the rights that are currently being denied." <5.1.6. Other Responses> Numerous Members of the European Parliament have expressed human rights concerns and called on New Delhi to "restore the basic freedoms" of Kashmiris. During her early November visit to New Delhi, German Chancellor Angela Merkel opined, "The situation for the people there is currently not sustainable and must improve." Later that month, Sweden's foreign minister said, "We emphasize the importance of human rights" in Kashmir. The Saudi government agreed in late December to host an Organization of Islamic Cooperation "special foreign ministers meeting" on Kashmir sometime in early 2020. <5.2. Human Rights and India's International Reputation> <5.2.1. Democracy and Other Human Rights Concerns100> New Delhi's August 5 actions appear to have been broadly popular with the Indian public and, as noted above, were supported by most major Indian political parties. Yet the government's process came under criticism from many quarters for a lack of prior consultation and/or debate, and many legal scholars opined that the government had overstepped its constitutional authority, predicting that the Indian Supreme Court would become involved. New Delhi's perceived circumvention of the J&K state administration (by taking action with only the assent of the centrally appointed governor) is at the heart of questions about the constitutionality of the government's moves, which, in the words of one former government interlocutor to the state, represent "the total undermining of our democracy" that was "done by stealth." The Modi government's argument appears to be that, since the J&K assembly was dissolved and the state had been under central rule since 2018, the national parliament could exercise the prerogative of the assembly, a position rejected as specious by observers who see the government's actions as a "constitutional coup." Many Indian (and international) critics of the government's moves see them not only as undemocratic in process, but also as direct attacks on India's secular identity. From this perspective, the BJP's motive is about advancing the party's "deeply rooted ideals of Hindu majoritarianism" and Modi's assumed project "to reinvent India as an India that is Hindu." One month before the government's August 5 bill submission, a senior BJP official said his party is committed to bringing back the estimated 200,000-300,000 Hindus who fled the Kashmir Valley after 1989 (known as Pandits ). This reportedly could include reviving a plan for construction of "segregated enclaves" with their own schools, shopping malls, and hospitals, an approach with little or no support from local figures or groups representing the Pandits. Beyond the Pandit-return issue, New Delhi's revocation of the state's restrictions on residency and rhetorical emphasis on bringing investment and economic development to the Kashmir Valley lead some analysts to see "colonialist" parallels with Israel's activities in the West Bank. Perceived human rights abuses on both sides of the Kashmir LOC, some of them serious, have long been of concern to international governments and organizations. A major and unprecedented 2018 R eport on the Situation on Human Rights in Kashmir from the U.N. Human Rights Commission harshly criticized the New Delhi government for alleged excessive use of force and other human rights abuses in the J&K state. With New Delhi's sweeping security crackdown in Kashmir continuing to date, the Modi government faces renewed criticisms for widely alleged abuses. Indian officials have also come under fire for the use of torture in Kashmir and for acting under broad and vaguely worded laws that facilitate abuses. The Indian government reportedly is in contravention of several of its U.N. commitments, including a 2011 agreement to allow all special rapporteurs to visit India. In spring 2019, after a U.N. Human Right Council's letter to New Delhi asking about steps taken to address abuses alleged in the 2018 report, Indian officials announced they would no longer engage U.N. "mandate holders." India appears to be the world leader in internet shutdowns by far, having blocked the network 134 times in 2018, compared to 12 shutdowns by Pakistan, the number two country in this category. Internet blockages are common in Kashmir, but rarely last more than a few days; at more than five months to date, the outage in the Valley is the longest ever. A group of U.N. Special Rapporteurs called the blackout "a form of collective punishment" that is "inconsistent with the fundamental norms of necessity and proportionality." Human Rights Watch and Amnesty International both contend that the communications blackout violates international law. As noted above, in early January 2020, India's Supreme Court seemed to agree, ruling that an indefinite suspension is "impermissible." Kashmiris have begun automatically losing their accounts on the popular WhatsApp platform due to 120 days of inactivity and, by mid-December, the internet shutdown had become the longest ever imposed in a democracy, according to Access Now, an advocacy group. Businesses have been especially hard hit: the Kashmir Chamber of Commerce estimated more than Rs178 billion (about $2.5 billion) in losses over four months. <5.2.2. Potential Damage to India's International Image> Late 2019 saw a spate of commentary in both the Indian and American press about the likelihood that New Delhi's moves on Kashmir, when combined with the national government's broader pursuit of sometimes controversial Hindu nationalist policies, would contribute to a tarnishing of India's reputation as a secular, pluralist democratic society. In December, Parliament passed a Citizenship Amendment Act (CAA) that adds a religious criterion to the country's naturalization process and triggered widespread and sometimes violent public protests. The Modi/BJP expenditure of political capital on social issues is seen by many analysts as likely to both intensify domestic instability and decrease the space in which to reform the economy, a combination that could be harmful to India's international reputation. Former Indian National Security Adviser and Foreign Secretary Shivshankar Menon told a public forum in New Delhi that the BJP's 2019 actions in Kashmir and changes to citizenship laws have caused self-inflicted damage to the country's international image. In the words of one scholar who agrees, "India's moral standing has taken a hit," and, "Even India's partners are questioning its credentials as a multicultural, pluralist society." One op-ed published in a major Indian daily warned that "the sense of creeping Hindu majoritarianism has begun to generate concern among a range of groups from the liberal international media, the U.S. Congress, to the Islamic world." The article contended that "India will need some course-correction in the new year to prevent the crystallization of serious external challenges." Another long-time observer argued that New Delhi's claims that "domestic" issues should be of no concern to an external audience are not credible: "It's hard to deny that 2019 was the year when Modi's domestic adventures robbed the bank of goodwill accumulated over time. India's image took a beating this year." Support for India's rise as a major regional player and U.S. partner has been among the few subjects of bipartisan consensus in Washington, DC, in the 21 st century, and some analysts contend that the New Delhi government may be putting that consensus to the test by "sliding into majoritarianism and repression." These analysts express concern that an existing consensus in favor of robust and largely uncritical support for India may be eroding, with signs that some Democratic lawmakers, in particular, have been angered by India's domestic policies. According to one Indian pundit, "[E]ven the mere introduction by House Democrats of two House resolutions on Kashmir bears the ominous signs of India increasingly becoming a partisan issue in the American foreign policy consensus." <6. U.S. Policy and Issues for Congress> A key goal of U.S. policy in South Asia has been to prevent India-Pakistan conflict from escalating to interstate war. This means the United States has sought to avoid actions that overtly favored either party. Over the past decade, however, Washington appears to have grown closer to India while relations with Pakistan appear to continue to be viewed as clouded by mistrust. The Trump Administration "suspended" security assistance to Pakistan in 2018 and has significantly reduced nonmilitary aid while simultaneously deepening ties with New Delhi. The Administration views India as a key "anchor" of its "free and open Indo-Pacific" strategy, which some argue is aimed at China. Yet any U.S. impulse to "tilt" toward India is to some extent offset by Islamabad's current, and by most accounts vital, role in facilitating Afghan reconciliation negotiations. President Trump's apparent bonhomie with Pakistan's prime minister and offer to mediate on Kashmir in July was taken by some as a new and potentially unwise strategic shift. The U.S. government has maintained a focus on the potential for conflict over Kashmir to destabilize South Asia. At present, the United States has no congressionally-confirmed Assistant Secretary of State leading the Bureau of South and Central Asia and no Ambassador in Pakistan, leading some experts to worry that the Trump Administration's preparedness for India-Pakistan crises remains thin. Developments in August 2019 and after also renewed concerns among some analysts that the Trump Administration's "hands-off" posture toward this and other international crises erodes American power and increases the risk of regional turbulence. Some commentary, however, was more approving of U.S. posturing. Developments in Kashmir in 2019 raise possible questions for Congress: Have India's actions changing the status of its J&K state negatively affect regional stability? If so, what leverage does the United States have and what U.S. policies might best address potential instability? Is there any diplomatic or other role for the U.S. government to play in managing India-Pakistan conflict or facilitating a renewal of their bilateral dialogue? To what extent does increased instability in Kashmir influence dynamics in Afghanistan? Will Islamabad's cooperation with Washington on Afghan reconciliation be reduced? To what extent, if any, are India's democratic/constitutional norms and pluralist traditions at risk in the country's current political climate? Are human rights abuses and threats to religious freedom increasing there? If so, should the U.S. government take any further actions to address such concerns?

In early August 2019, the Indian government announced that it would make major changes to the legal status of its Muslim-majority Jammu and Kashmir (J&K) state, specifically by repealing Article 370 of the Indian Constitution and Section 35A of its Annex, which provided the state "special" autonomous status, and by bifurcating the state into two successor "Union Territories" with more limited indigenous administrative powers. The changes were implemented on November 1, 2019. The former princely region's sovereignty has been unsettled since 1947 and its territory is divided by a military "Line of Control," with Pakistan controlling about one-third and disputing India's claim over most of the remainder as J&K (China also claims some of the region's land). The United Nations considers J&K to be disputed territory, but New Delhi, the status quo party, calls the recent legal changes an internal matter, and it generally opposes third-party involvement in the Kashmir issue. U.S. policy seeks to prevent conflict between India and Pakistan from escalating, and the U.S. Congress supports a U.S.-India strategic partnership that has been underway since 2005, while also maintaining attention on issues of human rights and religious freedom. India's August actions sparked international controversy as "unilateral" changes of J&K's status that could harm regional stability, eliciting U.S. and international concerns about further escalation between South Asia's two nuclear-armed powers, which nearly came to war after a February 2019 Kashmir crisis. Increased separatist militancy in Kashmir may also undermine ongoing Afghan peace negotiations, which the Pakistani government facilitates. New Delhi's process also raised serious constitutional questions and—given heavy-handed security measures in J&K—elicited more intense criticisms of India on human rights grounds. The United Nations and independent watchdog groups fault New Delhi for excessive use of force and other abuses in J&K (Islamabad also comes under criticism for alleged human rights abuses in Pakistan-held Kashmir). India's secular traditions may suffer as India's Hindu nationalist government—which returned to power in May with a strong mandate—appears to pursue Hindu majoritarian policies at some cost to the country's religious minorities. The long-standing U.S. position on Kashmir is that the territory's status should be settled through negotiations between India and Pakistan while taking into consideration the wishes of the Kashmiri people. The Trump Administration has called for peace and respect for human rights in the region, but its criticisms have been relatively muted. With key U.S. diplomatic posts vacant, some observers worry that U.S. government capacity to address South Asian instability is thin, and the U.S. President's July offer to "mediate" on Kashmir may have contributed to the timing of New Delhi's moves. The United States seeks to balance pursuit of a broad U.S.-India partnership while upholding human rights protections, as well as maintaining cooperative relations with Pakistan. Following India's August 2019 actions, numerous Members of the U.S. Congress went on record in support of Kashmiri human rights. H.Res. 745 , introduced in December and currently with 40 cosponsors, urges the Indian government to end the restrictions on communications and mass detentions in J&K that continue to date. An October hearing on human rights in South Asia held by the House Subcommittee on Asia, the Pacific, and Nonproliferation included extensive discussion of developments in J&K. In November, the Tom Lantos Human Rights Commission held an event entitled "Jammu and Kashmir in Context." This report provides background on the Kashmir issue, reviews several key developments in 2019, and closes with a summary of U.S. policy and possible questions for Congress.

crs_R46117

crs_R46117_0

<1. Introduction> The Teacher Education Assistance for College and Higher Education (TEACH) Grant program provides grants to students who are completing or plan to complete the coursework required to begin a career in teaching. As a condition for receiving a TEACH Grant, a recipient must teach for at least four years in a high-need field at an elementary or secondary school or in an educational service agency that serves students from low-income families within eight years of completing his or her program of study. If a recipient does not fulfill the service obligation, his or her TEACH Grants are converted to Direct Unsubsidized Loans. A recipient must repay these loans in full, including interest charged from the date of each TEACH Grant disbursement. Since the inception of the program in 2008, over 300,000 TEACH Grants have been disbursed, totaling nearly $938 million. In recent years, the TEACH Grant program has received significant attention due to challenges associated with administering it. One of the more prominently cited challenges pertains to loan conversions of TEACH Grants when recipients fail to submit annual certification paperwork on time even though they have been teaching in a qualifying position. The absence of an appeals or reconsideration process may increase the amount of such grant-to-loan conversions. While the Department of Education (ED) is working to address some of these administrative challenges, a broader issue still persists with the program: two-thirds of recipients are expected to see their grants converted to loans. This high expected failure rate raises several questions regarding the efficacy of the program. Several issues related to TEACH Grants may garner congressional attention. The bulk of these issues are related to program design, including the extent to which the program successfully identifies individuals who commit to teaching, the size of the TEACH Grant benefit, challenges associated with finding and sustaining a qualifying teaching placement, teacher preparation program quality at institutions that disburse TEACH Grants, and the continued application of the "highly qualified teacher" definition to the TEACH Grant program. Other issues are related to program implementation, such as challenges associated with certification of teaching service and the absence of an appeals process. Lawmakers may also wish to consider other changes that have been proposed since the TEACH Grant program was authorized. This report begins with a brief legislative history of the TEACH Grant program. This is followed by a brief description of how the program is structured and administered, as well as its budgeting approach and participation data. The report concludes with a discussion of issues related to the TEACH Grant program that might garner attention in the 116 th Congress. <2. Legislative History> The TEACH Grant program was first authorized in 2007 under the College Cost Reduction and Access Act of 2007 (CCRAA; P.L. 110-84 ). However, as early as 2005, bills were introduced in both the House and the Senate that included an authorization for TEACH Grants, such as H.R. 2835 and its companion bill, S. 1218 . H.R. 2835 presented findings suggesting that there was a shortage of qualified teachers in public schools, and in light of the significant number of teacher retirements expected over the next few years, the country would need to field 2 million new teachers over the next decade. Congress authorized the TEACH Grant program in response to concerns about growing demand for high-quality teachers in low-income schools. This demand was identified as being driven by several factors, including (1) the expected surge of retirements over the next five years and (2) a newly established set of minimum standards for teacher quality as enacted through the No Child Left Behind Act (NCLB; P.L. 107-110 ). Other concerns the TEACH Grant program aimed to address were related to low-income schools, where students were identified as being disproportionately taught by teachers who were inexperienced, unqualified, and out-of-field; and which were struggling to retain teachers for as long as three to five years. The committee report accompanying H.R. 2669 , the College Cost Reduction Act of 2007, stated that the TEACH Grant program was created to attract high-achieving individuals into the teaching profession to meet the demand in low-income schools. Given that, on average, teacher salaries tended to be lower than other entry-level jobs out of college, providing a financial incentive to help subsidize the cost of college was viewed as an important tool in offsetting the opportunity cost of entering into teaching. There was also a distinction made in providing financial assistance on the front-end in the form of a grant when an individual started undergraduate or graduate studies versus providing assistance once the individual had been teaching for some time, as with already existing teacher loan forgiveness programs. The idea was that earlier intervention might influence a student's career path and, thus, major, which could potentially incentivize many more individuals to pursue teaching as a career who would have not chosen it otherwise. The program was also focused on incentivizing high-quality individuals to teach in both schools and subject areas for which it is typically harder to attract and retain staff. This was intended to help address some of the recurring issues faced by low-income schools, in particular. Opponents of the program believed that this new entitlement was poorly targeted, unproven, and would place a significant financial burden on taxpayers. Further, it was argued that the program was not focused on the goals of increasing access to and persistence in higher education for students with the greatest need. Given that the program was authorized with mandatory funds, it was also contended that there was no mechanism for congressional accountability. <2.1. Changes Since Enactment> Since its enactment, there have been some changes to the statutory provisions of the TEACH Grant program. The most substantive changes were made under the Higher Education Opportunity Act (HEOA; P.L. 110-315 ), which added a provision that required ED to develop a "plain-language" disclosure form to accompany each recipient's Agreement to Serve that clearly described the nature of TEACH Grants, the service requirement, and the consequences of not fulfilling this requirement (see " Service-Related Requirements " for a description of the Agreement to Serve). The HEOA also included a provision that permitted grant recipients who obtained degrees in fields that were designated as "high need" at the time they applied for the grant but were no longer designated as such to still be able to complete their service requirement by teaching in that field. It also required ED to establish regulations describing the extenuating circumstances in which all or part of the service requirement could be waived. Finally, it required ED to prepare and submit to Congress a report every two years on TEACH Grant recipients and the schools and students served by those recipients. <2.2. "Service Payback" Programs> At the time of the TEACH Grant program's authorization, the idea of awarding grants or scholarships to subsidize the cost of undergraduate or graduate education in exchange for service (i.e., "service payback" programs) was not a new one. Prior to TEACH Grants, the Paul Douglas Teacher Scholarships program was first authorized under the Higher Education Amendments of 1986 ( P.L. 99-498 ) as a discretionary program to provide financial assistance to college students preparing to be elementary and secondary school teachers. Eligible students, who must have graduated in the top 10% of their high school class, could receive a scholarship in the amount of $5,000 per year for a maximum amount of up to $20,000. In exchange, scholarship recipients were required to teach one to two years for every year of scholarship receipt in a preschool or elementary or secondary school, depending on where and what subjects they taught. The program was administered as a formula grant to states, which were responsible for selecting scholarship recipients, verifying that each recipient was meeting service requirements, and submitting performance reports to ED. The program was repealed by the Higher Education Amendments of 1998 ( P.L. 105-244 ), though it was defunded in FY1996 appropriations ( P.L. 104-134 ). In eliminating funding for the program, the committee report that accompanied H.R. 2127 stated that the program was duplicative of other teacher training and student aid programs. It was also characterized as costly to administer and difficult to implement, monitor, and enforce. Another example of a teaching service payback program, authorized prior to the TEACH Grant program's inception, is the National Science Foundation's (NSF's) Robert Noyce Teacher Scholarship program, which was enacted under the National Science Foundation Authorization Act of 2002 ( P.L. 107-368 ). It makes awards to institutions of higher education (IHEs) to provide scholarships of $10,000 per year to undergraduate science, technology, engineering, and math (STEM) majors, starting in their junior year, and graduate STEM students. In exchange for this assistance, recipients are expected to obtain teaching certification in a STEM subject and serve as a teacher in a high-need local educational agency (LEA) for at least two years for each year of scholarship receipt. Similar to TEACH Grants, if recipients do not complete their required service, then they must pay all or a portion of their scholarships back in the form of a loan, including interest accrued since disbursement. Other examples of existing service payback programs include scholarships at each of the U.S. Service Academies and Reserve Officers' Training Corps (ROTC) Scholarships, which provide tuition assistance in exchange for military service. Boren Scholarships and Fellowships provide financial assistance to undergraduate and graduate students to study less commonly taught languages in international regions critical to U.S. interests in exchange for working in the federal government for at least one year upon graduation. The National Institutes of Health Ruth L. Kirschstein National Research Service Awards provide financial support for training to pre- and postdoctoral students in biomedical, behavioral, and clinical research in exchange for engaging in health-related biomedical, behavioral, and/or clinical research, research training, or health-related teaching for one year upon completion of their program. <3. Program Structure> This section describes how the program is structured, including TEACH Grant recipient eligibility, award amounts, service-related requirements, conditions under which TEACH Grants convert to loans, institutional eligibility to disburse TEACH Grants, and program administration. <3.1. TEACH Grant Recipient Eligibility> To be eligible to receive a TEACH Grant, a student must meet the basic eligibility criteria for the HEA Title IV federal student aid programs. Among the requirements generally applicable to the HEA Title IV student aid programs for award year (AY) 2018-2019 are the following: A student must be accepted for enrollment or enrolled in an eligible program at an eligible institution for the purpose of earning a certificate or degree. A student must not be enrolled in an elementary or secondary school and must have a high school diploma (or equivalent). A student must meet citizenship requirements. A male student must have registered with the selective service system when 18-25 years of age. A student must maintain satisfactory academic progress while enrolled. Satisfactory academic progress requires a minimum grade point average (GPA) or its equivalent and passing a minimum percentage of attempted credits or hours. A student must not be in default on a Title IV student loan, or have failed to repay or make an arrangement to repay an overpayment on a Title IV grant or loan, or be subject to a judgment lien for a debt owed to the United States. A student must have repaid any Title IV funds obtained fraudulently. A student may be disqualified for an unusual enrollment history receiving HEA Title IV aid at multiple schools in the same semester, or receiving aid and withdrawing before earning any credit. A student may be disqualified for a period of time for a federal or state conviction for possession or sale of drugs while receiving HEA Title IV student aid. Specific eligibility requirements for the TEACH Grant program include the following: A student must also be enrolled as an undergraduate, post-baccalaureate, or graduate student at an IHE that participates in the TEACH Grant program, and in a TEACH Grant-eligible program of study within the IHE. A post-baccalaureate program is a program of instruction for individuals who have completed a bachelor's degree that (1) does not lead to a graduate degree and (2) consists of courses required by a state in order for a student to receive a professional certification or licensing credential that is required for employment as a teacher in an elementary or secondary school in that state. A student must meet certain academic achievement requirements, generally, scoring above the 75 th percentile on one or more portions of an undergraduate, post-baccalaureate, or graduate school admissions test or having a cumulative GPA of at least 3.25 on a 4.0 scale or the numeric equivalent. The TEACH Grant program is currently the only HEA Title IV program with an academic merit requirement. If a student is a current or prospective teacher applying for the TEACH Grant program to obtain a graduate degree, then the student must be a teacher or retiree from another occupation with expertise in a field in which there is a shortage of teachers or a teacher who is using a high-quality alternative certification route. <3.2. Award Amounts> A student enrolled full-time in a qualifying program may receive four annual TEACH Grant awards of up to $4,000 each for his or her first bachelor's degree and first post-baccalaureate program of study combined. The aggregate award amount, or the total cumulative award amount , that a student may receive for a bachelor's degree and a post-baccalaureate program of study combined is $16,000. A graduate student enrolled full-time in a qualifying program may also receive two annual TEACH Grant awards of up to $4,000 each for a Master's degree . The aggregate award amount that a student may receive for a graduate degree is $8,000. Students enrolled in a qualifying program less - than - full - time are eligible to receive a prorated TEACH Grant award based on their attendance intensity (i.e. , half-time, three-quarter-time, or less-than-half-time) . For example, a student enrolled in a Master's degree program on a half -time basis may receive an annual award of up to $2,000. A TEACH Grant in combination with other student financial assistance canno t exceed the cost of attendance; thus, in some instances, an annual TEACH Grant award may be reduced. <3.3. Service-Related Requirements> When receiving a TEACH Grant, recipients must participate in TEACH Grant counseling that explains the terms and conditions of the TEACH Grant service obligation. They must receive entrance counseling with each TEACH Grant disbursement and exit counseling once they cease or complete their program of study. They must also sign a TEACH Grant Agreement to Serve, which specifies the terms and conditions for receiving a TEACH Grant, including the consequences for not fulfilling the service obligation. Upon completion or cessation of their respective program of study, recipients must serve as full-time teachers for at least four academic years within an eight-year period. They must also meet the requirements of a "highly qualified teacher" (HQT) as defined in the Elementary and Secondary Education Act (ESEA). Recipients must teach at a public or nonprofit private elementary or secondary school that serves low-income students, which is defined as a school: (1) that is in a school district of an LEA that is eligible for assistance under Title I-A of the ESEA and (2) in which more than 30% of the children enrolled in the school meet a measure of poverty identified in statute. A recipient may also teach in an educational service agency (ESA) in which more than 30% of the children meet a measure of poverty identified in statute. Additionally, ED includes in the definition of a school that serves low-income students, schools operated by the Bureau of Indian Education (BIE) or operated on Indian reservations by Indian tribal groups under contract or grant with BIE. ED identifies all qualifying schools in the annual Teacher Cancellation Low-Income Directory (TCLD). Once a recipient locates a vacancy in a high-need field in a qualifying school, he or she must apply for the job and be offered (and accept) a qualifying position at the school. If the school in which a recipient teaches in a qualifying position is designated as a school serving low-income students in his or her first year, and subsequently is no longer designated as such, a grant recipient may still fulfill his or her service obligation by continuing to teach in that school. As mentioned above, a recipient must also teach in high-need fields, which are defined as bilingual education and English language acquisition, foreign language, mathematics, reading specialist, science, and special education. High-need fields also include any other field that has been identified as high-need by the federal government, a state government, or an LEA, and approved by ED. ED documents fields that are identified as high-need by the federal government, a state government, or an LEA in the annual Teacher Shortage Area Nationwide Listing ("Nationwide List"), following ED approval. Qualifying fields on the Nationwide List must be designated as high-need at the time a TEACH Grant was received or when the individual begins teaching. Depending on their program of study, recipients may be required to declare a major and take coursework in a high-need field in order to be eligible for teacher certification in their state. If recipients choose a field that is on the Nationwide List when they first received the grant but is no longer designated as high-need by the time they start teaching, they may still perform qualifying service by teaching in that field. Further, if recipients are teaching in a field on the Nationwide List that in subsequent years is no longer designated as high-need, they may still teach in that field to fulfill their service obligation. Following completion of or ceasing enrollment in their program of study, recipients must provide two types of certification to the ED-contracted TEACH Grant loan servicer. The first is an initial certification within 120 days of completing or ceasing enrollment in their program. The recipient must verify either (1) employment as a full-time teacher in a qualifying position or (2) intention to be employed in a qualifying position. The loan servicer notifies recipients of when this initial certification is due. The second is annual certification to the loan servicer following each year of teaching service completion. The loan servicer notifies recipients of their annual certification requirement, including how to submit documentation of progress towards completing their service obligation and when that documentation is due. Specifically, by the annual certification date, recipients must provide documentation demonstrating that either (1) they have completed a full year of qualifying teaching service, verified by the chief administrative officer of their school or ESA, or (2) they intend to satisfy the terms and conditions of their TEACH Grant service obligation. Previously, the annual certification date was based on the date the recipient had completed or ceased enrollment in the TEACH Grant-eligible program of study; therefore, annual certification dates varied among recipients. However, on November 1, 2018, ED adopted a standardized annual certification date of October 31 for all recipients. <3.4. Grant-to-Loan Conversion> In general, TEACH Grants convert to an Unsubsidized Direct Loan, with interest accrued as of the date of disbursement of each grant, under the following conditions: Grant recipients voluntarily request that their TEACH Grants be converted to a loan because they decide not to teach or not to teach in a qualifying school or field. Grant recipients do not submit appropriate documentation by the initial or annual certification date or respond to reminder notices from the ED-contracted loan servicer. Grant recipients fail to complete the required four years of service within the eight-year period. This applies regardless of whether the recipient completed any portion of the service obligation. If grant recipients cease enrollment in their eligible program of study prior to completing it, their grant converts to a loan within one year unless they are eligible for a suspension (see below), they re-enroll in an eligible program, or they have begun qualifying teaching. The eight-year period in which a recipient must complete his or her four-year teaching service obligation begins once the recipient's enrollment in the eligible program of study ends. However, a recipient may be eligible to request a suspension of the eight-year period under various circumstances, including the following: enrollment in another TEACH Grant-eligible program (such as a Master's degree program if the recipient received TEACH Grants for a bachelor's degree program), enrollment in a program of study that is required by a state to receive certification or licensure to teach within the state, a condition qualifying for leave under the Family and Medical Leave Act, or a call or order to active duty status for more than 30 days as a member of the Armed Forces reserves or service as a member of the National Guard. Suspensions are granted in one-year increments, not to exceed a combined total of three years for the first three reasons or a total of three years for the last reason. TEACH Grant service obligations can be canceled if the recipient dies or becomes totally and permanently disabled. Additionally, a recipient may be discharged for all or some of their service obligation if they are called or ordered to active military duty for more than three years. An individual could receive TEACH Grants for more than one program of study. For example, a student could be awarded TEACH Grants for a bachelor's degree and then later awarded TEACH Grants for a Master's degree. In such cases, recipients must complete four years of teaching service for each program of study for which they received TEACH Grants. However, creditable teaching service, approved suspensions, and a service discharge resulting from a call to active military duty may apply to more than one service obligation. <3.5. Institutional Eligibility> To be eligible to disburse TEACH Grants, an IHE must meet general Title IV institutional eligibility requirements specified in statute and regulation. Additionally, IHEs must meet program-specific eligibility requirements. The HEA requires that an IHE (by determination of the Secretary of Education) provide high-quality teacher preparation and professional development services, including extensive clinical experience as a part of pre-service preparation; be financially responsible; provide pedagogical coursework, or assistance in the provision of such coursework, and formal instruction related to the theory and practices of teaching; and provide supervision and support services to teachers, or assistance in the provision of such services. ED further clarifies in regulation that to be a TEACH Grant-eligible institution , an IHE must meet financial responsibility standards or qualify under an alternative standard established in regulation; provide a high-quality teacher preparation program at the bachelor's or Master's degree level that is either accredited by an ED-recognized accrediting agency of teacher education programs; or is approved by a state, includes a minimum of 10 weeks of full-time pre-service clinical experience, or its equivalent, and provides either pedagogical coursework or assistance in the provision of such coursework; and provides supervision and support services to teachers, or assists in the provision of services to teachers, such as identifying and making available information on effective teaching skills or strategies, identifying and making available information on effective practices in the supervision and coaching of novice teachers, and mentoring focused on developing effective teaching skills and strategies; provide a two-year program of study that is acceptable for full credit for either a bachelor's teacher preparation degree or a bachelor's degree program in a high-need field at another TEACH Grant-eligible IHE with which it has an agreement ; offer a bachelor's degree that, in combination with other training or experience, will prepare a student to teach in a high-need field, and have an agreement with another IHE that offers a teacher preparation program or a post-baccalaureate program that prepares students to teach; or offer a post-baccalaureate program of study that is designed to prepare an individual to teach in a high-need field. A post-baccalaureate program is not TEACH Grant-eligible if it is offered by an IHE that also offers a bachelor's degree in education. ED defines a TEACH Grant-eligible program as an eligible program of study, as defined in regulation, that is designed to prepare an individual to teach as a HQT in a high-need field and leads to a bachelor's or Master's degree, or is a post-baccalaureate program of study. A two-year program of study that is acceptable for full credit toward a bachelor's degree is considered to be a program of study that leads to a bachelor's degree. A student who first received a TEACH Grant for enrolling in an eligible program of study is entitled to receive subsequent TEACH Grants to complete that program, even if it is no longer TEACH Grant-eligible. <3.6. Administration> TEACH Grant program administration responsibilities are divided among IHEs, the ED-contracted loan servicer, and ED. IHEs are generally responsible for determining program eligibility and awarding and disbursing grants to recipients. The ED-contracted loan servicer manages the day-to-day program administration tasks such as tracking whether recipients are fulfilling their required service obligation, sending recipients reminders of when annual certification is due, and managing loan repayment if a recipient's grant were to convert to a loan. ED assumes the broader role of setting program policy, providing guidance to the loan servicer and IHEs on how to administer the program, providing oversight of program recipients and the loan servicer, and monitoring for program compliance. <3.6.1. Institutions of Higher Education (IHE)> The IHE is responsible for determining whether to participate in the TEACH Grant program. It also selects the specific programs of study within the IHE to designate as TEACH Grant-eligible and, thus, decides whether to make TEACH Grants available to students enrolled in those programs. TEACH Grant administration is primarily overseen by the IHE's student financial aid office, sometimes in partnership with teacher preparation program departments. The financial aid office's responsibilities generally consist of evaluating initial and ongoing student eligibility, providing required TEACH Grant counseling to students who elect to participate in the program, disseminating information and materials about TEACH Grants to students and teacher preparation program staff, and packaging and disbursing TEACH Grants to recipients. Teacher preparation program staff's responsibilities could include supporting the financial aid office in evaluating student eligibility, creating awareness about TEACH Grants amongst students, and aiding students in identifying and securing qualifying job placements upon program completion. Additionally, IHEs have some latitude in determining how TEACH Grants are administered. For example, IHEs can choose to make TEACH Grants available only to upperclassmen at the undergraduate level, only to students who have been admitted into a teacher preparation program, or only to students who have declared a major or minor in a high-need field. <3.6.2. Loan Servicer> ED contracts with a private entity to support TEACH Grant administration at the federal level. Unlike other HEA Title IV grant programs, which are primari ly administered by ED following disbursement, many aspects of the TEACH Grant program are administered by the ED-contracted loan servicer post-disbursement. This is due to the program's service payback structure, which is unique among HEA Title IV aid programs. Following disbursement, the ED-contracted loan servicer is tasked with tracking whether recipients are fulfilling their required service obligation, rather than undertaking administrative tasks typically associated with federal student loans such as collecting and applying loan payments to borrower accounts. The loan servicer does this by accepting and processing recipients' annual certification paperwork. Its responsibilities also include reminding grant recipients of when their employment certification paperwork is due and sending quarterly notices informing recipients of the amount they would owe including interest if their grants were to convert to a loan. If a recipient's grants are converted to a loan, the loan servicer also carries out the more traditional loan servicer responsibilities of tracking loan repayment, providing billing and repayment services, and informing borrowers about their repayment options. The loan servicer also initially responds to customer service inquiries. <3.6.3. Department of Education (ED)> While the ED-contracted loan servicer manages the day-to-day administration of TEACH Grants, ED plays a broader role of setting program policy, providing guidance to the loan servicer and IHEs on how to administer the program, providing oversight of program recipients and the loan servicer, and monitoring for program compliance. This includes monitoring the loan servicer to ensure that it delivers on its responsibilities such as regularly communicating with recipients, adequately tracking recipients' progress toward satisfying grant requirements, and accurately converting TEACH Grants to loans if recipients do not meet grant requirements. It also broadly monitors compliance by participants, including IHEs and students, through monthly reports from the loan servicer and program reviews of IHEs that participate in Title IV programs, among other methods. Additionally, ED seeks to address recipient complaints and settles disputes that include incorrect grant-to-loan conversions. ED is also responsible for broad outreach on how to apply for and receive student aid such as TEACH Grants and developing student borrower guidance, which it maintains centrally on a federal student aid website ( https://studentaid.ed.gov ). <4. Budgeting Approach> Given that a TEACH Grant may be converted to a Direct Loan in certain circumstances, the TEACH Grant program is treated as a federal credit program . Thus, as with all other federal credit programs, the costs to the government, or subsidies , for the TEACH Grant program are estimated in accordance with the requirements of the Federal Credit Reform Act of 1990 (FCRA; Title V of P.L. 101-508 ). These subsidies are reestimated on an annual basis. According to FCRA, the budgetary cost of direct loans and loan guarantees must be measured on the basis of their estimated long-term cost to the government on a present-value basis. For each cohort year of TEACH Grants, the loan subsidy cost is the estimated long-term cost of those TEACH Grants to the government, given underlying assumptions about grant-to-direct loan conversion, loan repayment, and interest rates, and excludes administrative costs. It represents the estimated present value of the cash flows from the government (e.g., grant disbursement), less the estimated present value of the cash flows to the government (e.g., payments made by recipients whose grants convert to loans), discounted to the time when the grants are disbursed. Loan terms and conditions such as interest subsidies, deferments, loan forgiveness, defaults, and discharges are accounted for in these estimates. A positive loan subsidy cost for a cohort of TEACH Grants means that those grants are estimated to result collectively in a cost to the government, whereas a negative loan subsidy cost means that the cohort of grants will collectively achieve budgetary savings for the government (through repayment, with interest, of TEACH Grants that have been converted to loans). Subsidy costs are large and positive for TEACH Grants that have been made since the inception of the program. Subsidy costs are funded through permanent, indefinite budget authority. Administrative costs are funded separately through annual discretionary appropriations. Since FY2013, nonexempt mandatory spending programs have been subject each year to sequestration, a process of automatic "across-the-board" reductions in federal spending to reduce the federal budget deficit. This process was triggered by provisions in the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The TEACH Grant program account is not exempt from sequestration. In May 2013, ED implemented the first BCA-required sequester by reducing each recipient's TEACH Grant award by a specified percentage, starting with awards disbursed after March 1, 2013. A sequester has since been applied annually to the TEACH Grant program, resulting in a reduction in the annual award amount in each subsequent fiscal year. Under current law, the annual sequestration of nonexempt mandatory spending programs is scheduled to continue through FY2029. <5. Participation> Since the inception of the TEACH Grant program, ED has disbursed over 300,000 grants totaling nearly $938 million. Table 2 presents, by award year since program inception, the number of TEACH Grant awards disbursed, the number of IHEs that disbursed awards, the total amount disbursed, and the average award disbursed. The program saw a significant uptick in awards disbursed in AY2010-2011 and AY2011-2012. In recent years, analyses of the program have shed some light on benefit take-up rates and on the extent to which grants are being converted to loans. The Government Accountability Office (GAO), for instance, estimated that in the 2013-2014 academic year, 19% of individuals potentially eligible for TEACH Grants received grants under the program. With regard to loan conversions, an American Institutes for Research (AIR) study found that among TEACH Grant recipients who began their eight-year service period prior to July 2014, 63% had their grants converted to a Direct Unsubsidized Loan as of July 2016. Separately, in its FY2020 Congressional Budget Justification, ED estimates, based on administrative program data, that 66% of students who receive a TEACH Grant will fail to complete their service obligation and will see their grants converted to loans. <6. Selected Issues> Many issues that span aspects of the TEACH Grant program have arisen and garnered congressional interest. In general, these issues fall into two categories: (1) facets of program design and (2) program implementation. In recent years, legislative proposals have been introduced that would address some of the issues. <6.1. Program Design> Issues that have arisen related to facets of program design focus on whether the way in which the TEACH Grant program is structured contributes to its intended goal of recruiting and retaining high-quality teachers in low-income classrooms. They include whether the program identifies individuals with a commitment to teaching, the size of the benefit, challenges with finding and sustaining a qualifying teaching position, program quality at institutions that are eligible to disburse TEACH Grants, and the continued application of the "highly qualified teacher" definition. <6.1.1. Commitment to Teaching> One issue of interest pertains to whether the TEACH Grant program is effective at identifying individuals committed to teaching and teaching in high-need classrooms. Some data suggest that this may be a programmatic challenge. GAO reported that from August 2013 through September 2014, 14% of TEACH Grant recipients had voluntarily requested that their grants be converted to loans, and of those, 38% reported that the reason for the voluntary conversion was because they no longer intended to teach. One explanation may be that TEACH Grants can be made available to students as early as freshman year in their undergraduate education. Earlier intervention may have the effect of recruiting more individuals to enter into teaching who might not have considered it otherwise. However, those individuals who may not have chosen teaching otherwise might also lack a strong commitment to the endeavor of teaching or teaching in a high-need school. Further, underclassmen are making the choice to accept a potentially high-stakes grant at a point when they may be less likely to have a full understanding of where their career interests lie. These factors may impact the likelihood of a TEACH Grant recipient's successful completion of his or her required service obligation and whether his or her grant converts to a loan. Evidence of the effects of restricting TEACH Grants to students who might be more committed to teaching is inconclusive. Data from a 2018 AIR study suggest that institutions that restrict TEACH Grant availability to juniors and seniors, points at which a student may be more fully committed to a career in teaching, are more likely to have lower grant-to-loan conversion rates. Anecdotal data from the AIR and GAO studies suggest that some institutions restrict TEACH Grants to upperclassmen and graduate students because underclassmen "tend to change majors more frequently" and encounter challenges with maintaining the 3.25 GPA required for TEACH Grant eligibility. At the same time, the AIR study also suggests that there is no difference in grant-to-loan conversion rates by undergraduate class and graduate school year, with the only exceptions occurring for juniors and first-year graduate students (who had lower conversion rates). Further, there is no difference in loan conversion rates between recipients who were accepted into a teacher preparation program prior to receiving their first TEACH Grant versus after receiving their first TEACH Grant. Data from a study of the Robert Noyce Teacher Scholarship ("Noyce Scholarship"), which is only available to students during the last two years of their undergraduate program or during their graduate program, suggest that the scholarship self-selects candidates who are already committed to teaching given that it is available later in an individual's education trajectory. However, this same study also suggests that the Noyce Scholarship is less useful as a recruitment tool into teaching because it is less likely to influence a recipient's decision to enter into the profession; rather, studies suggest that the Noyce Scholarship is more likely to influence an individual's decision to teach in a high-need school. Even with TEACH Grants potentially available to individuals at any class level, the AIR study findings seem to corroborate this idea that teaching service payback programs may have a greater influence on a recipient's decision to teach in a high-need school versus his or her decision to enter into the teaching profession more generally. The AIR study findings show that 44% of recipients indicated that the grant was somewhat or very influential in their decision to teach, while 58% of recipients indicated that the grant was somewhat or very influential in their decision to teach in a high-need school. To address some of these concerns, one legislative proposal would amend TEACH Grants to limit eligibility to upperclassmen and graduate students. Limiting eligibility to upperclassmen may help to ensure that grants are not being awarded to individuals who may not demonstrate a strong commitment to teaching and, thus, are more likely to remain in a high-need classroom and complete their service obligation. At the same time, restricting TEACH Grants may limit the program's ability to recruit individuals who may not have otherwise considered teaching as a career. Additionally, there is some evidence from the AIR study that suggest that IHEs market TEACH Grants to students as a means to fund their education, more so than as a means to enter into teaching. Anecdotal evidence from IHEs also suggests that some students accept a TEACH Grant to access additional education funding, with no intention of fulfilling the required teaching service. Additionally, the AIR study found that in academic year 2013-2014, 42% of grant recipients would have been borrowing over their federal annual loan limit if their grants were considered loans from the outset. While these data do not shed light on the share of recipients who took a TEACH Grant only to fund their education and with no intention of teaching, they illustrate the prospect that this source of aid may be playing a role not encompassed in original program aims. <6.1.2. Size of the Benefit> Under the TEACH Grant program, a qualifying student is eligible for up to $4,000 per year to cover the cost of attendance at an eligible IHE for an eligible program of study. At the undergraduate and post-baccalaureate levels, the maximum cumulative amount a student could receive is $16,000, and at the graduate level, the maximum cumulative amount a student could receive is $8,000. At the time the program was authorized, it was thought that the award amount would help to offset the opportunity cost of entering into teaching, given the below-average compensation teachers receive. The estimated low take-up rate of TEACH Grants may be an indicator of several things. It may suggest that some students consider the program but cannot meet the academic requirement, or decide not to take the risk of accepting a grant that could convert to a loan if they are unable to meet program requirements. The low take-up rate could also indicate that the financial benefit may not be large enough to incentivize students to accept a TEACH Grant when they would have otherwise not considered teaching. Some research suggests that teacher scholarship programs can be effective at both recruiting and retaining teachers in high-need schools when the financial incentive "meaningfully offsets the cost of a teacher's professional preparation." One such study cited TEACH Grants as an example of a teacher scholarship program that did not provide a large enough financial benefit. In contrast, the Noyce Scholarship provides $10,000 per year to undergraduate students in their junior or senior year or the same amount per year for graduate studies. In 2013, an independent evaluator found that among Noyce Scholarship recipients who had had at least two years to find a teaching position after obtaining certification, 90% were teaching in high-need school districts. One legislative proposal would triple the annual TEACH Grant award, increasing it from $4,000 to $12,000; however, the proposal would also double the length of service requirement from four years to eight years and require it to be completed within 10 years of program completion. Any increase in the TEACH Grant award amount may have the effect of attracting more individuals to participate in the program. However, if a recipient fails to complete his or her service obligation, it could mean that recipients are left with a larger amount to pay back in loans. The impact on the cost to the government is unclear given that the change may increase the number of individuals who participate in the program and, thus, the cost, but if the rate at which grants convert to loans does not change, then it can be expected that a significant number of individuals' grants would continue to convert to loans, and they will be repaying the government in larger amounts. <6.1.3. Finding and Sustaining a Qualifying Teaching Position> For a TEACH Grant recipient to fulfill his or her service obligation, he or she is required to teach at a school or in an ESA that serves low-income students and in a high-need field. This is intended to focus federal dollars on helping to produce teachers in schools and fields that historically face teacher shortages. Data from the 2017-2018 school year suggest that over 70% of all operational public schools may have met the TEACH Grant definition of a school that serves low-income students. However, despite the seeming prevalence of schools where recipients could fulfill their service obligation, they may still face challenges in locating and maintaining qualifying employment, especially since those schools still may not have vacancies in fields that qualify as high-need. For example, elementary school teachers may not be considered as teaching in a high-need field where the majority of their time must be spent teaching math or science because many of them may teach all subjects an equal amount of time. The AIR study found that 39% of TEACH Grant recipients whose grants were converted to loans reported that they did not fulfill their service requirement because they were teaching in positions that did not qualify for TEACH Grant service. Of those recipients, 15% reported that they could not find a job in a high-need field and school, 15% decided they did not want to teach in a high-need field and school, 14% applied to one or more qualifying positions but were not offered the job, and 13% found a higher-paying teaching position at a non-qualifying school. Additionally, 43% of those recipients reported other reasons for not teaching in a qualifying position, such as their school losing its Title I designation, a previously qualifying position being eliminated, confusion about whether the position qualified, teaching students from low-income families in a non-qualifying school, or not being certified in a high-need field. Similarly, the GAO study found that finding and keeping an eligible teaching position can be a challenge for recipients in satisfying grant requirements. Some of the reported reasons include limited hiring by school districts and the length of time it can take to find a qualifying position. Another factor is that promotions to non-teaching administrative positions in eligible schools do not qualify as positions fulfilling TEACH Grant service requirements. Some legislative proposals would expand the fields that would qualify as high-need, adding areas such as early childhood education, technology, engineering, career and technical education, and writing specialist. This change could help to attract individuals to teach in fields that may be considered as high-priority and, thus, provide more options for securing a position in a qualifying school. However, some of these additional fields may not face true shortages in low-income schools. Further, while low-income communities may face a shortage of early childhood educators, it could be challenging for states to identify all qualifying early childhood programs. The HEA defines an early childhood education program as a Head Start or Early Head Start program; a state licensed or regulated child care program; or a program that addresses the cognitive, social, emotional, and physical development of children from birth through age six, and is a state prekindergarten program, a preschool or infant/toddler program authorized under the Individuals with Disabilities Education Act (IDEA), or a program operated by an LEA. Not all recipients receive support from their institutions to find and secure qualifying teaching placements. The AIR study found that 70% of IHEs in its sample provided students with some placement service for identifying qualifying TEACH Grant service positions: 58% provided guidance on how to identify TEACH Grant-qualifying positions, 48% provided an updated list of available positions, and 46% established relationships with schools that have eligible positions. However, none of these practices were correlated with lower grant-to-loan conversion rates. In addition, while the TCLI and Nationwide List help recipients identify TEACH Grant-qualifying schools and fields, respectively, there is no central job search tool that identifies existing TEACH Grant-qualifying vacancies or job announcements. It is possible that expanding the types of schools that would qualify as eligible teaching placements could lead to longer retention rates in the classroom, and thus improve grant-to-loan conversion rates. Under the Paul Douglas Teacher Scholarships Program, which preceded TEACH Grants, there was no statutory requirement that the schools in which recipients taught be high-need; although, recipients could reduce the length of their required teaching service if they taught in a geographic area with teacher shortages. The ED Biennial Evaluation Report of the Paul Douglas Teacher Scholarship program from FY1995 and FY1996 showed that through FY1992, 63% of scholarship recipients had completed their teacher certification course of study. Of those, 67% had taught in the past or were teaching as of the 1992-1993 school year. Additionally, 6% of scholarship recipients were repaying or had repaid some part or all of their scholarship as loans. The North Carolina Teaching Fellows Program, which is similar in structure to TEACH Grants, requires that its fellows only teach in North Carolina public schools. One study found that the program is more likely to produce teachers who stay in public classrooms for five years or more. However, that same study also found that fellows tended more than other novice teachers to teach students who are more advantaged. As such, expanding the types of schools in which recipients could complete their service obligation could run counter to the original intent of the program to support low-income schools with recruitment of high-quality teachers. <6.1.4. Program Quality at Institutions Eligible to Disburse TEACH Grants> To be eligible to disburse TEACH Grants, an IHE must provide a high-quality teacher preparation program. Such teacher preparation program must be accredited by an ED-recognized accrediting agency of teacher education programs; or is approved by a state, provides a minimum of 10 weeks of full-time pre-service clinical experience, or its equivalent, and provides or assists in the provision of pedagogical coursework. The program must also provide or assist in the provision of supervision and support services to teachers. The HEA and accompanying regulations do not define what it means for a teacher preparation program to be "high-quality." Title II of the HEA requires states and IHEs to publish report cards on the quality of teacher preparation. States must also report to ED on the quality of teacher preparation programs. Title II of the HEA further requires states to develop criteria to assess program quality, identify programs that are low-performing or at risk of being low-performing based on those criteria, and report this information to ED. In 2014, 12 states identified a total of 45 programs as low-performing or at risk of being low-performing nearly evenly split between the two designations. Of those 45 programs, 28 were based in IHEs that disburse TEACH Grants. Twenty-two states have never identified a program as low-performing or at risk of being low-performing. In 2016, ED published regulations that would have linked the definition of "high-quality teacher preparation program" in 420L(1)(A) of the HEA to teacher preparation program ratings under the HEA Title II state reporting requirements; although, these regulations were subsequently overturned under P.L. 115-14 , pursuant to the Congressional Review Act. Not only did the regulations require that states identify programs that are "effective," but among other things they required states to develop and report on specific indicators for assessing teacher preparation program performance, including the learning outcomes of students taught by program graduates. Further, under these regulations, IHEs operating a program that a state identified as low-performing or at risk of being low-performing for two out of three years would have lost their eligibility to participate in the TEACH Grant program. One argument made for limiting TEACH Grant eligibility to those programs that states identified as "effective" was that TEACH Grant recipients might be more likely to fulfill their service obligation if prepared by strong teacher preparation programs. In contrast, some arguments against limiting TEACH Grant eligibility included concerns about the decrease in the number of IHEs that would be eligible to provide TEACH Grants, which may result in fewer students pursuing teaching in high-need fields and low-income schools. It was also stated that such a change could disproportionately impact the entry of low-income students into the teaching profession. To address some of these issues, one legislative proposal would require that a qualifying teacher preparation program be one that is not identified by the state as low-performing or at risk of being low-performing. Given that under current law, states identify few teacher preparation programs as low-performing or at risk of being low-performing, this change could create a minimum standard that is tied to existing statute without implicating a significant number of programs. However, as with ED's 2016 regulations, it may be possible that such a change could limit the number of IHEs that qualify for the TEACH Grant program and, thus, disproportionately impact the entry of low-income students into the profession. <6.1.5. Continued Application of the Highly Qualified Teacher (HQT) Definition> To meet program service requirements, among other criteria, a TEACH Grant recipient must comply with the requirements for being a HQT, as defined under the ESEA. Prior to December 2015, the ESEA specified minimum standards for teacher quality by defining a HQT, requiring that all teachers of core subjects within any state receiving funds under Title I-A of ESEA meet these standards. In December 2015, the Every Student Succeeds Act (ESSA; P.L. 114-95 ) reauthorized the ESEA and repealed the HQT definition. Now, the ESEA, as amended by the ESSA, does not contain requirements pertaining to minimum standards for teacher quality like those formerly applicable to states receiving ESEA grant funds under NCLB-enacted HQT provisions. However, the ESSA amendments still made the pre-December 2015 HQT requirements applicable to the TEACH Grant program. Depending on whether states implement new minimum standards that veer from the previous HQT standards, TEACH Grant recipients may be required to meet both sets of requirements: meeting state requirements to teach within the state and federal requirements to fulfill TEACH Grant service requirements. It is unclear how the definition of HQT would apply to recipients who fulfill their service obligation in qualifying private schools. A recently concluded negotiated rulemaking resulted in draft consensus language that included a definition of HQT. While the new definition is nearly identical to the HQT definition in the NCLB, it also contains new requirements for private school teachers such as passing competency tests that are recognized by five or more states. <6.2. Implementation Issues> Implementation issues relate to whether the way in which the TEACH Grant program is administered by ED may have impacted the program's success. They include challenges associated with certification of teaching service and the absence of a formal appeals process. <6.2.1. Challenges with Certification of Teaching Service> Within 120 days of completing or ceasing enrollment in the relevant program of study, TEACH Grant recipients must provide an initial certification of their employment as a teacher in a qualifying teaching position or of their intention to obtain employment in a qualifying teaching position. Thereafter, a recipient must provide an annual certification of having completed or intending to complete (if the time in which it is possible to complete the required teaching service has not lapsed) qualifying teaching service. If certifying completed teaching service, the recipient must provide documentation that demonstrates that he or she (1) is teaching in a low-income school, (2) has taught a majority of classes during the year in a high-need field, and (3) meets HQT requirements. There are a number of issues that have stemmed from the requirement for annual certification, the administrative process by which recipients maintain their grant status. In its review of complaint data from ED's Federal Student Aid Ombudsman, GAO found that 64% of TEACH Grant recipients cited problems with submitting annual certification paperwork. The AIR study also found that 41% of TEACH Grant recipients whose grants have been converted to loans did not fulfill their service requirements due to factors related to annual certification. In particular, 19% did not certify because they did not know about the annual certification process and 13% did not certify because of challenges related to this process. The GAO study documented anecdotal evidence suggesting that students may not fully comprehend the paperwork requirements, despite the requirement that recipients undergo TEACH Grant counseling when each grant is disbursed and once recipients complete their program of study. Further, GAO found evidence suggesting that the ED-contracted loan servicer converted 2,252 grants in good standing to loans in error between August 2013 and September 2014. Of those erroneous conversions, 19% were converted because a recipient did not understand the terms of the grant and certification requirements, including paperwork needed to document teaching service, or the servicer provided "inaccurate, unclear, confusing, or misleading" information about program or certification requirements to the recipient. This lack of understanding and information about certification requirements may have significant consequences the AIR study found that recipients whose grants had been converted to loans were half as likely as recipients whose grants were still in good standing to report that they were well-informed about the annual certification requirements. Recent news coverage has given attention to the TEACH Grant recipients whose grants were converted to loans due to a failure to certify on time, despite the fact that they had been performing qualified teaching. The failure to certify may occur for a number of reasons, from submitting the certification late to forgetting to submit the certification altogether. Certification documentation must be mailed or faxed, forms of communication for which it is difficult to verify whether the paperwork was received and on time. Additionally, the annual certification date often occurred over the summer when recipients or certifying school personnel are away on vacation. If recipients fail to certify on time, then all of their grants are converted into an Unsubsidized Direct Loan (which includes interest accrued since disbursement of each grant) regardless of whether they are performing qualified teaching service. However, until recently there had not been a formal process for a recipient to appeal such a decision (see " Lack of a Formal Appeals Process " below). To help address issues with certification, ED recently established a standardized annual certification date of October 31 of each year. Additionally, through negotiated rulemaking that concluded earlier this year, draft consensus language would require ED to provide additional notifications to recipients about when required certification documentation is due. Some legislative proposals would simplify the certification process by requiring that recipients only certify that they have completed qualified teaching for (1) at least one year by no later than five years after completion of their program of study; (2) at least two years by no later than six years after completion; (3) at least three years by no later than seven years after completion; and (4) at least four years by no later than eight years after completion. Otherwise, recipients would be considered in compliance with program rules unless they proactively request that their grants be converted to loans. Other bills require that ED work with states to simplify the certification process. One bill would establish the annual certification date as October 31 in law. <6.2.2. Lack of a Formal Appeals Process> The consequences of an erroneous or premature grant-to-loan conversion can be disruptive for recipients, including new and unexpected debt and a negative effect on their credit history. Some documentation also suggests that some recipients whose grants were converted into loans were unable to stay in their qualifying teaching positions, and instead had to change to a more lucrative position or other employment in order to make their new loan payments. Erroneous or premature grant-to-loan conversions have largely occurred in two types of circumstances. The first is when grants in good standing are converted to loans due to an administrative error. As mentioned above, GAO reported that from August 2013 through September 2014, ED discovered that 2,252 recipients had their grants converted to loans in error. Fifty-six percent of the errors occurred because the servicer did not give recipients the full 30 days from final notification to submit their certification. Another 15% of the erroneous conversions occurred because recipients were not given the full year from graduation to submit their certification. ED and the ED-contracted loan servicer have implemented changes to combat these erroneous grant-to-loan conversions resulting from administrative error. The loan servicer now conducts system checks and manually reviews all accounts flagged for conversion to determine if the recipient met certification requirements in accordance with regulation. ED also expanded the loan servicer's authority to reconvert loans to grants in certain circumstances without having to elevate disputes to ED. The second circumstance is when grants are converted to loans for recipients who are performing qualified teaching but fail to submit their certification paperwork on time, as discussed above. The extent of this problem is not known. Starting in January 2019, ED established a reconsideration process for anyone whose grant had been converted to a loan and who met or was on track to meet the TEACH Grant service requirements within the eight-year window. In February, ED emailed TEACH Grant recipients who were eligible for a TEACH Grant reconsideration. If a qualifying recipient did not receive an email from ED, he or she could still request a reconsideration by calling or emailing the ED-contracted loan servicer. The loan servicer makes a determination of whether a reconsideration request is accepted and to reconvert loans back to grants; however, it is unclear whether any other actions are taken such as helping to repair any damage to the recipient's credit as a result of the grant-to-loan conversion. As of May 2019, of the nearly 6,000 recipients who applied for reconsideration, about 38% had been approved for a reconversion and less than 0.3% had been denied. Other changes were proposed in negotiated rulemaking that concluded earlier this year. The resulting draft consensus language would not only establish a reconsideration process in regulation but would also require three other actions by ED as a result of an erroneous grant-to-loan conversion: (1) crediting any qualifying teaching service performed while the grant was wrongly in loan status toward the recipient's service requirement; (2) granting a suspension of the eight-year service obligation period equal to the amount of time that the grant was wrongly in loan status; and (3) providing support to help recipients repair any damage to their credit that resulted from the grant-to-loan conversion. Several bills propose to codify a formal appeals process in circumstances in which TEACH Grants were wrongfully converted to loans, and allow grants to be reinstated if an error was made. Additionally, one such bill proposes that, for grants that are found to have been erroneously converted into loans, ED would be required to extend the recipient's eight-year service obligation period by the amount of time his or her grants were wrongly in loan status. <6.3. Legislative Proposals to Reform TEACH Grants> Apart from the legislative changes mentioned in the preceding sections, there have been a number of additional proposals concerning the TEACH Grant program. Most bills propose to keep but amend the program, while others would replace or repeal it. Some legislative proposals that would retain but amend the TEACH Grant program seek to allow partial payback of the award on a prorated basis based on the length of service completed for recipients who do not complete their full service requirement. The Noyce Scholarship currently implements this practice, and the Paul Douglas Teacher Scholarship program used it as well. This might lessen the risk to recipients of accepting the grant and, therefore, encourage more students to participate in the program and enter into teaching. It may also reduce the financial burden on those who had fulfilled some part of their service in a high-need classroom and field. However, one concern may be that this concession could detract from the program's overall goal to retain teachers in low-income classrooms and high-need fields, as there may be an incentive not to complete all four years of required service. In the 115 th Congress, one amendment proposed would have allowed teachers whose roles or duties change to continue to fulfill their required teaching service with such new roles or duties. This could include recipients who are promoted to leadership roles in which they might be spending more time supporting other teachers instead of in the classroom instructing. Under current regulations, a teacher must teach a majority of classes in a high-need field new roles or duties may not meet service requirements and a recipient may not be able to accept a new position or may have to find another qualifying position that meets service requirements. As research suggests, allowing opportunities for advancement may lead to greater retention rates amongst TEACH Grant recipients, potentially beyond the required four years. However, permitting other positions beyond teaching to qualify could detract from the overarching goal of recruiting and retaining high-quality individuals in the teaching profession. Alternatively, there have also been proposals to replace TEACH Grants and other student financial assistance programs for teachers with a new program altogether. One such proposal would have provided to teachers in qualifying positions a larger maximum loan repayment amount than is available under currently authorized federal teacher loan forgiveness programs, and in graduated amounts beginning with their first year and increasing the longer they stay in a qualifying position. One argument for such a proposal is that the current combination of approaches to student financial assistance programs for teachers either fully back-loading benefits (as with current teacher loan forgiveness) or fully front-loading benefits (as with TEACH Grants) has not been sufficient in incentivizing high-quality candidates to join and remain in the teaching profession. However, one consideration is that such a new program would likely result in an increased cost to the federal government. Several bills have proposed to eliminate the TEACH Grant program without creating a new program in its place. As justification for elimination, proponents have stated that because ED projects that the majority of TEACH Grant recipients will not be able to fulfill their service requirements, the program ultimately becomes a "risky gamble" for students, as they are more likely than not to incur a significant amount of debt as a result.

The Teacher Education Assistance for College and Higher Education (TEACH) Grant program is intended to encourage individuals to enter the teaching profession by providing recipients with grants of up to $4,000 annually to pursue coursework that leads to a certification in teaching. Congress authorized the TEACH Grant program in the College Cost Reduction and Access Act of 2007 ( P.L. 110-84 ) to address concerns about growing demand for high-quality teachers, especially in low-income schools. To be eligible for a TEACH Grant, among other requirements, a postsecondary student has to meet certain academic achievement requirements and be enrolled in a TEACH-Grant eligible program of study. The TEACH Grant program is the only HEA Title IV program with an academic merit requirement. As a condition of receiving a TEACH Grant, a recipient must complete four years of teaching in a high-need field and in a school that serves low-income students, within eight years of completing his or her program of study. If a recipient fails to complete the required teaching service, his or her TEACH Grant is converted into a Federal Unsubsidized Direct Loan, which must be repaid in full including interest that accrued since grant disbursement. To be eligible to disburse TEACH Grants, among other requirements, an institution of higher education (IHE) must provide a high-quality teacher preparation program that is either accredited by a Department of Education (ED)-recognized accrediting agency of teacher education programs; or is approved by a state, includes a minimum of 10 weeks of full-time pre-service clinical experience, and provides or assists in providing pedagogical coursework. Additionally, such teacher preparation programs must provide or assist in providing supervision and support services to program completers when they are working as teachers. Program administration tasks are divided among IHEs, ED, and the loan servicer with which ED contracts. IHEs award and disburse TEACH Grants to recipients, while the loan servicer performs day-to-day administrative tasks after a grant has been disbursed. ED oversees both the IHE's and the loan servicer's functions. Since the inception of the program, over 300,000 TEACH Grants, totaling nearly $938 million, have been disbursed. Based on a Government Accountability Office (GAO) analysis, the estimated take-up rate of TEACH Grants by the potentially eligible population in the 2013-2014 academic year was 19%. According to an American Institutes for Research (AIR) study, among TEACH Grant recipients who began their eight-year service period prior to July 2014, 63% saw their grants converted to loans as of July 2016. Several issues related to TEACH Grants may garner congressional attention. The bulk of these issues pertain to program design, including the extent to which the program successfully identifies individuals who commit to teaching, the size of the TEACH Grant benefit, challenges associated with finding and sustaining a qualifying teaching placement, teacher preparation program quality at IHEs that disburse TEACH Grants, and the continued application of the "highly qualified teacher" definition to the TEACH Grant program. Other issues are related to program implementation, such as challenges associated with certification of teaching service and the absence of an appeals process. Lawmakers may also wish to consider other changes that have been proposed since the TEACH Grant program was authorized. Some of these include permitting partial payback of TEACH Grants converted into loans that is prorated based on the length of service fulfilled for recipients who do not complete the service requirement, allowing teachers whose roles or duties change to continue to fulfill their required teaching service with such new roles or duties, or replacing or sunsetting the program altogether.

crs_R45852

crs_R45852_0

<1. Introduction> Three-dimensional (3D) printing is a manufacturing process used to create real-world parts from digital 3D design files. This process is of particular relevance to Congress because of its use in federal programs; economic potential; continued applications in scientific research and development; roles in national security; and potential areas of concern, including weapons development and intellectual property law. This report describes the basic parts common to 3D printers and explains the operation of the technology. It also provides a snapshot of current materials and capabilities, traces the historical development of the technology since 1980, provides information on the federal role in 3D printing, communicates the primary properties of 3D printing with reference to manufacturing, explains secondary manufacturing impacts that stem from these properties, and highlights particular issues relevant to Congress. 3D printing is sometimes known as additive manufacturing . The term additive refers to the construction of a final part through the addition of consecutive layers of material on a build plate. In contrast, subtractive manufacturing processes carve out a final part from an initial block by removing unwanted material. Computer-controlled additive and subtractive manufacturing originated in the 1980s and 1970s, respectively. Yet, the basic techniques underlying these manufacturing methods that is, addition or removal of material to create a product have existed for millennia. 3D printing is used in a wide variety of applications, including aerospace, medicine, defense, custom manufacturing, prototyping, art, hobbies, and education (see Table 1 ). The prices, capabilities, and dimensions of 3D printers also vary widely. For more information, see " Current Materials and Capabilities " section below. <2. Technical Overview> In general, 3D printers have five common parts: input material, print head, build plate, axes, and 3D design file (see Figure 1 ). Input material 3D-printed parts begin as input material. This material can be in the form of solid filament, pellets, liquid, or powder. Print head The input material is deposited at the tip of the print head. This process can occur through a variety of methods, including pushing filament or pellets through a metal extruder, using a laser to melt powder, or using a light to solidify liquid. Build plate The build plate is the base (flat surface) upon which the part is constructed. At the beginning of the 3D printing process, the print head is nearly touching the build plate. As more layers are added to the part, the distance between the print head and the build plate increases. Axes The axes move the print head relative to the build plate. This enables the 3D printer to create a particular pattern for each new layer of material. The final part is made up of the patterns in each layer, stacked on top of each other. 3D design file The 3D printing process is governed by a digital 3D design file. This file provides instructions to the 3D printer that describe how to move the axes, which in turn move the position of the print head relative to the build plate. The file controls exactly what patterns are produced in each layer; this determines which kind of part is produced by the 3D printer (see Figure 2 ). <3. Current Materials and Capabilities> The prices and capabilities of 3D printers span a wide range of options. Prices vary from several hundred dollars to millions of dollars. More specifically, 3D printers at the price range of $5,000 and below (known as consumer printers ) often are designed to print plastic parts. Several different plastics are available, each with different capabilities and costs. These materials include tough nylon plastics; flexible, rubber-like plastics; plastics reinforced with carbon fiber; dissolvable plastics; clear plastics; and decorative plastics with the appearance of wood or metal. Some 3D printers in this price range can also print using materials such as ceramic or chocolate. Structural metal-infused plastic, as opposed to decorative metal-infused plastic, also can be used in 3D printers at this price range. However, structural metal-infused 3D-printed parts require additional high-temperature post-processing to burn off the plastic. This process leaves an entirely metal product behind. The necessary high temperatures for post-processing can be attained using pottery kilns, sintering machines, or other specialized devices. Commercial services are available that offer high-temperature post-processing of metal-infused 3D-printed parts. 3D printers at the price range of $5,000 and up (known as industrial printers) are able to use a wider variety of materials in an even greater variety of applications. These 3D printers can create structures that are larger, more detailed, or more reliable than structures created by consumer printers, or they can print in materials that are unavailable at lower price ranges. For example, medical biofabrication printers can print structures made of living cells. Metal 3D printers can create parts out of titanium, steel, and other metals, which may cost less than traditional subtractive machining processes. Large-format plastic 3D printers can create parts that are more than 6 feet tall. Some concrete 3D printers can manufacture the walls of an entire building. <4. History> The development and growth of 3D printing can be described in three major periods. The period spanning 1980 to 2010 marks the creation of the technology, its industrial use, and the beginning of the consumer 3D printing movement. Between 2010 and 2015, the 3D printing market continued to expand, despite signs of weakening in 2014. Since 2015, prices for consumer 3D printers have fallen, while sales of consumer and industrial 3D printers have continued to rise as the technology has matured. <4.1. Early 3D Printing (1980-2010)> The first major patents for 3D printing methods were filed in the 1980s, creating a nascent 3D printing market for industrial clients. In the 1990s, 3D printers using plastic, metal, paper, ceramic, and wax became available at prices from thousands of dollars to hundreds of thousands of dollars. In the early 2000s, the 3D printer market expanded into specialized industries, including medicine, dentistry, and jewelry. At the same time, new plastic printing materials were developed. The first decade of the 21 st century marked the expiration of several key 1980s 3D printing patents. In the same period, consumers gained access to improved web connectivity and user-friendly computer-aided design (CAD) tools. These factors contributed to the birth of the consumer 3D printing movement. Key developments in this movement included the formation of the open-source 3D printer community; the 2007 release of the first website for print-on-demand custom 3D prints (Shapeways); and the 2008 creation of the popular 3D printing file-sharing website Thingiverse. In 2009, MakerBot, one of the first consumer 3D printing companies, released a $750 3D printer that incorporated some of the off-patent technologies from the 1980s. <4.2. Expansion of 3D Printing (2010-2015)> The consumer market for 3D printers expanded in the 2010s, fueled in part by the continued expiration of 20 th -century patents. Offerings included branded 3D printers, unbranded kits sold on eBay, and 3D printers funded on crowdfunding sites. Prices of bare-bones consumer 3D printers fell to $500-$600. Higher-end consumer printers gained advanced features that made them easier to use and maintain. Innovations in 3D design software and improvements in printer reliability contributed to the spread of consumer and industrial 3D printers in shared makerspaces, commercial establishments, libraries, and universities. 3D file sharing also became widespread, both for paid and free models. One 3D file website, Thingiverse, had more than 2 million active users in 2015. Transmission of 3D design files occurred not only through mainstream file-sharing sites such as Thingiverse, 3DShook, and Cults but also through anonymous channels, including internet torrents (a distributed, hard-to-trace online file-sharing method). At the same time, materials for consumer and industrial 3D printers grew more diverse and were sold by more companies, helping to reduce 3D printing costs. Print-on-demand services also expanded in this period, offering a wide variety of materials, including plastics, precious metals, and ceramics. These services allowed consumers to purchase a 3D-printed part made from their own 3D design file but fabricated by a third party. Some of the early print-on-demand services offered the ability to purchase printing services from a peer-to-peer network of individually owned desktop 3D printers. The 3D printing industry began to show signs of weakening in 2014 after a period of growth and consolidation. In June 2015, Time magazine reported that the stocks of four leading 3D printing companies had "lost between 71% and 80% of their market value in the past 17 months." Between January and October 2015, the 3D printing company Stratasys laid off 36% of staff in its MakerBot division. At the same time, annual grants of 3D printing-related patents more than doubled between 2010 and 2015, from 247 to 545. In 2015, industrial unit sales of 3D printers declined by 2.3% while consumer unit sales increased by 49.4%. Unit sales of both industrial and consumer 3D printers generally have shown sustained upward trends (see Figure 3 and Figure 4 ). Total 3D printing industry revenues increased year-over-year since 1993, with the exception of 2001, 2002, and 2009. On average, 3D printing industry revenues have grown annually over the past 30 years by 26.9%. <4.3. Recent 3D Printing History (2015-Present)> The period from 2015 to 2019 has seen renewed 3D printing investment, in terms of both research and development and investment in growing companies. Corporations (such as General Electric, Google Ventures, Alcoa, and Norsk Titanium AS) and federal departments and agencies such as the Department of Defense (DOD) and the National Institutes of Health (NIH) have invested a combined total of hundreds of millions of dollars in 3D printing initiatives over this period. At the same time, the price of consumer 3D printers has continued to fall. As of July 2019, a basic 3D plastic printer can be purchased online for less than $150. 3D printers in the low hundred-dollar range generally can be used after simple assembly or directly out of the box. The input material for these basic 3D printers is usually a spool of plastic filament, which can be purchased for less than $9 per pound. Sales of both industrial and consumer 3D printers have continued to rise. According to one market analysis, 19,285 industrial 3D printers and 591,079 consumer 3D printers were sold in 2018 (see Figure 3 and Figure 4 ). Further, that analysis estimates that a total of more than 140,000 industrial 3D printers and 2 million consumer 3D printers have been sold worldwide. This may be an underestimation of consumer 3D printers, because it does not include those assembled from parts or those purchased as kits. 3D-print-on-demand services now serve the consumer and industrial markets. These services provide access to industrial-grade 3D printers, allowing users to create high-precision parts out of plastic or other materials. In general, individuals do not have to create their own files for 3D printing; many online databases of 3D design files are available. Users also may join online 3D printing communities, some of which have hundreds of thousands to millions of users. The Wohlers Report estimates that annual 3D printing industry revenues reached $9.975 billion globally in 2018. However, 3D printing makes up less than 1% of manufacturing revenues worldwide. Further, analysts predict that most future products will be created through traditional manufacturing methods, even when 3D printing is technologically mature. Some estimates predict that 3D printing will eventually account for 5%-10% of total global manufacturing revenues. Several issues may limit the overall effectiveness and utility of current 3D printing technologies, including quality control, cybersecurity, and relative production speed as compared to traditional manufacturing. New evaluation methods, certification programs, cybersecurity advances, and research and development programs may help to address these limiting issues. <5. Federal Role in 3D Printing> Private industry has long been the primary innovator in 3D printing technology, accounting for an estimated 90% of additive manufacturing patents through 2015. DOD's Institute for Defense Analysis (IDA) found that the federal government played a relatively small but instrumental role in the creation of 3D printing technology, providing "direct funding for developing early phases of the technology and later refinements in two of the four processes." According to IDA, [Federal] support of early research ... created the knowledge, technologies, and tools later adopted in the [additive manufacturing] field and applied by inventors to develop foundational AM patents and technologies. The knowledge generated from federally sponsored [research and development] from the early 1970s influenced the patents filed in the 1980s and 1990s and later innovations. Observations from the backwards citations analysis of the foundational patents show that some of the earliest investors in AM were the Department of Defense Office of Naval Research (ONR) and the Defense Advanced Research Projects Agency (DARPA), which provided steady, continual streams of funding for both academic and industry-based researchers. NSF support was also instrumental in the development of early relevant AM research in the 1970s. The IDA report further credited federal "support of knowledge diffusion from the foundational patents to improve the technologies and develop new applications." The report also noted that the National Science Foundation (NSF) participated in the development of four of six foundational 3D printing processes developed in the 1980s and 1990s. According to the 2015 report, NSF "provided almost 600 grants for [additive manufacturing] research and other activities over the past 25 years, amounting to more than $200 million (in 2005 dollars) in funding." In 2012, President Obama announced the establishment of the National Additive Manufacturing Innovation Institute (NAMII) in Youngstown, OH, as a pilot institute under the National Network of Manufacturing Innovation (NNMI, now referred to as Manufacturing USA). Under NAMII, the Departments of Defense, Energy, and Commerce; the National Science Foundation; the National Aeronautics and Space Administration (NASA); 40 companies; 9 research universities; 5 community colleges; and 11 nonprofit organizations collaborated to share resources, move basic research toward product development, and provide workforce education and training. The National Center for Defense Manufacturing and Machining was selected to manage the NAMII pilot institute through a competitive selection process. In 2013, NAMII was rebranded as America Makes. The Manufacturing USA program's four stated goals are to increase the competitiveness of U.S. manufacturing; facilitate the transition of innovative technologies into scalable, cost-effective, and high-performing domestic manufacturing capabilities; accelerate the development of an advanced manufacturing workforce; and support business models that help the Manufacturing USA institutes to become stable and sustainable after the initial federal startup funding period. The Government Accountability Office (GAO) estimates that America Makes was to receive $56 million in federal funding and $85 million in nonfederal funding from August 2012 to August 2019. As of December 2018, America Makes had 225 members. Many national laboratories use 3D printing, including Oak Ridge National Laboratory, Lawrence Livermore National Laboratory, Sandia National Laboratories, Los Alamos National Laboratory, and Fermi National Accelerator Laboratory. The U.S. government also purchases 3D-printed products in several capacities; a 2016 report by the General Services Administration (GSA) notes that the Department of Defense purchases an especially wide variety of 3D-printed parts for defensive and medical purposes. The GSA offers a specific procurement subcategory for federal purchases of 3D printing technology. The federal government is involved in the creation of 3D printing standards, as well. Among other initiatives, the U.S. Air Force granted a private U.S. company $6 million in 2016 to develop standards for 3D-printed rocket engines. This grant was intended to reduce U.S. reliance on foreign-made launch vehicle components. Similarly, the Federal Aviation Administration (FAA) is working with industry organizations to develop certification methods for 3D-printed parts. The FAA published a road map in September 2018 that "includes training and education, development of regulatory documents, Research and Development (R&D) plan and interagency communication." Further, the National Institute of Standards and Technology and the Food and Drug Administration operate several projects in pursuit of improved process qualification for 3D printing. At the same time, standards have been developed privately by Committee F42, a technical group formed in 2009 by ASTM International and the Society of Manufacturing Engineers. <6. Manufacturing Impacts> In some cases, 3D printing offers advantages when compared to traditional methods of manufacturing, such as injection molding, drilling, or welding. These benefits stem from the particular design of the technology (see " Technical Overview ") and have changed the national security, manufacturing, and economic landscapes. The following list of properties provides an overview of ways in which 3D printing deviates from previously established manufacturing technologies. <6.1. Properties of 3D Printing> Reduced waste In general, the additive manufacturing process uses only the approximate amount of material needed to produce a product; subtractive manufacturing processes remove materials to produce a product, which inherently generates waste. Accordingly, less input material may be wasted in additive manufacturing. To the extent that some input material is wasted in 3D printing, that material can sometimes be recycled into new stock for use in making other 3D-printed parts. Capacity to create parts with high internal complexity 3D-printed parts are constructed layer by layer, which means complex internal geometries (such as hidden cavities or small channels) can be constructed easily. Cost-effectiveness of small production runs 3D printers do not require significant retooling when a new or modified part is manufactured. In contrast, manufacturing technologies such as injection molding or die casting incur significant retooling costs when a part design is modified. Ease of design modification Digital 3D design files can be easily modified and transmitted. <6.2. Associated Manufacturing Impacts> Potential reduction in discrete parts per product The high internal complexity of 3D-printed parts means that several distinct manufacturing processes (e.g., machining and welding) can often be integrated into a single 3D printing operation. This has supported manufacturing of parts that previously would have been impossible or prohibitively expensive. Single-piece construction can also result in parts that have fewer weak spots. Potential reduction in manufacturing costs 3D printing provides an alternative for companies considering investments in machine tools. In some cases, 3D printing may be more cost-effective than traditional options; this is particularly true for short-run, custom, or complex parts. 3D printing may be less cost-effective for parts that would require fewer post-processing steps if manufactured using traditional methods. The smaller size of a 3D printer compared to traditional manufacturing equipment may also reduce required physical plant size and related costs. Improved prototyping abilities Easy modification of design files, combined with the cost-effectiveness of short runs of parts, supports the ability to rapidly prototype parts using 3D printing. This rapid prototyping ability allows designs to be optimized and adjusted quickly. Potential reduction in part weight or improvement in part strength The capacity to create complex internal structures using 3D printing has improved manufacturers' ability to create parts that are lighter or stronger. This has shown particular promise in the aerospace and automotive industries. Potential reduction in inventory Large production runs usually are pursued in traditional manufacturing to minimize fixed costs per part. Often, many of the goods produced must be held in storage as inventory. The ability to create 3D-printed parts on demand may allow manufacturers to reduce their inventory of parts. Low set-up costs associated with additive manufacturing allow for smaller production runs, reducing the amount of capital tied up in inventory as well as overhead costs such as storage and insurance. Mass customization 3D-printed parts may be individually customized on a large scale. Additive manufacturing allows for the production of unique parts, sometimes modified from a basic design, to suit the needs of individual consumers. Potential environmental efficiency Reduced waste and the lack of a need for retooling 3D printers supports environmental efficiency in manufacturing. Energy costs also can be reduced by "re-manufacturing" parts using 3D printing that is, creating salable products by reconstructing worn-out areas of old parts, instead of manufacturing parts from entirely new input materials. Decentralized manufacturing 3D printers can be used to develop parts in a decentralized capacity. This may reduce the time required to provide parts to consumers, as well as the cost, energy, and environmental impacts of shipping. Low barriers to entry The comparatively low cost of 3D printing equipment may lower the barrier to entry to manufacturing. This may cause positive or negative impacts; although productivity in legal industry may increase, 3D printing also may be used to support manufacturing of contraband items, including light weapons or parts of nuclear weapons. Low barriers to entry also may create potential negative impacts for established businesses facing new competitors. <7. Issues for Congress> 3D printing is a relatively new approach to manufacturing, and the number of 3D printers in use has expanded greatly over the past 15 years. Some industry leaders and policymakers have expressed optimism about the potential of this technology to address certain manufacturing needs. 3D printing is seen as a tool for enabling cost-effective, customized, local production of parts, and in some cases, it allows for the production of parts that cannot be made using traditional manufacturing processes. 3D printing is also seen as enabling innovation and entrepreneurship by lowering the cost of entry into manufacturing. The federal government has played an important R&D role in the development and improvement of 3D printers. In addition, some agencies such as DOD, NASA, and NIH are using 3D printing capabilities to accomplish their missions, such as by making or acquiring parts that are no longer available, custom parts, or prototypes for testing and evaluation. As 3D printing technology matures, Congress may face a variety of related issues. Among these issues are how much funding to provide for R&D on 3D printing technology and materials; how much funding to provide for education and training activities focused on preparing scientists, engineers, technicians, and others for careers related to 3D printing; whether federal acquisition strategies need to be modified to reflect the availability of 3D-printed parts; how to ensure that U.S. regulatory agencies can appropriately address 3D printing processes and products; and whether and how the federal government can facilitate the development of industry standards and systems for testing and certification of 3D printing. One of the federal government's flagship efforts focused on 3D printing is the America Makes manufacturing institute, the first institute established as part of the Manufacturing USA program. America Makes is a public-private partnership that seeks to "[accelerate] the adoption of additive manufacturing technologies in the United States to increase domestic manufacturing competitiveness." Some have raised concerns over the long-term sustainability of the Manufacturing USA institutes after their period of initial federal financial assistance, which extends for five to seven years. According to the GAO, the agency sponsors of the institutes Department of Commerce, Department of Energy, and DOD "have taken steps to support their institutes' sustainability planning but have not developed criteria to evaluate whether institutes are on track to sustain their operations beyond the initial period of federal financial assistance." Institute representatives have expressed concern that the institutes may seek or accept support from foreign corporations, potentially undermining the competitiveness goals of the institutes. Congress may monitor the progress of the America Makes institute toward sustainability and consider whether the federal government should provide continuing financial support. Current bills in the 116 th Congress related to this issue include H.R. 2397 . Some have expressed concern about the potential use of 3D printing in the manufacture of firearms or other contraband material by individual criminals, criminal organizations, terrorists, or others precluded from the possession of such devices. Congress may wish to consider approaches to limiting or preventing such uses of 3D printing. Current bills in the 116 th Congress related to this issue include S. 1831 and H.R. 3265 . 3D printing may raise intellectual property (IP) issues. For example, the U.S. Army has stated that IP difficulties may impede the fabrication of 3D-printed parts in the field. A 2014 industry survey also indicated that manufacturers consider the "threat to intellectual property" to be a major concern created by the proliferation of 3D printing. Congress may explore how IP issues could impede the legitimate use of 3D printing, particularly its use by the federal government, and what options may be available for addressing such barriers. Current bills in the 116 th Congress related to this issue include H.R. 3313 . <8. Conclusion> 3D printing is an alternative manufacturing process with particular strengths and weaknesses. Although the technology is not suitable for all types of manufacturing, it is used in a wide variety of industries, including aerospace, medicine, and custom manufacturing. 3D printing has remained in wide use by the federal government, as well. The technology is likely to grow in usage as new materials become available, material and machine costs continue to fall, and quality issues are addressed. The influences that 3D printing has on the U.S. manufacturing landscape stem from an improved capacity for relatively inexperienced users to create extremely complex parts. This may create regulatory, IP, or safety challenges. At the same time, the manufacturing abilities provided by 3D printers also promote economic development and new avenues of scientific and medical exploration. For these reasons, 3D printing is likely to offer both challenges and opportunities over the coming years.

Three-dimensional (3D) printing, also known as additive manufacturing, is a highly flexible manufacturing process that has been used in product development and production for the past 30 years. Greater capabilities, lower prices, and an expanded range of manufacturing materials have vastly expanded adoption of 3D printers over the last decade and a half. The economic and scientific potential of this technology, as well as certain regulatory concerns (such as 3D printing of firearms), have recently increased congressional interest. 3D printers are used in a variety of industries—such as aerospace, medicine, and education—as well as in nonspecific custom prototyping. Both private industry and the federal government have supported these applications of 3D printing. Support from the federal government has included basic and applied research funding from the National Science Foundation, as well as research and development funding from mission agencies such as the Department of Defense, the National Institutes of Health, and the National Aeronautics and Space Administration. More broadly, federal support for additive manufacturing has been provided through the flagship institute of the Manufacturing USA program, the National Additive Manufacturing Innovation Institute (also known as America Makes). This consortium of industry, university, and government seeks to "[accelerate] the adoption of additive manufacturing technologies in the United States to increase domestic manufacturing competitiveness." In recent years, hundreds of millions of dollars—public and private—have been invested in 3D printing-related companies and 3D printing research and development. 3D printers span a range of alternative capabilities, print with many different kinds of materials, and are capable of building products at a variety of scales. The price of a 3D printer varies with its capabilities; machines may cost from hundreds of dollars to millions of dollars. 3D printing uses a fundamentally different process than most methods for traditional manufacturing. Much of modern manufacturing uses subtractive manufacturing processes, beginning with a block of material (e.g., a tube, a bar, or an ingot) and using a variety of tools to remove parts of the initial material to achieve a final design. 3D printers are additive, stacking up and fusing thin layer upon thin layer of a material (or materials) onto a blank platform to achieve a final design. This allows for flexibility and complexity in the manufacturing of 3D-printed items. Four primary properties of 3D printers stem from this unique additive construction method: reduced waste, capacity to create parts with high internal complexity, cost-effectiveness of small production runs, and ease of design modification. These four primary properties of 3D printers translate into several distinctive manufacturing impacts: potential reduction in discrete parts per product, potential reduction in manufacturing costs, improved prototyping abilities, potential reduction in part weight or improvement in part strength, potential reduction in inventory, mass customization, potential environmental efficiency, decentralized manufacturing, and low barriers to entry. Although these manufacturing impacts are particularly advantageous for some manufacturing activities, most experts say the current state of 3D printing tends to make the technology a poor fit for mass production of simple parts. For this reason, some have estimated that 3D printing may account for 5% to 10% of manufacturing in the long term. In general, 3D printing has been widely viewed as a driver for American economic development, national security, and combat readiness. At the same time, some have expressed concerns about potential adverse effects of this technology, such as its potential use in the manufacture of firearms or other contraband material by individual criminals, criminal organizations, or terrorists. 3D printing technology is expected to mature substantially in the coming decades to allow the use of new materials, faster production speeds, and lower costs. Prices of consumer 3D printers have fallen by about 80% over the past decade and appear poised to continue to fall. Industrial 3D printing is increasingly an essential part of the U.S. manufacturing portfolio, and it appears to be critical to the nation's upcoming advanced manufacturing strategy.

crs_R46260

crs_R46260_0

<1. Introduction to the Payments in Lieu of Taxes (PILT) Program> The Payments in Lieu of Taxes (PILT) program provides compensation for certain entitlement lands that are exempt from state and local taxes. These lands include selected federal lands administered by the Bureau of Land Management, the National Park Service, and the U.S. Fish and Wildlife Service, all in the Department of the Interior (DOI); lands administered by the U.S. Forest Service in the Department of Agriculture; federal water projects; dredge disposal areas; and some military installations. Enacted in 1976, PILT is the broadest in terms of federal land types covered of several federal programs enacted to provide compensation to state or local governments for the presence of tax-exempt federal lands within their jurisdictions. PILT was enacted in response to a shift in federal policy from one that prioritized disposal of federal lands one in which federal ownership was considered to be temporary to one that prioritized retention of federal lands, in perpetuity, for public benefit. This shift began in the late 19 th century and continued into the 20 th century. Along with this shift came the understanding that, because these lands were exempt from state and local taxation and were no longer likely to return to the tax base in the foreseeable future, some compensation should be provided to the impacted local governments. Following several decades of commissions, studies, and proposed legislation, Congress passed PILT to at least partially ameliorate this hardship. PILT payments generally can be used for "any governmental purpose," which could include assisting local governments with paying for local services, such as "firefighting and police protection, construction of public schools and roads, and search-and-rescue operations." The Office of the Secretary in DOI is responsible for the calculation and disbursement of payments under PILT. Payments under PILT are made annually to units of general local government typically counties, though other types of governmental units also may be used (hereinafter, counties refers to units of general local government) containing entitlement lands . PILT comprises three separate payment mechanisms: Section 6902, Section 6904, and Section 6905 payments, all named for the sections of law in which they are authorized. Section 6902 payments account for nearly all payments made through PILT. The Section 6902 authorized payment amount for each county is calculated according to a statutory formula that is subject to a maximum payment based on the county's population (see " PILT Payments Under Section 6902 "). The remaining payments are provided through Section 6904 and Section 6905 under selected circumstances and typically are limited in duration. Through FY2019, PILT payments have totaled approximately $9.2 billion (in current dollars). Members of Congress routinely consider amending PILT within both appropriations and authorizing legislation. For example, legislation in the 116 th Congress would amend how PILT appropriations are provided and would change how payments are calculated under Section 6902. In addition, Members of Congress may address issues related to which federal lands should be eligible for payments under PILT. This report provides an overview of the PILT payment program and includes sections on PILT's authorization and appropriations, which discusses the history of how Congress has provided funding for PILT; Section 6902 payments, which includes a breakdown of how Section 6902 payments are calculated; Section 6904 and Section 6905 payments, which outlines what situations result in payments under these mechanisms; and issues for Congress, which discusses several topics that have been or may be of interest to Members of Congress when considering the future of PILT. <2. PILT Authorizations and Appropriations> Congress has funded PILT through both discretionary and mandatory appropriations at various times since the program was first authorized. Some stakeholders and policymakers have routinely expressed concern about changes in the appropriations source, both the process of switching between mandatory and discretionary appropriations and the uncertainty that may accompany such changes. From 1982 to 2008, Section 6906 provided an "Authorization of Appropriations" for PILT, which stated, "Necessary amounts may be appropriated to the Secretary of the Interior to carry out [PILT]." Further, it clarified that "amounts are available only as provided in appropriation laws." Congress amended this language in 2008 and changed the section title from "Authorization of Appropriations" to "Funding." Further, Congress changed the text to read For each of fiscal years 2008 through 2012- (1) each county or other eligible unit of local government shall be entitled to payment under this chapter; and (2) sums shall be made available to the Secretary of the Interior for obligation or expenditure in accordance with this chapter. This amendment effectively changed PILT funding from being discretionary to being mandatory for the years specified (see Table 1 for PILT funding since FY2005). Since 2008, Congress has amended Section 6906 several times by changing the fiscal year in the first line through both annual discretionary appropriations laws and other legislative vehicles ( Table 1 ). PILT was funded through discretionary appropriations from its enactment through FY2007. Since FY2008, Congress has provided funding for PILT through both discretionary and mandatory appropriations ( Table 1 ). From FY2008 through FY2014, Congress authorized mandatory funding for PILT through several laws . Since FY2015, funding has been provided, at least partially, through the annual appropriations process. In FY2015, PILT received both discretionary and mandatory appropriations. For FY2016 through FY2020, Congress funded PILT through the annual appropriations process. In FY2016 and FY2017, the appropriations laws provided specific funding levels for PILT, which was treated as discretionary spending. In FY2018, FY2019, and FY2020, the appropriations laws provided funding for PILT by amending the authority provided in 31 U.S.C. 6906, which was treated as mandatory spending. In each of these three years, funding was provided for PILT at the full statutory calculation levels. Since FY2008, Congress has provided funding for PILT through both one-year and multiyear appropriations. Congress's actions have resulted in full funding and partial funding in different years ( Table 1 and Figure 1 ). These types of changes from year to year may have implications for counties that rely on PILT funding as part of their annual budgets. In addition to appropriating funding for the program, Congress routinely provides other guidance on PILT within the annual appropriations process, such as minimum payment thresholds, set-asides for program administration, and provisions for prorating payments. When appropriated funding is insufficient to cover the full amount for authorized payments under Sections 6902, 6904, and 6905, counties typically receive a proportional payment known as a prorated payment ( Figure 1 shows the disparity between the authorized amount and the appropriated amount in recent years). Even in years in which appropriations are set equal to 100% of the full statutory calculation, payments to counties may be prorated if funding is set aside for purposes other than payments, such as administration. <3. PILT Payments Under Section 6902> Section 6902 payments are provided to units of local government jurisdictions (referred to as counties in this report) across the United States to compensate for the presence of entitlement lands within their boundaries. Section 6902 payments also are provided to the District of Columbia, Guam, Puerto Rico, and the Virgin Islands. Section 6902 payments account for nearly all of the payments made under PILT. In FY2019, 99.85% of all PILT payments were made through Section 6902. Further, more counties are eligible for Section 6902 payments than either Section 6904 or Section 6905 payments. In FY2019, of the 1,931 counties that received PILT payments, 1,927 received payments under Section 6902, and 134 received payments under Section 6904 and/or Section 6905 (130 counties received payments under both Section 6902 and Section 6904 and/or Section 6905). <3.1. Entitlement Lands> There are nine categories of federal lands identified as entitlement lands in the PILT statute. 1. Lands in the National Park System 2. Lands in the National Forest System 3. Lands administered by the Bureau of Land Management (BLM) 4. Lands in the National Wildlife Refuge System (NWRS) that are withdrawn from the public domain 5. Lands dedicated to the use of federal water resources development projects 6. Dredge disposal areas under the jurisdiction of the U.S. Army Corps of Engineers 7. Lands located in the vicinity of Purgatory River Canyon and Pi on Canyon, CO, that were acquired after December 31, 1981, to expand the Fort Carson military reservation 8. Lands on which are located semi-active or inactive Army installations used for mobilization and for reserve component training 9. Certain lands acquired by DOI or the Department of Agriculture under the Southern Nevada Public Land Management Act ( P.L. 105-263 ) Of these categories, the first three (National Park System, National Forest System, and lands administered by BLM) largely account for all of the lands managed by the relevant agencies. The remaining categories are either lands tied to specific laws or actions (categories 7 and 9, above) or lands that represent a subset of the lands administered by a particular agency. For example, entitlement lands that are included within the NWRS (category 4) only account for lands within the system that have been withdrawn from the public domain, which excludes lands that have been purchased as additions to the NWRS. Further, lands administered by the U.S. Fish and Wildlife Service that are not included in the NWRS are not included within the definition of entitlement lands. Similarly, lands in the other categories (5, 6, and 8, above) may not include all, or even the majority of, lands administered by particular agencies or departments. <3.2. Calculating Section 6902 Payments> Section 6902 payments are determined based on a multipart formula (see Figure 2 ). The DOI Office of the Secretary calculates PILT payments according to several factors, including the number of entitlement acres; a per-acre calculation determined by one of two alternatives (Alternative A, also called the standard rate , or Alternative B, also called the minimum provision ); a population-based maximum payment (ceiling); certain prior-year payments pursuant to other compensation programs; and the amount available to cover PILT payments. To calculate a particular county's PILT payment, the DOI Office of the Secretary first must collect data from several federal agencies and the county's state to answer the following questions: How many acres of eligible lands are in the county? What is the population of the county? What was the increase in the Consumer Price Index for the 12 months ending the preceding June 30? What were the prior year's payments, if any, for the county under the other payment programs of federal agencies? Does the state have any laws requiring the payments from other federal land payment laws to be passed through to other local government entities, such as school districts, rather than stay with the county government? The first step in calculating a county's Section 6902 payment is to determine the number of entitlement acres within the county ( Figure 2 , Box A). The next step is to calculate the population-based ceiling by multiplying the county's population by the population payment rate ( Figure 2 , Box B). County population data are provided by the U.S. Census Bureau. For this calculation, counties with different populations are treated differently ( Figure 3 ): For counties with populations smaller than 5,000, a county's actual population is used in the calculation . For counties with populations larger than 5,000, a county's population is rounded to the nearest 1,000, and this rounded population is used in the calculation. All counties with populations greater than 50,000, regardless of their actual populations, are considered to have a population equal to 50,000 for the purposes of calculating the ceiling. The population payment rate generally declines as population increases in 1,000 person increments (per statute), although the population-based ceiling generally increases ( Figure 4 ). However, this is not always the case. For example, in FY2019, payment rates for several populations are the same despite increasing populations, such as the rates for populations of 26,000; 27,000; and 28,000, which are all $94.98. Further, some payment ceilings do not increase with increasing populations. For example, counties with populations of 50,000 have a lower ceiling than those with populations of 49,000 (49,000 $76.33 = $3,740,170; and 50,000 $74.63 = $3,731,500, or $8,670 less for the more populous county). The population payment rate is adjusted annually for inflation based on the change in the Consumer Price Index for the 12 months ending on the preceding June 30. For FY2019, the population payment rates ranged from $186.56 per person for counties with populations of 5,000 or fewer to $74.63 per person for counties with populations of 50,000 or greater. The next step is to calculate the payment level under alternatives A and B ( Figure 2 , Box C). Alternative A has a higher per-acre payment rate than Alternative B, but Alternative A is subject to a deduction for prior-year payments. Prior-year payments are those payments from the federal payment programs listed in statute: the Act of June 20, 1910 (ch. 310, 36 Stat. 557); Section 33 of the Bankhead-Jones Farm Tenant Act (7 U.S.C. 1012); the Act of May 23, 1908 (16 U.S.C. 500), or the Secure Rural Schools and Community Self-Determination Act of 2000 (16 U.S.C. 7101 et seq.); Section 5 of the Act of June 22, 1948 (16 U.S.C. 577g-577g 1); Section 401(c)(2) of the Act of June 15, 1935 (16 U.S.C. 715s(c)(2)); Section 17 of the Federal Power Act (16 U.S.C. 810); Section 35 of the Act of February 25, 1920 (30 U.S.C. 191); Section 6 of the Mineral Leasing Act for Acquired Lands (30 U.S.C. 355); Section 3 of the Act of July 31, 1947 (30 U.S.C. 603); and Section 10 of the Act of June 28, 1934 (known as the Taylor Grazing Act) (43 U.S.C. 315i). However, if a state has a pass - through law that requires some or all of these prior-year payments to be paid directly to a sub-county recipient (e.g., a school district), these payments are not deducted from subsequent PILT payments in the following year. Alternative B is calculated using a lower per-acre payment rate, but prior-year payments are not deducted. For FY2019, the per-acre payment rates were $2.77 per acre of entitlement land for Alternative A and $0.39 per acre of entitlement land for Alternative B. If the per-acre payment (number of acres multiplied by the per-acre payment rate) calculated under either alternative is greater than the population-based ceiling, then the population-based ceiling replaces the calculated amount. Once each alternative is calculated, the greater of the two is the Section 6902 authorized payment for the county ( Figure 2 , Box D). The Section 6902 authorized payments are calculated for every county, and this amount is added to the Section 6904 and Section 6905 authorized payments (for more information on Sections 6904 and 6905, see " PILT Payments Under Sections 6904 and 6905 "). This summed amount is the full statutory calculation for a given fiscal year ( Figure 2 , Box E). DOI compares the full statutory calculation with the amount appropriated and available for PILT payments to determine whether Congress has provided adequate funding to cover the full statutory calculation ( Figure 2 , Box F). If sufficient funding is available, each county receives its authorized amount; if funding is insufficient, each county receives a prorated payment that is proportional to its authorized payment ( Figure 2 , Box G). The full statutory calculation and the amount available for PILT payments determine proration. Although there are additional adjustments made in the PILT proration calculation resulting from small idiosyncrasies related to the requirements for PILT payments namely, the requirement of a minimum threshold of $100 for PILT payments the proration is fundamentally the ratio of the appropriated funding available for PILT payments to the full statutory calculation: As a result, counties may receive less than their authorized PILT payment in years when appropriated funding is insufficient to cover the full statutory calculation. This scenario can occur even when total PILT appropriations match the full statutory calculation; this has been the case in years with mandatory appropriations, when part of the appropriated amount is set aside for a use other than county payments. For example, laws providing appropriations for PILT routinely have allowed DOI to retain a small portion of PILT appropriations for administrative expenses. <4. PILT Payments Under Sections 6904 and 6905> Section 6904 and Section 6905 payments account for a small fraction of total PILT payments. In FY2019, these payments were made to 134 counties and accounted for 0.15% of PILT payments ($750,605 of $514.7 million in total payments made). Once a county receives Section 6904 and Section 6905 payments, it is to disburse payments to governmental units and school districts within the county in proportion to the amount of property taxes lost because of the federal ownership of the entitled lands, as enumerated under these sections. County units and school districts may use these payments for any governmental purpose. <4.1. Section 6904 Payments> Section 6904 authorizes the Secretary of the Interior to make payments to counties that contain certain lands, or interests in lands, that are part of the National Park System and National Forest Wilderness Areas. However, Section 6904 specifies that these lands, or interests, are eligible only if (1) they have been acquired by the U.S. government for addition to these systems and (2) they were subject to local property taxes in the five-year period prior to this acquisition. Payment under Section 6904 is calculated as 1% of the fair market value of the land at the time it was acquired, not to exceed the amount of property taxes levied on the property during the fiscal year prior to its acquisition. Further, Section 6904 payments are made annually only for the five fiscal years after the land, or interest, is acquired by the U.S. government, unless otherwise mandated by law. <4.2. Section 6905 Payments> Section 6905 authorizes the Secretary of the Interior to make payments to counties that contain lands, or interests, that are part of the Redwood National Park and are owned by the U.S. government or that are acquired by the U.S. government in the Lake Tahoe Basin under the Act of December 23, 1980. Section 6905 payments are paid at a rate of (1) 1% of the fair market value of the acquired land or interests or (2) the amount of taxes levied on the land in the year prior to acquisition, whichever is lesser. Payments on these lands continue for five years or until payments have totaled 5% of the fair market value of the land. <5. Issues for Congress> PILT is of perennial interest to many in Congress and to stakeholders throughout the country. County governments are particularly interested in the certainty of PILT payments, as well as in how payments are calculated, because many consider PILT payments to be an integral part of their annual budgets. Congressional and stakeholder interests include questions of how PILT should be funded, what lands should be included as entitlement lands, and how authorized payment levels are calculated under PILT, among others. Congress annually addresses questions of how funding should be provided to PILT. Congress has funded PILT through both mandatory and discretionary appropriations (see " PILT Authorizations and Appropriations "). More often than not, PILT funding has been provided through the discretionary appropriations process for one fiscal year at a time. Although PILT has consistently received funding since its enactment, the appropriations process has created uncertainty among some stakeholders about the level of annual funding. Stakeholders also have asserted that greater certainty, in terms of both the guarantee of funding and the amount of funding (i.e., full statutory calculation) would be better. Members of Congress typically contemplate the implications and tradeoffs of discretionary versus mandatory spending and may have different views than the counties that receive PILT payments. Congress, for example, may weigh its discretion to review and fund PILT on an annual basis through the appropriations process against the certainty of funding for specific activities that accompany mandatory appropriations. Several bills have been introduced to amend how PILT is funded. For example, legislation has been introduced in the 116 th Congress that would require mandatory funding for PILT for either a set period of time (e.g., 10 additional years) or indefinitely. The question of which lands should be eligible for PILT payments is also of interest to many Members and stakeholders. In law, entitlement lands are restricted to the listed federal land types (see " Entitlement Lands "). However, this definition does not fully encompass the types of lands that are held by the federal government, nor does it account for the full suite of lands that are exempt from state and local taxes. Although some of these other lands may receive compensation through other federal programs, not all do, which may cause financial hardships for counties that otherwise might receive revenue through taxation. To address this concern, some Members of Congress have contemplated amending the definition of entitlement lands under PILT. For example, past Congresses have introduced legislation that would have amended PILT by expanding the definition of entitlement land to include land "that is held in trust by the United States for the benefit of a federally recognized Indian tribe or an individual Indian"; lands under the jurisdiction of the Department of the Defense, other than those already included in PILT; lands acquired by the federal government for addition to the National Wildlife Refuge System; and lands administered by the Department of Homeland Security, among others. Amending the definition of entitlement lands could have several implications. Adding additional acres of entitlement lands could increase the authorized amount of payments under PILT, which likely would benefit those states with the added lands but not states that lack additional lands. This, in turn, could influence how Congress elects to fund PILT. Additional entitled lands may be eligible for other compensation programs, which could further affect PILT payments. The authorized payment level under Section 6902, which accounts for nearly all payments under PILT, is calculated pursuant to the statutory requirements. This section has remained largely unchanged since it was amended in 1994 to add the requirement to adjust for inflation, among other changes. The inflation adjustment clause has resulted in increasing payment and ceiling rates since that time. Congress routinely considers whether the current formula is the best means of calculating payments under PILT or whether the formula should be amended. For example, in the 116 th Congress, bills have been introduced that would adjust the payment structure for counties with a population of less than 5,000. This adjustment would have implications for how population or area would be incorporated into calculating PILT payments and whether PILT payments were provided in an equitable manner. PILT is of interest to a large number of counties and other state and local entities across the country, and it may remain of interest to many Members of Congress. In addition to the above issues, Congress may consider other issues related to PILT and how the program fits into the landscape of federal programs that compensate for the presence of tax-exempt federal lands.

The Payments in Lieu of Taxes (PILT; 31 U.S.C. §§6901-6907) program provides compensation for certain tax-exempt federal lands, known as entitlement lands . PILT payments are made annually to units of general local government—typically counties—that contain entitlement lands. PILT was first enacted in 1976 () and later recodified in 1982 ( P.L. 97-258 ). PILT is administered by the Office of the Secretary in the Department of the Interior (DOI), which is responsible for the calculation and disbursement of payments. PILT has most commonly been funded through annual discretionary appropriations, though Congress has authorized mandatory funding for PILT in certain years, which has replaced or supplemented discretionary appropriations. Since the start of the program in the late 1970s, PILT payments have totaled approximately $9.2 billion (in current dollars). From FY2015 through FY2019, authorized PILT payments averaged $489 million each year and appropriations for PILT payments averaged $485 million each year. Although several federal programs exist to compensate counties and other local jurisdictions for the presence of federal lands within their boundaries, PILT applies to the broadest array of land types. Entitlement lands under PILT include lands administered by the Bureau of Land Management, the National Park Service, the U.S. Fish and Wildlife Service, all in the DOI; lands administered by the U.S. Forest Service in the Department of Agriculture; federal water projects; some military installations; and selected other lands. Nearly 2,000 counties and other local units of government received an annual PILT payment in FY2019. PILT comprises three separate payment mechanisms, which are named after the sections of law in which they are authorized: Section 6902 (31 U.S.C. §6902), Section 6904 (31 U.S.C. §6904), and Section 6905 (31 U.S.C. §6905). Section 6902 payments are the broadest of the three. They account for nearly all of the funding disbursed under the PILT program and are made to all but a few of the counties receiving PILT funding. In contrast, Section 6904 and Section 6905 payments are provided only under selected circumstances, account for a small fraction of PILT payments, and are made to a minority of counties (most of which also receive Section 6902 payments). In addition, whereas Section 6902 payments are provided each year based on the presence of entitlement lands, most payments under Section 6904 and Section 6905 are provided only for a short duration after certain land acquisitions. Section 6902 payments are determined based on a multipart formula (31 U.S.C. §6903). Payments are calculated according to several factors, including (1) the number of entitlement acres present within a local jurisdiction; (2) a per-acre calculation determined by one of two alternatives (Alternative A, also called the standard rate , or Alternative B, also called the minimum provision ); (3) a population-based maximum payment (ceiling); (4) selected prior-year payments made to the counties pursuant to certain other federal compensation programs; and (5) the amount appropriated to cover the payments. Section 6904 and Section 6905 payments are provided to counties after the federal acquisition of specific types of entitlement lands (Section 6904) or entitlement lands located in specific areas (Section 6905) and are based on the fair market value of the acquisitions. If the appropriated amount is insufficient to cover the total payment amounts authorized in Sections 6902, 6904, and 6905, payments are prorated in proportion to the authorized rate. Annual discretionary appropriations bills generally also have included additional provisions dictating the terms of payments. PILT is of perennial interest to many Members of Congress and stakeholders throughout the country, and many local governments consider PILT payments to be an integral part of their annual budgets. In contemplating the future of PILT, Congress may consider topics and legislation related to the eligibility of various federal lands for entitlement under PILT (such as Indian lands or other lands currently excluded from compensation), amendments to the formula for calculating payments (especially under Section 6902), and issues related to funding PILT, among other matters.

crs_R46226

crs_R46226_0

<1. Introduction> The United States and Liberia have maintained diplomatic relations for more than 150 years. Close ties endured in the 20th century underpinned by U.S. investment in the rubber sector and robust political, development, and defense cooperation during the Cold War but they came under strain during Liberia's two civil wars (1989-1997 and 1999-2003). The United States provided substantial humanitarian assistance in response to those conflicts and helped mediate an end to each war, and the U.S. military briefly deployed a task force to assist peacekeepers and support aid delivery after the conflict. U.S.-Liberia ties improved considerably during the tenure of former President Ellen Johnson Sirleaf (in office 2006-2018) and have remained close under current President George Weah (inaugurated in 2018). Congress has shown enduring interest in Liberia and has held periodic hearings on the country. Since the end of the second civil war, Congress has appropriated over $2.4 billion in State Department- and USAID-administered assistance to support Liberia's stabilization, recovery, and development. Such aid has centered on promoting good governance, strengthening the rule of law, reforming the security sector, improving service delivery, and spurring inclusive economic development. Congress provided roughly $600 million in additional State Department- and USAID-administered assistance to help combat the 2014-2016 Ebola outbreak in Liberia, where the U.S. government in collaboration with Liberian authorities and U.N. agencies played a lead role in the response. In recent years, several Members of Congress have sought to adjust the immigration status of over 80,000 Liberian nationals resident in the United States, some of whom originally came to the United States as refugees. Members regularly travel to Liberia, including under a House Democracy Partnership legislative engagement program initiated in 2006. <2. Historical Background> The United States and Liberia established diplomatic relations in 1864, nearly two decades after Liberia declared independence from the American Colonization Society, a U.S. organization that resettled freed slaves and freeborn African-Americans in Liberia. A small elite dominated by "Americo-Liberians," descendants of this settler population, held a monopoly on state power until a 1980 military coup d' tat. Under President Samuel Doe, economic mismanagement, corruption, and repression along ethnic lines characterized much of the ensuing decade. In 1989, Charles Taylor, a Liberian former civil servant who had fled to the United States after falling out with Doe, launched a rebellion from neighboring C te d'Ivoire. Factional violence soon engulfed the country. Hundreds of thousands died and "virtually all" Liberians fled their homes at some point during Liberia's first civil war. After a series of abortive ceasefires, the war ended in a peace accord and general elections in 1997, which Taylor won by a wide margin. In 1999, an incursion by Liberian rebels based in neighboring Guinea grew into a second nationwide conflict that pitted Taylor's army against two insurgent factions. After years of fighting, a rebel assault on the capital, Monrovia, and mounting international pressure including U.N. sanctions and a public demand from President George W. Bush that Taylor resign ultimately forced Taylor to step down in 2003. Days later, a peace agreement officially ended the conflict and laid the foundations for a transitional government. The U.N. Security Council established a peacekeeping mission, the U.N. Mission in Liberia (UNMIL), in September 2003 to help stabilize the country. Liberia's wars impeded social service provision, devastated the economy, and destabilized the broader region. Notably, Taylor provided material support to rebels in neighboring Sierra Leone during that country's civil war (1991-2002). In 2006, Taylor was arrested in Nigeria (where he had been granted asylum upon stepping down in 2003) on a warrant issued by the Special Court for Sierra Leone (SCSL), a U.N.-mandated judicial body created to prosecute crimes perpetrated during the Sierra Leonean civil war. In 2012, the SCSL convicted Taylor of war crimes in relation to his support for Sierra Leonean rebels; he is now serving a 50-year sentence in a prison in the United Kingdom. To date, a similar tribunal to prosecute atrocities committed during Liberia's wars has not been established, spurring perceptions of impunity and mounting calls by civil society and some legislators for the creation of a war crimes court for Liberia (see " Postwar Transitional Justice Efforts "). Taylor's ex-wife and several former associates remain active in Liberian politics, as do figures formerly associated with various armed factions. <2.1. The Sirleaf Administration (2006-2018)> President Ellen Johnson Sirleaf, a Harvard-educated former Finance Minister and U.N. official, won election in 2006, putting an end to a three-year transitional government led by Taylor's vice president. During her two terms in office, Sirleaf won praise for overseeing a postwar transition marked by political stability and, until the Ebola outbreak in 2014, rapid economic growth. Africa's first elected female head of state, Sirleaf bolstered confidence among donors, drawing large inflows of U.S., Chinese, and multilateral assistance. Such aid financed the rehabilitation of infrastructure and a range of other development and stabilization efforts. Sirleaf also secured almost $5 billion in external debt relief and oversaw an expansion in state revenues. The United States long the largest bilateral donor to Liberia provided significant assistance to Sirleaf's administration, funding programs to spur economic growth and development, reform the security sector, promote good governance, and build state capacity (see " U.S. Relations and Assistance "). The Sirleaf administration took steps to rehabilitate Liberia's global standing. The U.N. Security Council had imposed various sanctions in response to Liberia's civil wars, including embargoes on imports of arms into the country and on exports of rough diamonds and timber of Liberian origin. As Liberia stabilized and the Sirleaf government enacted sectoral reforms, these sanctions were gradually lifted. The Security Council lifted the last arms embargo, on non-state actors, in 2016, ending the U.N. sanctions regime. (The Obama Administration lifted U.S. targeted sanctions on Taylor and key associates in late 2015.) Also in 2016, UNMIL officially transferred national security duties to Liberian authorities in anticipation of full withdrawal in 2018. Sirleaf's international standing arguably surpassed her popularity among Liberians. Despite rapid economic growth, her administration struggled to meet high expectations for Liberia's postwar trajectory. Extreme poverty remained widespread throughout her tenure, and her government failed to implement key recommendations of Liberia's postwar Truth and Reconciliation Commission (TRC), such as the creation of a war crimes court. Several corruption scandals arose during her tenure, and she drew criticism for appointing her sons to state posts. Her administration's response to the 2014-2016 Ebola outbreak reportedly featured financial irregularities and a heavy-handed approach by security forces. Some of these shortcomings reasonably could be attributed to structural challenges, such as corruption, low institutional capacity, deficiencies in education and health service provision, and infrastructure gaps. The October 2017 presidential and legislative polls were Liberia's third set of postwar general elections. Constitutional term limits barred Sirleaf from seeking reelection. Approaching the polls, the opposition Congress for Democratic Change party, led by professional soccer star-turned-politician George Weah, allied with the National Patriotic Party of Jewel Howard-Taylor (an ex-wife of Charles Taylor) to form the Coalition for Democratic Change (CDC). Weah won the presidency with 62% of votes in a runoff against incumbent Vice President Joseph Boakai of Sirleaf's Unity Party (UP). Despite some violence and a short-lived legal challenge over alleged fraud in the first round of polls, election observers from the U.S. National Democratic Institute (NDI) lauded the election as a "historic achievement for the country." Concurrent House of Representatives elections resulted in a slim plurality for Weah's party, which took 21 out of 73 seats, ahead of the UP, which took 20. Ten parties and thirteen independents claimed the rest. The United States, the European Union (EU), and other donors provided substantial support for the 2017 elections. U.S. support included the $17 million, USAID-funded Liberia Elections and Political Transition (LEPT) project, under which the U.S. International Foundation for Electoral Systems (IFES) and NDI provided technical assistance to the National Elections Commission (NEC), supported voter education initiatives targeting women and people with disabilities, and enhanced civil society oversight of voting and other electoral processes. <3. The Weah Administration (2018-Present)> President Weah, who took office in January 2018, gained prominence as a European league soccer star prior to his foray into politics. His lack of formal education was a point of criticism during an unsuccessful bid for the presidency in 2005; he went on to earn a high school diploma and, later, an undergraduate business degree in the United States. In 2014, he won a Senate seat representing Montserrado County, which surrounds Monrovia. His choice of then-Senator Jewel Howard-Taylor as his running mate in the 2017 election hinted at the enduring influence of Charles Taylor and his associates in Liberia's politics. As a legislator, Howard-Taylor sparked controversy by attempting to make homosexuality a felony punishable by death and to amend the constitution to declare Liberia a Christian state, despite its sizable Muslim minority. Goodwill surrounding Weah's inauguration which marked Liberia's first electoral transfer of power since 1944 and paved the way for UNMIL's withdrawal has dissipated as several high-profile corruption scandals have undermined his political standing. Weah initially drew criticism for failing to disclose his assets prior to taking office, as required of all senior public officials. He ultimately declared his assets in 2018, though the disclosure has remained confidential. Since Weah's inauguration, a number of his associates reportedly have been awarded public contracts, including for large infrastructure projects. Meanwhile, Weah's attempt to nominate a political ally, former Speaker of the House Alex Tyler, to the board of ArcelorMittal, Liberia's largest iron ore producer, prompted significant pushback in local media, given an open inquiry into bribery allegations against Tyler. Weah ultimately withdrew the nomination. (Tyler was later acquitted.) Among the highest-profile scandals that have arisen under Weah was the reported disappearance, in late 2018, of a shipping container holding 15.5 billion Liberian dollars ($104 million). Officials issued contradictory statements about the "missing millions," which the Sirleaf government had procured but whose delivery to Liberia extended into the Weah administration. A U.S. Embassy-contracted inquiry by Kroll Associates, a corporate investigations firm, found no evidence that banknotes had disappeared but documented "discrepancies at every stage" of the procurement and delivery processes. The review also raised concerns regarding the "potential misappropriation of banknotes" and "opportunities for money laundering" in the course of the Weah government's mid-2018 infusion of $25 million U.S. dollars into the monetary system to replace Liberian dollars in an effort to control inflation. (Liberia has two official currencies, the Liberian dollar and the U.S. dollar.) Several former central bank officials, including former President Sirleaf's son, have been charged in the scandal. A USAID technical assistance program, to be implemented by Kroll Associates, aims to enhance the Central Bank's currency management processes. Concerns also have centered on the Weah administration's management of donor assistance, a key source of financing for development efforts. In mid-2019, the U.S. ambassador to Liberia and several foreign counterparts sent a joint letter to the government signaling discontent with the Weah administration's use of aid funds for unintended purposes. The Weah administration publicly acknowledged that it had used aid funds to pay state salaries, but claimed that it had later restored donor accounts. Separately, press reports emerged that the U.N. Resident Coordinator in Liberia had sent a letter to the government over concerns about delayed and inaccurate financial reporting on U.N.-funded activities. In late 2019, the World Bank reportedly demanded that the government refund certain ineligible expenses identified during a project review. According to the State Department's congressionally mandated fiscal transparency report, "foreign assistance receipts, largely project-based, were neither adequately captured in the budget nor subject to the same audit and domestic oversight as other budget items" in 2018, the latest reporting year. In June 2019, simmering discontent over alleged corruption and mismanagement by the Weah administration gave way to large-scale anti-government protests in Monrovia. Headed by the Council of Patriots (COP), a coalition of opposition politicians and activists, the demonstrators called for an audit of all state ministries and petitioned Weah to publicly disclose his assets. The government drew criticism for its response to the protests, during which it blocked social media access. In January 2020, thousands of protesters joined COP-led demonstrations in Monrovia, which police dispersed with tear gas. The Independent National Commission on Human Rights, a state body, has called for an inquiry into allegations of excessive force by security forces. In a joint statement, the ambassadors of the United States, EU, and Economic Community of West African States (ECOWAS) lauded the security forces' management of the demonstrations but noted "with regret" the government's decision to disperse peaceful protesters without warning. Human rights groups and press freedom advocates have condemned what they have described as a crackdown on COP leader Henry Costa, a radio host who currently lives in the United States. <4. The Economy and Development Issues> Annual GDP growth averaged 7.4% over the decade following the end of Liberia's second conflict, as substantial donor assistance helped power a fragile postwar recovery and modest development gains. Foreign direct investment (FDI) significantly increased under President Sirleaf, mostly concentrated in the mining, palm oil, rubber, and timber industries. The 2014 Ebola outbreak and a simultaneous slump in global commodity prices cut short this expansion: Liberia's economy contracted by 1.6% in 2016 before rebounding to 2.5% growth the following year owing to expanded gold, rubber, and palm oil exports. The International Monetary Fund (IMF) projects a contraction of 1.4% in 2019 due to slowing aggregate demand, followed by a recovery to 1.4% growth in 2020 due to an expected rise in consumption. Since 2017, a weakening of the Liberian dollar (which depreciated by 26% in 2018) and rising inflation (which stands at around 30%) have undermined local purchasing power and living standards. The World Bank projects a rise in the household poverty rate from 42% in 2018 to 44% by 2021; the rural poverty rate, estimated at 72%, is more than double that of urban areas a longstanding pattern. The IMF predicts average annual growth of 3.0% between 2020 and 2023, a rate likely insufficient to raise living standards adequately for a population growing at 2.6% per year. Infrastructure gaps, low electricity access (estimated at 17% nationally and 3% in rural areas), poor service delivery, corruption, and an uncompetitive business climate all threaten growth prospects. Liberia ranked fifth lowest globally in the World Bank's 2018 Human Capital Index (HCI), a survey of health and education indicators. The government has struggled to marshal donor assistance for its ambitious Pro-Poor Agenda for Prosperity and Development (PAPD, 2018-2023), which centers on infrastructure investments and social service improvements. The government relies heavily on exports of rubber, gold, iron ore, diamonds, and palm oil for state revenues and foreign exchange, but these sectors have created minimal local employment. The multinational firms ArcelorMittal and Firestone, which are engaged in the extraction of iron and rubber, respectively, are among Liberia's largest private sector actors, though low global commodity prices have prompted both companies to downsize operations in recent years. Most working-age Liberians remain engaged in subsistence agriculture. According to the World Bank, infrastructure gaps, high transport costs, limited market information, and inadequate public sector support have discouraged a shift toward more productive agricultural activity. At the same time, few households produce enough food for family consumption, and Liberia depends on imports of key staple foods, such as rice and cassava, despite ample rainfall and fertile land. Rural poverty drives high rates of food insecurity and malnutrition. Liberia ranked 112 out of 117 countries surveyed on the International Food Policy Research Institute's 2019 Global Hunger Index, a composite ranking of undernourishment and related indicators. A 2018 analysis by the Liberian government and international partners found that 18% of Liberians faced moderate to severe food insecurity, meaning they regularly lack food and consistently do not consume a diet of adequate quality. Roughly 36% of children under five years old are "stunted," or too short for their age a risk indicator of impaired cognitive and physical development. Low global oil prices and a poor business climate have dimmed interest in Liberia's nascent oil and gas sector. Several U.S. oil firms, including Chevron, ExxonMobil, and Anadarko Petroleum, have relinquished licenses to offshore blocks, in some cases following unsuccessful exploration activities. According to the State Department, foreign investors have cited corruption as a key obstacle to engagement in Liberia, with graft perceived to be "most pervasive in government procurement, contract and concession awards, customs and taxation systems, regulatory systems, performance requirements, and government payments systems." <5. Human Rights> According to State Department monitors, key human rights challenges in 2018 included extrajudicial killings by police, arbitrary and prolonged detention, and harsh and overcrowded prison conditions. Additional challenges included discrimination and violence against women and marginalized communities. While Weah earned plaudits for supporting a new press freedom act, which repealed various criminal statutes that had been used to harass and arrest journalists, his government also has targeted opposition media figures and shuttered critical news outlets. Reporters have faced harassment and violence from government officials, including members of the national legislature, and press outlets self-censor to evade persecution. Sexual and gender-based violence is widespread; the State Department reports that rape remains "a serious and pervasive problem" despite efforts to address the issue by successive governments as well as nongovernmental organizations operating in Liberia. Access to justice is constrained by an under-resourced, uneven, and often ineffective justice system in which judicial corruption is common, and by social practices and attitudes that discourage reporting and prosecution. In August 2019, President Weah signed into law the Domestic Violence Act, which criminalizes various forms of intimate partner violence, including spousal rape long excluded from legal definitions of sexual assault. That legislation ultimately did not include a provision that would have criminalized female genital mutilation/cutting (FGM/C), which Liberia's legislature has not prohibited despite considerable pressure from the Sirleaf and Weah administrations, donors, and domestic and international civil society groups. The practice remains widespread and is politically sensitive. Same-sex relations are illegal under Liberian law, and lesbian, gay, bisexual, transgender, and intersex individuals face violence, discrimination, harassment, and hate speech. Interethnic grievances over access to land and other resources have been a source of social and political tension and conflict. Surrounding the 2017 polls, NDI election observers documented derogatory statements and other forms of discriminatory behavior targeting Liberia's Muslim community (roughly 12% of the population) and the largely Muslim Mandingo ethnic group (3%), some of whom were barred from registering or voting. Mandingo mobilization formed the backbone of the 1997-2003 insurgency against Taylor. Since 2017, Liberia has ranked as a Tier 2 Watch List country on the State Department's annual Trafficking in Persons (TIP) report, submitted pursuant to the Trafficking Victims Protection Act of 2000 (TVPA, Division A of P.L. 106-386 ). Per the TVPA, failure to improve from Tier 2 Watch List ranking for three consecutive years results in a downgrade to Tier 3 (worst) status, which may carry restrictions on access to certain types of U.S. assistance. The Administration granted Liberia a waiver from such a downgrade in 2019 because the State Department found that Liberia's "government has devoted sufficient resources to a written plan that, if implemented, would constitute significant efforts to meet the minimum standards" for TIP elimination. <5.1. Postwar Transitional Justice Efforts> Accountability for wartime human rights violations in Liberia remains a highly sensitive topic. A postwar Truth and Reconciliation Commission (TRC), which operated between 2005 and 2010, recommended the establishment of a war crimes tribunal, but no such court has been established. This is partly attributable to opposition from former combatants and others likely to be targeted by such a tribunal, some of whom are current or former elected officials. The TRC recommended the prosecution of at least three members of the current legislature. Such individuals wield influence not only within the legislature but also as vote mobilizers at the national level; for instance, Senator Prince Johnson, one of two former armed faction leaders currently serving in Liberia's legislature, arguably was critical to President Weah's winning 2017 political coalition. Opponents of a possible war crimes court also include former President Sirleaf, whom the TRC identified as having provided financial support to Charles Taylor in the early years of Liberia's first civil war. Some Liberians may oppose potential transitional justice measures out of a reluctance to revisit wartime atrocities or fear of rekindling social tensions. In September 2019, President Weah appeared to endorse the establishment of a war crimes court and requested that the legislature advise him on the issue. After Weah's announcement, a resolution calling for a war crimes tribunal quickly garnered the two-thirds support required for passage in Liberia's House of Representatives. Weah subsequently walked back his support for the court, however, and it remains to be seen whether Weah's announcement paves the way for the creation of a court and/or the implementation of other transitional justice measures. <5.1.1. U.S. Judicial Responses> Some perpetrators of wartime atrocities have faced justice abroad, including in the United States. In 2009, Charles Taylor's U.S.-born son, Roy M. Belfast Jr. (AKA Charles "Chuckie" Taylor), was sentenced to 97 years in prison by a U.S. District Court for wartime acts of torture. Belfast remains the only individual prosecuted in the U.S. judicial system specifically for atrocities committed during Liberia's conflicts. Others have faced immigration-related charges, however, often in relation to fraud or perjury linked to nondisclosure of involvement in wartime abuses in applications for U.S. asylum, residency, or citizenship. Several Liberian nationals have been convicted on such offenses, which can carry lengthy prison sentences and/or result in deportation and loss of citizenship or residency permission. Former armed faction leader George Boley was deported from the United States in 2012 in connection with his involvement in the use of child soldiers. This marked the first deportation under the Child Soldiers Accountability Act ( P.L. 110-340 ), which made use of child soldiers a ground for deportation from the United States. <6. U.S. Relations and Assistance> As noted above, the United States played a key role in Liberia's founding, and bilateral ties generally have been close, characterized by substantial U.S. assistance. U.S. engagement in Liberia expanded significantly during the administration of President Sirleaf, under successive U.S. Administrations and with bipartisan support from Congress. Sirleaf addressed a joint session of Congress in 2006, and between FY2006 and FY2018, Congress appropriated over $2.1 billion in State Department- and USAID-administered aid to Liberia to support stabilization, development, security sector reform, and health programs. This total does not include assistance provided via other U.S. agencies and substantial Millennium Challenge Corporation (MCC) aid funding (see below). It also excludes U.S. funding for UNMIL provided through assessed contributions to the U.N. peacekeeping budget, as well as U.S. support for Liberia's Ebola response or programs funded through regionally or centrally managed programs. The Trump Administration has expressed support for strong U.S.-Liberia ties. In late 2019, Assistant Secretary of State for African Affairs Tibor Nagy hosted the fourth U.S.-Liberia Partnership Dialogue, a high-level diplomatic engagement that most recently focused on "youth engagement, trafficking in persons, economic growth, and strengthening health and education systems." Congress has continued to appropriate sizable bilateral foreign assistance for the country (see below), and has held hearings on its development and governance prospects. Congress also has fostered relations through a House Democracy Partnership (HDP) program with the Liberian legislature, which is one of 21 HDP partner legislatures worldwide. Launched in 2006, the Liberia HDP program has focused on the development of Liberian parliamentary capacity, including through peer-to-peer visits. In October 2019, five Members of Congress visited Liberia, where they met with various legislators and President Weah. Immigration Issues. Liberian immigration to the United States has played a significant role in bilateral relations. According to the U.S. Census Bureau, there were roughly 85,000 foreign-born individuals from Liberia living in the United States in 2018 (latest available). Liberians in the United States first received Temporary Protected Status (TPS) in 1991 during the first civil war. In the years since, qualifying Liberians have been granted TPS and/or Deferred Enforced Departure (DED) temporary blanket relief from removal provided by the President in the context of Liberia's conflicts and, later, the Ebola outbreak. Efforts to extend the immigration status of Liberians eligible for such protections have drawn bipartisan congressional support. In March 2019, three days before DED was to expire for certain Liberians resident in the United States since 2002, President Trump reaffirmed the termination but extended the wind-down period through March 30, 2020. In his memorandum, President Trump stated that "Extending the wind-down period will preserve the status quo while the Congress considers remedial legislation" to provide Liberian DED beneficiaries with relief from removal. Congress ultimately granted such relief in the National Defense Authorization Act for 2020 ( P.L. 116-92 ), which directs the Secretary of Homeland Security to adjust the status of eligible Liberian applicants those continuously present in the United States since November 20, 2014, or the immediate family of such individuals, among other criteria to lawful permanent resident (LPR) status. <6.1. Current U.S. Assistance> Appropriated State Department and USAID-administered assistance for Liberia totaled $112.3 million in FY2018 and $96.5 million in FY2019. Recent U.S. aid largely has focused on health system strengthening and support for public service delivery, civil society capacity building, agriculture sector development, and justice sector improvements. Most U.S. development assistance is implemented by nongovernmental organizations, but the United States has a direct government-to-government financing agreement with Liberia's Ministry of Health that supports health service delivery. The State Department has funded programs to train, equip, advise, and professionalize the Armed Forces of Liberia (AFL), which was established with U.S. support after Liberia's second civil war, and to build the capacity of civilian law enforcement. DOD has conducted periodic trainings for AFL personnel and provided support to Liberia's defense ministry. Liberia also benefits from a State Partnership Program with the Michigan National Guard. The country hosts 94 Peace Corps Volunteers (PCVs) working on projects related to education and health. In December 2019, the U.S. Embassy withdrew PCVs from several regions due to liquidity challenges associated with withdrawing money from local banks. FY2020 aid allocations for Liberia pursuant to P.L. 116-94 have yet to be made public. The Administration requested $32.6 million in State Department- and USAID-administered aid for Liberia in FY2021, which would represent a 66% decrease from FY2019 appropriations. In successive years, Congress has appropriated aid for Liberia far in excess of the levels proposed in the Trump Administration's budget requests. <6.1.1. Millennium Challenge Corporation (MCC) Engagement> Liberia is currently implementing a five-year, $256.7 million MCC C ompact that entered into force in 2016. The Compact targets two constraints to economic growth: (1) a lack of access to reliable and affordable electricity, and (2) inadequate road infrastructure. The energy project seeks to provide a new hydropower turbine to the Mt. Coffee Hydropower Plant, train electricity sector personnel, and support the creation of an independent energy sector regulator. The roads project aims to build the capacity of Liberian authorities to plan road maintenance. Liberia previously benefitted from a $15 million MCC Threshold Program (2010-2013) focused on expanding girls' access to education, enhancing land rights and access, and promoting trade. In FY2019 and FY2020, Liberia did not secure a passing grade on half of its MCC Scorecard a prerequisite for a potential second compact. According to its FY2020 scorecard, Liberia failed to meet standards in fiscal and trade policy, regulatory quality, inflation control, land rights and access, government effectiveness, rule of law, and a range of human development measures. <7. Outlook> Pressures on Weah's administration are likely to mount. State finances are under increasing strain due to weak economic growth, poor tax administration, declining donor aid, and the departure of UNMIL, which came to play a key role in Liberia's economy. At a time when the government faces popular expectations for dividends from Liberia's postwar transition including for better infrastructure, improved public services, job creation, and poverty reduction surging inflation and a depreciation of the Liberian dollar have contributed to falling purchasing power, rising poverty, and a mounting food security crisis. The IMF has welcomed austerity measures on the part of the government, including cuts to the public sector wage bill, and in late 2019 approved a four-year, $213.6 million program to support macroeconomic adjustments and other reforms. Austerity policies are likely to be domestically unpopular, however, and it remains to be seen whether the Weah administration continues to pursue reforms that may be politically challenging. Efforts to address corruption and other governance demands are likely to encounter pushback from key segments of Liberia's political landscape. Corruption has been a longstanding concern in Liberia and remains prevalent throughout the government, according to the State Department, which has documented a "culture of impunity" in the civil service. Any attempts to enact meaningful anti-corruption measures may thus founder on a lack of political will from legislators and other officials who profit from the current system. Meanwhile, Weah's stated commitment to address mounting calls from civil society and some legislators for postwar transitional justice measures has met with opposition from some legislators who are central to his political coalition. Recent protests and instances of inflammatory rhetoric have raised concerns over political tensions in the country. In May 2019, the U.S. Embassy condemned ethnically divisive statements by politicians, reproaching those who "incite unlawful acts through ill-considered rhetoric that could jeopardize Liberia's hard-won peace and security." The U.S. Embassy also has warned Liberia's opposition against using charged rhetoric, as it has called on the Weah administration to respect political freedoms. Mounting socioeconomic pressures and calls for governance reform and postwar accountability are key challenges facing Liberia's fledgling democracy; how the country's political class responds to such forces will have implications for Liberia's trajectory. U.S.-Liberia ties remain close, and the United States appears poised to continue supporting the country's development, albeit with potentially lower aid allocations than in past years. The United States continues to exert significant influence in the country, and Liberian authorities appear receptive to U.S. engagement, as suggested by President Weah's recent suspension of an official whom the U.S. ambassador had accused of promoting societal divisions. At the same time, the Weah administration's mismanagement of donor assistance may be of concern to some Members of Congress, as may enduring corruption, rising political tensions, persistent institutional weaknesses, and continued inaction on transitional justice measures. Members of Congress may continue to debate the relative effectiveness of various tools for advancing U.S. interests in Liberia, including diplomacy, foreign assistance, and possible punitive measures.

Introduction . Congress has shown enduring interest in Liberia, a small coastal West African country of about 4.8 million people. The United States played a key role in the country's founding, and bilateral ties generally have remained close despite significant strains during Liberia's two civil wars (1989-1997 and 1999-2003). Congress has appropriated considerable foreign assistance for Liberia, and has held hearings on the country's postwar trajectory and development. In recent years, congressional interest partly has centered on the immigration status of over 80,000 Liberian nationals resident in the United States. Liberia participates in the House Democracy Partnership, a U.S. House of Representatives legislative-strengthening initiative that revolves around peer-to-peer engagement. Background. Liberia's conflicts caused hundreds of thousands of deaths, spurred massive displacement, and devastated the country's economy and infrastructure, aggravating existing development challenges. Postwar foreign assistance supported a recovery characterized by high economic growth and modest improvements across various sectors. An Ebola outbreak from 2014-2016 cut short this progress; nearly 5,000 Liberians died from the virus, which overwhelmed the health system and spurred an economic recession. The outbreak also exposed enduring governance challenges, including weak state institutions, poor service delivery, official corruption, and public distrust of government. Politics. Optimism surrounding the 2018 inauguration of President George Weah—which marked Liberia's first electoral transfer of power since 1944—arguably has waned as his administration has become embroiled in a series of corruption scandals and the country has encountered new economic headwinds. According to the International Monetary Fund (IMF), the economy contracted by 1.4% in 2019, down from 1.2% growth in 2018, as rising inflation has undermined household purchasing power. Weah's government has struggled to deliver on ambitious pro-poor campaign pledges, as diminishing foreign aid flows, poor tax administration, and low global prices for Liberia's top export commodities have strained state finances. Public discontent with alleged mismanagement and corruption has given way to large anti-government protests in the capital city of Monrovia. The Economy and Development Issues . Liberia faces substantial obstacles to broad-based, sustainable development. Infrastructure gaps, poor electricity provision, corruption, and an uncompetitive business climate impede growth. Exports of raw rubber, gold, iron ore, diamonds, and palm oil are key sources of government revenues and foreign exchange, but these industries provide few high-paying jobs to local Liberians, and much of the population relies on subsistence agriculture. Nearly one-third of Liberians face moderate to severe chronic food insecurity despite the country's fertile land, extensive coastline, and abundant rainfall. Human Rights. Human rights conditions have improved considerably since the early 2000s, though corruption, episodic security force abuses against civilians, and di scrimination against women and marginalized communities persist. Press freedoms have come under threat during Weah's presidency; reporters have faced harassment and occasional violence from government officials, including legislators, and some journalists reportedly self-censor to evade persecution. Accountability for wartime abuses remains a highly sensitive issue, and several individuals who played key roles in Liberia's conflicts retain influence and/or serve in elected office. Several perpetrators of wartime abuses have faced trial in the U.S. court system, most on immigration-related fraud or perjury charges related to nondisclosure of involvement in such abuses in applications for U.S. asylum, residency, or citizenship. U.S. Assistance. Since the end of Liberia's second conflict in 2003, the United States has provided more than $2.4 billion in State Department- and USAID-administered assistance to support Liberia's post-war stabilization and development. This does not include nearly $600 million in emergency assistance for Liberia's Ebola response, aid channeled through other U.S. agencies, or U.S. funding for a long-running U.N. peacekeeping mission that completed its mandate in 2018. Current U.S. assistance, which totaled $96.5 million in FY2019, centers on supporting agriculture-led development and strengthening the health system, public service delivery, civil society capacity, and justice and security sectors. An ongoing $256.7 million Millennium Challenge Corporation (MCC) Compact seeks to enhance Liberia's power sector and roads infrastructure.

crs_R46147

crs_R46147_0

Companies that provide cable television service (cable operators) are subject to regulation at the federal, state, and local levels. Under the Communications Act of 1934 (Communications Act), as amended, the Federal Communications Commission (FCC or Commission) exercises regulatory authority over various operational aspects of cable service such as technical standards governing signal quality, ownership restrictions, and requirements for carrying local broadcast stations. At the same time, a cable operator must obtain a "franchise" from the relevant state or local franchising authorities for the region in which it seeks to provide cable services. Franchising authorities often require cable operators to meet certain requirements, provide certain services, and pay fees as a condition of their franchise. As a result, the franchising process is an important component of cable regulation. In the early history of cable regulation, the FCC did not interfere with franchising authority operations, opting instead for a system of "deliberately structured dualism." The Cable Communications Policy Act of 1984 (Cable Act) codified this dualist structure by adding Title VI to the Communications Act. Title VI requires cable operators to obtain franchises from state or local franchising authorities and permits these authorities to continue to condition the award of franchises on an operator's agreement to satisfy various requirements. However, Title VI also subjects franchising authorities to a number of important statutory limitations. For instance, franchising authorities may not charge franchise fees greater than 5% of a cable operator's gross annual revenue and may not "unreasonably refuse" to award a franchise. As explained below, the FCC issued a series of orders restricting the requirements and costs that franchising authorities may impose on cable operators. The FCC issued its first such order in 2007 (First Order) after gathering evidence suggesting that some franchising authorities were imposing burdensome requirements on new entrants to the cable market. The First Order clarified when practices by franchising authorities, such as failing to make a final decision on franchise applications within time frames specified in the order, amount to an "unreasonabl[e] refus[al]" to award a franchise in violation of the Cable Act. The First Order also provided guidance on which costs count toward the 5% franchise fee cap, and it maintained that franchising authorities could not refuse to grant a franchise based on issues related to non-cable services or facilities. The U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) upheld the First Order in its 2008 decision in Alliance for Community Media v. FCC . Shortly after issuing the First Order, the FCC adopted another order (Second Order), extending the First Order's rulings to incumbent cable operators as well as new entrants. In a later order responding to petitions for reconsideration (Reconsideration Order), the FCC affirmed the Second Order's findings and further clarified that "in-kind" (i.e., noncash) payments exacted by franchising authorities, even if related to the provision of cable service, generally count toward the maximum 5% franchise fee. In 2017, the Sixth Circuit reviewed aspects of the Second Order and Reconsideration Order in its decision in Montgomery County v. FCC , upholding some rules and vacating others. In response, the FCC adopted a new order on August 1, 2019 (Third Order). The Third Order seeks to address the defects identified by the Sixth Circuit by clarifying the Commission's reasoning for counting cable-related, in-kind payments toward the 5% franchise fee cap and for applying the First Order's rulings to incumbent cable operators. The Third Order also explicitly asserts the Cable Act's preemption of state and local laws to the extent they impose fees or other requirements on cable operators who provide non-cable service, such as broadband internet, over public rights-of-way. Some municipalities have criticized this order for, among other things, hampering their ability to control public rights-of-way and reducing their ability to ensure the availability of public, educational, and government (PEG) programming in their communities. Several cities have filed legal challenges to the order that are currently before the Sixth Circuit. As an aid to understanding the complex and evolving nature of the law in this area, this report provides a basic overview of the federal legal framework governing the cable franchising process. The report begins with a historical overview of the law's evolution, from the Communications Act through the Cable Act and its later amendments, to the FCC's various orders interpreting the act. Next, the report details several key issues that have arisen from the FCC's orders, specifically (1) the circumstances under which a franchising authority might be found to have unreasonably refused to award a franchise; (2) the types of expenditures that count toward the 5% cap on franchise fees; and (3) the extent to which Title VI allows franchising authorities to regulate "mixed-use" networks, that is, networks through which a cable operator provides cable service and another service such as telephone or broadband internet. The report concludes with a discussion of other legal issues that may arise from pending challenges to the FCC's Third Order and offers some considerations for Congress. A summary of federal restrictions on local authority to regulate cable operators and a glossary of some terms used frequently in this report are found in the Appendix . <1. Historical Evolution of the Federal Legal Framework for Cable Regulation> <1.1. Regulation of Cable Services Prior to 1984> The FCC's earliest attempts to regulate cable television relied on authority granted by the Communications Act, a legal framework that predated cable television's existence. The Communications Act brought all wire and radio communications under a unified federal regulatory scheme. The act also created the FCC to oversee the regulatory programs prescribed by the Communications Act. Title II of the act gave the FCC authority over "common carriers," which principally were telephone service providers. Title III governed the activities of radio transmission providers. The FCC's Title III jurisdiction encompasses broadcast television transmitted via radio signals. For the first half of the 20 th Century, when virtually all commercial television broadcast in this manner, Title III thus gave the FCC regulatory authority over this industry. In the late 1940s and early 1950s, however, municipalities with poor broadcast reception began experimenting with precursors to modern cable systems. These areas erected large "community antennas" to pick up broadcast television signals, and the antenna operators routed the signals to residential customers by wire, or "cable." Through the 1950s, the FCC declined to regulate these systems, initially known as "Community Antenna Television" systems and later simply as "cable television." The FCC reasoned that cable television was neither a common carrier service subject to Title II regulation nor a broadcasting service subject to Title III regulation. The FCC changed course in a 1966 order in which it first asserted jurisdiction over cable television. The Commission acknowledged that it lacked express statutory authority to regulate cable systems. Even so, the agency concluded that it had jurisdiction because of cable television's "uniquely close relationship" to the FCC's then-existing regulatory scheme. The Supreme Court affirmed the FCC's authority to regulate cable television in a 1968 decision, relying on the FCC's argument that regulatory authority over cable television was necessary for the FCC's performance of its statutory responsibility to "provid[e] a widely dispersed radio and television service, with a fair, efficient and equitable distribution of service among the several States and communities." Following this reasoning, the Court construed the Communications Act as enabling the FCC to regulate what was "reasonably ancillary" to its responsibilities for regulating broadcast television under Title III. The FCC thereafter maintained regulatory authority over operational aspects of cable television, such as technical standards and signal carriage requirements. However, state and local "franchising authorities" continued to regulate cable operators through the negotiation and grant of franchises. The Commission recognized that cable television regulation ha d an inherent ly local character, insofar as local regulators were better situated to manage rights-of- way and to determine how to divide large urban areas into smaller service areas . As part of the ir franchising process, f ranchising authorities often imposed fees and other conditions on cable operators in exchange for allowing them to use public rights-of- way to construct their cable systems. Federal courts at the time tolerated this local regulation, noting that because cable systems significantly affect public rights-of-way, "government must have some authority . . . to see to it that optimum use is made of the cable medium in the public interest." <1.2. The Cable Act and Its Amendments> The Cable Communications Policy Act of 1984 (Cable Act) was the first federal statutory scheme to regulate expressly cable television. The act's purposes, as defined by Congress, included "assur[ing] that cable systems are responsive to the needs and interests of the local community," providing the "widest possible diversity of information sources," promoting competition, and minimizing unnecessary regulation in the cable industry. The House Energy and Commerce Committee report accompanying the legislation explained that the act was intended to preserve the "critical role" of municipal governments in the franchising process, while still making that power subject to some "uniform federal standards." To these ends, the Cable Act added Title VI to the Communications Act to govern cable systems. Specifically, Section 621of Title VI preserved the franchising authorities' power to award franchises and required cable operators to secure franchises as a precondition to providing services. Title VI also permits franchising authorities to require that cable operators designate "channel capacity" for PEG use or provide "institutional networks" ("I-Nets"). But the power of franchising authorities is limited to regulating "the services, facilities, and equipment provided by a cable operator," such as by prohibiting franchising authorities from regulating "video programming or other information services." Section 622 of Title VI allows franchising authorities to charge fees to cable operators as a condition of granting the franchise, but it caps those fees at 5% of the operator's gross annual revenue from providing cable services. Section 622 defines "franchise fee" to include "any tax, fee, or assessment of any kind imposed by a franchising authority . . . on a cable operator or a cable subscriber, or both, solely because of their status as such[.]" Franchise fees do not include taxes or fees of "general applicability," capital costs incurred by the cable operator for PEG access facilities (PEG capital costs exemption), and any "requirements or charges incidental to the awarding or enforcing of the franchise" (incidental costs exemption). Congress amended Title VI in the Cable Television Consumer Protection and Competition Act of 1992, with a stated goal of increasing competition in the cable market. Specifically, Congress amended Section 621 to prohibit the grant of exclusive franchises and to prevent franchising authorities from "unreasonably refus[ing] to award an additional competitive franchise." Congress also granted potential cable operators the right to sue a franchising authority for refusing to award a franchise. Congress amended the Cable Act again in 1996 to further promote competition in the cable television marketplace by enabling telecommunications providers regulated under Title II of the Communications Act (i.e., telephone companies) to offer video programming services. Congress repealed a provision banning telecommunications providers from offering video programming to customers in their service area and added a provision governing the operation of "open video systems," a proposed competitor to cable systems. These amendments also added provisions barring franchising authorities from conditioning the grant of a franchise on a cable operator's provision of telecommunications services or otherwise requiring cable operators to obtain a franchise to operate a telecommunications service. <1.3. FCC Orders> In the decades following the passage of the Cable Act and its amendments, many phone companies upgraded their networks to enter the cable market. To streamline the process for these new entrants, the FCC issued orders interpreting the franchising provisions of Title VI. The four orders discussed in this section the First, Second, Reconsideration, and Third Orders each address a range of topics and in some cases retread topics covered by an earlier order. Table 1 summarizes the orders. In 2007, after gathering evidence suggesting that some local and municipal governments were imposing burdensome demands on new entrants, the FCC adopted the First Order. The Commission observed that the franchising process had prevented or delayed the entry of telephone companies into the cable market. The First Order thus sought to reduce entry barriers by clarifying when Title VI prohibits franchising authorities from imposing certain franchise conditions on new entrants. The FCC gave examples of practices by franchising authorities that constitute an "unreasonable refusal" to award a franchise, such as 1. a delay in making a final decision on franchise applications beyond the time frames set forth in the order; 2. requiring cable operators to "build out" their cable systems to provide service to certain areas or customers as a condition of granting the franchise; 3. imposing PEG and I-Net Requirements beyond those imposed on incumbents; and 4. requiring that new cable operators agree to franchise terms that are substantially similar to those agreed to by incumbent cable operators (called "level-playing-field requirements"). The First Order further clarified when certain costs counted toward the 5% franchise fee cap and maintained that franchising authorities could not refuse to grant a franchise based on issues related to non-cable services or facilities. Several franchising authorities and their representative organizations challenged the legality of the Order in the Sixth Circuit. But the Sixth Circuit denied those challenges in Alliance for Community Media v. FCC , upholding both the FCC's authority to issue rules construing Title VI and the specific rules in the First Order itself. Although the First Order applied only to new entrants to the cable market, the FCC shortly thereafter adopted the Second Order, extending many of the First Order's rulings to incumbent cable television service providers. Following the release of the Second Order, the Commission received three petitions for reconsideration, to which it responded in the Reconsideration Order in 2015. In the Reconsideration Order, the FCC affirmed its conclusions from the Second Order applying its earlier rulings to incumbent cable operators. The Reconsideration Order also clarified that "in-kind" (i.e., noncash) payments exacted by franchising authorities, even if unrelated to the provision of cable service, may count toward the maximum 5% franchise fee allowable under Section 622. In 2017, in Montgomery County v. FCC , the Sixth Circuit vacated the FCC's determinations in the Second Order and Reconsideration Order on both issues. Following the ruling in Montgomery County, the Commission started a new round of rulemaking and, on August 1, 2019, adopted another order, the Third Order, addressing the issues raised by the Sixth Circuit. In the Third Order, the FCC clarified its basis for counting in-kind payments toward the 5% franchise fee cap, provided additional reasoning for applying the First Order's rulings to incumbent cable operators, and preempted state and local regulation inconsistent with Title VI. While prior orders applied only to local franchising authorities, the Third Order extended the Commission's rules in all three orders to state-level franchising authorities, concluding that there was "no statutory basis for distinguishing between state- and local-level franchising actions." This report addresses issues raised in these various orders in greater detail below. <2. Key Legal Issues in Cable Franchising> As the foregoing discussion reflects, the FCC's post-2007 orders have focused on several key issues within Title VI's framework. Most notably, the Commission has addressed (1) when certain franchise requirements amount to an "unreasonable refusal" to award the franchise under Section 621; (2) the types of costs that are subject to the 5% franchise fee cap under Section 622; and (3) the extent to which franchising authorities may regulate "mixed-use" networks operated by cable operators. This section first reviews the relevant statutory provisions from which each of these three issues arise and then discusses the FCC's interpretations of those provisions. <2.1. Unreasonable Refusal to Award a Franchise> Title VI prohibits franchising authorities from "unreasonably refus[ing]" to grant a franchise to a cable operator. In the First Order, the FCC identified specific types of franchising conditions or practices that violate the unreasonable refusal standard, such as failing to process an application within certain time periods. The Sixth Circuit reviewed and upheld the First Order's interpretation of this standard, which remains in effect. <2.1.1. Statutory Provisions Governing the "Unreasonable Refusal" Standard> Title VI allows franchising authorities to condition a franchise on the cable operator performing or meeting certain requirements. Sections 621(a)(4)(B) and 621(b)(3)(D) explicitly allow franchising authorities to require cable operators to provide PEG channel "capacity, facilities, or financial support" and to provide I-Net "services or facilities." Section 621(a)(1), however, imposes a significant limitation on franchising authorities' ability to impose such conditions. Under that provision, franchising authorities may not "grant an exclusive franchise" or "unreasonably refuse to award an additional competitive franchise." <2.1.2. FCC Interpretations of the "Unreasonable Refusal" Standard> In the First Order, the FCC clarified when certain practices or requirements amount to an unreasonable refusal of a new franchise under Section 621(a)(1) of Title VI. The FCC gave four specific examples of unreasonable refusals: (1) delaying a final decision on franchise applications; (2) requiring cable operators to "build out" their cable systems to provide service to certain areas or customers as a condition of granting the franchise; (3) imposing PEG and I-Net requirements that are duplicative of, or are more burdensome than, those imposed on incumbents; and (4) requiring that new cable operators agree to franchise terms that are substantially similar to those agreed to by incumbent cable operators (the "level-playing-field requirements"). As for delays in acting on a franchise application, the FCC stated that a franchising authority unreasonably refuses a franchise when it subjects applicants to protracted negotiations, mandatory waiting periods, or simply a slow-moving franchising process. To prevent such delays, the FCC set decision deadlines of 90 days for applications by entities with existing access to rights-of-way and six months for applications by entities without such access. Once these time periods expire, franchise applications are deemed granted until the franchising authority takes final action on the application. As for build-out requirements, the FCC stated that requiring new franchise applicants to build out their cable systems to cover certain areas may constitute an unreasonable refusal of a franchise. The Commission explained that what constitutes an "unreasonable" build-out requirement may vary depending on the applicant's existing facilities or market penetration, but it clarified that certain build-out requirements are per se unreasonable refusals under Section 621. The FCC also determined that certain PEG and I-Net terms and conditions constitute an unreasonable refusal. Specifically, the Commission determined that PEG and I-Net requirements that are "completely duplicative" (i.e., a requirement for capacity or facilities that would not provide "additional capability or functionality, beyond that provided by existing I-Net facilities") are unreasonable unless redundancy serves a public safety purpose. The FCC also viewed PEG requirements as unreasonable when such requirements exceeded those placed on incumbent cable operators. Lastly, the FCC determined that level-playing-field requirements in local laws or franchise agreements amount to an unreasonable refusal of a franchise. The Commission explained that such requirements are unreasonable because new cable entrants are in a "fundamentally different situation" from incumbent operators. The FCC therefore concluded that these mandates "unreasonably impede competitive entry" into the cable market and are unreasonable refusals. As discussed above, several franchising authorities and their representative organizations unsuccessfully challenged the FCC's interpretation of the unreasonable refusal standard in Alliance for Community Media v. FCC , in which the Sixth Circuit upheld the First Order in its entirety. Applying the framework set forth in Chevron USA , Inc. v. Natural Resources Defense Council, Inc. which guides courts when reviewing agency regulations that interpret the agency's governing statute the court reasoned that the phrase "unreasonably refuse" is inherently ambiguous because the word "unreasonably" is subject to multiple interpretations. The court then held that the First Order's interpretation of this phrase was entitled to deference because it was reasonable and not unambiguously foreclosed by Title VI. As a result, the First Order's rules on what constitutes an unreasonable refusal remain binding on franchising authorities. Accordingly, if a franchising authority denies a cable operator's franchise request for a reason the FCC's has deemed unreasonable such as the cable operator's refusal to accept build-out or level-playing-field requirements the cable operator may sue the franchising authority for "appropriate relief" as determined by the court. Alternatively, if the franchising authority fails to make a final decision within the allotted time, the franchise will be deemed granted until the franchising authority makes a final decision. <2.2. Franchise Fees> Title VI limits franchising authorities to charging cable operators "franchise fees" of up to 5% of the cable operator's revenue, subject to specific exceptions. However, the types of obligations limited by the 5% cap have been a point of contention. The FCC, in its various orders, has clarified the scope of the exceptions to the 5% cap (in particular, the PEG capital costs and incidental costs exemptions); it has further explained that, unless they fall under one of the express exceptions, non-monetary (or "in-kind") contributions are subject to the 5% cap even if they are related to the provision of cable service. Litigation over the Commission's current interpretations of what constitutes a "franchise fee" is ongoing. <2.2.1. Statutory Provisions Governing Franchise Fees> Section 622 allows franchising authorities to charge franchise fees to cable providers, but it subjects such fees to a cap. For any "twelve-month period," franchise fees may not exceed 5% of the cable operator's gross annual revenues derived "from the operation of the cable system to provide cable service." Section 622 broadly defines "franchise fees" to include "any tax, fee, or assessment of any kind imposed by a franchising authority or other governmental entity on a cable operator or cable subscriber, or both, solely because of their status as such." However, Section 622 exempts certain costs from this definition, including 1. "any tax, fee, or assessment of general applicability"; 2. "capital costs which are required by the franchise to be incurred by the cable operator for public, educational, or governmental access facilities" (PEG capital costs exemption) ; and 3. "requirements or charges incidental to the awarding or enforcing of the franchise, including payments for bonds, security funds, letters of credit, insurance, indemnification, penalties, or liquidated damages" (incidental costs exemption). <2.2.2. FCC Interpretations of the Statutory Franchise Fee Provisions> The FCC has provided guidance on the types of expenses subject to the 5% cap. In particular, it has clarified (1) when non-monetary (or "in-kind") contributions must be included in the calculation of franchise fees subject to the 5% cap; (2) the scope of the PEG capital costs exemption; and (3) the scope of the incidental costs exemption. <2.2.2.1. In-Kind Contributions> The FCC has elaborated on the types of in-kind contributions that are subject to the 5% cap. In the First Order, the Commission maintained that in-kind fees unrelated to provision of cable service such as requests that the cable operator provide traffic light control systems are subject to the 5% cap because they are not specifically exempt from the "franchise fee" definition. In the Reconsideration Order, the agency further clarified that the First Order's conclusions were not limited to in-kind exactions unrelated to cable service and that cable-related in-kind contributions (such as providing free or discounted cable services to the franchising authority) could also count toward the 5% cap. The Sixth Circuit vacated this conclusion, however, in Montgomery County v. FCC . The Sixth Circuit recognized that Section 622's definition of "franchise fee" is broad enough to encompass "noncash exactions." But the court explained that just because the term "can include noncash exactions, of course, does not mean that it necessarily does include every one of them." The court faulted the FCC for giving "scarcely any explanation at all" for its decision to expand its interpretation of "franchise fee" to include cable-related exactions, and held that this defect rendered the Commission's interpretation "arbitrary and capricious" in violation of the Administrative Procedure Act (APA). Following the Sixth Circuit's decision in Montgomery County , the Commission issued the Third Order, in which it detailed its reasons for including cable-related in-kind contributions in the 5% cap. The FCC first explained that, as recognized by the court in Montgomery County , the definition of "franchise fee" is broad enough to encompass in-kind contributions as well as monetary fees. The Commission also acknowledged the Sixth Circuit's observation that just because the definition is broad enough to include in-kind fees "does not mean that it necessarily does include everyone one of them." Nevertheless, the FCC maintained that cable-related in-kind contributions should be included in the fee calculation because there is nothing in the definition that "limits in-kind contributions included in the franchise fee." The Commission further reasoned that Section 622's specific exceptions do not categorically exclude such expenses, as there is no "general exemption for cable-related, in-kind contributions." Along with its construction of Section 622, the FCC rejected arguments that "other Title VI provisions should be read to exclude costs that are clearly included by the franchise fee definition," such as the provision that allows franchising authorities to require that cable operators designate channel capacity for PEG use. According to the Commission, "the fact that the Act authorizes [franchising authorities] to impose such obligations does not mean that the value of these obligations should be excluded from the five percent cap on franchise fees." While the Third Order concluded that cable-related, in-kind contributions are not categorically exempt from the 5% cap, it recognized that certain types of cable-related in-kind contributions might be excluded. For instance, the FCC concluded that franchise terms requiring a cable operator to build out its system to cover certain localities or to meet certain customer service obligations are not franchise fees. The Commission reasoned that these requirements are "simply part of the provision of cable service" and are not, consequently, a "tax, fee, or assessment." Furthermore, the FCC noted that the PEG capital costs exemption, which exempts costs associated with the construction of public, educational, or governmental access facilities, covers certain cable-related, in-kind expenses, and, as discussed below, the PEG capital costs exemption provides guidance on the types of costs to which it applies. On the other hand, the agency also identified specific cable-related, in-kind expenses that are subject to the 5% cap, such as franchise terms requiring cable operators to provide free or discounted cable service to public buildings or requiring operators to construct or maintain I-Nets. Lastly, the Third Order concluded that, for purposes of the 5% cap, cable-related in-kind services should be measured by their "fair market value" rather than the cost of providing the services. The FCC reasoned that fair market value is "easy to ascertain" and "reflects the fact that, if a franchising authority did not require an in-kind assessment as part of its franchise, it would have no choice but to pay the market rate for services it needs from the cable operator or another provider." In sum, despite the setback for the Commission in Montgomery County , the FCC has maintained its position that in-kind contributions even if related to cable service are not categorically exempt from the 5% cap. The issue is not settled, however. As discussed later, the Third Order is being challenged in court, and it remains to be seen whether the FCC's position will ultimately be upheld. <2.2.2.2. PEG Capital Costs Exemption> The FCC's interpretation of the PEG capital costs exemption has evolved. In the First Order, the Commission interpreted this exemption as applying to the costs "incurred in or associated with" constructing the facilities used to provide PEG access. However, the FCC broadened its interpretation in the Third Order. In the Third Order, the Commission conceded that its earlier statements were "overly narrow" because the plain meaning of the term "capital costs" can include equipment costs as well as construction costs. Consistent with this analysis, the FCC concluded that the term "capital costs" is not limited to construction-related costs, but can also include equipment purchased for the use of PEG access facilities, "such as a van or a camera." The Third Order noted that capital costs "are distinct from operating costs" that is, the "costs incurred in using" PEG access facilities and that operating costs are not exempt from inclusion in the franchise fee calculation. While the Third Order provided additional clarification on the PEG capital costs exemption, it left at least one issue unresolved. Specifically, the FCC determined there was an insufficient record before it to conclude whether "the costs associated with the provision of PEG channel capacity" fall within the exclusion. Consequently, it deferred consideration of this issue and stated that, in the meantime, channel capacity cost "should not be offset against the franchise fee cap." Ultimately, the scope of the PEG capital costs exemption remains in flux. The FCC's Third Order is being challenged in court, and it is possible the agency's interpretation of the PEG capital costs exemption could be vacated. Even if the Third Order is upheld, it left unresolved whether the costs of providing PEG channel capacity fall under the capital costs exclusion; thus, while franchise authorities are not required to offset such costs against the 5% cap in the interim, it is unclear whether these costs will count toward the franchise fee cap in the long run. <2.2.2.3. Incidental Costs Exemption> While the FCC has articulated its position on in-kind contributions and the PEG capital costs exemption over the course of several orders, the Commission largely addressed its interpretation of the "incidental costs" exemption in the First Order. There, the FCC read the exemption narrowly to include only those expenses specifically listed in Section 622(g)(2)(D) namely, "bonds, security funds, letters of credit, insurance, indemnification, penalties, or liquidated damages." The Commission explained that it did not interpret unlisted costs including, among other things, attorney fees, consultant fees, and in-kind payments to be "incidental" costs, based on the text of the exemption and the legislative history of Section 622. The FCC noted, however, that certain "minor expenses" beyond those listed in the statute may be included as "incidental costs," such as application or processing fees that are not unreasonably high relative to the cost of processing the application. In Alliance for Community Media v. FCC , the Sixth Circuit denied petitions challenging the First Order's interpretation of the "incidental costs" exemption. Petitioners argued that the plain meaning of the phrase "incidental to" meant that the fee had to be "related to the awarding or enforcing of the franchise." According to petitioners, the FCC's per se listing of non-incidental fees such as attorney and consultants' fees contradicted this plain meaning. The court, however, upheld the FCC's interpretation. The court reasoned that the phrase "incidental to" lent itself to multiple interpretations, including both the FCC's and the petitioners' readings. Consequently, it concluded under Chevron that the "FCC's rules regarding fees" qualified as "reasonable constructions" of Sections 622(b) and 622(g)(2)(D) that are entitled to deference. In sum, unlike in-kind contributions and the PEG capital costs exemption, the FCC's interpretation of the incidental costs exemption is not subject to any ongoing legal challenge. Consequently, with the exception of the "minor expenses" mentioned in the First Order, only those expenses listed in Section 622(g)(2)(D) (bonds, security funds, etc.) are exempt from the 5% cap under the incidental costs exemption. <2.3. Franchising Authority over Mixed-Use Networks> A continuing area of disagreement between the FCC and franchising authorities has been the extent to which franchising authorities can regulate non- cable services that a cable operator provides over the same network used for its cable service (e.g., a "mixed-use network"). From the First Order onward, the Commission has maintained that, based on its interpretation of various Title VI provisions, franchising authorities may not regulate the non-cable services aspects of mixed-use networks. While the First Order applied this rule only to new entrants to the cable market, the Second Order extended it to incumbent cable operators. The Sixth Circuit upheld this rule as applied to new entrants into the cable market, but vacated the FCC's application of it to incumbent cable operators. The Commission sought to cure this defect in the Third Order, and it further clarified that any efforts by state and local governments to regulate non-cable services provided by cable operators, even if done outside the cable franchising process and relying on the state's inherent police powers, are preempted by Title VI. However, given the ongoing legal challenge to the Third Order, this issue, too, remains unsettled. <2.3.1. Statutory Provisions Governing Mixed-Use Networks> Several Title VI provisions arguably prohibit franchising authorities from regulating non-cable services (such as telephone or broadband internet access service) provided over mixed-use networks, or networks over which an operator provides both cable and non-cable services. Section 602's definition of "cable system" explicitly excludes the "facility of a common carrier" except "to the extent such facility is used in the transmission of video programming directly to subscribers." Further, with respect to broadband internet access service, Section 624(b)(1) states that franchising authorities "may not . . . establish requirements for video programming or other information services." Lastly, Section 624(a) states that "[a] franchising authority may not regulate the services, facilities, and equipment provided by a cable operator except to the extent consistent with [Title VI]." <2.3.2. FCC Interpretations of Statutory Provisions Governing Mixed-Use Networks> Beginning with the First Order, the FCC has relied on these statutory provisions to clarify the bounds of franchising authority jurisdiction over mixed-use networks. The Commission asserted that a franchising authority's "jurisdiction applies only to the provision of cable services over cable systems." To support its view, the FCC cited Section 602's definition of "cable system," which explicitly excludes common carrier facilities except to the extent they are "used in the transmission of video programming directly to subscribers." The Commission did not address whether video services provided over the internet might are "cable services." The First Order applied only to new entrants to the cable market. However, in the Second Order, the FCC determined that the First Order's conclusions regarding mixed-use networks should apply to incumbent providers because those conclusions "depended upon [the Commission's] statutory interpretation of Section 602, which does not distinguish between incumbent providers and new entrants." The FCC reaffirmed this position in the Reconsideration Order, stating that franchising authorities "cannot . . . regulate non-cable services provided by an incumbent." In Montgomery County v. FCC , however, the Sixth Circuit vacated the FCC's extension of its mixed-use network rule to incumbent cable providers on the ground that this interpretation was arbitrary and capricious. The court explained that the Commission could not simply rely on the reasoning in its First Order because Section 602 did not support an extension of the mixed-use rule to incumbent cable providers. The court observed that the FCC correctly applied its mixed-use rule to new entrants who were generally common carriers because Section 602's definition of "cable system" expressly excludes common carrier facilities. But most incumbents, by contrast, are not common carriers. Consequently, because the Commission did not identify any other "valid basis statutory or otherwise " for its extension of its mixed-use rule to non-common carrier cable providers, the court vacated that decision as arbitrary and capricious. Responding to Montgomery County , the FCC's Third Order provides additional support for extending the mixed-use rule to incumbent cable operators. The Order first reiterates that Section 602's definition of "cable system" provides the basis for barring franchising authorities from regulating incumbent cable operators when acting as common carriers, because the definition explicitly excludes common carrier facilities except to the extent they are "used in the transmission of video programming directly to subscribers." Similarly, the Commission concluded that franchising authorities cannot regulate non -common carriers to the extent they provide other services along with cable, in particular, broadband internet access. The Third Order supports that conclusion by reference to Section 624(b)(1)'s command that franchising authorities may not "establish requirements for video programming or other information services ." While "information services" is not defined in Title VI, the FCC concluded that, based on Title VI's legislative history, the term should have the same meaning it has in Title I of the Communications Act. The Commission has interpreted "information service" under Title I of the Communications Act to include broadband internet access service, and the D.C. Circuit has upheld that interpretation. The Third Order also notes that "it would conflict with Congress's goals in the Act" to treat cable operators that are not common carriers differently from those that are common carriers, as allowing franchising authorities to regulate non-common carrier operators more strictly "could place them at a competitive disadvantage." Beyond clarifying that franchising authorities cannot use their Title VI authority to regulate the non-cable aspects of a mixed-use cable system, the Third Order also explicitly preempts state and local laws that "impose[] fees or restrictions" on cable operators for the "provision of non-cable services in connection with access to [public] rights-of-way, except as expressly authorized in [Title VI]." Prior to the Third Order's issuance, for example, the Oregon Supreme Court in City of Eugene v. Comcast upheld the City of Eugene's imposition of a 7% fee on the revenue a cable operator generated from its provision of broadband internet services. Rather than impose the fee as part of the cable franchising process, the city cited as its authority an ordinance imposing a "license-fee" requirement on the delivery of "telecommunications services" over the city's public rights-of-way. The court held that Title VI did not prohibit the city from imposing the fee, as it was not a "franchise fee" subject to the 5% cap because the ordinance applied to both cable operators and non-cable operators. Thus, the court reasoned, the city did not require Comcast to pay the fee "solely because of" its status as a cable operator and the franchise fee definition was not met. In the aftermath of the Oregon Supreme Court's decision, other state and local governments relied on sources of authority outside of Title VI, such as their police power under state law, to regulate the non-cable aspects of mixed-use networks. The Third Order rejects City of Eugene 's reading of Title VI. The FCC reasoned that Title VI establishes the "basic terms of a bargain" by which a cable operator may "access and operate facilities in the local rights-of-way, and in exchange, a franchising authority may impose fees and other requirements as set forth and circumscribed in the Act." Although Congress was "well aware" that cable systems would carry non-cable services as well as cable, it nevertheless "sharply circumscribed" the authority of state and local governments to "regulate the terms of this exchange." Consequently, the Commission concluded, the Third Order "expressly preempt[s] any state or local requirement, whether or not imposed by a franchising authority, that would impose obligations on franchised cable operators beyond what Title VI allows." The Third Order also concluded that the FCC has authority to preempt such laws because, among other things, Section 636(c) of Title VI expressly preempts any state or local law" that is "inconsistent with this chapter." Thus, in the FCC's view, wherever such express preemption provisions are present, the "Commission has [been] delegated authority to identify the scope of the subject matter expressly preempted." In sum, while franchising authorities may not use the cable franchising process to regulate non-cable services provided over mixed-use networks by new entrants to the cable market, the FCC's extension of this rule to incumbents has not yet been upheld in court. Furthermore, the Third Order's broad preemption of any state and local law regulating cable operators' use of public rights-of-way beyond what Title VI allows raises even more uncertainty. As discussed further below, the Third Order's preemption raises difficult questions about the extent to which the Commission may rely on Title VI to preempt not only state and local cable franchising requirements but also generally applicable state regulations and ordinances that regulate non-cable services provided by cable operators. <3. Legal Challenges> Several cities, franchising authorities, and advocacy organizations have filed petitions for review of the Third Order in various courts of appeals, and these petitions have been consolidated and transferred to the Sixth Circuit. In their petitions, the petitioners generally allege that the Third Order violates the Communications Act and the U.S. Constitution and is arbitrary and capricious under the APA. The same parties filed a motion with the FCC to stay the Third Order, which the Commission recently denied. While the petitions challenging the order state their legal theories in general terms, this case will likely raise complex issues of statutory interpretation, as well as administrative and constitutional law. For instance, petitioners could argue, as commenters did during the rulemaking process for the Third Order, that the text and structure of Title VI contradicts the FCC's broad interpretation that a franchise fee should include most cable-related, in-kind expenses. Pointing to provisions such as Section 611(b), which authorizes franchising authorities to impose PEG and I-Net requirements without any reference to the franchise fee provision, some commenters argued that Title VI treats the cost of complying with franchise requirements as distinct from the franchise fee. A reviewing court would likely apply the Chevron framework to resolve such statutory arguments. While it is difficult to predict how a reviewing court would decide any given issue, the Sixth Circuit's decision in Montgomery County indicates that the court might uphold the Third Order's legal interpretation of the franchise fee provision under the Chevron doctrine. Specifically, as discussed above, the Sixth Circuit held that Section 622's definition of franchise fee is broad enough to include "noncash exactions." Given this decision, the Sixth Circuit could potentially hold that the franchise fee definition is broad enough to accommodate the FCC's interpretation and that the FCC's interpretation is reasonable and entitled to deference. Even were the Sixth Circuit to reach that conclusion, however, that is not the end of the analysis. As the Sixth Circuit's decision in Montgomery County also demonstrates, the FCC's rulings may be vacated regardless of whether the Commission's statutory interpretation enjoys Chevron deference if the court concludes that the FCC's interpretation is arbitrary and capricious under the APA. A federal agency's determination is arbitrary and capricious if the agency "has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." In Montgomery County , the Sixth Circuit held that the FCC had acted arbitrarily and capriciously by failing to give "scarcely any explanation at all" for expanding its franchise fee interpretation to cable-related in-kind expenses and for failing to identify a statutory basis for extending its mixed-use rule to incumbents. While the Commission took pains to address these concerns in the Third Order, it remains to be seen whether a court would find those efforts sufficient or accept other arguments as to why the FCCs interpretations should be held arbitrary and capricious. For instance, those challenging the Third Order might argue that the Commission failed to address evidence that "runs counter" to its rules or failed to consider important counterarguments. One such area of focus for petitioners in their motion to stay the Third Order was the FCC's alleged failure to address potential public safety effects of the Third Order's treatment of cable-related in-kind contributions. In addition, the Third Order's assertion of preemption may come under scrutiny from state or local challengers who seek to regulate mixed-use networks. A recent D.C. Circuit decision struck down the FCC's attempt to preempt "any state or local requirements that are inconsistent with [the FCC's] deregulatory approach" to broadband internet regulation. Additionally, in a recent opinion concurring in the U.S. Supreme Court's denial of a petition for certiorari in a case involving a state's effort to regulate Voice over Internet Protocol service, Justice Thomas, joined by Justice Gorsuch, voiced concerns about allowing the FCC's deregulatory policy to preempt state regulatory efforts. Both the D.C. Circuit and Justices Thomas and Gorsuch expressed skepticism that the FCC has statutory authority to preempt state and local regulation in areas where the FCC itself has no statutory authority to regulate. Cities and local franchising authorities may seize on the reasoning in these opinions to argue that Title VI's preemption provision cannot extend to non-cable services that fall outside Title VI's purview. Lastly, along with statutory interpretation and administrative law issues, challengers to the Third Order may assert constitutional arguments. As mentioned, the Third Order prevents state and local governments from relying on state law to regulate non-cable services provided by cable operators. However, some commenters have argued that the Third Order violates the anti-commandeering doctrine, a constitutional rule that prohibits the federal government from compelling states to administer federal regulations. The Supreme Court recently clarified the anti-commandeering doctrine in Murphy v. NCAA . In Murphy , the Court struck down the Professional and Amateur Sports Protection Act of 1992, which prohibited states from legalizing sports gambling. Justice Alito, writing for the Court, reasoned that the anti-commandeering doctrine prohibits Congress from "issu[ing] direct orders to state legislatures," compelling them to either enact certain legislation or to restrict them from enacting certain legislation. The Court explained that the anti-commandeering doctrine promotes accountability, because, when states regulate at Congress's command, "responsibility is blurred." Justice Alito further explained that the doctrine "prevents Congress from shifting the costs of regulation to the States." The Court contrasted unlawful commandeering with permissible "cooperative federalism" regimes. Under such regimes, Congress allows, but does not require, states to implement a regulatory program according to federal standards, and a federal body implements the program when a state refrains from doing so. According to some commenters, the FCC's Third Order violates the anti-commandeering doctrine because it "effectively command[s] local government[s] to grant right-of-way access on the terms the Commission, not local government or the states set." Further, some commenters, including the National Association of Telecommunications Officers and Advisors and National League of Cities, argue that the Third Order would violate the accountability and cost-shifting principles animating the anti-commandeering doctrine, as explained in Murphy . According to these commenters, the FCC's "mixed-use rule unquestionably blurs responsibility" because residents unhappy with cable operators' use of the right-of-way for non-cable purposes would "blame their local elected officials," and the mixed-use rule would shift cost to local governments by "usurp[ing]" the "compensation local governments may be entitled to for use of the [rights-of-way] for non-cable services." Ultimately, this issue may turn on whether Title VI, as interpreted by the FCC's rules, is a permissible "cooperative federalism" program under Murphy . In its Third Order, the Commission argued Title VI was such a program because it "simply establishes limitations on the scope of [states' authorities to "award franchises" to cable operators] when and if exercised." The FCC further maintained that, rather than "requir[ing] that state or local governments take or decline any particular action," its rules were "simply requiring that, should state and local governments decide to open their rights-of-way to providers of interstate communication services within the Commission's jurisdiction, they do so in accordance with federal standards." It remains to be seen, however, how broadly lower courts will apply Murphy 's cooperative federalism distinction. <4. Considerations for Congress> Beyond the various legal arguments discussed above, there are notable disagreements over the practical impact of the FCC's rules. On the one hand, localities and their representative organizations have claimed that the Commission's Third Order will "gut[] local budgets" and that, by subjecting in-kind franchise requirements such as PEG and I-Net requirements to the 5% cap, it will force franchising authorities to "choose between local PEG access and I-Nets, and the important other public services supported by franchise fees." Similarly, the two FCC commissioners who dissented from the Third Order Jessica Rosenworcel and Geoffrey Starks maintained in their dissents that the Third Order was part of a broader trend at the Commission of "cutting local authorities out of the picture" and that it would, among other things, diminish the "value of local public rights-of-way." In response, the FCC's chairman, Ajit Pai, and other Commissioners in the majority contended that the rule would benefit consumers because the costs imposed by franchising authorities through in-kind contributions and fees get "passed on to consumers" and discourage the deployment of new services like "faster home broadband or better Wi-Fi or Internet of Things networks." Given the competing arguments relating to the FCC's interpretation of Title VI's scope, Congress may be interested in addressing the issues raised by the Third Order. For instance, Congress might address the extent to which Section 622's definition of "franchise fee" includes cable-related, in-kind expenses such as PEG and I-Net services. It might also address whether Title VI preempts state and local governments from relying on their police powers or other authorities under state law to regulate non-cable services provided by cable operators. However, Congress also might consider federalism issues implicated by any attempt to prohibit state and local authorities from regulating such services. As discussed in the previous section, the anti-commandeering principle prohibits direct orders to states that command or prohibit them from enacting certain laws, but permits lawful "cooperative federalism" regimes where Congress gives states a choice of either refraining from regulating a particular area or regulating according to federal standards. Thus, Congress may avoid anti-commandeering issues by setting federal standards for regulation of ancillary non-cable services rather than prohibiting states from regulating these services. <4.1. Appendix. Supplemental Information> Federal Standards and Restrictions on Franchising Authority Power The following table summarizes functions and areas traditionally regulated by franchising authorities that are subject to federal standards or federal restrictions. This table is not a summary of all federal requirements and regulations cable operators face under the act, only those that implicate the powers of franchising authorities. Glossary Build-Out Requirement: A requirement placed on a cable operator to provide cable service to particular areas or residential customers. Cable Operator: From the Cable Act, 47 U.S.C. 522, "[a]ny person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system." Cable Service: One-way transmission of video programming to customers, and any customer interaction required for the selection or use of such video programming. Cable System: A facility designed to provide video programming to multiple subscribers within a community, with limited exceptions. See note 39 , supra , for the precise exceptions. Common Carrier: A person or entity who provides interstate telecommunications service. Franchise: A right to operate a cable system in a given area. Franchise Fee: From the Cable Act, 47 U.S.C. 542, "any tax, fee, or assessment of any kind imposed by a franchising authority or other governmental entity on a cable operator or cable subscriber, or both, solely because of their status as such," with several exceptions. See the " Franchise Fees " section, supra , for a discussion of some of these exceptions. Franchising Authority: A state or local governmental body responsible for awarding franchises. I-Net: Abbreviation for "institutional network"; a communication network constructed or operated by a cable operator for use exclusively by institutional (non-residential) customers. In-Kind : Non-monetary. Mixed-Use Network: A communication network over which a person or entity provides both cable service and other service(s), such as telecommunications service. PEG: Abbreviation for "Public, Educational, or Governmental." See note 41 , supra , for more discussion of this term. Telecommunications : From the Communications Act, 47 U.S.C. 153, "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." Telecommunications Service: The offering of telecommunications directly to the public for a fee. Title VI: The collected provisions of the Cable Act, as amended.

Companies that provide cable television service (cable operators) are subject to regulation at the federal, state, and local levels. Under the Communications Act of 1934, the Federal Communications Commission (FCC or Commission) exercises regulatory authority over various operational aspects of cable service. At the same time, a cable operator must obtain a franchise from the state or local franchising authority for the area in which it wishes to provide cable service. The franchising authority often negotiates various obligations as a condition of granting the franchise. Under the Cable Communications Policy Act of 1984 (Cable Act), cable operators must obtain franchises from state or local franchising authorities, and these authorities may continue to condition franchises on various requirements. Nevertheless, the Cable Act subjects franchising authorities to important limitations. For instance, the Cable Act prohibits franchising authorities from charging franchise fees greater than 5% of a cable operator's gross annual revenue and from "unreasonably" refusing to award a franchise. In a series of orders since 2007, the FCC has interpreted the Cable Act to authorize an expanding series of restrictions on the powers of state and local franchising authorities to regulate cable operators. In particular, these orders clarify (1) when practices or policies by a franchising authority amount to an unreasonable refusal to award a franchise; (2) the types of expenditures that count toward the 5% franchise fee cap; and (3) the extent to which franchising authorities may regulate non-cable services provided by cable operators. Franchising authorities, in turn, have successfully challenged some of the FCC's administrative actions in federal court. The U.S. Court of Appeals for the Sixth Circuit upheld many rules in the FCC's orders, but it also vacated some of the FCC's rules in the 2017 decision in Montgomery County v. FCC . In response to the Montgomery County decision, the FCC adopted a new order on August 1, 2019, which clarifies its interpretations of the Cable Act. Among other things, the order reiterates the FCC's position that in-kind (i.e., non-monetary) expenses, even if related to cable service, may count toward the 5% franchise fee cap and preempts any attempt by state and local governments to regulate non-cable services provided by cable operators. Some localities have criticized the order for hampering their ability to control public rights-of-way and for reducing their ability to ensure availability of public, educational, and government (PEG) programming in their communities. Several cities have filed legal challenges to the order, which will likely involve many complex issues of statutory interpretation and administrative law, along with constitutional questions regarding the FCC's ability to impose its deregulatory policy on states. This report first outlines the FCC's role in regulating cable operators and franchising authorities, beginning with the Commission's approach under the Communications Act through the passage of the Cable Act and its amendments. The report then turns to a discussion of recurring legal issues over the FCC's power over franchising authorities. The report concludes with a discussion of possible legal issues that may arise in current legal challenges to FCC regulations and offers considerations for Congress.

crs_R46311

crs_R46311_0

<1. Introduction> Robocalls are the top complaint received by the Federal Communications Commission (FCC) and a consistent congressional concern. A robocall, also known as "voice broadcasting," is any telephone call that delivers a pre-recorded message using an automatic (computerized) telephone dialing system, more commonly referred to as an automatic dialer or "autodialer." The Telephone Consumer Protection Act of 1991 (TCPA) regulates robocalls. Legal robocalls are used by legitimate call originators for political, public service, and emergency messages, which are legal. Other legitimate uses can be, for example, to announce school closures or to remind consumers of medical appointments. Illegal robocalls are usually associated with fraudulent telemarketing campaigns, but an illegal robocall under the TCPA does not necessarily mean that the robocall is fraudulent. Illegal, fraudulent calls usually include misleading or inaccurate Caller ID information to disguise the identity of the calling party and trick called parties, which is called "spoofing." Scammers sometimes use " neighbor spoofing " so it will appear that an incoming call is coming from a local number . They may also spoof a number from a legitimate company or a government agency that consumers know and trust . Like robocalls more generally, spoofing can also be used for legitimate purposes, such as to hide the number of a domestic violence shelter or an individual employee extension at a business or government agency. This report addresses robocalls that are both illegal under the TCPA as well as intended to defraud, not robocalls that are defined only as illegal. The number of robocalls continues to grow in the United States, and the figures tend to fluctuate based on the introduction of new government and industry attempts to stop them and robocallers' changing tactics to thwart those attempts (see Figure 1 ). In 2019, U.S. consumers received 58.5 billion robocalls, an increase of 22% from the 47.8 billion received in 2018, according to the YouMail Robocall Index. In 2016, the full first year the Robocall Index was tabulated, that figure was 29.1 billion calls half the number of calls in 2019. Further, the FCC states that robocalls make up its biggest consumer complaint category, with over 200,000 complaints each year around 60% of all the complaints it receives. Over the past three years, the FCC has pursued a multi-part strategy for combatting spoofed robocalls. The agency has issued hundreds of millions of dollars in fines for violations of its Truth in Caller ID rules; expanded its rules to reach foreign calls and text messages; enabled voice service providers to block certain clearly unlawful calls before they reach consumers' phones; clarified that voice service providers may offer call-blocking services by default; and called on the industry to "trace back" illegal spoofed calls and text messages to their original sources. The FCC estimates that eliminating illegal scam robocalls would provide a public benefit of $3 billion annually. A survey by Truecaller, a company that tracks and blocks robocalls, puts that figure as high as $10.5 billion. <2. The Telephone Robocall Abuse Criminal Enforcement and Deterrence Act> The Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act) empowered the FCC to take specific actions to fight illegal robocalls; it was signed into law on December 30, 2019 ( P.L. 116-105 ). The law requires the FCC to administer a forfeiture penalty for violations (with or without intent) of the prohibition on certain robocalls; promulgate rules establishing when a provider may block a voice call based on information provided by the call authentication framework, called Secure Telephony Identity Revisited (STIR) and Signature-based Handling of Asserted information using toKENs (SHAKEN) (together known as "STIR/SHAKEN"), and establish a process to permit a calling party adversely affected by the framework to verify the authenticity of its calls; initiate a rulemaking to help protect subscribers from receiving unwanted calls or texts from a caller using an unauthenticated number; assemble, in conjunction with the Department of Justice, an interagency working group to study and report to Congress on the enforcement of the prohibition of certain robocalls; and initiate a proceeding to determine whether its policies regarding access to number resources could be modified to help reduce access to numbers by potential robocall violators. STIR/SHAKEN is seen by many, including the FCC, as a particularly important part of achieving the projected cost savings associated with eliminating illegal robocalls. STIR/SHAKEN must be implemented by June 30, 2021. <3. Ongoing Efforts to Combat Robocalls> Both the telecommunications industry and the FCC are taking steps to counter illegal robocalls. The telecommunications industry has developed new technologies and other tools to detect and block illegal robocalls. The FCC has taken steps to create a policy environment in which those tools can be implemented. The FCC has also expanded the scope of some existing rules and continues to target and fine illegal robocallers. <3.1. Call Blocking Initiatives> In November 2017, the FCC authorized telecommunications providers to block calls originating from numbers that should not originate calls, or that are invalid, unallocated, or unused, without violating call completion rules. In December 2018, the FCC adopted a declaratory ruling clarifying that wireless providers are authorized to take measures to stop unwanted text messaging as well as unwanted calls. The FCC has also encouraged companies that block calls to establish an appeals process for erroneously blocked callers. <3.1.1. Do Not Originate Registry and Other Call Blocking> The telecommunications industry has now widely implemented the blocking of numbers that should not originate calls, called the "Do Not Originate" (DNO) Registry. In November 2017, the FCC promulgated rules on the creation and use of the DNO Registry. The rules explicitly allow service providers to block calls from two categories of number: (1) numbers that the subscriber has asked to be blocked, such as "in-bound only" numbers (numbers that should not ever originate a call); and (2) unassigned numbers, as the use of such a number indicates that the calling party is intending to defraud a consumer. USTelecom, a trade association representing telecommunications-related businesses in the United States, maintains this registry and works with industry to implement DNO call blocking for in-bound numbers associated with government agencies. <3.1.2. 2020 FCC Report on Call Blocking> On December 20, 2019, the FCC released a public notice seeking comments for its first of two staff reports on call blocking issues mandated by the TRACED Act. The agency asked for comments on the availability and effectiveness of call blocking tools offered to consumers; the impact of the FCC's actions on illegal calls; the impact of call blocking on 911 services and public safety; and any other issues parties would like to see addressed. Comments were due January 29, 2020, and reply comments were due February 28, 2020. <3.2. Caller ID Authentication> Illegitimate robocallers nearly always spoof their originating number. That is, they deliberately falsify the Caller ID information they are transmitting to disguise their identity. One way to help consumers recognize spoofing and identify scams is to verify who is calling through Caller ID authentication. Over the past few years, the telecommunications industry developed a set of protocols, the STIR/SHAKEN framework that enables phone companies to verify that the Caller ID information transmitted with a call matches the caller's phone number. Once fully implemented, STIR/SHAKEN is expected to reduce the effectiveness of illegal spoofing and enable the identification of illegal robocallers. The FCC mandated the adoption of STIR/SHAKEN on March 31, 2020. These steps are discussed in detail in the section of this report, " FCC Order and Further Notice of Proposed Rulemaking, March 2020 ." <3.3. Call Traceback> More than 30 voice service providers participate in the USTelecom Industry Traceback Group (ITG), which was formally established in May 2016. The ITG is a collaborative effort of companies across the wireline, wireless, voice over internet protocol, and cable industries that actively trace and identify the source of illegal robocalls. The ITG coordinates with federal and state law enforcement agencies to identify non-cooperative providers so those agencies can take enforcement action, as appropriate. During 2019, ITG members conducted more than 1,000 tracebacks, associated with more than 10 million illegal robocalls. This activity has resulted in more than 20 subpoenas and/or civil investigative demands from federal and state enforcement agencies. The ITG published its first status report in January 2020. <3.4. Reassigned Numbers Database> When a consumer cancels service with a voice provider, the provider may reassign the number to a new consumer. If callers are unaware of the reassignment, they can make unwanted calls to the new consumer, unintentionally violating the Telephone Consumer Protection Act. In March 2018, the FCC proposed that one or more databases be created to provide callers with the comprehensive and timely information they need to discover potential number reassignments before making a call. In December 2018, the commission authorized the creation of a reassigned numbers database to enable callers to verify whether a telephone number has been permanently disconnected and is therefore eligible for reassignment before calling that number thereby helping to protect consumers with reassigned numbers from receiving unwanted calls. On January 24, 2020, the FCC requested public comment on the technical requirements developed for the database by the North American Numbering Council (NANC). Comments were due February 24, 2020, and reply comments were due March 9, 2020. <4. FCC Declaratory Ruling and Third Further Notice of Proposed Rulemaking, June 2019> On June 6, 2019, the FCC adopted a declaratory ruling and third further notice of proposed rulemaking (FNPRM), "Advanced Methods to Target and Eliminate Unlawful Robocalls and Call Authentication Trust Anchor." <4.1. Declaratory Ruling> The declaratory ruling empowers phone companies to block suspected illegal robocalls by default (customers may opt out) and asserts the FCC's view that carriers can allow consumers to opt in to more aggressive call-blocking tools, known as white-listing. Both blocking by default and opt-in white-listing tools seek to stop unwanted calls on the voice provider's network before calls reach the consumer's phone. <4.1.1. Call-Blocking Programs (Opt Out)> Call-blocking programs have become more popular and effective in the past few years. There are numerous blocking tools for different platforms, and the number of available tools is growing. Many service providers only offer these programs on an opt-in basis, limiting their potential impact. Providing a call-blocking program as the default option can significantly increase consumer participation while maintaining consumer choice. <4.1.2. White-List Programs (Opt In)> White-list programs require consumers to specify the telephone numbers from which they wish to receive calls all other calls are blocked. Smartphones have provided a new way to implement white-list programs, because they store the consumer's contact list. When the consumer's contacts change, the white list can be updated. The declaratory ruling asserts the FCC's view that nothing in the Communications Act of 1934 or the FCC's rules prohibits a service provider from offering opt-in white-list programs. <4.2. Third Further Notice of Proposed Rulemaking> The FNPRM requested feedback on several proposals: a safe harbor for providers that implement blocking of calls that fail caller authentication under STIR/SHAKEN, protections for critical calls, mandating Caller ID authentication, and measuring the effectiveness of robocall solutions. Comments were due on July 24, 2019, and reply comments were due on August 23, 2019. <4.2.1. Safe Harbor for Call-Blocking Programs Based on Potentially Spoofed Calls> The FCC proposed a narrow safe harbor for voice service providers that offer call-blocking programs that take into account (1) whether a call has been properly authenticated under the SHAKEN/STIR framework and (2) may potentially be spoofed. The safe harbor limits liability for voice service providers if they block a legal robocall. Among other elements, the FCC proposed a safe harbor for voice service providers that choose to block calls that fail SHAKEN/STIR authentication and asked whether there might be other instances where authentication would fail. The FCC also asked how it could ensure that wanted calls are not blocked and sought comment as to how to identify and remedy the blocking of wanted calls. <4.2.2. Protections for Critical Calls> The FCC requested comments on whether it should require voice providers offering call-blocking to maintain a "critical calls list" of emergency numbers that must not be blocked. Such lists would include, for example, the outbound numbers of 911 call centers and other government emergency services. The blocking prohibition would apply only to STIR/SHAKEN-authenticated calls. <4.2.3. Mandating Caller ID Authentication> The FCC requested comments on its proposal to mandate implementation of the STIR/SHAKEN authentication framework, if major voice providers fail to meet the end-of-2019 deadline for voluntary implementation. This is the topic of the FCC order issued on March 31, 2020, and is discussed in detail in the next section of this report, " FCC Order and Further Notice of Proposed Rulemaking, March 2020 ." <4.2.4. Measuring the Effectiveness of Robocall Solutions> The FCC requested feedback on whether it should create a mechanism to provide information to consumers about the effectiveness of voice providers' robocall solutions and, if so, how it should define and evaluate that effectiveness. The FCC also asked how it could obtain the information needed for such an evaluation. <5. FCC Order and Further Notice of Proposed Rulemaking, March 2020> The FCC published its latest guidance and proposals on March 31, 2020, in a new order and FNPRM. <5.1. Order> The new rules require implementation of Caller ID authentication using STIR/SHAKEN. Specifically, the rules require "all originating and terminating voice service providers to implement STIR/SHAKEN in the Internet Protocol (IP) portions of their networks by June 30, 2021, a deadline that is consistent with Congress's direction in the recently-enacted TRACED Act," described earlier in, " The Telephone Robocall Abuse Criminal Enforcement and Deterrence Act ." Most experts say that widespread deployment of STIR/SHAKEN will reduce the effectiveness of illegal spoofing, allow law enforcement to identify bad actors more easily, and help phone companies to identify calls with illegally spoofed Caller ID information before those calls reach their subscribers. <5.2. Further Notice of Proposed Rulemaking> The FNPRM requests public comments on expanding the STIR/SHAKEN implementation mandate to cover intermediate voice service providers; extending the implementation deadline by one year for small voice service providers pursuant to the TRACED Act; adopting requirements to promote caller ID authentication on voice networks that do not rely on IP technology; and implementing other aspects of the TRACED Act. Comments to the FNPRM are due on May 15, 2020, and reply comments are due on May 29, 2020. <6. Other FCC Actions Related to Robocalls> Other FCC actions to fight illegal robocallers include ongoing enforcement actions, an extension of a robocall ban to international callers, and the establishment of a hospital robocall protection group. <6.1. Ongoing Enforcement Actions> Since January 2017, the FCC has imposed or proposed about $240 million in forfeitures against robocallers. One case involved an individual who made more than 96 million illegal robocalls over the course of three months. Another involved an individual who conducted a large-scale robocalling campaign that marketed health insurance to vulnerable populations. In both cases, the illegal calls disrupted an emergency medical paging service. <6.2. Extension of Robocall Ban to International Callers> In 2018, Congress amended the Communications Act of 1934 to prohibit spoofing activities directed at U.S. consumers from callers outside the United States and Caller ID spoofing using alternative voice and text messaging services. To implement these amendments, the FCC issued rules in July 2019 that expanded the act's prohibition on the use of misleading and inaccurate Caller ID information. <6.3. Hospital Robocall Protection Group> The TRACED Act of 2019 required the FCC to establish a Hospital Robocall Protection Group. For most consumers, robocalls are a potentially fraudulent nuisance. For hospitals, though, the robocalls can present challenges that are increasingly threatening doctors and patients: At Tufts Medical Center, administrators registered more than 4,500 calls between about 9:30 and 11:30 a.m. on April 30, 2018, said Taylor Lehmann, the center's chief information security officer. Many of the messages seemed to be the same: Speaking in Mandarin, an unknown voice threatened deportation unless the person who picked up the phone provided their personal information. The FCC began soliciting nominations for the group in March 2020. Once established, the group is to be charged to develop and issue best practices regarding (1) how voice service providers can better combat unlawful robocalls made to hospitals; (2) how hospitals can better protect themselves from such calls; and (3) how the federal government and state governments can help combat such calls. <7. Outlook> The FCC has taken wide-ranging steps to stop illegal robocalls, including imposing fines on law breakers; mandating the implementation of call authentication technologies by the telecommunications industry; creating databases of numbers that should not be called; and providing regulatory permission to implement call blocking. Although these steps appear to be having some impact, scammers remain determined to continue their attempts to defraud consumers using robocalls. Historically, decreases in the number of robocalls are sometimes followed shortly thereafter by spikes in those numbers, illustrating how robocallers continue to overcome measures to stop them (e.g., by changing their originating numbers). Most of the tools being used against robocalls have been developed recently, while some are still under development. Therefore, it may take telecommunications providers some time to fully implement them, and it may be some time before a long-term and ongoing decrease in robocall numbers will be realized. The positive impacts of FCC initiatives on fraudulent robocalls, as well as potential negative impacts on the telemarketing industry due to blocking legitimate calls, may be the subject of continued oversight by Congress.

The number of robocalls continues to grow in the United States, and the figures tend to fluctuate based on the introduction of new government and industry attempts to stop them and robocallers' changing tactics to thwart those attempts (see Figure ). In 2019, U.S. consumers received 58.5 billion robocalls, an increase of 22% from the 47.8 billion received in 2018, according to the YouMail Robocall Index. In 2016, the full first year the Robocall Index was tabulated, that figure was 29.1 billion calls—half the number of calls in 2019. Further, the Federal Communications Commission (FCC) states that robocalls make up its biggest consumer complaint category, with over 200,000 complaints each year—around 60% of all the complaints it receives. A robocall is any telephone call that delivers a pre-recorded message using an automatic (computerized) telephone dialing system. The Telephone Consumer Protection Act of 1991 ( P.L. 102-243 ) regulates robocalls. Legal robocalls are used by legitimate call originators for political, public service, and emergency messages. Illegal robocalls are usually associated with fraudulent telemarketing campaigns. The FCC estimates that eliminating illegal scam robocalls would provide a public benefit of $3 billion annually. A survey by Truecaller, a company that tracks and blocks robocalls, puts that figure as high as $10.5 billion. Figure . Robocalls per Month, April 2019 through March 2020 (in billions) Source: Robocall Index, https://www.robocallindex.com . Over the past three years, the FCC has pursued a multi-part strategy for combatting illegal robocalls. The agency has issued hundreds of millions of dollars in fines for violations of its Truth in Caller ID rules; expanded its rules to reach foreign calls and text messages; enabled voice service providers to block certain clearly unlawful calls before they reach consumers' phones; clarified that voice service providers may offer call-blocking services by default; and called on the industry to "trace back" illegal spoofed calls and text messages to their original sources. Other wide-ranging steps by the FCC to stop illegal robocalls include mandating the implementation of call authentication technologies by the telecommunications industry, creating databases of numbers that should not be called, and establishing a reassigned numbers database. Major recent FCC regulatory actions include a June 2019 FCC Declaratory Ruling and Third Further Notice of Proposed Rulemaking, and a March 2020 FCC Order and Further Notice of Proposed Rulemaking. The FCC was empowered to take many of these actions by the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act) signed into law on December 30, 2019 ( P.L. 116-105 ). Although these steps appear to be having some impact, scammers remain determined to continue their attempts to defraud consumers using robocalls. Historically, decreases in the number of robocalls are sometimes followed shortly thereafter by spikes in those numbers, illustrating how robocallers continue to overcome measures to stop them (e.g., by changing their originating numbers). Most of the tools being used against robocalls have been developed recently, while some are still under development. Therefore, it may take telecommunications providers some time to fully implement them, and it may be some time before a long-term and ongoing decrease in robocall numbers will be realized. The positive impacts of FCC initiatives on fraudulent robocalls, as well as potential negative impacts on the telemarketing industry due to blocking legitimate calls, may be the subject of continued oversight by Congress.

crs_R46366

crs_R46366_0

<1. Introduction> A pension is a voluntary benefit offered by employers to assist employees in preparing for retirement. Pension plans may be classified according to whether they are (1) defined benefit (DB) or defined contribution (DC) plans and (2) sponsored by one or more than one employer. In DB plans, participants typically receive regular monthly benefit payments in retirement (which some refer to as a "traditional" pension). In DC plans, of which the 401(k) plan is the most common, participants have individual accounts that can provide a source of income in retirement. This report focuses on DB plans. Pension plans are also classified by whether they are sponsored by one employer (single-employer plans) or by more than one employer (multiemployer and multiple-employer plans). Multiemployer pension plans are sponsored by more than one employer (often, though not required to be, in the same industry) and maintained as part of a collective bargaining agreement. Multiple-employer plans are sponsored by more than one employer but are not maintained as part of collective bargaining agreements. Multiple-employer plans follow the same funding rules as single-employer plans and are generally not reported separately. This report focuses on single-employer plans. Except where noted, references to single-employer plans in this report include multiple-employer plans. To protect the interests of pension plan participants and beneficiaries, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406 ). The law is codified in the Internal Revenue Code (26 U.S.C.) and Labor Code (29 U.S.C.). ERISA sets standards that private-sector pension plans must follow with regard to plan participation (who must be covered); minimum vesting requirements (how long a person must work for an employer to be covered); fiduciary duties (how individuals who oversee the plan must behave); and plan funding (how much employers must set aside to pay for future benefits). In addition, ERISA established the Pension Benefit Guaranty Corporation (PBGC), which is a government corporation that insures DB pension plans covered by ERISA in the case of plan termination. ERISA covers only private-sector pension plans and plans established by nonprofit organizations. It exempts pension plans established by the federal, state, and local governments and by churches. The funding relief provisions discussed in this report generally apply only to plans covered by ERISA. <2. Basics of Single-Employer Defined Benefit Pension Plan Funding> Pension funding consists of several elements. These include the value of plan benefits that participants will receive in the current and in future years; the amount a plan has set aside to pay for these benefits; and the employer contributions required each year to ensure the plan has sufficient funds to pay benefits when participants retire. The amount of a participant's benefit in a single-employer DB plan is based on a formula that typically uses a combination of length of service, accrual rate, and average of final years' salary. For example, a plan might specify that retirees receive an amount equal to 1.5% of their pay for each year of service, where the pay is the average of a worker's salary during his or her highest-paid five years. In general, ERISA requires DB plans to have enough assets set aside to pay the benefits owed to participants. For various reasons, plans may have less or more than this amount. Employers that sponsor DB plans are required to make annual contributions to their plans to ensure they ultimately reach that 100% funding goal. <2.1. Typical Defined Benefit Plan Balance Sheet> Figure 1 depicts a typical DB pension plan's balance sheet. It consists of (1) plan assets, which are the value of the investments made with accrued employer (and employee, if any) contributions to the plan, and (2) plan liabilities, which are the value of participants' benefits earned under the terms of the plan. Plan assets are invested in equities (such as publicly-traded stock), debt (such as the U.S. Treasury and corporate bonds), private equity, hedge funds, and real estate. <2.1.1. Plan Assets> Pension plans are required to report the value of plan assets using two methods: (1) market values (the value at which assets can be sold on a particular date) and (2) smoothed, or actuarial , values (the average of the past, and sometimes expected future, market values of each asset). Actuarial values are used to determine the 100% funding goal and any additional employer contributions necessary to achieve that goal. The smoothing of asset values prevents large swings in asset values and creates a more predictable funding environment for plan sponsors. Some advocates of reporting market values note that smoothed values are often higher than market values (particularly during periods of market declines), which could overstate the financial health of some pension plans. Some advocates of smoothing argue that market values are useful only if a plan needs to know its liquidated value (e.g., if the plan had to pay all of its benefit obligations at one point in time), which is unlikely to be the case as most employers sponsoring pension plans are unlikely to enter bankruptcy. <2.1.2. Plan Liabilities> A pension plan's benefits are a plan liability spread out over many years in the future. These future benefits are calculated and reported as present values (also called current values). Using a formula, benefits that are expected to be paid in a particular year in the future are calculated so they can be expressed as a present value. This process is called discounting , and it is the reverse of the process of compounding , which projects how much a current dollar amount will be worth at a point in the future. The formula by which future values are calculated as present values is shown in Figure 2 . Figure 3 shows a simplified example of a DB pension benefit calculation. In this example, it is assumed that at the beginning of year 1, the worker has already earned a benefit of $100 per year in retirement, which is expected to begin in year 5. Retirement is expected to last four years. Each of the payments is made at the beginning of the year and is discounted using the present value formula in Figure 2 and assuming an interest rate of 10%. In this example, the first benefit is received at the beginning of year 5, so that benefit payment is discounted over four years. The benefits for the following three years are also discounted to beginning of year 1 dollar amounts and are then summed, resulting in a benefit value of $238.16 at the beginning of year 1. The calculated present value of the benefit payments depends on the year in which the benefit is calculated. For example, as a worker moves closer to the expected date of retirement and recalculates the present value of the benefit, the calculated value of the obligation increases. For example, when calculated at the beginning of year 2, the simplified pension benefit has a present value of $261.97 in year 2 dollars . When calculated at the beginning of year 3, the benefit has a present value of $288.17 in year 3 dollars . <2.1.3. Defined Benefit Plan Funding Ratio> The DB plan funding ratio compares the value of a plan's assets with the present value of a plan's liabilities and is often used as an indicator of the financial health of a plan. The DB plan funding ratio is calculated as A funding ratio of 100% indicates that the DB plan has set aside enough funds to pay the present value of the plan's future benefit obligations. Funding ratios that are less than 100% indicate that the DB plan has not set aside enough to meet the calculated value of its future benefit obligations. Because benefit obligations are typically paid out over a period of 20 to 30 years, participants in even an underfunded plan will likely receive their promised benefits in the near term. However, if the underfunding persists without additional contributions or higher investment returns, plan participants in an underfunded plan might not receive 100% of their promised benefits in the future. Returning to the example above, setting aside $238.16 at the beginning of year 1 would fund the year 1 value of the benefit. At the beginning of year 2, the benefit has a recalculated value of $261.97 in year 2 dollars. Because $238.16 was set aside at the beginning of year 1 and assuming no investment gains or losses and no additional pension benefits an additional contribution of $23.81 ($261.97 - $238.16) is needed to fund the value of the benefit as calculated at the beginning of year 2. Likewise, at the beginning of year 3, the benefit has a recalculated value of $288.17 in year 3 dollars. Because $238.16 was set aside at the beginning of year 1, and $23.81 more was contributed at the beginning of year 2 and assuming no investment gains or losses and no additional pension benefits an additional contribution of $26.20 ($288.17 - $261.97) is needed to fund the value of the benefit as calculated at the beginning of year 3. This discussion of the example in Figure 3 has reviewed the funding ratio and required payments for only the first three years displayed. In practice, the DB plan funding ratio would continue to be recalculated and payments necessary to satisfy any DB plan funding ratio shortfalls would continue to be required each year to ensure the DB plan funding obligation is fully satisfied. The present value of a dollar amount is inversely related to the assumed interest rate. As the interest rate increases, present value decreases; as the interest rate decreases, present value increases. In the above example, if the interest rate is 15%, then the pension benefit has a value of $187.72 calculated at the beginning of year 1, $215.88 calculated at the beginning of year 2, and $248.26 calculated at the beginning of year 3. In this modification of the simplified example, with the only difference being a 15% interest rate, the pension benefit would be funded and assuming no investment gains or losses and no additional pension benefits with contributions of $187.72 at the beginning of year 1; $215.88 - $187.72 = $28.16 at the beginning of year 2; and $248.26 - $215.88 = $32.38 at the beginning of year 3. This example shows payments for the first three years; in practice, contributions would continue until the obligation is fully satisfied. Note that the amounts of the yearly payments differ depending on the interest rate used. Compared with the payments in the 10% interest rate example, the initial payment in the 15% example is lower ($187.72 versus $238.16) but subsequent payments are higher (e.g., year 2 payments are $28.16 using the 15% interest rate and $23.81 using the 10% interest rate). Over time, the required payments in both cases assuming no investment gains or losses and no additional pension benefits sum to the total benefits received in retirement. The interest rate used by single-employer DB plans is discussed later in this report. <2.2. Annual Employer Contributions to Defined Benefit Plans> ERISA sets out requirements for the minimum required contribution , which is amount of money that must be contributed each year to a DB pension plan. In general, the minimum required contribution is the sum of (1) the value of benefits earned by participants in the plan year (the target normal cost ), (2) installment payments resulting from plan underfunding in previous years (the shortfall amortization charge ), and (3) installment payments resulting from Internal Revenue Service- (IRS-) approved waived required contributions in previous years (the waiver amortization charge ). <2.2.1. Target Normal Cost> The target normal cost represents the value of pension benefits that are earned or accrued by employees in a plan year and the cost to administer these benefits (minus any mandatory employee contributions). <2.2.2. Amortization Charges> A DB plan's funding can change in a given year as a result of changes to participants' benefits, employer contributions, and circumstances or events outside the plan's control. Plan underfunding could increase from events such as a decrease in plan assets due to declines in the stock market or an increase in plan liabilities due to decreases in interest rates. In order for a plan to remain fully funded, employers must increase their plan contributions to make up for losses that are outside the plan's control. Employers are not required to make up for the losses all at once. Rather, they may make installment payments to make up for plan losses over a number of years. Plan underfunding is paid off in installment payments via amortization . The amortization period is the length of time over which a plan can spread the installment payments. <2.2.2.1. Shortfall Amortization Charge> A plan's funding target is the present value of all benefits earned by participants as of the beginning of the year. A plan's funding shortfall is the amount by which the funding target is greater than the value of plan assets. Various factors can cause funding shortfalls, such as investment losses and decrease in interest rates. In general, PPA required plan underfunding resulting from funding shortfalls to be amortized over a period of seven years. <2.2.2.2. Waiver Amortization Charge> Employers that face a temporary substantial business hardship can apply to the IRS for a funding waiver. Missed minimum required contributions as a result of receiving an IRS funding waiver must be amortized over five years. The waiver amortization charge is the amount of a plan's installment payment that amortizes the missed contributions. <2.3. Single-Employer Defined Benefit Pension Plan Data> Table 1 provides data on single-employer DB pension plans. In 2018, there were over 23,000 of such plans with 26.2 million participants. According to PBGC, 81.4% of plans (containing 95.2% of plan participants) were underfunded in 2016. The total amount of underfunding in these plans was $625.4 billion. In addition, 18.6% of plans (containing 4.8% of participants) were overfunded in 2016. The total amount of overfunding in these plans was $15.3 billion. Figure 4 shows the funding percentage of the 100 largest corporate DB pension plans from 2015 to 2020. The most recent data show that in February 2020, these plans had $1.6 trillion in assets and $1.9 trillion in projected benefit obligations. The funding percentage (assets as a percentage of benefit obligations) was 82.2%, and total underfunding was $0.3 trillion. <3. The Pension Protection Act of 2006> The Pension Protection Act of 2006 (PPA; P.L. 109-280 ) was the most recent major legislation to affect pension plan funding. Among other provisions, PPA established new funding rules for single- and multiple-employer plans and required that plans become 100% funded over a certain time period. PPA specified interest rates and other actuarial assumptions that plans must use to calculate their funding targets and target normal costs. PPA gave plans three years to transition to the new funding requirements. PPA also created special rules for certain types of plans, including those sponsored by certain government contractors, commercial airlines, and rural cooperatives. <3.1. Pension Protection Act Interest Rates> PPA specified that pension plans discount their future benefit obligations using three different interest rates. The rates, called segment rates, used in the calculation depend on the date on which benefit obligations are expected to be paid and the corresponding rates on the corporate bond yield curve. The segment rates are calculated as the average of the corporate bond yields within the segment for the preceding 24 months. The IRS publishes the segment rates on a monthly basis. The first segment is for benefits payable within five years. The first segment rate is calculated as the average of short-term bond yields (with a maturity less than five years) for the preceding 24 months. Likewise, the second and third segments are for benefits payable after 5 years to 20 years and after 20 years, respectively. The second and third segment rates are calculated similarly to the first segment rates, using bonds of appropriate maturities. <3.1.1. Pension Protection Act Amortization Periods> PPA required that shortfall amortization charges (funding shortfalls as a result of, for example, investment losses) be amortized over seven years and waiver amortization charges (from missed required minimum contributions) be amortized over five years. Amortization payments include interest. <3.2. Pension Protection Act Special Rules for Certain Plans> PPA outlined special rules for certain pension plans. Some of the rules have expired; others have been extended or expanded by subsequent legislation. <3.2.1. Special Rules for Certain Commercial Airline Industry Plans> PPA provided special funding rules for certain eligible plans maintained by (1) a commercial passenger airline or (2) an employer whose principal business is providing catering services to a commercial passenger airline. Eligible plans that met certain benefit accrual and benefit increase restrictions could (1) use a 17-year amortization period, instead of the seven years required by PPA, beginning in 2006 or 2007 and (2) use an 8.85% interest rate, instead of the required segment rates, for the purposes of valuing benefit obligations. Eligible plans that did not meet certain benefit accrual and benefit increase restrictions could choose to use a 10-year amortization period for the first taxable year, beginning in 2008. <3.2.2. Special Rules for Certain Government Contractor Plans> PPA delayed the date for certain government contractor plans to adopt the new funding rules to the 2011 plan year. Eligible plans were defense industry contractors whose primary source of revenue was derived from business performed under government contracts that exceeded $5 billion in the prior fiscal year. <3.2.3. Special Rules for Certain Pension Benefit Guaranty Corporation Settlement Plans> PPA delayed the date for certain PBGC settlement plans to adopt the new funding rules to the 2014 plan year. Eligible plans were those in existence as of July 26, 2005, and (1) sponsored by an employer in bankruptcy proceedings giving rise to a claim of $150 million or less, and the sponsorship of which was assumed by another employer, or (2) that, by agreement with PBGC, were spun off from plans that were subsequently terminated by PBGC in involuntary terminations. <4. Funding Relief and Other Modifications for Single-Employer Plans> Since PPA's enactment in 2006, Congress has modified funding rules for pension plans several times. Funding relief provisions have delayed the implementation dates of some PPA provisions, extended amortization periods, or changed interest rates. Some funding relief has been directed toward all single-employer DB plans; other modifications of funding rules have been targeted to specific types of pension plans, such as plans for certain cooperative and charitable organizations and for community newspapers. An extension of amortization periods allows plans a greater amount of time to pay off unfunded liabilities, meaning that plans can contribute less money per year over a greater number of years. Changes in interest rates modify the timing of required employer contributions. As previously mentioned, a higher interest rate decreases the present value of plan liabilities, which means employers can contribute less today to fund a future benefit. The dollar amount of the benefit that a participant will receive in the future remains unchanged. Relative to a lower interest rate, a higher interest rate allows plans to contribute relatively smaller amounts in the near term but will have to be made up with higher contributions in the longer term. A lower interest rate does the opposite it increases the present value of plan liabilities, requiring more employer contributions in the near term (and fewer in the long term). <4.1. Funding Relief and Other Modifications Since the Pension Protection Act> The following sections describe funding relief provisions and other funding rule modifications in chronological order, where feasible, since PPA. <4.1.1. Special Rules for Certain Plans in the Commercial Airline Industry> The U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ) provided funding relief for plans operated by certain commercial airlines and airline catering companies. As described above, PPA had extended the amortization period to either 10 or 17 years for these plans. P.L. 110-28 specified that eligible plans that had chosen the 10-year amortization period could use an interest rate of 8.25% for purposes of calculating the funding target for each of those 10 years. <4.1.2. Delay of Certain Pension Protection Act Rules> The Worker, Retiree, and Employer Recovery Act of 2008 (WRERA; P.L. 110-458 ) delayed the implementation of the PPA transition rules, giving plans additional time to become fully funded (given the decline in asset values due to the 2007-2009 economic downturn). <4.1.3. Extended Amortization Periods> The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 ( P.L. 111-192 ) allowed plans to amortize underfunding resulting from the 2007-2009 market downturn using one of two alternative amortization schedules. Pension plan sponsors could amortize their funding shortfalls over either (1) 9 years, with the first 2 years of payments consisting of interest only on the amortization charge and the next 7 years consisting of interest and principal, or (2) 15 years. Plan sponsors that chose one of these amortization schedules were required to make additional contributions to the plan if the plan sponsors paid excess compensation or declared extraordinary dividends, as defined in P.L. 111-192 . <4.1.4. Interest Rate Corridors> The Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) established a funding corridor to provide minimum and maximum interest rates used in calculating plan liabilities. The minimum and maximum rates were initially calculated as 90% and 110%, respectively, of the average of corporate bond yields for the segment over the prior 25-year period. If the 24-month segment interest rate as calculated under PPA is below the minimum percentage of the funding corridor, the interest rate is adjusted upward to the minimum. If the 24-month segment interest rate is higher than the maximum, it is adjusted downward to the maximum. MAP-21 adjusted the minimum and maximum percentages surrounding the baseline rate over time to become 70% and 130%, respectively, by 2016 (essentially widening the corridor). When interest rates increase (which occurs when the 24-month rate is adjusted upward to the minimum rate), the present value of future benefit obligations decreases, and required plan contributions decrease. When companies contribute less to their pension plan, lower plan contributions increase companies' taxable income, which results in increased Treasury revenue. Since MAP-21, provisions in enacted legislation twice delayed the beginning of the widening of the funding corridor. First, the Highway and Transportation Funding Act of 2014 (HTF; P.L. 113-159 ) delayed the beginning of widening of the funding corridor until 2018. Later, the Bipartisan Budget Act of 2015 (BBA; P.L. 114-74 ) delayed it until 2021. Table 2 shows the applicable minimum and maximum percentages under MAP-21, HTF, and BBA. Figure 5 shows a hypothetical example of how segment rates are determined using the funding corridors. The red line shows the average of a segment's interest rates for the prior 25 years. The yellow and gold lines indicate the minimum and maximum rates around the 25-year average under the MAP-21 provisions. The light green and dark green lines indicate the widening of the corridors around the 25-year average under the HTF provisions (starting in 2018). The light blue and dark blue lines are the minimum and maximum rates around the 25-year averages in current law, as passed in the BBA (starting in 2021). Because of the HTF and BBA extensions, the minimum and maximum corridors have remained at 90% and 110%, respectively, since 2012. The following example demonstrates how segment rates are adjusted. If Treasury determines that the segment rate is above the maximum segment rate point (1) in Figure 5 then Treasury adjusts the segment rate downward until it equals the proposed maximum segment rate. If Treasury determines that the segment rate is at or below the maximum segment rate and at or above the minimum segment rate point (2) in Figure 5 Treasury does not adjust the segment rates. If Treasury determines that the segment rate is below the minimum segment rate point (3) in Figure 5 then Treasury adjusts the interest rate upward until it equals the proposed minimum segment rate. For example, in April 2020, the first segment rate before adjustment was 2.68%. Adjusted for the 25-year average bond yields, the first segment rate was 3.64%. <4.1.5. Special Rules for Certain Cooperative and Charity Pension Plans> Congress has authorized special funding rules for plans sponsored by specific types of employers, such as rural cooperatives and certain charities. PPA delayed the implementation of funding rules for certain cooperatives. Subsequent legislation expanded this delayed effective date to certain charities. Later legislation modified funding rules for these plans, referred to as Cooperative and Small Employer Charity (CSEC) pension plans. With two exceptions, CSEC plans are multiple-employer pension plans established by eligible cooperatives and certain charitable organizations to provide retirement benefits for their employees. <4.1.5.1. Delay of PPA Funding Rules> PPA provided a delayed effective date of January 1, 2017, for certain multiple-employer cooperative plans such as pension plans for agriculture, electric, and telephone cooperatives to adopt the new funding rules. The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 ( P.L. 111-192 ) extended PPA's delayed effective date to apply to certain charitable organizations' pension plans multiple-employer plans whose employers are charitable organizations described in 26 USC 501(c)(3). <4.1.5.2. Establishment of CSEC Funding Rules> The Cooperative and Small Employer Charity Pension Flexibility Act of 2013 ( P.L. 113-97 ) established funding rules for and provided a definition of CSEC pension plans. Among other provisions, this act permanently exempted these plans from PPA's funding rules and outlined minimum funding standards for CSEC plans. Plans must indicate if they use the CSEC-specific funding rules in their required annual reporting to the Department of Labor (DOL). Table A-1 provides a list of CSEC plans and funded status in the 2017 plan year. <4.1.5.3. Expanded Definition of CSEC Plans in 2015> Section 3 of Division P of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) expanded the definition of CSEC plans to include plans maintained by an employer that meet several criteria. It appears that the Boy Scouts of America Master Pension Trust is the only plan that meets these expanded criteria. <4.1.5.4. Expanded Definition of CSEC Plans in 2020> Section 3609 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136 ) applies CSEC funding rules to plans sponsored by certain charitable employers "whose primary exempt purpose is providing services with respect to mothers and children," among other criteria. It appears that the pension plan sponsored by March of Dimes is the only plan that meets these expanded criteria. <4.1.6. Special Rules for Community Newspaper Plans> Section 115 of the Setting Every Community up for Retirement Enhancement Act of 2019 (SECURE Act, enacted as Division O of the Further Consolidated Appropriations Act of 2020; P.L. 116-94 ) provided special funding rules for pension plans operated by certain community newspapers that had no benefit increases for participants after December 31, 2017. Community newspaper plans are those maintained by certain private community newspaper organizations that are family-controlled and have been in existence for 30 or more years. For these plans, the SECURE Act increased the interest rate to 8%, and extended the amortization period from 7 to 30 years. <4.1.7. Delayed Due Date for 2020 Plan Contributions> Section 3608 of the CARES Act ( P.L. 116-136 ) allows contributions that are due in calendar year 2020 to be made, with interest, on January 1, 2021. Section 3608 also allows plans to use the funding percentage for the 2019 plan year, rather than the 2020 plan year (which would likely be lower), in determining whether plans must impose benefit restrictions. <4.2. Policy Considerations> Policymakers and stakeholders might consider some of the policy implications of single-employer DB pension plan funding relief. The considerations include the rationale for providing relief, the effects of lower levels of plan assets on participant benefits and PBGC, and the effect on the federal budget. Funding relief results in lower employer contributions to DB plans in the near term. Among the rationales for funding relief is that it allows employers the flexibility to use funds for other priorities (such as retaining or hiring employees). For example, 74 trade associations said in a 2009 letter to policymakers that, "[P]roviding defined benefit funding relief is directly related to improving the economy and employment." On the other hand, some policymakers oppose funding relief to specific industries or companies because they provide "a special-interest bailout" and set both "bad policy and bad precedent." Some stakeholders have expressed concern that employers adopting funding relief measures might use the funds saved via reduced contributions for non-core business activities. For example, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 ( P.L. 111-192 ) limited the ability of employers that adopted funding relief measures to provide excess employee compensation or extraordinary dividends. Although employer contributions and plan assets are lower following funding relief, participants' benefits are not necessarily at risk although they may be under certain circumstances. Participants in DB plans that receive funding relief remain entitled to their benefits; funding relief does not reduce these benefits. For employers that do not become bankrupt, modifying the timing of contributions generally would not be problematic over time, the employer would need to make all required contributions for participants to receive their full benefits. However, in the case of employer bankruptcy, the timing of contributions may negatively affect both participants' benefits and PBGC. Participants with benefits greater than the PBGC maximum guarantee or with non-guaranteed benefits might see reduced benefits when PBGC becomes trustee of their plan. Following funding relief, there are fewer plan assets available from which to pay non-guaranteed benefits because funding relief lowers employer contributions to DB plans in the short term. In addition, PBGC receives fewer assets from the plans that it trustees, which harms its financial position. ERISA requires PBGC to be self-supporting and receives no appropriations from general revenue. ERISA states that the "United States is not liable for any obligation or liability incurred by the corporation." Increasingly large amounts of unfunded liabilities in terminated plans may burden PBGC's single-employer insurance program. Although PBGC ended FY2019 with a surplus of $8.6 billion, the effects of (1) the Coronavirus Disease 2019 (COVID-19) pandemic on the financial health of employers and (2) the market downturn in early 2020 on the value of DB plan assets will likely worsen the funding position of single-employer pension plans and PBGC's financial position. Funding relief can result in short-term revenue for Treasury and PBGC. Because employer contributions to pension plans are generally tax deductible, decreasing a plan's required contributions for a year (either through increasing the interest rate or extending the amortization period) increases the plan's taxable income. Some stakeholders point out that because funding relief provides revenue to Treasury, it has been used for budgetary offsets without regard to the policy justifications. Funding relief can positively affect PBGC finances because greater DB plan underfunding results in higher variable-rate premiums (premiums based on the amount of plan underfunding) paid by employers to PBGC. <4.2.1. Appendix. Data on CSEC Plans in 2017> Table A-1 provides data on Cooperative and Small Employer Charity (CSEC) plans in the 2017 plan year (the most recent year for which complete data are available). In total, CSEC plans had about 239,000 participants, $19.6 billion in assets, and a total funding target of $20.7 billion in 2017. The largest plan by number of participants in 2017 was the Retirement Security Plan, which had assets of $8.6 billion and a total funding target of $9.2 billion in that year. To determine which plans use CSEC funding rules, the Congressional Research Service (CRS) analyzed public-use Form 5500 data from the Department of Labor (DOL) for the 2014 to 2017 plan years. 2014 is the first year that Form 5500 includes an option to indicate the use of CSEC funding rules (following P.L. 113-97 ), and 2017 is the most recent year for which complete data are available. Most private-sector pension plans are required to submit annual forms to the Internal Revenue Service (IRS), DOL, and the Pension Benefit Guaranty Corporation (PBGC). These forms generally include information about the plan, such as the number of participants, financial information, and the companies that provide services to the plan. In addition to Form 5500, pension plans are generally required to file information in specific schedules. For example, most single-employer and multiple-employer plans are required to file Schedule SB, which contains information specific to these plans. Each pension plan's Form 5500 and required schedules are available by search on DOL's website. Because data are self-reported, Table A-1 may not capture all plans that used CSEC funding rules or may include non-CSEC plans that erroneously identified as CSEC plans. Table A-1 provides data on private-sector defined benefit (DB) pension plans that indicated using CSEC funding rules on their 2014, 2015, 2016, or 2017 Schedule SB filings. Twenty-eight plans indicated using CSEC funding rules in multiple years. One plan, the Johns Hopkins Health System Corporation Plan, appeared to start using CSEC funding rules in 2017. Table A-1 provides the total number of participants, actuarial value of assets, total funding target, and funding target attainment percentage for the 29 plans (including the Johns Hopkins plan). In addition to the Johns Hopkins plan, 10 plans indicated using CSEC funding rules in a single year but not in other years. An examination of individual plan filings from the Employee Benefits Security Administration (EBSA) showed that these plans did not use CSEC funding rules in the year they indicated having done so and are not included in this analysis. The Employee Benefit Plan of Jewish Community of Louisville, Inc., indicated using CSEC funding rules in 2014, 2015, and 2016, but a Form 5500 for the 2017 plan year is not available and is not included in Table A-1 . In 2016, this plan had 110 participants.

To protect the interests of participants and beneficiaries in pension plans, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406 ). ERISA specified funding rules for single-employer defined benefit (DB) pension plans, among other provisions. Single-employer DB pension plans are sponsored by one employer for the benefit of its employees. In DB pension plans, participants typically receive regular monthly benefit payments in retirement (which some refer to as a "traditional" pension). ERISA also authorized the creation of the Pension Benefit Guaranty Corporation (PBGC), which is a government corporation that insures private-sector pension benefits up to a specified maximum in the case of plan termination. Single-employer DB funding rules generally require several steps: calculating the value of benefits that a plan will pay in the future; determining how much a plan has set aside to pay those benefits; and determining how much, and the time period over which, an employer must contribute to the plan each year. Since ERISA, Congress has periodically modified funding rules for pension plans. The Pension Protection Act of 2006 (PPA; P.L. 109-280 ) outlined new pension funding standards for single-employer DB plans, among other requirements. PPA required that plans become 100% funded over time and outlined assumptions that pension plans must use to become fully funded. PPA also provided special rules for DB plans sponsored by certain employers, such as some airlines and defense contractors. Since PPA was enacted, legislation has further modified funding rules for single-employer DB plans for various reasons. At times, legislation has applied broadly to most private-sector DB plans; at other times, changes to funding rules have targeted plans sponsored by specific industries or types of employers. At times, legislation has provided funding relief , which are measures that lower employer contributions. In general, funding relief measures allow plans more time to make required payments by (1) modifying assumptions that affect the calculated value of pension benefits or (2) extending the time period to make up for plan losses. The adoption of a funding corridor for interest rates in the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) marked a significant change to single-employer DB funding rules. DB plans calculate the present value of future benefits that will be owed using certain specified interest rates for discounting. In response to a period of low interest rates, MAP-21 established a process for determining minimum and maximum interest rates for discounting based on 25-year averages of historical corporate bond yields. As originally established, the funding corridor was scheduled to widen eventually, which, when applied to the specified interest rates, would have resulted in the use of lower interest rates to calculate DB pension obligations. Subsequent legislation delayed the date when the funding corridor is to begin widening. Under current law, the widening is scheduled to begin in 2021. Funding relief measures do not directly affect participants' benefits. However, they can result in pension plans having lower funding levels than they otherwise would at a point in time. Thus, funding relief can negatively affect PBGC's finances because it could take over a plan that has fewer assets than the plan otherwise would in the absence of funding relief. Funding relief can also affect PBGC's ability to pay non-guaranteed benefits, such as benefit increases implemented within five years prior to plan termination. On the other hand, funding relief can positively affect PBGC finances because greater DB plan underfunding results in higher variable-rate premiums (premiums based on the amount of plan underfunding) paid to PBGC by employers. This report provides (1) background on single-employer DB pension funding, (2) a discussion of funding rules under PPA, and (3) provisions since PPA that have provided funding relief or otherwise modified single-employer DB pension funding rules.

crs_R45985

crs_R45985_0

<1. Introduction> Fully autonomous vehicles, which would carry out many or all of their functions without the intervention of a driver, may someday bring sweeping social and economic changes and "lead to breakthrough gains in transportation safety." Motor vehicle crashes caused an estimated 36,560 fatalities in 2018; a study by the National Highway Traffic Safety Administration (NHTSA) has shown that 94% of crashes are due to human errors. Legislation that would encourage development and testing of autonomous vehicles has faced controversy in Congress. In the 115 th Congress, the House of Representatives passed an autonomous vehicle bill, H.R. 3388 , by voice vote in September 2017. The Senate Committee on Commerce, Science, and Transportation reported a different bill, S. 1885 , in November 2017, but after some Senators raised concerns about the preemption of state laws and the possibility of large numbers of vehicles being exempted from some Federal Motor Vehicle Safety Standards, the Senate bill did not reach the floor. No further action was taken on either bill before the 115 th Congress adjourned. Although some Members of Congress remain interested in autonomous vehicles, no legislative proposals have become law. Several fatal accidents involving autonomous vehicles raised new questions about how federal and state governments should regulate vehicle testing and the introduction of new technologies into vehicles offered for sale. A pedestrian was killed in Arizona by an autonomous vehicle operated by Uber on March 18, 2018, and three Tesla drivers died when they failed to respond to hazards not recognized by the vehicles. These accidents suggest that the challenge of producing fully autonomous vehicles that can operate safely on public roads may be greater than developers had envisioned, a new outlook voiced by several executives, including the Ford Motor Co. CEO. However, with the authorization of federal highway and public transportation programs set to expire at the end of FY2020, a surface transportation reauthorization bill could become a focus of efforts to also enact autonomous vehicle legislation. <2. Advances in Vehicle Technology> While fully autonomous vehicles may lie well in the future, a range of new technologies is already improving vehicle performance and safety while bringing automation to vehicular functions once performed only by the driver. The technologies involved are very different from the predominantly mechanical, driver-controlled technology of the 1960s, when the first federal vehicle safety laws were enacted. These new features automate lighting and braking, connect the car and driver to the Global Positioning System (GPS) and smartphones, and keep the vehicle in the correct lane. Three forces are driving these innovations: technological advances enabled by new materials and more powerful, compact electronics; consumer demand for telecommunications connectivity and new types of vehicle ownership and ridesharing; and regulatory mandates pertaining to emissions, fuel efficiency, and safety. Manufacturers are combining these innovations to produce vehicles with higher levels of automation. Vehicles do not fall neatly into the categories of "automated" or "nonautomated," because all new motor vehicles have some element of automation. The Society of Automotive Engineers International (SAE), an international standards-setting organization, has developed six categories of vehicle automation ranging from a human driver doing everything to fully autonomous systems performing all the tasks once performed by a driver. This classification system ( Table 1 ) has been adopted by the U.S. Department of Transportation (DOT) to foster standardized nomenclature to aid clarity and consistency in discussions about vehicle automation and safety. Vehicles sold today are in levels 1 and 2 of SAE's automation rating system. Although some experts forecast market-ready autonomous vehicles at level 3 will be available in a few years, deployment of fully autonomous vehicles in all parts of the country at level 5 appears to be more distant, except perhaps within closed systems that allow fully autonomous vehicles to operate without encountering other types of vehicles. Testing and development of autonomous vehicles continue in many states and cities. Technologies that could guide an autonomous vehicle ( Figure 1 ) include a wide variety of electronic sensors that would determine the distance between the vehicle and obstacles; park the vehicle; use GPS, inertial navigation, and a system of built-in maps to guide the vehicle's direction and location; and employ cameras that provide 360-degree views around the vehicle. To successfully navigate roadways, an autonomous vehicle's computers, sensors and cameras will need to accomplish four tasks that a human driver undertakes automatically: detect objects in the vehicle's path; classify those objects as to their likely makeup (e.g., plastic bag in the wind, a pedestrian or a moving bicycle); predict the likely path of the object; and plan an appropriate response. Most autonomous vehicles use dedicated short-range communication (DSRC) to monitor road conditions, congestion, crashes, and possible rerouting. As 5G wireless communications infrastructure is installed more widely, DSRC may evolve and become integrated with it, enabling vehicles to offer greater interoperability, bandwidth, and cybersecurity. Some versions of these autonomous vehicle technologies, such as GPS and rear-facing cameras, are being offered on vehicles currently on the market, while manufacturers are studying how to add others to safely transport passengers without drivers. Manufacturers of conventional vehicles, such as General Motors and Honda, are competing in this space with autonomous vehicle "developers" such as Alphabet's Waymo. In addition, automakers are aligning themselves with new partners that have experience with ride-sharing and artificial intelligence: Ford and Volkswagen have announced that they expect to use autonomous vehicle technology in a new ride-sharing service in Pittsburgh, PA, as early as 2021; GM acquired Cruise Automation, a company that is developing self-driving technology for Level 4 and 5 vehicles. GM has also invested $500 million in the Lyft ride-sharing service; Honda, after breaking off talks about partnering with Waymo, purchased a stake in GM's Cruise Automation; Volvo and Daimler have announced partnerships with ride-sharing service Uber; and BMW partnered with the Mobileye division of Intel, a semiconductor manufacturer, to design autonomous vehicle software. <2.1. Cybersecurity and Data Privacy> As vehicle technologies advance, the security of data collected by vehicle computers and the protection of on-board systems against intrusion are becoming more prominent concerns. Many of the sensors and automated components providing functions now handled by the driver will generate large amounts of data about the vehicle, its location at precise moments in time, driver behavior, and vehicle performance. The systems that allow vehicles to communicate with each other, with roadside infrastructure, and with manufacturers seeking to update software will also offer portals for possible unauthorized access to vehicle systems and the data generated by them. Protecting autonomous vehicles from hackers is of paramount concern to federal and state governments, manufacturers, and service providers. A well-publicized hacking of a conventional vehicle by professionals demonstrated to the public that such disruptions can occur. Hackers could use more than a dozen portals to enter even a conventional vehicle's electronic systems ( Figure 2 ), including seemingly innocuous entry points such as the airbag, the lighting system, and the tire pressure monitoring system (TPMS). Requirements that increasingly automated vehicles accept remote software updates, so that owners do not need to take action each time software is revised, are in part a response to concerns that security weaknesses be rectified as quickly as possible. To address these concerns, motor vehicle manufacturers established the Automotive Information Sharing and Analysis Center (Auto-ISAC), which released a set of cybersecurity principles in 2016. DOT's autonomous vehicle policies designate Auto-ISAC as a central clearinghouse for manufacturers to share reports of cybersecurity incidents, threats, and violations with others in the vehicle industry. Aside from hackers, many legitimate entities would like to access vehicle data, including vehicle and component manufacturers, the suppliers providing the technology and sensors, the vehicle owner and occupants, urban planners, insurance companies, law enforcement, and first responders (in case of an accident). Issues pertaining to vehicle data collection include vehicle testing crash data (how is it stored and who gets to access it); data ownership (who owns most of the data collected by vehicle software and computers); and consumer privacy (transparency for consumers and owner access to data). At present, no laws preclude manufacturers and software providers from reselling data about individual vehicles and drivers to third parties. <3. Pathways to Autonomous Vehicle Deployment Abroad> Autonomous vehicles are being developed and tested in many countries, including those that produce most of the world's motor vehicles. Several analyses have evaluated the factors that are contributing to the advancement of autonomous vehicles in various countries: Innovation . Benchmarks in this area include the number and engagement of domestic automakers and technology developers working on automation, the partnerships they forge with academic and related businesses, the prevalence of ride-sharing services, and autonomous vehicle patents issued. V ehicle infrastructure . Autonomous vehicles will need new types of infrastructure support and maintenance, including advanced telecommunications links and near-perfect pavement and signage markings. Planning and implementing these highway improvements may enable autonomous vehicles to be fully functional sooner. In addition, many test vehicles are currently powered by electricity, so the availability of refueling stations could be a factor in their acceptance. Wo rkforce training. The increased reliance on autonomous vehicle technologies may require different workforce skills. Many traditional mechanical parts may disappear, especially if autonomous vehicles operate entirely on battery power, while the arrangement and function of dashboards and seating may be reinvented. Components suppliers that are already addressing this new product demand and reorienting their workforces will assist in the transition to autonomous vehicles. G overnment laws and regulations that encourage development and testing . Fully autonomous vehicles may not have standard features of today's cars, such as steering wheels and brake pedals, as there will not be a driver. By law or regulation, motor vehicles built today are required to have many of these features. Some governments are taking a lead by modifying vehicle requirements for purposes of pilot programs and tests. Permanent changes in standards will most likely be necessary if autonomous vehicle technologies are to be commercialized. L evel of consumer acceptance . Markets are more likely to embrace autonomous vehicles if many residents in cities see autonomous vehicles on the road, a high level of technology is in use (including internet access and mobile broadband), and ride-hailing services are more widely used. Several surveys have been conducted analyzing many of these factors. For example, a 2018 Harvard University report highlights plans in China, South Korea, Japan, and the United States to "seize the benefits" of autonomous vehicles. In a report on innovation policies in four Asian countries (China, Japan, South Korea, and Singapore), the United Nations Economic and Social Commission for Asia and the Pacific ranked Singapore first in autonomous vehicle readiness because of its policies and new laws governing their deployment and its high consumer acceptance. The report also notes that South Korea's K-City facility is "intended to be the world's largest testbed for self-driving cars." A more detailed comparison of factors affecting autonomous vehicle development and deployment has been conducted by KPMG International, which has developed an index to measure how 25 countries are guiding autonomous vehicles ( Table 2 ). The Netherlands ranked first overall in the KPMG report, where it was cited as "an example of how to ready a country for AVs by performing strongly in many areas , " as well as first in infrastructure. Singapore came in first on policy and legislation because it has a single government entity overseeing autonomous vehicle regulations, it is funding autonomous vehicle pilots, and it has enacted a national standard to promote safe deployment. Contributing to its rank was a World Economic Forum (WEF) report that ranked it first among 139 countries in having an effective national legislature and efficient resolution of legal disputes. Singapore also scored first place on the consumer acceptance metric, primarily because its extensive autonomous testing is being conducted throughout the island nation, thereby familiarizing residents with autonomous passenger vehicles and buses. Two other major auto-producing countries Germany and Japan fall just below the United States on technology and innovation, according to KPMG, while Japan ranks higher on autonomous vehicle infrastructure ( Table 3 ). <4. Issues in Federal Safety Regulation> Vehicles operating on public roads are subject to dual regulation by the federal government and the states in which they are registered and driven. Traditionally, NHTSA, within DOT, has regulated auto safety, while states have licensed automobile drivers, established traffic regulations, and regulated automobile insurance. Proponents of autonomous vehicles note that lengthy revisions to current vehicle safety regulations could impede innovation, as the rules could be obsolete by the time they take effect. In 2016, the Obama Administration issued the first report on federal regulations affecting autonomous vehicles. Since then, DOT has issued two follow-up reports and has said it anticipates issuing annual updates to its regulatory guidance. In addition, the Federal Communications Commission (FCC) is reconsidering the allocation of electromagnetic spectrum currently reserved for motor vehicle communications, and its decisions may affect how autonomous vehicles evolve. <4.1. Obama Administration Policy Direction> DOT's 2016 report proposed federal and state regulatory policies in these areas: A set of guidelines outlining best practices for autonomous vehicle design, testing, and deployment. DOT identified 15 practices and procedures that it expected manufacturers, suppliers, and service providers (such as ridesharing companies) to follow in testing autonomous vehicles, including data recording, privacy, crashworthiness, and object and event detection and response. These reports, called Safety Assessment Letters, would be voluntary, but the report noted that "they may be made mandatory through a future rulemaking." A m odel s tate p olicy that identifies where new autonomous vehicle-related issues fit in the current federal and state regulatory structures. The model state policy, developed by NHTSA in concert with the American Association of Motor Vehicle Administrators and private-sector organizations, suggests state roles and procedures, including administrative issues (designating a lead state agency for autonomous vehicle testing), an application process for manufacturers that want to test vehicles on state roads, coordination with local law enforcement agencies, changes to vehicle registration and titling, and regulation of motor vehicle liability and insurance. A streamlined review process to issue DOT regulatory interpretations on autonomous vehicle questions within 60 days and on regulatory exemptions within six months. Identification of new tools and regulatory structures for NHTSA that could build its expertise in new vehicle technologies, expand its ability to regulate autonomous vehicle safety, and increase speed of its rulemakings. Two new tools could be expansion of existing exemption authority and premarket testing to assure that autonomous vehicles will be safe. Some of the new regulatory options cited would require new statutory authority, while others could be instituted administratively. The report noted that "DOT does not intend to advocate or oppose any of the tools. [I]t intends to solicit input and analysis regarding those potential options from interested parties." <4.2. Trump Administration Policy Guidelines and Proposed Safety Rules> The two follow-up reports issued by the Trump Administration describe a more limited federal regulatory role in overseeing autonomous passenger vehicle deployment, while also broadening the scope of DOT oversight by addressing the impact of autonomous technology on commercial trucks, public transit, rail, and ports and ships. The policies described in these reports replace those recommended by the Obama Administration in several ways, including the following: Encouraging integration of automation across all transportation modes , instead of just passenger vehicles. The October 2018 report Automated Vehicles 3.0 outlines how each of DOT's agencies will address autonomous vehicle safety within its purview. Establishing six automation principles that will be applied to DOT's role in overseeing passenger cars, trucks, commercial buses, and other types of vehicles. These include giving priority to safety; remaining technology-neutral; modernizing regulations; encouraging a consistent federal and state regulatory environment; providing guidance, research, and best practices to government and industry partners; and protecting consumers' ability to choose conventional as well as autonomous vehicles. Reiterating the traditional roles of federal and state governments in regulating motor vehicles and motorists, respectively. The reports cite best practices that states should consider implementing, such as minimum requirements for autonomous vehicle test drivers, and discuss how DOT can provide states with technical assistance. Recommending voluntary action in lieu of regulation. This could include suggesting that manufacturers and developers of autonomous driving systems issue and make public voluntary safety self-assessments to demonstrate transparency and increase understanding of the new technologies and industry development of "voluntary technical standards" to "advance the integration of automation technologies into the transportation system." The NHTSA Voluntary Safety Self-Assessment web page lists 17 companies that have filed self-assessment reports, including three major automakers. To provide a perspective, 64 companies have been issued autonomous vehicle testing permits by the State of California alone. Accelerating NHTSA decisions on requests for exemptions from federal safety standards for autonomous vehicle testing. Promoting development of voluntary technical standards by other organizations, such as the Society of Automotive Engineers, the government's National Institute of Standards and Technology, and the International Organization for Standardization. DOT has indicated that it wants to revise regulations pertinent to autonomous vehicles, such as redefining the terms "driver" and "operator" to indicate that a human being does not always have to be in control of a motor vehicle. It also said it plans to require changes in standards for the inspection, repair, and maintenance of federally regulated commercial trucks and buses. Along these lines, NHTSA issued a Notice of Proposed Rulemaking in May 2019, requesting comments on testing and verifying how autonomous vehicle technologies may comply with existing federal safety standards. <4.3. National Transportation Safety Board Investigation and Recommendations> On November 19, 2019, the National Transportation Safety Board (NTSB) issued its report on the probable cause of a 2018 fatality involving an autonomous vehicle in Tempe, AZ. In that accident, a pedestrian was fatally injured by a test vehicle operated by Uber Technologies with an operator in the driver's seat. The NTSB investigation determined that the probable cause of the crash "was the failure of the vehicle operator to monitor the driving environment and the operation of the ADS [automated driving system] because she was visually distracted throughout the trip by her personal cell phone." Though the vehicle detected the pedestrian 5.6 seconds before the crash, the NTSB reported that "it never accurately classified her as a pedestrian or predicted her path." Beyond the immediate cause of this accident, NTSB reported that an "inadequate safety culture" at Uber and deficiencies in state and federal regulation contributed to the circumstances that led to the fatal crash. Among the findings were the following: Uber's internal safety risk-assessment procedures and oversight of the operator were inadequate, and its disabling of the vehicle's forward collision warning and automatic emergency braking systems increased risks. The Arizona Department of Transportation provided insufficient oversight of autonomous vehicle testing in the state. NHTSA provides insufficient guidance to developers and manufacturers on how they should achieve safety goals, has not established a process for evaluating developers' safety self-assessment reports, and does not require such reports to be submitted, leaving their filing as voluntary. NTSB recommended that Uber, the Arizona Department of Transportation, and NHTSA take specific steps to address the issues it identified. It also recommended that the American Association of Motor Vehicle Administrators inform all states about the circumstances of the Tempe crash, encouraging them to require and evaluate applications by developers before granting testing permits. <5. Connected Vehicles and Spectrum Allocation> Federal regulation of the spectrum used in vehicle communications may affect how automation proceeds. Autonomous vehicles, whose artificial intelligence and technology are generally self-contained in each vehicle, are part of a larger category of connected vehicles and infrastructure. Federal, state, and industry research and testing of vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications has been under way since the 1990s. Together, these two sets of technologies, known as V2X, are expected to reduce the number of accidents by improving detection of oncoming vehicles, providing warnings to drivers, and establishing communications infrastructure along roadways that would prevent many vehicles from leaving the road and striking pedestrians. These technologies fall within the broad category of intelligent transportation systems, which have received strong support from Congress due to their potential to improve traffic flow and safety. For vehicles to communicate wirelessly, they use radio frequencies, or spectrum, which are regulated by the Federal Communications Commission (FCC). In 1999, the FCC allocated the 5.9 gigahertz (GHz) band solely for motor vehicle safety purposes for vehicles using DSRC. Over the past two decades, industry and government agencies have collaborated to develop, test, and deploy DSRC technologies. States have invested in DSRC-based improvements, and this technology is operating in dozens of states and cities. As industry has continued to explore vehicle automation, an alternative, cellular-based technology has recently emerged, known as C-V2X. In December 2019, the FCC proposed rules that would reallocate the lower 45 MHz of the 5.9 GHz band for unlicensed use (e.g., Wi-Fi), and allocate the remaining 30 MHz for transportation and vehicle-related use. Of the 30 MHz, the FCC proposed to grant C-V2X exclusive use of 20 MHz of the segment. It is seeking comment on whether the remaining 10 MHz should remain dedicated to DSRC or be dedicated to C-V2X. The FCC commissioners noted that DSRC has evolved slowly and has not been widely deployed, and the rules are intended to ensure the spectrum supports its highest and best use. This decision has competitive implications for the automotive, electronics, and telecommunications industries, and may affect the availability of safety technologies and the path toward vehicle automation. DOT has called for retaining the entire 5.9 GHz band for exclusive transportation use. Figure 3 shows that these two technologies facilitate somewhat different types of vehicle and infrastructure communications. In light of their different characteristics, the European Commission has approved DSRC use for direct V2V and V2I communications, while endorsing cellular-based technology for vehicle access to the cloud and remote infrastructure. Industry groups in the United States took varying positions in the FCC proceedings. DSRC advocates argued that this technology has been proven by years of testing and is already deployed in many areas. They generally supported retaining the 5.9 GHz band for exclusive use for DSRC. C-V2X supporters contended that its cellular-based solution is aligned with international telecommunications standards for 5G technologies and should be allowed to use the 5.9 GHz band alongside DSRC. A group of technology companies, including device makers, argued that additional spectrum is needed to accommodate the increasing number of interconnected devices, and that the 5.9GHz band can safely be shared among transportation and non-transportation uses. <6. Congressional Action> During the 115 th Congress, committees in the House of Representatives and the Senate held numerous hearings in 2017 on the technology of autonomous vehicles and possible federal issues that could result from their deployment. Initially, bipartisan consensus existed on major issues: H.R. 3388 , the SELF DRIVE Act, was reported unanimously by the House Committee on Energy and Commerce, and on September 6, 2017, the House of Representatives passed it without amendment by voice vote. A similar bipartisan initiative began in the Senate. Prior to markup in the Committee on Commerce, Science, and Transportation, the then-chairman and ranking member issued a set of principles they viewed as central to new legislation: prioritize safety , acknowledging that federal standards will eventually be as important for self-driving vehicles as they are for conventional vehicles; promote innovation and address the incompatibility of old regulations written before the advent of self-driving vehicles; remain technology - neutral , not favoring one business model over another; reinforce separate but complementary federal and state regulatory roles ; strengthen cybersecurity so that manufacturers address potential vulnerabilities before occupant safety is compromised; and educate the public through government and industry efforts so that the differences between conventional and self-driving vehicles are understood. Legislation slightly different from the House-passed bill emerged: S. 1885 , the AV START Act, was reported by the Committee on Commerce, Science, and Transportation on November 28, 2017. It was not scheduled for a floor vote prior to adjournment in December 2018 because of unresolved concerns raised by several Senators. To address some of those concerns, a committee staff draft bill that would have revised S. 1885 was circulated in December 2018 that could form the basis of future legislation. The House and Senate bills addressed concerns about state action replacing some federal regulation, while also empowering NHTSA to take unique regulatory actions to ensure safety and encouraging innovation in autonomous vehicles. The bills retained the current arrangement of states controlling most driver-related functions and the federal government being responsible for vehicle safety. The House and Senate bills included the following major provisions. Where the December 2018 Commerce Committee staff draft proposed significant changes, they are noted in this analysis. P reemption of state laws . H.R. 3388 would have barred states from regulating the design, construction, or performance of highly autonomous vehicles, automated driving systems, or their components unless those laws are identical to federal law. The House-passed bill reiterated that vehicle registration, driver licensing, driving education, insurance, law enforcement, and crash investigations should remain under state jurisdiction as long as state laws and regulations do not restrict autonomous-vehicle development. H.R. 3388 provided that nothing in the preemption section should prohibit states from enforcing their laws and regulations on the sale and repair of motor vehicles. S. 1885 would also have preempted states from adopting laws, regulations, and standards that would regulate many aspects of autonomous vehicles, but would have omitted some of the specific powers reserved to the states under the House-passed bill. States would not have been required to issue drivers licenses for autonomous-vehicle operations, but states that chose to issue such licenses would not have been allowed to discriminate based on a disability. The bill provided that preemption would end when NHTSA establishes standards covering these vehicles. The Senate staff draft sought to clarify that state and local governments would not lose their traditional authority over traffic laws. It also would have added provisions that state common law and statutory liability would be unaffected by preemption, and would have limited use of arbitration in death or bodily injury cases until new federal safety standards are in effect. Exemption authority . Both the House and Senate bills would have expanded DOT's ability to issue exemptions from existing safety standards to encourage autonomous-vehicle testing on public roads. To qualify for an autonomous-vehicle exemption, a manufacturer would have had to show that the safety level of the vehicle equaled or exceeded the safety level of each standard for which an exemption was sought. Current law limits exemptions to 2,500 vehicles per manufacturer per year. The House-passed bill would have phased in increases over four years of up to 100,000 vehicles per manufacturer per year; the Senate bill would have permitted up to 80,000 in a similar phase-in. H.R. 3388 provided constraints on the issuance of exemptions from crashworthiness and occupant protection standards; S. 1885 did not address those two issues. DOT would have been directed to establish a publicly available and searchable database of motor vehicles that have been granted an exemption. Crashes of exempted vehicles would have had to be reported to DOT. The Senate bill would not have required the establishment of a database of exempted vehicles, and reporting of exempt vehicle crashes would not have been required. The Senate staff draft added a provision to ensure that vehicles exempted from federal standards would have been required to nonetheless maintain the same level of overall safety, occupant protection, and crash avoidance as a traditional vehicle. A DOT review of vehicle exemptions would have been required annually. The draft capped exemptions at no more than five years. New NHTSA safety rules. The House bill would have required NHTSA to issue a new regulation requiring developers and manufacturers to submit a "safety assessment certification" explaining how safety is being addressed in their autonomous vehicles. The Senate bill included a similar provision requiring a "safety evaluation report," and would have delineated nine areas for inclusion in the reports, including system safety, data recording, cybersecurity risks, and methods of informing the operator about whether the vehicle technology is functioning properly. While manufacturers and developers would be required to submit reports, the legislation did not mandate that NHTSA establish an assessment protocol to ensure that minimum risk conditions are met. The Senate staff draft would have clarified the process by which federal motor vehicle safety standards would be updated to accommodate new vehicle technologies, providing additional time for new rulemaking. Within six months of enactment, DOT would have been required to develop and publicize a plan for its rulemaking priorities for the safe deployment of autonomous vehicles. To address concerns that autonomous vehicles might not recognize certain potential hazards including the presence of bicyclists, pedestrians, and animals and hence possibly introduce new vulnerabilities to motor vehicle travel, the Senate staff draft would have clarified that manufacturers must describe how they are addressing the ability of their autonomous vehicles to detect, classify, and respond to these and other road users. Manufacturers and developers would include this analysis in their safety evaluation reports. Cybersecurity. The House-passed bill provided that no highly autonomous vehicle or vehicle with "partial driving automation" could be sold domestically unless a cybersecurity plan had been developed by the automaker. Such plans would have to have been developed within six months of enactment and would include a written policy on mitigation of cyberattacks, unauthorized intrusions, and malicious vehicle control commands; a point of contact at the automaker with cybersecurity responsibilities; a process for limiting access to autonomous driving systems; and the manufacturer's plans for employee training and for maintenance of the policies. The Senate bill would have required written cybersecurity plans to be issued, including a process for identifying and protecting vehicle control systems, detection, and response to cybersecurity incidents, and methods for exchanging cybersecurity information. A cybersecurity point of contact at the manufacturer or vehicle developer would have had to be named. Unlike the House-passed bill, S. 1885 would have directed DOT to create incentives so that vehicle developers would share information about vulnerabilities, and would have specified that all federal research on cybersecurity risks should be coordinated with DOT. In addition, S. 1885 would have established a Highly Automated Vehicle Data Access Advisory Committee to provide Congress with recommendations on cybersecurity issues. Federal agencies would have been prohibited from issuing regulations pertaining to the access or ownership of data stored in autonomous vehicles until the advisory committee's report was submitted. The staff draft would have added several cybersecurity provisions, including an additional study by the National Institute of Standards and Technology that would recommend ways vehicles can be protected from cybersecurity incidents. Privacy. Before selling autonomous vehicles, manufacturers would have been required by the House-passed bill to develop written privacy plans concerning the collection and storage of data generated by the vehicles, as well as a method of conveying that information to vehicle owners and occupants. However, a manufacturer would have been allowed to exclude processes from its privacy policy that encrypt or make anonymous the sources of data. The Federal Trade Commission would have been tasked with developing a report for Congress on a number of vehicle privacy issues. Although S. 1885 would not have explicitly required privacy plans by developers and manufacturers, it would have required NHTSA to establish an online, searchable motor vehicle privacy database that would include a description of the types of information, including personally identifiable information (PII), that are collected about individuals during operation of a motor vehicle. This database would have covered all types of vehicles not just autonomous vehicles and would have included the privacy policies of manufacturers. The database would also have included an explanation about how PII would be collected, retained, and destroyed when no longer relevant. The Senate staff draft would have added new passenger motor vehicle privacy protections. Research and advisory panels. Both bills would have established several new advisory bodies to conduct further research on autonomous vehicles and advise DOT on possible new vehicle standards. H.R. 3388 would have established a NHTSA advisory group with a broad cross-section of members to advise on mobility access for senior citizens and the disabled; cybersecurity; labor, employment, environmental, and privacy issues; and testing and information sharing among manufacturers. S. 1885 would have established other panels, including a Highly Automated Vehicles Technical Committee to advise DOT on rulemaking policy and vehicle safety; a working group comprising industry and consumer groups to identify marketing strategies and educational outreach to consumers; and a committee of transportation and environmental experts to evaluate the impact of autonomous vehicles on transportation infrastructure, mobility, the environment, and fuel consumption. Separately, DOT would have been required to study ways in which autonomous vehicles and parts could be produced domestically, with recommendations on how to incentivize U.S. manufacturing. The Senate staff draft would have consolidated some of the advisory committees in S. 1885 into a Highly Automated Vehicle Advisory Council with diverse stakeholder representation, and mandated to report on mobility for the disabled, senior citizens and populations underserved by public transportation; cybersecurity; employment and environmental issues; and privacy and data sharing. No similar comprehensive autonomous vehicle legislation has been introduced in the 116 th Congress, although discussions on a bicameral bill have been ongoing. In addition, the Senate Committee on Environment and Public Works has reported America's Transportation Infrastructure Act of 2019, S. 2302 , which includes several provisions in Subtitle D addressing the possible impact of autonomous vehicles on highway infrastructure. It would establish a grant program to modernize the U.S. charging and fueling infrastructure so that it would be responsive to technology advancements, including autonomous vehicles. The legislation would also require research on ways in which roadway infrastructure should be improved for autonomous vehicles. <7. State Concerns> State and local rules and regulations may affect how autonomous vehicles are tested and deployed. The National Governors Association (NGA) has noted that state governments have a role with respect to vehicle and pedestrian safety, privacy, cybersecurity, and linkage with advanced communications networks. While supporting technology innovations in transportation, a recent NGA report notes that "the existing regulatory structure and related incentives have not kept pace with the new technology" and that "recent accidents have raised concerns about the safety of drivers, pedestrians and other road users in the period during which autonomous and non-autonomous vehicles share the road." NGA has joined with other state and local government organizations to call for modifications in forthcoming autonomous vehicle legislation, including clarity that states and local governments not only can enforce existing laws governing operation of motor vehicles on public roads, but also originate new statutes and regulations; requiring submission of more detailed automaker and developer reports to DOT on the safety of their technologies, so that states and cities can be assured that autonomous vehicle testing is being conducted in a safe manner; differentiation between limited vehicle testing and the commercial deployment of large numbers of autonomous vehicles through an expanded exemptions process; and expansion of plans for consumer education about "safe use and interaction" with respect to autonomous vehicles. According to the National Conference of State Legislatures (NCSL), at least 41 states and the District of Columbia considered legislation related to autonomous vehicles between 2013 and October 2019; in that time, 29 states and the District of Columbia enacted legislation, governors in 11 states issued executive orders, and 5 states issued both an executive order and enacted legislation. ( Figure 4 ). Of the states that have enacted laws in 2017, 2018, and 2019 pertaining to autonomous vehicles, NCSL reports that the largest number of states have passed laws that clarify certain types of commercial activity, such as how closely autonomous vehicles can follow each other when they are coordinated, as in truck platooning. According to NCSL, no recent state laws have been enacted dealing with cybersecurity or vehicle inspection reports. NCSL has organized and categorized the types of state legislation ( Table 4 ). For a more thorough description of the legislation passed in 2017, 2018, and 2019, the NCSL Table of Enacted State Legislation provides more detail. <8. Implications for Highway Infrastructure> Deployment of fully autonomous vehicles will require not only a suite of new technologies, but also changes to the highway infrastructure on which those vehicles will operate. Autonomous vehicles being tested today rely on clear pavement markings and legible signage to stay in their lanes and navigate through traffic. Major highways as well as side roads in urban and rural settings will need to accommodate autonomous vehicles in addition to a large fleet of conventional vehicles with human drivers. In this transition period to more autonomous vehicles which many anticipate will last several decades the Federal Highway Administration (FHWA) is expected to play a significant role through its administration of the Manual on Uniform Traffic Control Devices (MUTCD), which sets standards for all traffic control devices, including signs, intersection signals, and road markings. For example, overhead signage on Interstate Highways contains white lettering on a green background in all 50 states easily recognizable to any U.S. driver due to MUTCD standards. FHWA is in the process of updating the 2009 MUTCD to address issues specific to autonomous vehicle technologies. However, state compliance with MUTCD is voluntary, and not all states uniformly apply all standards. Audi reportedly announced in 2018 that it would not make its new Level 3 autonomous vehicle technology, called Traffic Jam Pilot, available in the United States because of "laws that change from one state to the next, insurance requirements, and things like lane lines and road signs that look different in different regions." Other automakers have made similar complaints about U.S. roads. In the near term, improvement and better maintenance of pavement markings, signage and intersection design may be the most helpful steps that federal and state transportation officials can take. Despite national standards based on MUTCD, not all states maintain their highway markings at a level that would be useful to guide autonomous vehicles. Inadequate road maintenance may affect the pace of autonomous vehicle deployment. Some 21% of major U.S. roads are in poor condition, and a road with many potholes or temporary pavement repairs may also lack continuous lane markings. Many minor roads, which are generally the responsibility of county or municipal governments, may lack road edge lines as well as center lines, potentially making it difficult for autonomous vehicles to position themselves correctly. Dirt and gravel roads may pose particular challenges for autonomous vehicles, as they generally have no pavement markings and cameras may be unable to detect potholes or edges in low-visibility conditions. Closely tied to the need for clearer road markings and signage will be ways in which federal and state transportation agencies develop a standardized method to communicate information to vehicles and motorists about construction, road accidents, detours, and other changes to road environments. Many of the perceived benefits of autonomous vehicles reduced vehicle fatalities, congestion mitigation, and pollution reduction may depend on the ability of vehicles to exchange information with surrounding infrastructure. The Transportation Research Board (TRB) has been evaluating how states should begin now to plan and develop the types of connected vehicle infrastructure that will be necessary for full autonomous vehicle deployment. TRB's research is also focused on how cash-strapped transportation agencies can identify the large investments that will in turn be necessary to implement connectivity on top of regular maintenance of highways, bridges, and other traditional infrastructure. Other options to facilitate autonomous vehicle travel may include designation of special highway corridors that would include all V2X systems necessary for safe autonomous vehicle operation; three European countries have agreed to build such a corridor. Over a longer time line, the importance of highway markings may fade as automakers and developers find new ways for autonomous vehicles to navigate, including greater use of guardrails and roadside barriers, sensors, and three-dimensional maps. If highly detailed mapping is deemed to be one replacement for visual cues such as lane markings, then transportation agencies and automakers may need to develop an open standard so that all vehicles will understand the mapping technology. V2X communications through DSRC and cellular may evolve to provide a mechanism for new types of vehicle guidance. <8.1. Appendix. Image of Nuro Robot, R2X>

Autonomous vehicles have the potential to bring major improvements in highway safety. Motor vehicle crashes caused an estimated 36,560 fatalities in 2018; a study by the National Highway Traffic Safety Administration (NHTSA) has shown that 94% of crashes are due to human errors. For this and other reasons, federal oversight of the testing and deployment of autonomous vehicles has been of considerable interest to Congress. In the 115 th Congress, autonomous vehicle legislation passed the House as H.R. 3388 , the SELF DRIVE Act, and a separate bill, S. 1885 , the AV START Act, was reported from a Senate committee. Neither bill was enacted. In the 116 th Congress, interest in autonomous vehicles remains strong, but similar comprehensive legislative proposals have not been introduced. The America's Transportation Infrastructure Act of 2019, S. 2302 , which has been reported by the Senate Environment and Public Works Committee, would encourage research and development of infrastructure that could accommodate new technologies such as autonomous vehicles. In recent years, private and government testing of autonomous vehicles has increased significantly, although it is likely that widespread use of fully autonomous vehicles—where no driver attention is needed—may be many years in the future. The pace of autonomous vehicle commercialization may have slowed due to the 2018 death in Arizona of a pedestrian struck by an autonomous vehicle, which highlighted the challenges of duplicating human decisionmaking by artificial intelligence. The National Transportation Safety Board determined that the fatality was caused by an "inadequate safety culture" at Uber—which was testing the vehicle—and deficiencies in state and federal regulation. The U.S. Department of Transportation and NHTSA have issued three reports since 2016 that inform the discussion of federal autonomous vehicle policies, suggesting best practices that states should consider in driver regulation; a set of voluntary, publicly available self-assessments by automakers showing how they are building safety into their vehicles; and a proposal to modify the current system of granting exemptions from federal safety standards. On February 6, 2020, NHTSA announced its approval of the first autonomous vehicle exemption—from three federal motor vehicle standards—to Nuro, a California-based company that plans to deliver packages with a robotic vehicle smaller than a typical car. Proponents of autonomous vehicles contend that lengthy revisions to current safety regulations could impede innovation, as the rules could be obsolete by the time they took effect. Federal and state regulatory agencies are addressing vehicle and motorist standards, while Congress is considering legislative solutions to some of the regulatory challenges. Legislation did not pass the 115 th Congress due to disagreements on several key issues. These included the following: The extent to which Congress should alter the traditional division of vehicle regulation, with the federal government being responsible for vehicle safety and states for driver-related aspects such as licensing and registration, as the roles of driver and vehicle merge. The number of autonomous vehicles that NHTSA should permit to be tested on highways by granting exemptions to federal safety standards, and which specific safety standards, such as those requiring steering wheels and brake pedals, can be relaxed to permit thorough testing. How much detail legislation should contain related to addressing cybersecurity threats, including whether federal standards should require vehicle technology that could report and stop hacking of critical vehicle software and how much information car buyers should be given about these issues. The extent to which vehicle owners, operators, manufacturers, insurers, and other parties have access to data that is generated by autonomous vehicles, and the rights of various parties to sell vehicle-related data to others. Congress may address these issues in legislation reauthorizing surface transportation programs. The current surface transportation authorization expires at the end of FY2020. Policy decisions about the allocation of radio spectrum and road maintenance also may affect the rate at which autonomous vehicle technologies come into use.

crs_RL31675

crs_RL31675_0

<1. Congressional Notification Requirements> This report reviews the process and procedures that currently apply to congressional consideration of foreign arms sales proposed by the President. This includes consideration of proposals to sell major defense equipment, defense articles and services, or the retransfer to other states of such military items. In general, the executive branch, after complying with the terms of applicable U.S. law, principally contained in the Arms Export Control Act (AECA) (P.L. 90-629, 82 Stat. 1320), is free to proceed with an arms sales proposal unless Congress passes legislation prohibiting or modifying the proposed sale. The President has the obligation under the law to submit the arms sale proposal to Congress, but only after he has determined that he is prepared to proceed with any such notifiable arms sales transaction. The Department of State (on behalf of the President) submits a preliminary or informal notification of a prospective major arms sale 20 calendar days before the executive branch takes further formal action. This informal notification is provided to the committees of primary jurisdiction for arms sales issues. In the Senate, this is the Senate Foreign Relations Committee; in the House, it is the Foreign Affairs Committee. It has been the practice for such informal notifications to be made for arms sales cases that would have to be formally notified to Congress under the provisions of Section 36(b) of the AECA. The informal notification practice stemmed from a February 18, 1976, letter from the Department of Defense making a nonstatutory commitment to give Congress these preliminary classified notifications. Beginning in 2012, the State Department implemented a new informal notification process, which the department calls a "tiered review," in which the relevant committees are notified between 20 and 40 calendar days before receiving formal notification, depending on the system and destination in question. During June 2017 testimony, Acting Assistant Secretary of State Tina Kaidanow described this process as Congressional review period during which the Committees can ask questions or raise concerns prior to the Department of State initiating formal notification. The purpose is to provide Congress the opportunity to raise concerns, and have these concerns addressed, in a confidential process with the Administration, so that our bilateral relationship with the country in question is protected during this process. If a committee "raises significant concerns about a sale or [export] license," the State Department "will typically extend the review period until we can resolve those concerns," Kaidanow explained. Under Section 36(b) of the AECA, Congress must be formally notified 30 calendar days before the Administration can take the final steps to conclude a government-to-government foreign military sale of major defense equipment valued at $14 million or more, defense articles or services valued at $50 million or more, or design and construction services valued at $200 million or more. In the case of such sales to NATO member states, NATO, Japan, Australia, South Korea, Israel, or New Zealand, Congress must be formally notified 15 calendar days before the Administration can proceed with the sale. However, the prior notice threshold values are higher for NATO members, Japan, Australia, South Korea, Israel, or New Zealand. These higher thresholds are $25 million for the sale, enhancement, or upgrading of major defense equipment; $100 million for the sale, enhancement, or upgrading of defense articles and defense services; and $300 million for the sale, enhancement, or upgrading of design and construction services, so long as such sales to these countries do not include or involve sales to a country outside of this group of states. Section 36(i) requires the President to notify both the Senate Foreign Relations Committee and House Foreign Affairs Committee at least 30 days in advance of a pending shipment of defense articles subject to the 36(b) requirements if the chairman and ranking member of either committee request such notification. Certain articles or services listed on the Missile Technology Control Regime are subject to a variety of additional reporting requirements. Commercially licensed arms sales also must be formally notified to Congress 30 calendar days before the export license is issued if they involve the sale of major defense equipment valued at $14 million or more, or defense articles or services valued at $50 million or more (Section 36(c) AECA). In the case of such sales to NATO member states, NATO, Japan, Australia, South Korea, Israel, or New Zealand, Congress must be formally notified 15 calendar days before the Administration can proceed with such a sale. However, the prior notice threshold values are higher for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand, specifically: $25 million for the sale, enhancement, or upgrading of major defense equipment; $100 million for the sale, enhancement, or upgrading of defense articles and defense services; and $300 million for the sale, enhancement, or upgrading of design and construction services, so long as such sales to these countries do not include or involve sales to a country outside of this group of states. Furthermore, commercially licensed arms sales of firearms (which are on category I of the United States Munitions List) valued at $1 million or more must also be formally notified to Congress for review 30 days prior to the license for export being approved (15 days prior notice is required for proposed licenses for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand). Section 36(b)(5)(A) contains a reporting requirement for defense articles or equipment items whose technology or capability has, prior to delivery, been "enhanced or upgraded from the level of sensitivity or capability described" in the original congressional notification. For such exports, the President must submit a report to the relevant committees at least 45 days before the exports' delivery that describes the enhancement or upgrade and provides "a detailed justification for such enhancement or upgrade." This requirement applies for 10 years after the Administration has notified Congress of the export. According to Section 36(b)(5)(C), the Administration must, in the case of upgrades or enhancements meeting certain value thresholds, submit a new notification to Congress and the export will be considered "as if it were a separate letter of offer ... subject to all of the requirements, restrictions, and conditions set forth in this subsection." The threshold values are higher for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand. A congressional recess or adjournment does not stop the 30 calendar-day statutory review period. It should be emphasized that after Congress receives a statutory notification required under Sections 36(b) or 36(c) of the AECA, for example, and 30 calendar days elapse without Congress having blocked the sale, the executive branch is free to proceed with the sales process. This fact does not mean necessarily that the executive branch and the prospective arms purchaser will sign a sales contract and that the items will be transferred on the 31 st day after the statutory notification of the proposal has been made. It would, however, be legal to do so at that time. <2. Congressional Disapproval by Joint Resolution> Although Congress has more than one legislative option it can use to block or modify an arms sale, one option explicitly set out in law for blocking a proposed arms sale is the use of a joint resolution of disapproval as provided for in Section 36(b) of the AECA. Under that law, the formal notification is legally required to be submitted to the chairman of the Senate Foreign Relations Committee and the Speaker of the House. The Speaker has routinely referred these notifications to the House Foreign Affairs Committee as the committee of jurisdiction. As a courtesy, the Defense Department has submitted a copy of the statutory notification to the House Foreign Affairs Committee when that notification is submitted to the Speaker of the House. Under this option, after receiving a statutory Section 36(b) notification from the executive branch, opponents of the arms sale would introduce joint resolutions in the House and Senate drafted so as to forbid by law the sale of the items specified in the formal sale notification(s) submitted to Congress. If no Member introduces such a measure, the AECA's provisions expediting congressional action, discussed below, do not take effect. The next step would be committee hearings in both houses on the arms sale proposal. If a majority of either the House or the Senate committee supported the joint resolution of disapproval, they would report it to their respective chamber in accordance with its rules. Following this, efforts would be made to seek floor consideration of the resolution. <2.1. Senate Procedures> At this point, it is important to take note of procedures crafted to expedite the consideration of arms sales resolutions of disapproval. Since 1976, Section 36(b)(2) of the AECA has stipulated that consideration of any resolution of disapproval in the Senate under Section 36(b)(1) of the AECA shall be "in accordance with the provisions of Section 601(b) of the International Security Assistance and Arms Export Control Act of 1976" ( P.L. 94-329 , 90 Stat. 729). Since 1980, this stipulation has also applied to resolutions of disapproval in the Senate relating to commercially licensed arms sales under Section 36(c)(1) of the AECA. The purpose of Section 601(b) was to establish rules to facilitate timely consideration of any resolution of disapproval in the Senate. The rules set forth in Section 601(b) supersede the standing rules of the Senate and include the following: Give the committee with jurisdiction [the Senate Foreign Relations Committee] 10 calendar days from the date a resolution of disapproval is referred to it to report back to the Senate its recommendation on any such resolution (certain adjournment periods are excluded from computation of the 10 days); Make it in order for a Senator favoring a disapproval resolution to move to discharge the committee from further consideration of the matter if the committee fails to report back to the Senate by the end of the 10 calendar days it is entitled to review the resolution (the AECA expressly permits a discharge motion after 5 calendar days for sales to NATO, NATO countries, Japan, Australia, South Korea, Israel, and New Zealand); Make the discharge motion privileged, limit floor debate on the motion to one hour, and preclude efforts to amend or to reconsider the vote on such a motion; Make the motion to proceed to consider a resolution of disapproval privileged and preclude efforts to amend or to reconsider the vote on such motion; Limit the overall time for debate on the resolution of disapproval to 10 hours and preclude efforts to amend or recommit the resolution of disapproval; Limit the time (one hour) to be used in connection with any debatable motion or appeal; provide that a motion to further limit debate on a resolution of disapproval, debatable motion, or appeal is not debatable. The Senate is constitutionally empowered to amend its rules or to effect a rule change at any time. The fact that an existing rule is in Section 601 of the International Security Assistance and Arms Export Control Act of 1976 is not an obstacle to changing it by Senate action alone should the Senate seek to do so. <2.2. House Floor Procedures12> The House of Representatives is directed by Sections 36(b)(3) and 36(c)(3)(B) of the AECA to consider a motion to proceed to the consideration of a joint resolution disapproving an arms sale reported to it by the appropriate House committee as "highly privileged." Generally, this means that the resolution will be given precedence over most other legislative business of the House, and may be called up on the floor without a special rule reported by the Rules Committee. Unlike for the Senate, however, the AECA contains no provision for discharge of the House committee if it does not report on the joint resolution. If reported and called up, the measure will be considered in the Committee of the Whole, meaning that amendments can be offered under the "five-minute rule." Nevertheless, amendments to joint resolutions disapproving arms sales have apparently never been offered in the House. The Rules Committee usually sets the framework for floor consideration of major legislation in the House of Representatives, however, and could do so for a joint resolution of disapproval. Upon receiving a request for a rule to govern consideration of such a resolution, the House Rules Committee could set a time limit for debate, exclude any amendments to, and waive any points of order against the resolution. If the House adopted the rule reported by the committee, it would govern the manner in which the legislation would be considered, superseding the statutory provision. <2.3. Final Congressional Action> After a joint resolution is passed by both the House and the Senate, the measure would next be sent to the President. Once this legislation reaches the President, presumably he would veto it in a timely manner. Congress would then face the task of obtaining a two-thirds majority in both houses to override the veto and impose its position on the President. <3. Congressional Use of Other Legislation> Congress can also block or modify a proposed sale of major defense equipment, or defense articles and services, if it uses the regular legislative process to pass legislation prohibiting or modifying the sale or prohibiting delivery of the equipment to the recipient country. While it is generally presumed that Congress will await formal notification under Section 36(b) or 36(c) of the AECA before acting in opposition to a prospective arms sale, it is clear that a properly drafted law could block or modify an arms sale transaction at any time including before a formal AECA notification was submitted or after the 30-day AECA statutory notification period had expired so long as the items have not been delivered to the recipient country. Congressional use of its lawmaking power regarding arms sales is not constrained by the AECA reporting requirements. In order to prevail, however, Congress must be capable of overriding a presidential veto of this legislation, for the President would presumably veto a bill that blocked his wish to make the arms sale in question. This means, in practical terms, that to impose its view on the President, Congress must be capable of securing a two-thirds majority of those present and voting in both houses. There are potentially important practical advantages, however, to prohibiting or modifying a sale, if Congress seeks to do so, prior to the date when the formal contract with the foreign government is signed which could occur at any time after the statutory 30-day period. These likely advantages include (1) limiting political damage to bilateral relations that could result from signing a sales contract and later nullifying it with a new law; and (2) avoiding financial liabilities which the U.S. Government might face for breaking a valid sales contract. The legislative vehicle designed to prohibit or modify a specific arms sale can take a variety of forms, ranging from a rider to any appropriation or authorization bill to a freestanding bill or joint resolution. The only essential features that the vehicle must have are (1) that it is legislation passed by both houses of Congress and presented to the President for his signature or veto and, (2) that it contains an express restriction on the sale and/or the delivery of military equipment (whether it applies to specific items or general categories) to a specific country or countries. <4. Presidential Waiver of Congressional Review> It is important to note that the President also has the legal authority to waive the AECA statutory review periods. For example, if the President states in the formal notification to Congress under AECA Sections 36(b)(1), 36(c)(2), 36(d)(2) that "an emergency exists" which requires the sale (or export license approval) to be made immediately "in the national security interests of the United States," the President is free to proceed with the sale without further delay. The President must provide Congress at the time of this notification a "detailed justification for his determination, including a description of the emergency circumstances" which necessitated his action and a "discussion of the national security interests involved." AECA Section 3(d) (2)(A) provides similar emergency authority with respect to retransfers of U.S.-origin major defense equipment, defense articles, or defense services. Section 614(a) of the Foreign Assistance Act of 1961 (FAA), as amended, also allows the President, among other things, to waive provisions of the AECA, the FAA, and any act authorizing or appropriating funds for use under either the AECA or FAA in order to make available, during each fiscal year, up to $750 million in cash arms sales and up to $250 million in funds. Not more than $50 million of the $250 million limitation on funds use may be made available to any single country in any fiscal year through this waiver authority unless the country is a "victim of active aggression." Not more than $500 million of cash sales (or cash sales and funds made available combined) may be provided under this waiver authority to any one country in any fiscal year. To waive the provisions of these acts related to arms sales, the President must determine and notify Congress in writing that it is "vital" to the "national security interests" of the United States to do so. Before exercising the authority granted in Section 614(a), the President must "consult with" and "provide a written policy justification to" the House Foreign Affairs and the Senate Foreign Relations Committees and House and Senate Appropriations Committees. In summary, in the absence of a strong majority in both houses of Congress supporting legislation to block or modify a prospective arms sale, the practical and procedural obstacles to passing such a law whether a freestanding measure or one within the AECA framework are great. Even if Congress can pass the requisite legislation to work its will on an arms sale, the President need only veto it and secure the support of one-third plus one of the Members of either the Senate or the House to have the veto sustained and permit the sale. It should be noted that Congress has never successfully blocked a proposed arms sale by use of a joint resolution of disapproval, although it has come close to doing so (see section below for selected examples). Nevertheless, Congress has by expressing strong opposition to prospective arms sales, during consultations with the executive branch affected the timing and the composition of some arms sales, and may have dissuaded the President from formally proposing certain arms sales. <4.1. 2019 Sales to Jordan, Saudi Arabia, and the United Arab Emirates> On May 24, 2019, Secretary of State Michael Pompeo stated that he had directed the State Department "to complete immediately the formal notification of 22 pending arms transfers" to Jordan, Saudi Arabia, and the United Arab Emirates. In a determination to Congress, Pompeo invoked the AECA Section 36 emergency provisions described above. The transfers included a variety of defense articles and services, as well as an agreement to coproduce and manufacture components of Paveway precision-guided munitions in Saudi Arabia. On June 20, 2019, the Senate passed S.J.Res. 36 , which prohibited both the Paveway coproduction agreement described above and the transfer of additional such munitions, and S.J.Res. 38 , which prohibited transfers of "defense articles, defense services, and technical data to support the manufacture of the Aurora Fuzing System for the Paveway IV Precision Guided Bomb Program." The same day, the Senate passed en bloc another 20 resolutions of disapproval prohibiting the remaining notified transfers. The House passed S.J.Res. 36 and S.J.Res. 38 on July 17, 2019. The same day, the House also passed S.J.Res. 37 , which prohibited the transfer to the UAE of "defense articles, defense services, and technical data to support the integration, operation, training, testing, repair, and operational level maintenance" of the Maverick AGM-65 air-to-surface guided missile and several Paveway systems for use on a number of Emirati-operated aircraft. The resolution also prohibited the transfer of a number of Paveway munitions to the UAE. President Donald Trump vetoed the three bills on July 24. A July 29 Senate vote failed to override these vetoes. <4.2. Examples of AECA Resolutions of Disapproval> On October 14, 1981, the House adopted a resolution ( H.Con.Res. 194 ) objecting to President Reagan's proposed sale to Saudi Arabia of E-3A airborne warning and control system (AWACS) aircraft, Sidewinder missiles, Boeing 707 refueling aircraft, and defense articles and services related to F-15 aircraft. An October 28, 1981, Senate vote on identical legislation failed, however, after President Reagan made a series of written commitments to Congress regarding the proposed sale. Congress later enacted legislation requiring the President to certify that the commitments made in 1981 regarding the proposed sale had been met prior to the delivery of the AWACS planes (Section 127 of the International Security and Development Cooperation Act of 1985; P.L. 99-83 ). On April 8, 1986, President Ronald Reagan formally proposed the sale to Saudi Arabia of 1,700 Sidewinder missiles, 100 Harpoon missiles, 200 Stinger missile launchers, and 600 Stinger missile reloads. On May 6, 1986, the Senate passed legislation to block these sales ( S.J.Res. 316 ) by a vote of 73-22. The House concurred with the Senate action on May 7, 1986, by passing H.J.Res. 589 by a vote of 356-62. The House then passed S.J.Res. 316 by a voice vote and (in lieu of H.J.Res. 589 ) sent it to the President. On May 21, 1986, President Reagan vetoed S.J.Res. 316 . But, in a letter that day to then-Senate Majority Leader Robert Dole, President Reagan said he would not include the controversial Stinger missiles and launchers in the sales proposal. On June 5, 1986, the Senate, by a 66-34 vote, sustained the President's veto of S.J.Res. 316 , and the sale of the Sidewinder and Harpoon missiles to Saudi Arabia proceeded. More recently, on March 10, 2016, the Senate Foreign Relations Committee rejected a motion to discharge a joint resolution ( S.J.Res. 31 ) prohibiting the sale of several defense articles, particularly eight F-16 Block 52 aircraft. H.J.Res. 82 was the House companion bill. On May 5, 2016, a State Department spokesperson, noting congressional objections to using Foreign Military Financing funds for the aircraft, told reporters that the United States had "told the Pakistanis that they should put forward national funds for the purchase." In late May, the U.S. offer expired after Islamabad failed to submit a letter of acceptance by the required deadline. On June 13, 2017, the Senate voted to reject a motion to discharge from the Senate Foreign Relations Committee a joint resolution ( S.J.Res. 42 ) prohibiting certain proposed defense exports to Saudi Arabia, such as "technical data, hardware, and defense services" to support the Royal Saudi Air Force's deployment of the Joint Direct Attack Munition and integration of the FMU-152A/B JPB Fuze System into several warhead types. The bill also would have prohibited the transfer of "defense articles, defense services, and technical data to support the assembly, modification, testing, training, operation, maintenance, and integration" of certain precision guided munitions for the certain Royal Saudi Air Force planes. H.J.Res 102 was the House companion bill.

This report reviews the process and procedures that currently apply to congressional consideration of foreign arms sales proposed by the President. This includes consideration of proposals to sell major defense equipment, defense articles and services, or the retransfer to third-party states of such military items. Under Section 36(b) of the Arms Export Control Act (AECA), Congress must be formally notified 30 calendar days before the Administration can take the final steps to conclude a government-to-government foreign military sale of major defense equipment valued at $14 million or more, defense articles or services valued at $50 million or more, or design and construction services valued at $200 million or more. In the case of such sales to NATO member states, NATO, Japan, Australia, South Korea, Israel, or New Zealand, Congress must be formally notified 15 calendar days before the Administration can proceed with the sale. However, the prior notice threshold values are higher for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand. Commercially licensed arms sales also must be formally notified to Congress 30 calendar days before the export license is issued if they involve the sale of major defense equipment valued at $14 million or more, or defense articles or services valued at $50 million or more (Section 36(c) AECA). In the case of such sales to NATO member states, NATO, Japan, Australia, South Korea, Israel, or New Zealand, Congress must be formally notified 15 calendar days before the Administration is authorized to proceed with a given sale. As with government-to-government sales, the prior notice threshold values are higher for sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand. Furthermore, commercially licensed arms sales cases involving defense articles that are firearms-controlled under category I of the United States Munitions List and valued at $1 million or more must also be formally notified to Congress for review 30 days prior to the license for export being approved. In the case of proposed licenses for such sales to NATO members, Japan, Australia, South Korea, Israel, or New Zealand, 15 days prior notification is required. In general, the executive branch, after complying with the terms of applicable U.S. law, principally contained in the AECA, is free to proceed with an arms sales proposal unless Congress passes legislation prohibiting or modifying the proposed sale. Under current law Congress faces two fundamental obstacles to block or modify a presidential sale of military equipment: it must pass legislation expressing its will on the sale, and it must be capable of overriding a presumptive presidential veto of such legislation. Congress, however, is free to pass legislation to block or modify an arms sale at any time up to the point of delivery of the items involved. This report will be updated, if notable changes in these review procedures or applicable law occur.

crs_R45864

crs_R45864_0

Tax policy is one of several policy tools that can be used for disaster relief. At various points in time, Congress has passed legislation to provide tax relief and to support recovery following disaster incidents. Permanent tax relief provisions may take effect following qualifying disaster events. Targeted, temporary tax relief provisions can be designed to respond to specific disaster events. The Internal Revenue Code (IRC) contains a number of permanent disaster-related tax provisions. These include provisions providing that qualified disaster relief payments and certain insurance payments are excluded from income, and thus not subject to tax. Taxpayers are also able to deduct casualty losses and defer gain on involuntary conversions (an involuntary conversion occurs when property or money is received in payment for destroyed property). The Internal Revenue Service (IRS) can also provide administrative relief to taxpayers affected by disasters by delaying filing and payment deadlines, waiving underpayment of tax penalties, and waiving the 60-day requirement for retirement plan rollovers. For disasters declared after December 20, 2019, the IRS is required to postpone federal tax deadlines for 60 days. The availability of certain tax benefits is triggered by a federal disaster declaration. Before 2017, casualty losses were generally deductible. However, changes made in the 2017 tax revision (commonly referred to as the "Tax Cuts and Jobs Act" [TCJA]; P.L. 115-97 ) restrict casualty loss deductions to federally declared disasters. Temporary tax-related disaster relief measures were enacted following a number of major disasters that occurred between 2001 and 2019. The following measures addressed specific disasters: The Job Creation and Worker Assistance Act of 2002 (Job Creation Act; P.L. 107-147 ) responded to the terrorist attacks of September 11, 2001. The Katrina Emergency Tax Relief Act of 2005 (KETRA; P.L. 109-73 ) responded to Hurricane Katrina. The Gulf Opportunity Zone Act of 2005 (GO Zone Act; P.L. 109-135 ) responded to Hurricanes Katrina, Rita, and Wilma. The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill; P.L. 110-246 ) responded to severe storms and tornadoes in Kansas in 2007. The Heartland Disaster Tax Relief Act of 2008, enacted as Title VII of Division C of P.L. 110-343 (the Heartland Act), and other provisions in P.L. 110-343 responded to severe Midwest storms in summer 2008 and Hurricane Ike and provided general disaster relief for events occurring before January 1, 2010. The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Disaster Tax Relief Act of 2017; P.L. 115-63 ) responded to Hurricanes Harvey, Irma, and Maria. The 2017 tax act ( P.L. 115-97 ; commonly referred to using the title of the bill as passed in the House, the "Tax Cuts and Jobs Act") responded to disasters occurring in 2016. The Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123 ) responded to the 2017 California wildfires. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Division Q of the Further Consolidated Appropriations Act, 2020; P.L. 116-94 ) provided relief for major disasters that generally occurred in 2018 or 2019. This report provides an overview of permanent and temporary disaster tax provisions that have been enacted in response to specific disaster events. The report also summarizes which types of temporary provisions have been used to support different disaster events. Policy considerations related to business, individual, and charitable disaster relief are also addressed. <1. Permanent Disaster Tax Relief Provisions> There are several permanent disaster tax relief provisions. In some cases, these provisions apply to any property that is destroyed or damaged due to casualty or theft. In other cases, relief is limited to property lost as a result of federally declared disasters or for disasters for which the IRS undertakes administrative actions. Additionally, as discussed further below, there are instances where these permanent relief provisions have been temporarily enhanced in response to specific disaster events. <1.1. Disaster Casualty Losses> Taxpayers may be able to deduct casualty losses resulting from damage to or destruction of personal property (property not connected to a trade or business). For tax years 2018 through 2025, the casualty loss deduction is limited to losses attributable to federally declared disasters. After 2025, under current law, the deduction is to be available to losses arising from any fire, storm, shipwreck, or other casualty or theft. Casualty losses are an itemized deduction. Each casualty is subject to a $100 floor, meaning that only losses in excess of $100 are deductible for each casualty. Additionally, casualty losses are deductible only to the extent that aggregate losses exceed 10% of the taxpayer's adjusted gross income (AGI). Only casualty losses not compensated for by insurance or otherwise can be deducted. <1.2. Involuntary Conversions> An involuntary conversion occurs when property is destroyed, stolen, condemned, or disposed of under threat of condemnation, and the owner of the property receives money or payment for the property, such as an insurance payment. An involuntary conversion can also be viewed as a forced sale of property. The IRC allows taxpayers to defer recognizing a gain on property that is involuntarily converted. The replacement period the time within which a taxpayer must replace converted property to receive complete deferral is two years (three years for condemned business property). For a taxpayer's principal residence and its contents, the replacement period for an involuntary conversion stemming from a federally declared disaster is four years. Taxpayers whose principal residence or any of its contents are involuntarily converted as a result of a federally declared disaster qualify for additional special rules. First, gain realized from the receipt of insurance proceeds for unscheduled personal property (property in the home that is not listed as being covered under the insurance policy) is not recognized. Second, any other insurance proceeds received for the residence or its contents are treated as a common fund. If the fund is used to purchase property that is similar or related in service or use to the converted residence or its contents, then the owner may elect to recognize gain only to the extent that the common fund exceeds the cost of the replacement property. If a taxpayer's business property is involuntarily converted as a result of a federally declared disaster, then the taxpayer is not required to replace it with property that is similar or related in service to the original property in order to avoid having to recognize gain on the conversion, as long as the replacement property is still held for a type of business purpose. <1.3. Disaster Relief for Low-Income Housing Credit> The low-income housing tax credit allows owners of qualified residential rental property to claim a credit over a 10-year period that is based on the costs of constructing, rehabilitating, or acquiring the building attributable to low-income units. Owners may claim a credit based on 130% of the project's costs if the housing is in a low-income or difficult development area. Owners must be allocated this credit by a state. Each state is limited in the amount of credits it may allocate to the greater of $2,000,000 or $1.75 multiplied by the state's population (both figures are adjusted for inflation and are $3,166,875 and $2.75625, respectively, for 2019), with adjustments. Owners of low-income housing tax credit (LIHTC) properties are eligible for relief from certain requirements of the program if the property is located in a major disaster area. Specifically, property owners are provided relief from credit recapture, carryover allocation rules, and income certifications for displaced households temporarily housed in an LIHTC unit. Property owners may also qualify for additional credits for rehabilitation expenditures, and, for severely damaged buildings in the first year of the credit period, the allocation of credits may either be treated as having been returned, or the first year of the credit period can be extended. State LIHTC allocating agencies are eligible for relief from compliance monitoring under the same IRS guidance. Additionally, households are eligible to occupy an LIHTC unit without being subject to the program's income limits if their principal residence was located in a major disaster area. <1.4. Exclusion for Disaster Assistance Payments to Individuals> Taxpayers can exclude from income qualified disaster relief and disaster mitigation payments. Excludable relief payments include payments for expenses that are not compensated for by insurance (or otherwise compensated). Excludable relief payments can include personal, family, living, or funeral expenses incurred as a result of the disaster; payments for home repairs or to replace damaged and destroyed contents; payments by a transportation provider for injuries or deaths resulting from a disaster; and payments from governments (or similar entities) for general welfare when disaster relief is warranted. Qualified disaster mitigation payments include amounts paid under the Robert T. Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) for hazard mitigation. <1.5. Exclusion for Insurance Living Expense Payments> Taxpayers whose principal residence is damaged in a disaster (including a fire, storm, or other casualty) can exclude insurance reimbursements for living expenses while temporarily occupying another residence from income. This exclusion also applies to taxpayers who are denied access to their home by government authorities due to the threat of casualty or disaster. <1.6. IRS Administrative Relief> The IRS is authorized to postpone any federal tax deadline, including deadlines for filing returns, paying taxes, or claiming refunds, for up to one year for taxpayers affected by federally declared disasters. The IRS may also postpone certain Individual Retirement Account (IRA) deadlines. Specifically, the IRS can extend the 60-day period for plan participants to deposit rollover retirement plan distributions to another qualified plan or IRA. Additionally, the IRS may extend the time for a qualified plan to make a required minimum distribution. The IRS is required to postpone federal tax deadlines for 60 days for disasters declared after December 20, 2019. Taxpayers for whom deadlines are automatically postponed include (1) those whose principal residence is in a disaster area; (2) those whose principal place of business is in a disaster area; (3) individuals who are relief workers assisting in a disaster area; (4) individuals whose tax records are maintained in a disaster area; (5) any individual visiting a disaster area who was killed or injured as a result of the disaster; or (6) spouses filing a joint return with any person described in (1) to (5). The IRS is also authorized to waive underpayment penalties when a casualty, disaster, or other unusual circumstances have made it such that the imposition of a penalty would be against equity and good conscience. <2. Past Temporary Disaster-Relief Provisions> At times, Congress has chosen to use tax policy to provide temporary relief and support following disaster incidents. Temporary and event-specific disaster tax policy has been enacted following many major disaster events in recent years. However, temporary or targeted tax relief has not been enacted following all major disaster events. For example, no temporary or targeted disaster tax relief was enacted in response to Hurricane Irene in 2011 or Hurricane Sandy in 2012. The specific tax relief provisions enacted to respond to past disaster events are summarized in Table 3 and Table 4 . The following discussion provides additional information on these provisions. Tax provisions that have been used to respond to disasters most recently are discussed first . <2.1. Temporary Provisions Enacted to Respond to Recent Disasters> The disaster tax relief packages enacted in 2017 to respond to Hurricanes Harvey, Irma, and Maria; in 2018 to respond to the 2017 California wildfires; and in 2019 to respond to disasters that occurred in 2018 and 2019 contained the same five provisions: (1) an enhanced casualty loss deduction; (2) expanded access to retirement plan funds; (3) increased limits on charitable deductions; (4) employee retention tax credits; and (5) EITC/CTC credit computation look-back rules. Enhanced casualty loss deductions were allowed for losses associated with any federally declared disaster occurring in 2016 and 2017, and access to retirement plan funds was enhanced for 2016 disasters. Certain areas of California that were affected by natural disasters in 2017 and 2018 will receive additional LIHTC allocations in 2020. Additionally, disaster tax relief for 2018 and 2019 disasters will also be available in U.S. possessions. <2.1.1. Enhanced Casualty Loss Deduction> An enhanced casualty loss deduction has been made available for losses attributable to certain disasters or for losses occurring during certain periods of time. Most recently, an enhanced casualty loss deduction was provided for 2018 and 2019 disasters in the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Division Q of P.L. 116-94 ). Before that, an enhanced casualty loss deduction was provided for California wildfires in the Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123 ); any disaster-related casualty loss in calendar years 2016 or 2017 in the 2017 tax act, commonly called the "Tax Cuts and Jobs Act" (TCJA; P.L. 115-97 ); and Hurricanes Harvey, Irma, and Maria in the Disaster Tax Relief and Airport and Airway Extension Act of 2017 ( P.L. 115-63 ). The enhancements (1) waive the 10% of AGI floor; (2) increase the $100 floor for each casualty to $500; and (3) allow taxpayers not itemizing deductions to add the deduction to their standard deduction. Generally, casualty loss deductions are claimed in the year of the loss. However, a loss in a federally declared disaster area may be deducted on the prior year's tax return. A similar provision was enacted in response to several previous disasters. <2.1.2. Retirement Plan Distributions> The Disaster Tax Relief Act of 2019, BBA18, TCJA, and the Disaster Tax Relief Act of 2017 all provided tax relief relating to retirement plan distributions. First, each act waived the 10% penalty that would otherwise apply on early withdrawals made from a qualifying retirement plan if the individual's principal place of abode was in the disaster area and the individual sustained an economic loss due to the disaster. The distributions were required to occur within a specified time frame, and the maximum amount that could be withdrawn without penalty was $100,000 or 100% of the present value of the plan participant's benefits (but not less than $10,000). Funds could be recontributed to a qualified plan over a three-year period and receive tax-free rollover treatment. Additionally, with respect to any taxable portion of the distribution, the individual could include one-third of such amount in gross income each year over the course of three tax years rather than including the entire amount on the tax return for the year of distribution. The acts increased the amount disaster victims could borrow from their retirement plans without immediate tax consequences. Under current law, the maximum amount that may be borrowed without being treated as a taxable distribution is the lesser of (1) $50,000, reduced by certain outstanding loans, or (2) the greater of $10,000 or 50% of the present value of the employee's vested benefits. For loans made during the applicable period, the acts increased this to the lesser of (1) $100,000, reduced by certain outstanding loans, or (2) the greater of $10,000 or 100% of the present value of the employee's vested benefits, as well as extending certain loan repayment dates by one year. A similar provision was enacted in response to several previous disasters. <2.1.3. Increased Limits on Charitable Deductions> Taxpayers are generally permitted to deduct contributions made to 501(c)(3) charitable organizations, subject to various limitations. Individuals may not claim a charitable deduction that exceeds 50% (temporarily increased to 60% beginning in 2018 through 2025) of their "contribution base" (adjusted gross income with certain adjustments), and corporations may not claim a deduction that exceeds 10% of their taxable income with certain adjustments. Any excess contributions may generally be carried forward for five years. The Disaster Tax Relief Act of 2019, BBA18, and the Disaster Tax Relief Act of 2017 temporarily suspended the 50% and 10% limitations for qualified contributions made for disaster relief efforts. An additional deduction is allowed for amounts by which the taxpayer's charitable contribution base exceeds the amount of all other allowable charitable contributions in the tax year. For individuals, the deduction could not exceed the amount by which the charitable contribution base exceeded other charitable contributions. For individuals, the earlier acts also suspended the overall limitation on itemized deductions for qualified contributions that was in effect through 2017. A similar provision was enacted in response to several previous disasters. <2.1.4. Employee Retention Credit> The Disaster Tax Relief Act of 2019, BBA18, and the Disaster Tax Relief Act of 2017 provided a temporary retention credit for disaster-damaged businesses that continued to pay wages to their employees who were unable to work after the disaster rendered the business inoperable. Eligible employees were those whose principal place of employment was in the applicable disaster area. The credit equaled 40% of the employee's first $6,000 in wages paid between the date the business became inoperable and the date it resumed significant operations at that location (or the end of the first calendar year, whichever came first). Wages can be those paid even if the employee provides no services for the employer, or for wages paid for services performed at a different location or before significant operations resume. This employee retention may not be for an employee during any period that the employer claims a work opportunity credit for the employee. A similar provision was enacted in response to several previous disasters. <2.1.5. EITC/CTC Credit Computation Look-Back> The Disaster Tax Relief Act of 2019 and BBA18 permitted individuals affected by 2018 and 2019 disasters or California wildfires in 2017 to elect to use their earned income from the previous year for computing the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC), instead of their disaster-year income, if previous-year income was greater than disaster-year income. The Disaster Tax Relief Act of 2017 also included this provision for those affected by Hurricanes Harvey, Irma, and Maria. This may have benefited taxpayers whose income was reduced in the year of the disaster. Taxpayers generally qualified only if they lived in the disaster zone or lived in the disaster area and the disaster caused them to be displaced from their principal place of abode. A similar provision was enacted in response to several previous disasters. <2.1.6. Low-Income Housing Tax Credit> The Disaster Tax Relief Act of 2019 increased credits available to California in 2020. Specifically, for certain areas of California that were affected by natural disasters in 2017 and 2018, the act increased California's 2020 LIHTC allocation by the lesser of the state's 2020 LIHTC allocations to buildings located in qualified 2017 and 2018 California disaster areas, or 50% of the state's combined 2017 and 2018 total LIHTC allocations. In the past, disaster relief legislation has provided additional LIHTC allocations to disaster-affected areas. The GO Zone Act temporarily increased the credits available to Alabama, Louisiana, and Mississippi for use in the GO Zone by up to $18.00 multiplied by the state's population that was located in the GO Zone prior to the date of Hurricane Katrina. It also temporarily treated the disaster zones as difficult development areas and used an alternate test for determining whether certain GO Zone projects qualified as low-income housing. The Heartland Act permitted affected states to allocate additional amounts for use in the disaster area of up to $8.00 multiplied by the state's disaster area population. <2.1.7. Treatment of Certain U.S. Possessions> Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands are U.S. territories. Each has a local tax system with features that help determine the territory's local public finances. Guam, the U.S. Virgin Islands, and the Northern Mariana Islands are mirror code possessions, meaning these territories use the Internal Revenue Code as their territorial tax law. Puerto Rico and American Samoa are non-mirror code possessions. These two possessions have their own tax laws. The Disaster Tax Relief Act of 2019 requires payments from the U.S. Treasury to possessions for the temporary tax relief provided in the bill. Mirror code possessions will receive an amount equal to the loss in revenue by reason of the temporary disaster-related tax relief provided in the legislation. Non-mirror code possessions may receive a similar payment (a payment equal to the amount of temporary disaster tax relief that would have been provided if a mirror code had been in effect) if the possession has an approved plan for prompt distribution of payments . <2.2. Temporary Tax Provisions Used to Respond to Disasters Before 2010> Provisions used to respond to 2016, 2017, 2018, and 2019 disasters were also used to respond to some disasters before 2010. Additionally, a number of other temporary tax provisions were used to respond to these pre-2010 disasters. The first time a temporary disaster tax relief package was enacted was in response to the September 11 terrorist attacks. The following sections summarize the various provisions included in temporary disaster tax relief legislation before 2010. <2.2.1. Expensing> In general, capital expenditures must be added to a property's basis rather than being expensed (i.e., deducted in the current year). IRC Section 179 provides an exception so that a business may expense the costs of certain property in the year it is placed in service. After 2018, the maximum expensing allowance is $1 million, with an investment limitation of $2.5 million (both amounts are adjusted for inflation). In the past, these thresholds have been lower. For example, in 2007, the maximum expensing allowance under Section 179 was $125,000, and the deduction decreased dollar-for-dollar as the total cost of all property the business placed in service during the year exceeded $500,000. The Heartland Act increased the Section 179 limitations by up to $100,000 and $600,000 for qualified disaster area property for federally declared disasters occurring prior to January 1, 2010. Increased expensing allowances were enacted in response to several disasters before 2007 as well. The Heartland Act also added IRC Section 198A, which permitted full expensing (subject to depreciation recapture) of qualified expenditures for the abatement or control of hazardous substances released on account of a federally declared disaster, the removal of debris or the demolition of structures on business-related real property damaged by such a disaster, and the repair of business-related property damaged by such a disaster. This provision applied only to federally declared disasters occurring prior to January 1, 2010. <2.2.2. Net Operating Loss Carryback> Under current law, a business's net operating loss (NOL) can be carried forward indefinitely. Additionally, NOLs are limited to 80% of taxable income. There is no carryback of NOLs. This treatment was enacted in the 2017 tax act ( P.L. 115-97 ). Before 2018, in general, a taxpayer's net operating loss (NOL) could be carried back and deducted in the two tax years before the NOL year, and then carried forward for up to 20 years after the NOL year. Additionally, before 2018, the carryback was extended to three years for individuals who had a loss of property arising from a casualty or theft. A three-year period also applied for small businesses and farmers for NOLs attributable to federally declared disasters. The Heartland Act provided for a five-year carryback period for qualified losses from any federally declared disaster occurring prior to January 1, 2010. For such disasters, it also suspended the alternative minimum tax (AMT) provision that generally limits NOL deductions to 90% of alternative minimum taxable income. The corporate AMT was repealed in the 2017 tax act. <2.2.3. Bonus Depreciation> For eligible property acquired and placed in service after September 27, 2017, and before January 1, 2023, businesses may claim a 100% expensing (or bonus depreciation) allowance under Section 168(k). Like expensing limitations, the bonus depreciation allowance has changed over time. The Heartland Act provided a 50% bonus depreciation provision for qualified disaster assistance property from a federally declared disaster occurring prior to January 1, 2010. However, since other legislation provided 50% bonus depreciation during this time period, the provision was probably not meaningful. With 100% bonus depreciation in effect through 2022, providing additional bonus depreciation is not currently a policy option. <2.2.4. Mortgage Revenue Bonds> Mortgage revenue bonds are tax-exempt bonds used to finance below-market-rate mortgages for low- and moderate-income homebuyers. In general, the homebuyers must not have owned a residence for the past three years, and the houses' costs may not exceed 90% of the average purchase price for the area. However, for areas that are low income or in chronic economic distress, the three-year restriction does not apply, and the purchase price limitation is increased to 110%. For individuals whose homes were declared unsafe or ordered to be demolished or relocated due to a federally declared disaster occurring prior to January 1, 2010, the Heartland Act waived the three-year restriction and increased the purchase price limitation from 90% to 110%. It also permitted individuals whose homes were damaged by the disaster to treat the amount of owner financing provided for home repair and construction as a qualified rehabilitation loan, limited to $150,000 (the amount is generally limited to $15,000), which had the effect of waiving the three-year requirement for such financing. The GO Zone Act and KETRA contained similar provisions. In the Heartland Act, the maximum amount of bonds each state could issue was $1,000 multiplied by that state's population in the disaster area, and need-based prioritization for state allocations was established. The GO Zone Act also expanded qualified private activity bond issuances for mortgage revenue bonds in disaster areas. The Go Zone Act added $2,500 per person in the federally declared Katrina disaster areas in which the residents qualify for individual and public assistance. The increased capacity added approximately $2.2 billion for Alabama, $7.8 billion for Louisiana, and $4.8 billion for Mississippi in aggregate bonds over the subsequent five years through 2010. <2.2.5. Expensing of Environmental Remediation Costs ("Brownfields")> Capital expenditures must generally be added to the property's basis rather than being expensed (i.e., deducted in the current year). IRC Section 198 provided an exception by allowing taxpayers to expense any qualifying environmental remediation costs paid or incurred prior to January 1, 2012, for the abatement or control of hazardous substances at a qualified contaminated site. Unlike the other provisions discussed in this report, Section 198 is not limited to federally declared disasters or specific disasters. The provision was enacted as a temporary one in the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) and was extended a number of times before expiring at the end of 2011. The Heartland Act was among those laws that temporarily extended Section 198. The GO Zone Act had also extended the provision, but only for those costs for contaminated sites in the GO Zone, and treated petroleum products as a hazardous substance for the purposes of environmental remediation. <2.2.6. Charitable Contributions of Inventory> Before 2005, donors of food inventory that were not C corporations could only claim a charitable deduction equal to their basis in the inventory (typically, its cost). C corporations were allowed an enhanced deduction, which was the lesser of (1) the basis plus 50% of the property's appreciated value, or (2) two times basis. KETRA provided special rules that allowed all donors of wholesome food inventory to benefit from the enhanced deduction and allowed C corporations to claim an enhanced deduction for donations of book inventory to public schools. Neither provision was limited to donations related to the hurricane, but both were originally set to expire on December 31, 2005. The provisions have been extended several times since then, including by the Heartland Act (as part of its tax extenders package, rather than its disaster relief provisions). The enhanced deduction for charitable contributions of food inventory was made permanent in the Protecting Americans from Tax Hikes Act of 2015, enacted as Division Q in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). The enhanced deduction for book inventory expired as scheduled at the end of 2011. <2.2.7. Involuntary Conversions> In addition to the general treatment of involuntary conversions (discussed above), the Job Creation Act, KETRA, the 2008 Farm Bill, and the Heartland Act increased the two-year time period to purchase the replacement property to five years for property in the applicable disaster area so long as substantially all of the use of the replacement property occurred in such area. <2.2.8. Discharge of Indebtedness> When all or part of a debt is forgiven, the amount of the cancellation is ordinarily included in the income of the taxpayer receiving the benefit of the discharge. However, there are several exceptions to this general rule. For example, no amount of the discharge is included in income if the cancellation is intended to be a gift or is from the discharge of student loans for the performance of qualifying services. The Mortgage Forgiveness Debt Relief Act of 2007 ( P.L. 110-142 ) temporarily excluded qualified canceled mortgage debt income that is associated with a primary residence from taxation (this provision was extended multiple times, and expired at the end of 2017). There are also certain situations in which the taxpayer may defer taxation, with the possibility of permanent exclusion, on income from the discharge of indebtedness, such as if discharge occurs when the debtor is in Title 11 bankruptcy proceedings or legally insolvent. Both KETRA and the Heartland Act included provisions that allowed victims to exclude nonbusiness debt forgiveness from income in certain conditions. Victims of Hurricane Katrina were allowed to exclude nonbusiness debt that was forgiven by a governmental agency or certain financial institutions if the discharge occurred after August 24, 2005, and before January 1, 2007. Individuals were eligible for this benefit if (1) their principal place of abode was in the core disaster area, or (2) it was in the Hurricane Katrina disaster area and they suffered an economic loss due to the hurricane. Individuals with certain tax attributes (such as basis) were required to reduce them by the amount excluded from income, which has the effect of deferring (rather than permanently eliminating) the tax on the cancelled debt. For victims with a principal place of abode in a Midwestern disaster area, the Heartland Act provided similar relief. However, if that home was in an area determined by the President to warrant only public assistance, the individual also had to have suffered an economic loss due to the severe weather. <2.2.9. Employer-Provided Housing> Both the GO Zone Act and the Heartland Act excluded the value of certain employer-provided housing, limited to $600 per month, from the employee's income and allowed the employer to claim a credit equal to 30% of that amount. Among other requirements, the employee must have had a principal residence in the applicable disaster area and have performed substantially all employment services for that employer in that area. The employer must have had a trade or business located within the applicable disaster area. <2.2.10. Tax-Exempt Bonds> Both the GO Zone Act and the Heartland Act temporarily allowed affected states to issue tax-exempt bonds to finance (1) qualified activities involving residential rental projects, nonresidential real property, and public utility property located in the disaster area; and (2) below-market rate mortgages for low- and moderate-income homebuyers. Under the GO Zone Act, the maximum amount of bonds that each state could issue was $2,500 multiplied by that state's population located in the GO Zone as determined prior to the date of Hurricane Katrina. Under the Heartland Act, the maximum amount of bonds each state could issue was capped at $1,000 multiplied by that state's population in the disaster area, and the act expressly stated that the bonds would have to be designated by the appropriate state authority on the basis of providing assistance to where it was most needed. The Job Creation Act, meanwhile, allowed New York to issue up to $8 billion (divided equally between the state and New York City) in tax-exempt bonds to finance qualified activities involving residential rental projects, nonresidential real property, and public utility property located in the disaster zone. The Job Creation Act and the GO Zone Act also allowed one additional advance refunding of qualifying bonds that were issued by those states. The GO Zone Act, the 2008 Farm Bill, and the Heartland Act allowed operators of low-income residential rental projects financed by IRC Section 142(d) bonds to rely on the representations of displaced individuals regarding their income qualifications so long as the tenancy began within six months of the displacement. <2.2.11. Tax Credit Bonds> Both the GO Zone Act and the Heartland Act permitted affected states to issue tax credit bonds to pay the principal, interest, or premiums on qualified governmental bonds or to make loans to political subdivisions to make such payments. Bondholders may claim a credit based on the product of a credit rate and the bonds' outstanding face amount. The bonds were required to be issued within a certain time period and could not have a maturity date beyond two years, among other requirements. Further, each state was capped in the amount of bonds it could issue for example, under the Heartland Act, the maximum amount of bonds that could be issued by states with disaster area populations of at least 2 million was $100 million; the cap was $50 million for states with disaster area populations between 1 million and 2 million; and the other states could not issue any bonds. Bonds could not be used for certain activities. <2.2.12. Housing Exemption> Both KETRA and the Heartland Act provided tax relief to those who provided free housing to those displaced by the storms. Individuals could claim additional personal exemptions of $500 each for up to four displaced people whom they housed for at least 60 consecutive days. These exemptions could be claimed in both the year of the disaster and the next year; however, no person could qualify the taxpayer for the exemption in both years. Among other requirements, the displaced person must have had a principal place of abode in the disaster area; if the home was not in the core disaster area, then the person must have been displaced due to either storm damage to the home or evacuation caused by the storm. <2.2.13. Mileage Rate and Reimbursement> Generally, individuals who use their personal vehicles for charitable purposes may claim a deduction based on the number of miles driven. The amount is set by statute at 14 cents per mile. KETRA and the Heartland Act each temporarily increased the charitable mileage rate to 70% of the standard business mileage rate if the vehicle was used for hurricane or Midwest disaster relief. The standard business mileage rate is periodically set by the IRS. In 2019, the standard mileage rate is 56 cents per mile. Additionally, both acts provided a temporary exclusion from a charitable volunteer's gross income for any qualifying mileage reimbursements received from the charity for the operating expenses of a volunteer's passenger automobile, when used for disaster relief. <2.2.14. Treasury Authority to Make Adjustments Relating to Status> KETRA, the GO Zone Act, and the Heartland Act all contained similar provisions that authorized the Treasury Secretary to make adjustments in the application of the tax laws for the tax years of the disaster and the immediate subsequent year so that temporary relocations due to the disaster did not cause taxpayers to lose any deduction or credit or to experience a change of filing status. <2.2.15. Education Credits> Individuals with eligible tuition and related expenses may claim certain higher education tax credits. Under the law existing when KETRA, the GO Zone Act, and the Heartland Act were enacted, the Hope credit was 100% of the first $1,000 of eligible expenses plus 50% of the next $1,000 of eligible expenses, both adjusted for inflation. The maximum Lifetime Learning credit is and was 20% of up to $10,000 of eligible expenses. Beginning in 2009, the partially refundable American Opportunity Tax Credit (AOTC) temporarily increased the Hope credit, allowing 100% of eligible expenses up to $2,000 plus 25% of the next $2,000 of eligible expenses. The Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113 ) made the AOTC permanent, effectively eliminating the Hope credit. For individuals attending school in the GO Zone for 2005 and 2006, the GO Zone Act allowed certain nontuition expenses (e.g., books, equipment, and room and board) to qualify for the Hope and Lifetime Learning credits; doubled the $1,000 limitations in the Hope credit to $2,000; and increased the 20% limitation in the Lifetime Learning credit to 40%. The Heartland Act provided similar rules for students attending school in a Midwestern disaster area during 2008 or 2009. However, to take advantage of this provision for 2009, taxpayers were required to waive application of the AOTC provisions. <2.2.16. Rehabilitation Credit> Taxpayers may claim a credit equal to 10% of the qualifying expenditures to rehabilitate a qualified building or 20% of such expenditures for a certified historic structure. Both the GO Zone Act and the Heartland Act temporarily increased these percentages to 13% and 26%, respectively, for rehabilitating qualifying buildings and structures damaged by the applicable disasters. <2.2.17. Public Utility Losses> Under IRC Section 172, certain net operating losses, called specified liability losses, may be carried back for 10 years. Under IRC Section 165(i), certain disaster losses may be deducted in the year prior to the disaster. The GO Zone Act treated public utility casualty losses as a Section 172 loss. The GO Zone Act and the 2008 Farm Bill allowed public utility disaster losses to be deducted in the fifth taxable year preceding the disaster. <2.2.18. Gulf Coast Recovery Bonds> The GO Zone included provisions to encourage the Treasury Secretary to designate at least one series of bonds as Gulf Coast Recovery Bonds. The Treasury designated Series I inflation-indexed savings bonds purchased through financial institutions as "Gulf Coast Recovery Bonds." <2.2.19. New Markets Tax Credit> Under the new markets tax credit, taxpayers are allocated a credit for investments made in qualified community development entities. The credit is claimed over a period of seven years and equals the amount of the investment multiplied by a percentage: 5% for the first three years and 6% for the next four years. The credit was capped at $2 billion for 2005 and $3.5 billion for 2006 and 2007. The GO Zone Act increased the cap by $300 million for 2005 and 2006 and by $400 million for 2007, and it allocated these amounts to entities making low-income community investments in the GO Zone. <2.2.20. Small Timber Producers> Under IRC Section 194, taxpayers may expense up to $10,000 of qualifying reforestation expenditures. Under IRC Section 172, the general rule is that taxpayers may carry net operating losses back for two years. The GO Zone Act created two special rules for timber producers with less than 501 acres of timber property: it (1) increased the Section 194 limit by up to $10,000 for expenditures made for qualified timber property in the applicable disaster zones; and (2) increased the Section 172 carry back period to five years for certain losses attributable to timber property in those zones. <2.2.21. Work Opportunity Tax Credit> Generally, businesses that hire individuals from groups with high unemployment rates or special employment needs, such as high-risk youths and veterans, may claim the work opportunity tax credit. The credit may be claimed for the wages of up to $6,000 that were paid during the employee's first year. For an employee who worked at least 400 hours, the credit equals 40% of his or her wages thus, the maximum credit is $2,400. KETRA allowed businesses to claim the work opportunity credit on wages paid to certain employees hired after Hurricane Katrina. Eligible employees were those who had a principal place of abode in the core disaster area and either (1) were hired during the two-year period beginning August 28, 2005, for a position in the area, or (2) were displaced by the hurricane and hired after August 27, 2005, and before January 1, 2006. Congress later extended the WOTC's expiration from August 28, 2007, to August 28, 2009, for firms who hire "Hurricane Katrina employees" to work in the core disaster area (see the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 in P.L. 110-343 ). The Job Creation Act provided similar treatment for New York Liberty Zone business employees and certain employees outside the zone. <2.2.22. Leasehold Improvements> For purposes of depreciation, the Job Creation Act generally shortened the recovery period for leasehold improvement property to five years for qualifying property located in the New York disaster zone. <3. Economic and Policy Considerations57> Tax policy for disaster relief might be motivated by multiple objectives. One objective could be distributional or relief-oriented. Tax policy could be designed to provide additional resources to businesses or individuals who experienced an uncompensated disaster loss. This relief could be targeted toward the low-income, although there are limitations when using tax policy to address low-income individuals and businesses. Tax policy can also be used to encourage investment in disaster-affected areas. Absent government intervention, some level of private rebuilding will occur. A policy question, however, is whether this private building is sufficient, or if there are other barriers to investment in the disaster-affected region that call for government intervention. When investment subsidies are provided, there is the question of how much new investment is supported relative to how much investment is subsidized that would have occurred absent the subsidy. There are also challenges associated with identifying the disaster area for the purposes of providing tax relief. In some cases, relief has been provided to a certain geographic area. In other cases, relief has been tied to a federal disaster declaration or provided only when individual assistance or individual and public assistance is provided. Narrowly defined geographic areas can limit tax benefits to those most likely to be harmed by the disaster, but can exclude some disaster victims. The following sections discuss considerations by examining instances in which disaster relief was provided through the tax code for businesses and individuals, as well as through tax policy designed to support disaster-related charitable giving. <3.1. Providing Disaster Tax Relief to Businesses> For businesses, hurricanes like Katrina, Maria, Irma, and Harvey caused unprecedented property and earnings losses. Employee displacement can create labor market challenges that persist over time. Further, longer-term supply chain disruptions can make it difficult for businesses to resume operations after initial clean-up efforts are complete. In the past, tax policy has been used to reduce the cost of business investment in cleanup and repairs. Bonus depreciation and enhanced expensing were used to provide disaster tax relief to businesses following several disasters before 2010. However, at present, with bonus depreciation at 100% (100% bonus depreciation is expensing), this policy tool is not readily available. Expensing allowances are higher than they have been historically, but could, if deemed necessary and under certain circumstances, be expanded further to provide additional expensing allowances in disaster areas. For instance, this could be a policy option should bonus depreciation be set at a rate of less than 100%, or eliminated altogether. An expansion to expensing for disaster-relief purposes could be accomplished through raising the expensing limit; expensing is currently allowed for investments up to $1,040,000. Expansions to net operating loss (NOL) carrybacks and lengthening of replacement periods for involuntary conversions have also been used to provide tax relief following past disasters. Under current law, there is no carryback of NOLs. Allowing an NOL carryback for disaster-related losses could provide relief for taxpayers experiencing losses who had positive tax liability in a recent tax year. Expanding the replacement period for involuntary conversions could provide more flexibility to taxpayers looking to rebuild or reestablish businesses in the disaster area. Tax policy can also be used to encourage businesses to provide employment and housing following disaster events. Employee retention credits encourage employers to continue paying employees in circumstances where the disaster affects business operations. Targeted hiring credits, such as the WOTC, can be used to provide an incentive to hire workers who were displaced by a disaster. With respect to housing, tax policy has been used to encourage employers to provide housing to their employees, as well as to support more low-income housing development in disaster-affected areas. Disaster recovery and rebuilding has also been supported following certain disasters by providing targeted tax benefits to disaster-impacted geographic zones. The New York Liberty Zone was established following the September 11 terrorist attacks. The Gulf Opportunity Zone was established following the 2005 Gulf Coast hurricanes. These zones can receive additional allocations of allocated tax credits, such as the NMTC or the LIHTC. Past disaster tax relief has also provided additional allocations of tax-exempt or tax-credit bonds in disaster-affected zones. Some have questioned the effectiveness of tax-exempt private activity bonds as a tool for disaster relief, noting that in the case of the GO Zone, areas with the most damage were less likely to have access to bonds to help finance recovery and rebuilding. Should special bond allocations be deployed in response to future disasters, there may be ways to improve the bond allocation process to better target small businesses or heavily impacted areas. Other provisions might be designed to support specific industries or sectors affected by the disaster. For example, tax provisions for small timber producers and public utilities have been included in past disaster tax legislation. Narrowly targeted tax benefits, however, might leave out disaster-affected taxpayers that suffered losses yet have business activities that differ from the sector targeted for relief. One consideration related to tax relief provisions for business is timing. The tax code is not well-suited to provide capital for cleanup, rebuilding, or recovery in the short term. Reduced tax liabilities provide a future financial benefit, but past disaster tax relief has not been designed to provide immediate access to capital that may be needed following a disaster. Another consideration related to business disaster tax relief is the potential scope of the benefit. For many business-related provisions, the benefit is limited to businesses with positive taxable income. Accelerated cost recovery, special deductions, and nonrefundable tax credits provide limited benefits to businesses with little profit or no tax liability. Businesses with limited current income or tax liability may, however, benefit from expanded NOL carrybacks. One policy question is whether certain disaster-related tax benefits are necessary or effective in achieving intended policy goals, given that much of the tax relief accrues to taxpayers who would have rebuilt without incentives. This critique raises the question of whether disaster-related tax benefits are intended to encourage certain behavior (rebuilding, for example), or primarily provide financial relief for businesses affected by the disaster. <3.2. Providing Disaster Tax Relief to Individuals> Tax provisions might be used to provide financial relief to individuals who have lost property, income, or both following a disaster. To provide relief for taxpayers experiencing a loss of property, Congress has enacted legislation following certain past disasters to expand the deduction for casualty losses (beyond what is available under the permanent provision). Relief has been provided to taxpayers experiencing a loss of income by providing enhanced access to retirement plan funds or by using look-back rules for computing refundable tax credits. Several past disaster relief packages have also included provisions to support providing housing to affected individuals. There are limits to using tax policy to provide disaster relief to low- and moderate-income taxpayers. Many low- and moderate-income individuals have zero individual income tax liability. For these individuals, additional exclusions from income or deductions will provide little or no relief, as there is no tax burden to eliminate. Further, low- and moderate-income individuals may have limited wealth. Tax provisions designed to enhance access to certain forms of savings (e.g., retirement accounts) also provide limited relief to the least well-off. Allowing refundable tax credits the EITC and CTC to be computed using the previous year's income is one form of individual disaster tax relief that is targeted at low- and moderate-income taxpayers. Tax policy is generally better suited for providing relief to taxpayers higher in the income distribution. These taxpayers tend to have a positive tax liability that can be offset with various forms of tax reductions. Additionally, taxpayers in higher tax brackets receive a larger tax benefit from additional deductions (a deduction of $100 is worth $35 to someone in the 35% tax bracket, but worth $12 to someone in the 12% tax bracket, for example). Empirical evidence suggests access to savings via retirement account withdrawals helped some taxpayers replace lost income or destroyed assets following Hurricane Katrina. Thus, policies that reduce penalties associated with early withdrawals from retirement accounts or otherwise enhance access to this form of savings is one option for providing relief to taxpayers that have such resources to draw on. There are also timing concerns in using the tax code to provide individuals relief following a disaster. As was noted for businesses, the tax code does not lend itself to providing immediate relief. Another question regarding individual disaster tax relief is whether relief should be contingent on an individual having suffered losses due to a federally declared disaster, as opposed to some other disaster event. Through 2025, the casualty loss deduction is limited to federally declared disasters. However, after 2025, individuals may be able to claim a deduction for casualty losses arising from a fire, storm, shipwreck, or other casualty, regardless of whether the casualty was caused by an event with a federal disaster declaration. Is there something about having one's personal property destroyed in a federally declared disaster that merits special relief, different from what is provided when property is destroyed from a disaster without a federal disaster declaration? As it stands, disaster tax policy is inconsistently applied across different types of disaster events (e.g., federally declared versus non-federally declared disasters; disaster areas receiving or not receiving individual or individual and public assistance). Disaster tax policy can also be designed to prevent taxpayers from facing a tax burden triggered by receipt of disaster relief. The permanent exclusions from income for disaster relief payments and insurance living expense payments clarify that these items are excluded from income for income tax purposes, and thus do not result in additional tax liability. In response to past disasters, temporary provisions have provided that certain forgiven debt would not be treated as income for income tax purposes. <3.3. Charitable Giving to Support Disaster Relief> The charitable sector supports a wide range of activities associated with disaster relief and longer-term recovery. At times, Congress has acted following a disaster to provide additional tax incentives to support charitable disaster-related activities. To encourage charitable giving in the wake of a disaster, Congress has, in the past, relaxed certain income limitations associated with the deduction for charitable giving. The amount individuals can deduct for charitable use of a vehicle (the charitable mileage rate) was also temporarily increased in response to certain past disasters. Qualifying mileage reimbursements have also been allowed to be excluded from income. Other tax incentives enacted in response to disasters have encouraged particular types of charitable giving. Provisions designed to encourage charitable contributions of food inventory and books were enacted following Hurricane Katrina. The enhanced deduction for contributions of food inventory was later made permanent, while the enhanced deduction for book inventory expired in 2011. In some instances, Congress has relaxed charitable giving deadlines to allow contributions for disaster relief made early in the year to be deducted on the previous year's tax return. A key question regarding enhanced deductions for charitable giving is how much additional giving results from the policy change. Is it the tax benefits that drive giving, or individuals' desire to aid those affected by the storm? Another question to consider is whether individuals shift their giving to disaster-related causes at the expense of other charitable activities (i.e., does disaster-related giving "crowd out" other forms of charitable giving?). When evaluating enhanced charitable giving incentives following a disaster, another question is how much giving is for disaster-related charitable activities, as opposed to other activities or uses. Charitable giving incentives are often applied broadly, and it can be difficult to target them to a particular event or geographic region. Another consideration is who benefits from an enhanced charitable giving deduction. On the individual side, the value of the tax benefit of the charitable deduction is highly concentrated among high-income taxpayers. <4. Concluding Remarks> Since 2001, a variety of temporary tax policies have been used to respond to various disaster events. Following some disaster events, tax relief packages providing numerous types of tax relief were passed by Congress and became law. Following other disaster events, no temporary disaster relief was enacted. Certain permanent tax provisions provide tax relief to all affected by qualifying disasters, even in cases where specific or targeted disaster tax relief is not enacted. Disasters are inevitable. Each disaster is also unique, with damages affecting individuals, businesses, industries, and other economic sectors differently. This poses a challenge for policymakers in determining what type of disaster relief can provide efficient and effective one-size-fits-all relief. Some disasters may require a targeted and tailored policy response. Some disasters are especially catastrophic events that fundamentally change the economy of the affected region. If disasters cause economic hardships across the region, disaster relief might include broader economic development measures, ones that go beyond compensating individuals or businesses for lost income or property. Disaster tax relief as presently applied combines a base set of permanent disaster tax provisions, with additional provisions or relief provided for certain disaster events, targeted disaster zones, or time periods. Conceptually, this provides policymakers with flexibility regarding relief provided after certain disaster events. A question to consider is whether the current balance of permanent and temporary disaster tax relief provides the desired policy response efficiently and effectively. If temporary tax relief cannot be relied upon to deliver relief that is efficient and effective, one option could be to expand the set of permanent disaster-triggered tax relief provisions. Tax relief that is provided broadly, however, may not be particularly efficient, as it is not designed to provide the specific type of relief needed in the wake of a certain disaster event.

The Internal Revenue Code (IRC) contains a number of provisions intended to provide disaster relief. Following certain disasters, Congress has passed legislation with temporary and targeted tax relief policies. At other times, Congress has passed legislation providing tax relief to those affected by all federally declared major disasters (disasters with Stafford Act declarations) occurring during a set time period. In addition, several disaster tax relief provisions are permanent features of the IRC. This report discusses the following permanent provisions: disaster casualty loss deductions; deferral of gain from involuntary conversions of property destroyed by a disaster; disaster relief for owners of low-income housing tax credit properties; income exclusion for disaster relief payments to individuals; income exclusion for certain insurance living expense payments; and IRS administrative relief in the form of extended deadlines and waiving of certain penalties. Congress began enacting tax legislation generally intended to assist victims of specific disasters in 2002 in the wake of the September 11, 2001, terrorist attacks. Laws targeting specific disasters contained provisions that were temporary in nature. Three acts, however—the Heartland Disaster Tax Relief Act of 2008 ( P.L. 110-343 ), the 2017 tax act ( P.L. 115-97 ), and the Taxpayer Certainty and Disaster Tax Relief Act of 2019 ( P.L. 116-94 )—provided more general, but still temporary, relief for any federally declared disaster occurring during designated time periods. The acts providing temporary relief include the following: The Job Creation and Worker Assistance Act of 2002 ( P.L. 107-147 ), which provided tax benefits for areas of New York City damaged by the terrorist attacks of September 11, 2001; The Katrina Emergency Tax Relief Act of 2005 (KETRA; P.L. 109-73 ), which provided tax relief to assist the victims of Hurricane Katrina in 2005; The Gulf Opportunity Zone (GO Zone) Act of 2005 ( P.L. 109-135 ), which provided tax relief to those affected by Hurricanes Katrina, Rita, and Wilma in 2005; The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill; P.L. 110-234 ), which provided tax relief intended to assist those affected by severe storms and tornadoes in Kansas in 2007; The Heartland Disaster Tax Relief Act of 2008 ( P.L. 110-343 ), which provided tax relief to assist recovery from both the severe weather that affected the Midwest during summer 2008 and Hurricane Ike (this act also included general disaster tax relief provisions that applied to federally declared disasters occurring before January 1, 2010); The Disaster Tax Relief and Airport and Airway Extension Act of 2017 ( P.L. 115-63 ), which provided tax relief to those affected by Hurricanes Harvey, Irma, and Maria in 2017; The 2017 tax act ( P.L. 115-97 , commonly referred to using the title of the bill as passed in the House, the "Tax Cuts and Jobs Act") responded to major disasters occurring in 2016; The Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123 ), which provided relief to those affected by the 2017 California wildfires; and The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Division Q of the Further Consolidated Appropriations Act, 2020; P.L. 116-94 ), which provided relief for major disasters generally occurring in 2018 and 2019. This report provides a basic overview of existing, permanent disaster tax provisions, as well as past, targeted legislative responses to specific disasters. The report also includes a discussion of economic and policy considerations related to providing disaster tax relief to individuals and businesses, and encouraging charitable giving to support disaster relief.

crs_R46316

crs_R46316_0

<1. Introduction> The global pandemic of Coronavirus Disease 2019 (COVID-19) is affecting communities around the world and throughout the United States, with case counts growing daily. Containment and mitigation efforts by federal, state, and local governments have been undertaken to "flatten the curve" that is, to slow widespread transmission that could overwhelm the nation's health care system. The Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ) is the second of three comprehensive laws enacted specifically to support the response to the pandemic. The first law, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 ( P.L. 116-123 ), enacted on March 6, 2020, provides roughly $7.8 billion in discretionary supplemental appropriations to the Department of Health and Human Services (HHS), the Department of State, and the Small Business Administration. The law also authorizes the HHS Secretary to temporarily waive certain telehealth restrictions to make telehealth services more available during the emergency. The third law, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136 ), was enacted on March 27, 2020. In addition to a number of economic stimulus and other provisions, the CARES Act provides payment for or requires coverage of a COVID-19 vaccine, when available, for federal health care payment and services programs and most private health insurance plans; it also provides appropriations to continue support for federal, state, and local public health efforts, and for federal purchase of COVID-19 vaccines. The act also appropriates a $100 billion "Provider Relief Fund" to assist health care facilities and providers facing revenue losses and uncompensated care as a result of the pandemic. This CRS report describes the health provisions included in FFCRA as of the date of enactment, including relevant background information. Other divisions in the law contain provisions regarding HHS social services programs, federal nutrition programs, and other matters that are not within the scope of this CRS report. Other CRS reports summarize the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, and the CARES Act, and will link to this report as they become available. Some provisions described in this report have been amended by the CARES Act, and in such cases, footnotes reference the relevant CRS expert who can answer questions about the amendments. This report will not otherwise be updated or changed to reflect subsequent congressional or administrative action related to the FFCRA health provisions. The Appendix contains a list of CRS experts for follow-up on further developments. <2. FFCRA Overview> <2.1. Legislative History6> On March 14, 2020, the House amended and passed H.R. 6201 , the Families First Coronavirus Response Act, by a vote of 363-40. The House considered the measure under the suspension of the rules procedure, a process that allows for expedited consideration of measures that enjoy overwhelming support. The measure had been introduced on March 11, 2020, and referred to the Committee on Appropriations as the primary committee, as well as to the Committee on the Budget and the Committee on Ways and Means. The committees took no formal action on the legislation; the suspension of the rules procedure allows the House to take up a measure (even one in committee), amend it, and pass it, all with a single vote. To suspend the rules and pass the bill requires the support of two-thirds of those voting. On March 16, 2020, the House (by unanimous consent) considered and agreed to a resolution (H.Res. 904) that directed the Clerk to make changes to the legislation when preparing the final, official version of the House-passed bill. The process of preparing this version is called "engrossment." The engrossed version was sent to the Senate. The Senate considered the bill under the terms of a unanimous consent agreement that allowed for the consideration of three amendments and required the support of 60 Senators to approve any amendment and for final passage of the bill. The Senate did not agree to any of the amendments but passed the bill, 90-8, on March 18, 2020. The President signed the bill into law the same day. It became P.L. 116-127 . <2.2. Provisions in Brief> The Families First Coronavirus Response Act, among other things, increases appropriations to the Department of Defense, Indian Health Service (IHS), HHS, and Veterans Health Administration for testing and ancillary services associated with the SARS-CoV-2 virus, or COVID-19. Through several provisions in FFCRA Divisions A and F, the act provides payment for or requires coverage of testing for the COVID-19 virus, along with items and services associated with such testing, such as supplies and office visits, without any cost sharing, for individuals who are covered under Medicare, including Medicare Advantage, traditional Medicaid, the State Children's Health Insurance Program (CHIP), TRICARE, Veterans health care, the Federal Employees Health Benefits (FEHB) Program, most types of private health insurance plans, the IHS, and for individuals who are uninsured (as defined under FFCRA). These coverage provisions are effective beginning on the date of enactment through any portion of the COVID-19 public health emergency (declared pursuant to Section 319 of the Public Health Service Act). The FFCRA prohibits private health insurance plans and Medicare Advantage plans from employing utilization management tools, such as prior authorization, for the COVID-19 test, or the visit to furnish it. FFCRA provides for an increase to all states, the District of Columbia, and territories in the share of Medicaid expenditures financed by the federal government, subject to specific requirements. It provides additional Medicaid funding to territories. FFCRA modifies requirements related to waiving certain Medicare telehealth restrictions during the emergency. Finally, it waives liability, with a narrow exception, for manufacturers, distributors, or providers of specified respiratory protective devices used for COVID-19 response. The Congressional Budget Office and the Joint Committee on Taxation provided a preliminary estimate of the budget effects of the Families First Coronavirus Response Act. Overall, the act is estimated to increase discretionary spending by $2.4 billion from emergency supplemental appropriations, to increase mandatory outlays by $95 billion, and to decrease revenues by $94 billion. These estimates are based on assumptions about the severity and duration of the pandemic, and they may vary substantially from final estimates to be provided later this year. Discretionary spending totals and CBO's estimates of mandatory outlays for health care programs in Division F are provided in the " Summaries of Provisions " section. <2.3. Key Definitions> Several key terms are referred to repeatedly throughout this report: emergency period, COVID-19 testing and testing-related items and services, and uninsured individuals. This section provides the technical definitions for those terms. <2.3.1. Duration of Emergency Period> Several provisions in Division F define the effective period of the authorized activity as "the emergency period defined in paragraph (1)(B) of section 1135(g)," or comparable construction, referring to a paragraph in Section 1135 of the Social Security Act (SSA). Section 1135 allows the Secretary of Health and Human Services (HHS Secretary) to waive specified requirements and regulations to ensure that health care items and services are available to enrollees in the Medicare, Medicaid, and CHIP programs during emergencies. Paragraph (1)(B) of SSA Section 1135(g) refers to "the public health emergency declared with respect to the COVID-19 outbreak by the Secretary on January 31, 2020, pursuant to section 319 of the Public Health Service Act [PHSA]." Hence, the referenced emergency period in provisions in Division F is the period during which this particular Section 319 public health emergency declaration whether initial or renewed is in effect. However, while most Division F provisions are effective during any portion of the emergency period described above, those provisions bec a me effective as of the date of enactment of FFCRA , March 18, 2020, even though the emergency period began earlier. Division F provisions with different effective dates are so noted in the descriptions of the sections below. <2.3.2. Definitions of COVID-19 Testing and Related Services> Through several provisions in FFCRA Divisions A and F, the act provides payment for or requires coverage of testing for the COVID-19 virus, and items and services associated with such testing, such as supplies and office visits, without cost sharing. These coverage requirements apply to individuals who are covered under Medicare, traditional Medicaid, CHIP, TRICARE, Veterans health care, FEHB, the IHS, most types of private health insurance plans, and individuals who are uninsured (as defined below). <2.3.2.1. COVID-19 Testing> Provisions in Division F refer to COVID-19 testing in several ways: "In vitro diagnostic products (as defined in section 809.3(a) of title 21, Code of Federal Regulations) for the detection of SARS-CoV-2 or the diagnosis of the virus that causes COVID-19 that are approved, cleared, or authorized under section 510(k), 513, 515 or 564 of the Federal Food, Drug, and Cosmetic Act [FFDCA]"; "COVID-19 related items and services"; "in vitro diagnostic products"; "clinical diagnostic lab tests"; and "any COVID-19 related items and services." COVID- 19 stands for Coronavirus Disease 2019, the name of the pandemic disease. SARS-CoV- 2 is the scientific name of the virus that causes COVID-19. Diagnostic testing identifies the presence of the virus, which, in conjunction with clinical signs and symptoms, informs the diagnosis of COVID-19. In Vitro Diagnostics (IVDs) are medical devices used in the laboratory analysis of human samples, including commercial test products and instruments used in testing. IVDs may be used in a variety of settings, including a clinical laboratory, a physician's office, or in the home. IVDs are defined in FDA regulation as a specific subset of devices that include "reagents, instruments, and systems intended for use in the diagnosis of disease or other conditions ... in order to cure, mitigate, treat, or prevent disease ... [s]uch products are intended for use in the collection, preparation, and examination of specimens taken from the human body." As indicated by this definition, an IVD may be either a complete test or a component of a test, and in either case, the IVD comes under FDA's regulatory purview. FDA premarket review of IVDs may include Premarket Approval (PMA); notification and clearance (510(k)); authorization pursuant to de novo classification; or authorization for use in an emergency pursuant to an Emergency Use Authorization (EUA) based on circumstances (e.g., a public health emergency determination) and the risk the device poses. Although the terms and definitions used to refer to COVID-19 testing vary throughout FFCRA, they do not necessarily reflect actual differences in the types of tests and ancillary services that are or must be covered. Some of these definitions and terms were amended in the CARES Act. In summarizing FFCRA provisions in this CRS Report, mention of any of these definitions of a COVID-19 test, as described above, is referred to as " COVID-19 testing ." <2.3.2.2. Testing-Related Items and Services> Sections in FFCRA Divisions A and F that refer to COVID-19 testing generally also refer to health care items and services furnished in relation to testing, such as supplies and office visits, although definitions vary. FFCRA Section 6001(a)(2) defines these ancillary services, in the context of private health insurance coverage, as [i]tems and services furnished to an individual during health care provider office visits (which term in this paragraph includes in-person visits and telehealth visits), urgent care center visits, and emergency room visits that result in an order for or administration of an in vitro diagnostic product described in paragraph (1), but only to the extent such items and services relate to the furnishing or administration of such product or to the evaluation of such individual for purposes of determining the need of such individual for such product. This definition could encompass additional diagnostic testing associated with the visit, which may include additional laboratory tests and imaging studies. However, it would not encompass treatment for COVID-19 illnesses . See the " Section 6001. Coverage of Testing for COVID-19 " section below regarding enforcement and implementation of this section's provisions. <2.3.2.3. Applicable References> Provisions in Division F that use language discussed above, comparable construction, or cross-reference, are as follows: Section 6001(a)(1)-(2), regarding specified types of private health insurance coverage. Section 6004(a)(1)(C), which amends SSA Section 1905(a)(3) regarding Medicaid medical assistance, and Section 6004(a)(2), which amends SSA Sections 1916 and 1916A regarding Medicaid cost-sharing. Both provisions refer to SSA Section 1905(a)(3), as amended. Section 6004(b)(1), which amends SSA Section 2103(c), regarding CHIP child coverage, and Section 6004(b)(2), which amends SSA Section 2112(b)(4), regarding CHIP pregnant women coverage. Both provisions reference SSA Section 1905(a)(3), as amended. Section 6006, regarding TRICARE, veterans health care, and federal civilian employee health coverage (FEHB), each referencing FFCRA Section 6001(a)(1)-(2). Section 6007, regarding IHS referencing FFCRA Section 6001(a)(1)-(2). In addition, appropriations provided in FFCRA Division A to the Defense Health Program, Veterans Health Administration, IHS, and the HHS Public Health and Social Services Emergency Fund are to be used, in whole or in part, to pay for COVID-19 testing and related services, with reference to Section 6001(a) of the act. However, Division F sections pertaining to Medicare, Medicare Advantage, and the Medicaid and CHIP programs do not reference FFCRA Section 6001(a)(1)-(2) with respect to the definition of COVID-19 tests, administration of the tests, or related items and services, but rather amend the Social Security Act directly to require coverage of these things. <2.3.3. Definition of the Uninsured> Two provisions in FFCRA facilitate access to COVID-19 testing for "uninsured individuals": Division A, Title V, and Division F, Section 6004. Title V provides funding to the National Medical Disaster System (NDMS) that can be used to reimburse health care providers for costs related to COVID-19 testing for uninsured individuals, as defined in that section (and as explained below). Section 6004 provides states an option to use Medicaid as a vehicle to provide COVID-19 testing without cost to uninsured individuals, as defined in that section. The respective definitions of uninsured individuals are similar but not identical. In Title V, "uninsured individual" means an individual who is not enrolled in coverage in any of the following three categories: A federal health care program, as defined: This includes but is not limited to Medicare, Medicaid, CHIP, TRICARE, and the VA health care system. Most types of private health insurance plans: This includes individual health insurance coverage and group plans, whether fully insured or self-insured. The explanation of these coverage types and the applicability of Section 6001 to them also apply to this provision. The Federal Employees Health Benefits ( FEHB ) Program: See the " Section 6006. Application with Respect to TRICARE, Coverage for Veterans, and Coverage for Federal Civilians " section below for background on FEHB. In other words, individuals enrolled in coverage in one of these three categories are considered insured and are not eligible for the testing assistance described in Title V. Note that individuals with certain types of private coverage may be considered uninsured, due to the coverage definitions cited. The definition of individual health insurance coverage does not include a type of coverage called short-term, limited duration insurance (STLDI) (see " Section 6001. Coverage of Testing for COVID-19 "). Thus, individuals with STLDI appear to be considered uninsured for the purpose of eligibility for assistance under Title V. Section 6004 includes additional groups in the definition of "uninsured individual" that applies under such sections. Specifically, for the purposes of Section 6004, uninsured individuals are defined as those who are not enrolled in (1) a federal health care program, as defined; (2) a specified type of private health insurance plan; or (3) FEHB. Such individuals are also not Medicaid-eligible under one of Medicaid's mandatory eligibility pathways (e.g., the poverty-related pregnant women and child pathways, or the Medicaid expansion pathway under the Patient Protection and Affordable Care Act [ACA; P.L. 111-148 , as amended]). The first three categories are defined and referenced the same way in Section 6004 as they are in Title V, although wording and punctuation differ slightly. See the discussion of Section 6004 in this report for more information about the additional criteria related to COVID-19 testing without cost-sharing under Medicaid. <3. Summaries of Provisions> <3.1. Division A Second Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020> This section describes the health care-related supplemental appropriations in FFCRA Division A for the Defense Health Program, the Veterans Health Administration, and HHS accounts, and applicable general provisions. All such appropriations are designated as an emergency requirement and, as a result, are not constrained by the statutory discretionary spending limits (often referred to as budget caps). <3.1.1. Title II: Department of Defense, Defense Health Program> The Defense Health Program (DHP) is an account in the Department of Defense budget that funds various functions of the Military Health System. These functions include the provision of health care services, certain medical readiness activities, expeditionary medical capabilities, education and training programs, medical research, management and headquarters activities, facilities sustainment, procurement, and civilian personnel. For FY2020, Congress appropriated $34.4 billion to the DHP. FFCRA appropriates an additional $82 million to the DHP for COVID-19 testing, administration of the test, and related items and services outlined in FFCRA Section 6006(a). (For a summary of this section, see " Definitions of COVID-19 Testing and Related Services " and " Section 6006. Application with Respect to TRICARE, Coverage for Veterans, and Coverage for Federal Civilians .") The additional funds are designated as emergency spending and are to remain available until September 30, 2022. <3.1.2. Title IV: Department of Health and Human Services, Indian Health Service> The IHS within HHS is the lead federal agency charged with improving the health of American Indians and Alaska Natives. In FY2019, IHS provided health care to approximately 2.6 million eligible American Indians/Alaska Natives. IHS's FY2020 appropriation was $6.1 billion, with $4.3 billion appropriated to the Indian Health Services account, which supports the provision of clinical services and public health activities. The services provided at IHS facilities vary, with some facilities providing inpatient services, laboratory testing services, and emergency care, while others focus on outpatient primary care services. IHS does not offer a standard benefit package, nor is it required to cover certain services within its facilities or when it authorizes payment for services to its beneficiaries outside of the IHS system (see " Section 6007. Coverage of Testing for COVID-19 at No Cost Sharing for Indians Receiving Purchased/Referred Care "). FFCRA appropriates an additional $64 million for COVID-19 testing, administration of the test, and related items and services as specified in FFCRA Section 6007. (See " Definitions of COVID-19 Testing and Related Services " and " Section 6007. Coverage of Testing for COVID-19 at No Cost Sharing for Indians Receiving Purchased/Referred Care .") The section also specifies that the additional funds are to be allocated at the discretion of the IHS director. The additional funds are designated as emergency spending and are to remain available until September 30, 2022. <3.1.3. Title V. Department of Health and Human Services, Public Health and Social Services Emergency Fund> There is no federal assistance program designed purposefully to pay the uncompensated costs of health care for the uninsured and underinsured necessitated by a public health emergency or disaster. In general, there has been no consensus that doing so should be a federal responsibility. Nonetheless, Congress has provided appropriations for several limited mechanisms to address uncompensated health care costs in response to previous incidents. The health care needs of uninsured and underinsured individuals and the financial pressures many individuals and their health care providers are facing during the COVID-19 outbreak have spurred congressional interest in these approaches. Among other forms of assistance, the CARES Act ( P.L. 116-136 ) appropriates a $100 billion "Provider Relief Fund" to assist health care facilities and providers facing revenue losses and uncompensated care as a result of the pandemic. FFCRA uses the National Disaster Medical System (NDMS) Definitive Care Reimbursement Program as the mechanism for federal payment for COVID-19 testing and related services for uninsured individuals. Historically, NDMS has paid for health care items and services at between 100% and 110% of the applicable Medicare rate, and the Centers for Medicare & Medicaid Services (CMS) has processed payments. To fund this approach, FFCRA provides $1 billion to the Public Health and Social Services Emergency Fund (PHSSEF), an account used in appropriations acts to provide the HHS Secretary with one-time or emergency funding, as well as annual funding for the office of the HHS Assistance Secretary for Preparedness and Response (ASPR). Covered COVID-19 testing, administration of the test, and related services are as defined in Subsection 6001(a) of the act. (See " Definitions of COVID-19 Testing and Related Services .") An uninsured individual is defined, for purposes of this section, as someone who is not enrolled in (1) a federal health care program, as defined; (2) a specified type of private health insurance plan; or (3) FEHB. (See " Definition of the Uninsured " for more information.) The additional funds are designated as emergency spending and are to remain available until expended. <3.1.4. Title VI. Department of Veterans Affairs, Veterans Health Administration> The Veterans Health Administration (VHA) of the Department of Veterans' Affairs (VA) provides health care to eligible veterans and their dependents who meet certain criteria as authorized by law. The VHA is funded through five appropriations accounts: (1) medical services, (2) medical community care, (3) medical support and compliance, (4) medical facilities, and (5) medical and prosthetic research. The first four accounts provide funding for medical care for veterans. FFCRA provides $60 million in supplemental appropriations for FY2020 to the VHA $30 million for medical services and $30 million for medical community care for COVID-19 testing, administration of the test, and related items and services for visits for veterans. (See " Definitions of COVID-19 Testing and Related Services " and " Veterans .") The additional funds are designated as emergency spending and are to remain available until September 30, 2022. <3.1.5. Title VII. General Provisions, Division A> This title provides a reporting requirement (Section 1701) which states that each amount appropriated or made available by Division A is in addition to amounts otherwise appropriated for the fiscal year involved (Section 1703), and that unless otherwise provided, appropriations in Division A are not available for obligation beyond FY2020 (Section 1704). Title VII also includes Section 1702. This section was repealed in its entirety by Section 18115 of the CARES Act ( P.L. 116-136 ), which replaced it with a requirement for all laboratories carrying out COVID-19 testing to report testing data to HHS, as specified. An explanation of the repealed provision is provided here, for completeness. <3.1.6. Section 1702: Repealed> Generally, laboratories report testing results for specified diseases and conditions (called notifiable conditions ) directly to state or territorial (jurisdictional) health departments, pursuant to requirements in jurisdictional law. Through its National Notifiable Diseases Surveillance System (NNDSS), the HHS Centers for Disease Control and Prevention (CDC) works with jurisdictions and the Council of State and Territorial Epidemiologists (CSTE) to track national notifiable conditions, mostly infectious diseases and some noninfectious conditions (e.g., lead poisoning). Usually, such data are provided to CDC voluntarily. COVID-19 is a reportable disease in all reporting jurisdictions, and CDC receives data on COVID-19 cases and laboratory test results through NNDSS from all jurisdictions, as well as directly from some commercial laboratories. In addition, the FDA often includes, as a condition of an Emergency Use Authorization (EUA), the requirement that laboratories carrying out the EUA test comply with all relevant state and local reporting requirements. FFCRA Section 1702 would have required all states and local governments receiving funding under Division A to report real-time and aggregated data on both testing (tests performed) and test results to the respective State Emergency Operations Center. These data would then have been transmitted to the CDC. <3.2. Division F Health Provisions> This section describes all of the provisions included in FFCRA Division F. Some provisions described below have been amended by the CARES Act ; in such cases, foot n otes reference the relevant CRS expert who can answer questions about the amendment s . In some cases, the amendments made by the CARES Act are substantial, in which case, the footnote may also provide a brief description of the amendment . <3.2.1. Section 6001. Coverage of Testing for COVID-19> Private health insurance is the predominant source of health insurance coverage in the United States. In general, consumers may obtain individual health insurance coverage directly from an insurer, or they may enroll in a group health plan through their employer or another sponsor . Group health plan sponsors may finance coverage themselves (self-insure) or purchase (fully insured) coverage from an insurer. Covered benefits and consumer costs may vary by plan, subject to applicable federal and state requirements. The federal government may regulate all the coverage types noted above, and states may regulate all but self-insured group plans. Federal and state requirements may vary by coverage type. Some federal requirements apply to all coverage types noted above, while other federal requirements only apply to certain coverage types. Prior to the enactment of FFCRA, there were no federal requirements specifically mandating private health insurance coverage of items or services related to COVID-19 testing. In recent weeks, some states have announced relevant coverage requirements, and some insurers have clarified or expanded their policies to include relevant coverage. FFCRA newly requires most private health insurance plans to cover COVID-19 testing, administration of the test, and related items and services (see " Definitions of COVID-19 Testing and Related Services "). The coverage must be provided without consumer cost-sharing, including deductibles, copayments, or coinsurance. Prior authorization or other utilization management requirements are prohibited. These requirements apply to individual health insurance coverage and to group plans, whether fully insured or self-insured. This includes plans sold on and off the individual and small group exchanges. Per the definition of individual health insurance coverage cited in the act, the requirements do not apply to short-term, limited-duration plans. The requirements do apply to grandfathered plans , which are individual or group plans in which at least one individual was enrolled as of enactment of the ACA (March 23, 2010), and that continue to meet certain criteria. Plans that maintain their grandfathered status are exempt from some federal requirements, but FFCRA specifies that Section 6001 applies to them. The coverage requirements in this act apply only to the specified items and services that are furnished during the emergency period described in the act (see " Duration of Emergency Period "), as of the date of enactment (March 18, 2020). Subsection (b) states that the Secretaries of HHS, Labor, and the Treasury are required to enforce this section's provisions as if the provisions were incorporated into the PHSA, Employee Retirement Income Security Act (ERISA), and Internal Revenue Code (IRC), respectively. Subsection (c) states that those Secretaries also have authority to implement the provisions of this section "through sub-regulatory guidance, program instruction, or otherwise." CBO preliminarily estimates that Section 6001 will decrease federal revenues by $4 million and increase federal outlays by $7 million over the FY2020 FY2022 period. <3.2.2. Section 6002. Waiving Cost Sharing Under the Medicare Program for Certain Visits Relating to Testing for COVID-19> Medicare Part B covers physicians' services, outpatient hospital services, durable medical equipment, and other medical services. Most physicians, providers, and practitioners are subject to limits on amounts they can bill beneficiaries for covered services, and they can bill the beneficiary for only the 20% coinsurance of the Medicare payment rate plus any unmet deductible. Part B also covers outpatient clinical laboratory tests provided by Medicare-participating laboratories, such as certain blood tests, urinalysis, and some screening tests, including the test for the coronavirus that causes COVID-19. These services may be furnished by labs located in hospitals and physician offices, as well as by independent labs. Beneficiaries have no coinsurance, co-payments, or deductibles for covered clinical lab services. FFCRA eliminates the Medicare Part B beneficiary cost-sharing for provider visits during which a coronavirus diagnostic test is administered or ordered during the emergency period (see " Duration of Emergency Period "). Beneficiaries are not responsible for any coinsurance payments or deductibles for any specified COVID-19 testing-related service, defined as a medical visit that falls within the evaluation and management service codes for the following categories: office and other outpatient services; hospital observation services; emergency department services; nursing facility services; domiciliary, rest home, or custodial care services; home services; or online digital evaluation and management services. The elimination of beneficiary cost-sharing for COVID-19 testing-related services applies to Medicare payment under the hospital outpatient prospective payment system, the physician fee schedule, the prospective payment system for federally qualified health centers, the outpatient hospital system payment system, and the rural health clinic services payment system. The HHS Secretary is to provide appropriate claims coding modifiers to identify the services for which beneficiary cost-sharing is waived. The HHS Secretary is allowed to implement this section by program instruction or otherwise. CBO preliminarily estimates that enacting Sections 6002 and 6003 will increase direct spending by $6.7 billion over the FY2020-FY2022 period. <3.2.3. Section 6003. Coverage of Testing for COVID-10 at No Cost Sharing Under the Medicare Advantage Program> Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits. Under MA, private health plans are paid a per-person monthly amount to provide all Medicare-covered benefits (except hospice) to beneficiaries who enroll in their plan. In general, cost sharing (copayments and coinsurance) under an MA plan must be actuarially equivalent to cost sharing under original Medicare, but cost sharing for a specific item or service may vary from amounts required under original Medicare. Private plans may use different techniques to influence the medical care used by enrollees, such as requiring enrollees to receive a referral to see specialists, or requiring prior approval or authorization from the plan before a service will be paid for. FFCRA requires MA plans to cover COVID-19 testing, the administration of the test, and related items and services during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). Plans are prohibited from charging cost sharing for those items and services, and are prohibited from using prior authorization or other utilization management techniques, with respect to the coverage of the test or ancillary services. The HHS Secretary is allowed to implement this section by program instruction or otherwise. CBO preliminarily estimates that enacting Sections 6002 and 6003 will increase direct federal spending by $6.7 billion over the FY2020-FY2022 period. <3.2.4. Section 6004. Coverage at No Cost Sharing Under Medicaid and CHIP> <3.2.4.1. Medicaid Background> Medicaid is a federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, to a diverse low-income population. Medicaid is financed jointly by the federal government and the states. States must follow broad federal rules to receive federal matching funds, but they have flexibility to design their own versions of Medicaid within the federal statute's basic framework. This flexibility results in variability across state Medicaid programs. Medicaid coverage includes a variety of primary and acute-care services, as well as long-term services and supports (LTSS). Not all Medicaid enrollees have access to the same set of services. An enrollee's eligibility pathway determines the available services within a benefit package. Most Medicaid beneficiaries receive services in the form of what is called traditional Medicaid. In general, under traditional Medicaid coverage, state Medicaid programs must cover specific required services listed in statute (e.g., inpatient and outpatient hospital services, physician's services, or laboratory and x-ray services) and may elect to cover certain optional services (e.g., prescription drugs, case management, or physical therapy services). Under alternative benefit plans (ABPs), by contrast, states must provide comprehensive benefit coverage that is based on a coverage benchmark rather than a list of discrete items and services, as under traditional Medicaid. Coverage under an ABP must include at least the essential health benefits (EHBs) that most plans in the private health insurance market are required to furnish. States that choose to implement the ACA Medicaid expansion are required to provide ABP coverage to the individuals eligible for Medicaid through the expansion (with exceptions for selected special-needs subgroups), and are permitted to extend such coverage to other groups. Beneficiary cost sharing (e.g., premiums and co-payments) is limited under the Medicaid program. States can require certain beneficiaries to share in the cost of Medicaid services, but there are limits on (1) the amounts that states can impose, (2) the beneficiary groups that can be required to pay, and (3) the services for which cost sharing can be charged. <3.2.4.2. CHIP Background> The State Children's Health Insurance Program (CHIP) is a federal-state program that provides health coverage to uninsured children and certain pregnant women with annual family income too high to qualify for Medicaid. CHIP is jointly financed by the federal government and states, and is administered by the states. Like Medicaid, the federal government sets basic requirements for CHIP, but states have the flexibility to design their own version of CHIP within the federal government's framework. As a result, CHIP programs vary significantly from state to state. States may design their CHIP programs as (1) a CHIP Medicaid expansion, (2) a separate CHIP program, or (3) a combination approach, where the state operates a CHIP Medicaid expansion and one or more separate CHIP programs concurrently. CHIP benefit coverage and cost-sharing rules depend on program design. CHIP Medicaid expansions must follow the federal Medicaid rules for benefits and cost sharing. For separate CHIP programs, the benefits are permitted to look more like private health insurance, and states may impose cost sharing, such as premiums or enrollment fees, with a maximum allowable amount that is tied to annual family income. Regardless of the choice of program design, all states must cover emergency services, well-baby and well-child care including age-appropriate immunizations, and dental services. <3.2.4.3. FFCRA Provision> FFCRA adds COVID-19 testing and related services the list of Medicaid mandatory services under traditional Medicaid benefits for the period beginning March 18, 2020, through the duration of the public health emergency as declared by the HHS Secretary pursuant to Section 319 of the PHSA (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). States and territories are prohibited from charging beneficiary cost sharing for such testing, or for testing-related state plan services furnished during this period. FFCRA also permits states to extend COVID-19 testing, testing-related state plan services, testing-related visit and the administration of the testing without cost sharing (as referenced earlier in this provision) to uninsured individuals during the specified public health emergency period. For the purposes of this provision, uninsured individuals are defined as those who are not Medicaid-eligible under one of Medicaid's mandatory eligibility pathways (e.g., the poverty-related pregnant women and child pathways, or the ACA Medicaid expansion pathway), and who are not enrolled in (1) a federal health care program (e.g., Medicare, Medicaid, CHIP, or TRICARE); (2) a specified type of private health insurance plan (e.g., individual health insurance coverage and group plans, whether fully insured or self-insured); or (3) FEHB (see " Definition of the Uninsured "). The law provides 100% federal medical assistance percentage (FMAP or federal matching rate) for medical assistance and administrative costs associated with uninsured individuals who are eligible for Medicaid under this provision. The law also requires CHIP programs (regardless of program design) to cover COVID-19 testing for CHIP enrollees for the period beginning March 18, 2020, through the duration of the public health emergency period as specified (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). States are prohibited from charging beneficiary cost sharing for such testing, or for testing-related visits furnished to CHIP enrollees during this period. CBO preliminarily estimates that Section 6004 will increase direct federal spending by a total of $1.9 billion in FY2020 and FY2021. <3.2.5. Section 6005. Treatment of Personal Respiratory Protective Devices as Covered Countermeasures> In 2005 Congress passed the Public Readiness and Emergency Preparedness Act (PREP Act), which authorizes the federal government to waive liability (except for willful misconduct) for manufacturers, distributors, and providers of medical countermeasures, such as drugs and medical supplies, that are needed to respond to a public health emergency. The act also authorizes the federal government to establish a program to compensate eligible individuals who suffer injuries from administration or use of products covered by the PREP Act's immunity provisions. FFCRA explicitly adds to the list of PREP Act-covered countermeasures any personal respiratory protective device that is (1) approved by the National Institute for Occupational Safety and Health (NIOSH); (2) subject to an emergency use authorization (EUA); and (3) used for the COVID-19 response, retroactive from January 27, 2020, and through October 1, 2024. The CARES Act, Section 3103, amends this provision to define a covered personal respiratory protective device as one that "is approved by [NIOSH], and that the Secretary determines to be a priority for use during a public health emergency declared under section 319." This amendment removes the requirement for an FDA authorization and extends PREP Act authority to these devices during both the COVID-19 emergency period and any future public health emergencies declared pursuant to PHSA Section 319. CBO did not provide an estimate of this provision. <3.2.6. Section 6006. Application with Respect to TRICARE, Coverage for Veterans, and Coverage for Federal Civilians> <3.2.6.1. TRICARE> Under Chapter 55 of Title 10, U.S. Code , the Department of Defense administers a statutory health entitlement to approximately 9.5 million beneficiaries (i.e., servicemembers, military retirees, and family members). These entitlements are delivered through the Military Health System (MHS), which offers health care services in military hospitals and clinics known as military treatment facilities and through civilian health care providers participating in TRICARE. With the exception of active duty servicemembers, MHS beneficiaries may have a choice of TRICARE plan options depending on their status and geographic location. Each plan option has different beneficiary cost-sharing features, including annual enrollment fees, deductibles, copayments, and an annual catastrophic cap. FFCRA requires the Secretary of Defense to waive any TRICARE cost-sharing requirements related to COVID-19 testing, administration of the test, and related items and services provided during an associated health care office, urgent care, or emergency department visits during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). <3.2.6.2. Veterans> All veterans enrolled in the VA health care system are eligible for a standard medical package that includes laboratory services. Currently, some veterans are required to pay copayments for medical services and outpatient medications related to the treatment of a nonservice-connected condition. Any health service or medication provided in connection to the treatment of a service-connected condition or disability is always furnished without cost sharing. In addition, the VA does not charge copayments for preventive screenings, such as those for infectious diseases; cancers; heart and vascular diseases; mental health conditions and substance abuse; metabolic, obstetric, and gynecological conditions; and vision disorders, as well as regular recommended immunizations. Generally, laboratory services are also expressly exempt from copayment requirements. FFCRA requires the VA Secretary to waive any copayment or other cost-sharing requirements related to COVID-19 testing, administration of the test, and related items and services for visits during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). <3.2.6.3. Federal Civilians> The FEHB Program provides health insurance to federal employees, retirees, and their dependents. Cost-sharing requirements (e.g., deductibles, co-payments, and coinsurance amounts) vary by plans participating in the FEHB Program. For some services, such as the preventive care services outlined in the ACA, plans are not allowed to impose cost sharing. FFCRA requires that no federal civil servants enrolled in a health benefits plan or FEHB enrollees may be required to pay a copayment or other cost sharing related to COVID-19 testing, administration of the test, related items and services for visits during the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). <3.2.7. Section 6007. Coverage of Testing for COVID-19 at No Cost Sharing for Indians Receiving Purchased/Referred Care> IHS provides health care to eligible American Indians/Alaska Natives 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). IHS also provides services to urban Indians through grants or contracts to Urban Indian Organizations (UIOs). The services provided vary by facility, and IHS does not offer a standard benefit package, nor is it required to cover certain services that its beneficiaries may receive at facilities outside of IHS. When services are not available at an IHS facility, the IHS facilities may authorize payment through the Purchased Referred Care Program (PRC). Generally, PRC requires prior approval except in cases of emergency. PRC funds are limited, and as such, not all PRC claims are authorized and PRC is not available to UIOs. To be authorized, claims must meet medical priority levels, individuals must not be eligible for another source of coverage (e.g., Medicaid or private health insurance), and individuals must live in certain geographic areas. FFCRA requires IHS to pay for the cost of COVID-19 testing and related items and services, as described in Section 6001(a), without any cost-sharing requirements, from the date of enactment (i.e., March 18, 2020) throughout the emergency period (see the sections " Definitions of COVID-19 Testing and Related Services " and " Duration of Emergency Period "). This requirement applies to any Indian receiving services through the IHS including through UIOs. It also specifies that the requirement to waive cost-sharing requirements applies regardless of whether the testing and related services were authorized through PRC. <3.2.8. Section 6008. Temporary Increase of Medicaid FMAP> Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP) rate, which varies by state and is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. In the past, there were two temporary FMAP exceptions to provide states with fiscal relief due to recessions. They were provided through the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JRTRRA, P.L. 108-27 ) and the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). To be eligible for both of these temporary FMAP increases, states had to abide by some requirements. These requirements varied in the two FMAP increases, but for both increases, states were required to maintain Medicaid "eligibility standards, methodologies, and procedures" and ensure that local governments did not pay a larger percentage of the state's nonfederal Medicaid expenditures than otherwise would have been required. FFCRA provides an increase to the FMAP rate for all states, the District of Columbia, and the territories of 6.2 percentage points for each calendar quarter occurring during the period beginning on the first day of the emergency period (i.e., January 1, 2020) and ending on the last day of the calendar quarter in which the last day of the public health emergency period ends (see " Duration of Emergency Period "). States, the District of Columbia, and the territories will not receive this FMAP rate increase if (1) the state's Medicaid "eligibility standards, methodologies, or procedures" are more restrictive than what was in effect on January 1, 2020; (2) the amount of premiums imposed by the state exceeds the amount as of January 1, 2020; (3) the state does not maintain eligibility for individuals enrolled in Medicaid on the date of enactment (i.e., March 18, 2020) or for individuals who enroll during the emergency period through the end of the month in which the emergency period ends (unless the individual requests a voluntary termination of eligibility or the individual ceases to be a resident of the state); or (4) the state does not provide coverage (without the imposition of cost sharing) for any testing services and treatments for COVID-19 (including vaccines, specialized equipment, and therapies). FFCRA adds another condition for the FMAP rate increase. Specifically, states, the District of Columbia, and the territories cannot require local governments to fund a larger percentage of the state's nonfederal Medicaid expenditures for the Medicaid state plan or Medicaid disproportionate share hospital (DSH) payments than what was required on March 11, 2020. CBO preliminarily estimates that Section 6008 will increase direct spending by about $50.0 billion over the FY2020-FY2022 period. <3.2.9. Section 6009. Increase in Medicaid Allotments for Territories> Medicaid financing for the territories (i.e., America Samoa, Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands) is different than the financing for the 50 states and the District of Columbia. Federal Medicaid funding to the states and the District of Columbia is open-ended, but the Medicaid programs in the territories are subject to annual federal capped funding. Federal Medicaid funding for the territories comes from different sources. The permanent source of federal Medicaid funding for the territories is the annual capped funding. Currently, the Medicaid annual capped funding for the territories is supplemented by additional funding for FY2020 and FY2021 that was provided through the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). FFCRA increases the additional funding available for each territory for FY2020 and FY2021. The aggregate additional funding for the territories increases from $3.0 billion to $3.1 billion for FY2020 and $3.1 billion to $3.2 billion for FY2021. CBO preliminarily estimates that Section 6009 increases the allotment amount, and thus direct spending, by $204 million over the FY2020-FY2021 period. <3.2.10. Section 6010. Clarification Relating to Secretarial Authority Regarding Medicare Telehealth Services Furnished During COVID-19 Emergency Periods> Medicare coverage under Part B (fee-for-service) for telehealth services is defined under SSA Sec. 1834(m), which places certain conditions on such care including who can furnish and be paid for the service, where the patient is located (the originating site), where the physician is located (the distant site), and the types of services that are covered. Recent legislation has modified some of the conditions under which telehealth services may be furnished under Medicare. The Coronavirus Preparedness and Response Supplemental Appropriations Act ( P.L. 116-123 ), Division B, Sec. 102, added certain Medicare telehealth restrictions to the list of applicable conditions for which the Secretary could temporarily waive or modify program requirements or regulations during the COVID-19 emergency period. (See " Duration of Emergency Period ".) The provision also defined a qualified telehealth provider, requiring a prior relationship within the past three years between the patient and the provider under Medicare. FFCRA expands the definition of a qualified provider to include those who had provider-patient relationships within the past three years outside of Medicare. <3.2.10.1. Appendix. CRS Experts and Contact Information> Below is a list of the health care provisions in FFCRA with the name and contact information for the CRS expert on that provision. In some cases, more than one expert contributed to a section, in which case their topics of expertise are also included.

The global pandemic of Coronavirus Disease 2019 (COVID-19) is affecting communities around the world and throughout the United States, with case counts growing daily. Containment and mitigation efforts by federal, state, and local governments have been undertaken to "flatten the curve"—that is, to slow widespread transmission that could overwhelm the nation's health care system. The Families First Coronavirus Response Act (FFCRA, P.L. 116-127 ) was enacted on March 18, 2020. It is the second of three comprehensive laws enacted in March specifically to support the response to the pandemic. The FFCRA, among other things, increases appropriations to the Department of Defense, the Indian Health Service, the Department of Health and Human Services Public Health and Social Services Emergency Fund, and the Veterans Health Administration for testing and ancillary services associated with the SARS-Co V-2 virus, that virus that causes COVID-19 disease. Beginning on the date of enactment through any portion of the COVID-19 public health emergency (declared pursuant to Section 319 of the Public Health Service Act), the FFCRA provides payment for or requires coverage of testing for the COVID-19 virus, and items and services associated with such testing, such as supplies and office visits, without any cost sharing, for individuals who are covered under Medicare, including Medicare Advantage, traditional Medicaid, CHIP, TRICARE, Veterans healthcare, the Federal Employees Health Benefits (FEHB) Program, most types of private health insurance plans, the Indian Health Service, and individuals who are uninsured (as defined under FFCRA). It prohibits private health insurance plans and Medicare Advantage plans from employing utilization management tools, such as prior authorization, for the COVID-19 test, or the visit to furnish it. In addition, FFCRA provides for an increase to all states, the District of Columbia, and territories in the share of Medicaid expenditures financed by the federal government, subject to specific requirements. It provides additional Medicaid funding to territories. FFCRA modifies requirements related to waiving certain Medicare telehealth restrictions during the emergency. Finally, FFCRA waives liability, with a narrow exception, for manufacturers, distributors, or providers of specified respiratory protective devices used for COVID-19 response.

crs_R45791

crs_R45791_0

<1. Introduction> The poverty rate among Americans aged 65 and older has declined by almost 70% in the past five decades. In 2017, 4.7 million people aged 65 and older had income below the federal poverty thresholds. The poverty rate (i.e., the percentage who were in poverty) among the aged fell from 28.5% in 1966 to 9.2% in 2017. Several government programs have contributed to older Americans' increased incomes, including Old Age, Survivor and Disability Insurance (OASDI, commonly known as Social Security) and Supplemental Security Income (SSI). However, certain groups of older Americans, such as widows, divorced women, and never married men and women, are still vulnerable to poverty. Congress may be interested in the effect of existing programs that reduce poverty, as well as potential proposals aimed at improving income among vulnerable groups of older Americans. This report presents the time trends and current status of poverty rates among Americans aged 65 and older, as well as poverty rates among different demographic groups of the aged. This report also summarizes federal programs that may provide income to the aged poor. Over the past several decades, criticisms of the official poverty measure have led to the development of an alternative research measure called the Supplemental Poverty Measure (SPM), which the Census Bureau also computes and releases. This report compares the official aged poverty measure with the SPM and provides statistics measuring the impact of federal cash benefits (mainly Social Security and SSI), taxes, and in-kind benefits (such as housing, energy, and food assistance) on aged poverty. <2. How the Official Poverty Measure Is Computed> Poverty status is determined by comparing a measure of a family's resources against a measure of its needs. Families whose resources are less than a dollar amount representing an austere level of "needs" are considered to be in poverty. However, defining resources and needs is not straightforward. The official poverty measure is based on 48 dollar amounts called poverty thresholds that vary by family size and composition, but not by geographic area. These official thresholds were developed in the 1960s, were based on food consumption in 1955 and food costs in 1961, and are updated annually for inflation. As such, they reflect a level of deprivation based on a restrictive food budget, but are not based on a full measurement of families' and individuals' needs and their associated costs. Family resources are measured in dollars and are based on cash income before taxes. All poverty data presented in this report are estimates based on a survey, and like all survey estimates, they are subject to sampling and nonsampling error. The poverty research community has discussed the official poverty measure's limitations for decades. Its use of pretax income renders it unhelpful in gauging tax credits' effects on the low-income population. It does not consider in-kind (noncash) benefits, such as housing subsidies as income, and as a result cannot (on its own) illustrate such benefits' effects on the poor population. Although the measure of need represented by the thresholds is updated every year for overall inflation, it may not accurately reflect the current costs of basic needs, because prices for goods and services related to basic needs may not rise at the same rate as prices for luxury items. Since the official measure's initial development, new data sources have offered more detail on the goods and services families consume, but developing an approach that defines basic needs and determines available resources for families to spend on those needs has taken decades of research and discussion. The SPM resulted from that research, and is described briefly in the section, " The Supplemental Poverty Measure ." Notwithstanding the official measure's limitations, for more than 50 years, it has provided a consistent measure of poverty in the United States, with few methodological changes over that time, and it is based on empirical measures of need (food budgets and food consumption, albeit in 1961 and 1955, respectively) . For these reasons, trends for the aged population based on the official measure are discussed below. <3. Poverty Status of the Aged> The proportion of Americans aged 65 and older who lived in poverty has declined significantly in the past 50 years. In 1966, 28.5% of Americans aged 65 and older had family incomes below the poverty thresholds. By 2017, the poverty rate among older Americans had dropped to 9.2% (see Figure 1 ). However, whereas the proportion of persons aged 65 and older who live in poverty has fallen over the past five decades, the number of aged poor has increased since the mid-1970s as the total number of elderly people has grown. In 1974, 3.1 million people aged 65 and older had income below the federal poverty thresholds, whereas in 2017, 4.7 million people aged 65 and older had income below the thresholds. The poverty rate for Americans aged 65 and older historically was higher than the rates for adults aged 18 to 64 and children under the age of 18, but today it is the lowest among those three age groups. In 1966, the poverty rate among persons aged 65 and older was 28.5%, compared with 10.5% among adults aged 18 to 64 and 17.6% among children under the age of 18. In 1974, the aged poverty rate fell below the rate among children under the age of 18, and by the early 1990s, the aged poverty rate had fallen below the rate among adults aged 18 to 64. The elderly poverty rate has remained lower than the nonelderly adult poverty rate since that time. The poverty rate among Americans aged 65 and older was 9.2% in 2017, which was lower than the 11.2% poverty rate among adults aged 18 to 64 and the 17.5% poverty rate among children under 18 years old (see Figure 2 ). <4. Poverty Among the Aged by Demographic Characteristics> Poverty status among Americans aged 65 and older generally varies across different demographic groups. This section describes the aged population's poverty status for selected demographic characteristics based on age groups, gender, marital status, and race and Hispanic origin. <4.1. Age> People aged 80 and older have a higher poverty rate than older Americans under the age of 80. Figure 3 displays the percentage of Americans aged 65 and older who were in poverty by age groups from 1975 to 2017. In 1975, the poverty rate among individuals who were in the oldest age group (80 and older) was 21.5%, compared with 16.4% among Americans aged 75-79, 14.4% among those aged 70-74, and 12.5% among those aged 65-69. Poverty rates declined over the past 40 years, and in 2017, approximately 11.6% of people aged 80 and older lived in poverty (a 10 percentage-point reduction from 1975), but the share was still higher than the 9.3% poverty rate among individuals aged 75-79, 8.6% among those aged 70-74, and 7.9% among those aged 65-69. Individuals aged 80 and older might be more vulnerable to income risks because they are more likely to have lower or no earnings (as they phase out of the labor force), exhaust existing retirement resources, have reduced purchasing power in certain defined benefit pensions, and incur higher medical expenses. Women aged 80 and older had the highest poverty rate among elderly women and men in all age groups (see Figure 4 ). In 1975, the poverty rate among women aged 80 and older was 25.1%, compared with 15.2% among men in the same age group and 14.9% among women aged 65-69. In 2017, the poverty rate of women aged 80 and older declined to 13.5%, compared with 8.7% among men in the same age group and 8.6% among women aged 65-69. Poverty status among individuals aged 80 and older varies depending on whether the person is living with other family members. Poverty rates for those living with other family members in 2017 were less than half the rates for those living alone. In 2017, the poverty rate for men aged 80 and older was 6.3% if they lived with other family members, and 15.5% if they lived alone (see Figure 5 ). In the same year, the poverty rate for women aged 80 and older was about 8.2% if they lived with other family members and 18.6% if they lived alone. <4.2. Marital Status> Americans aged 65 and older who were married and living together at the time of the survey generally had a lower poverty rate than those who were not married (see Figure 6 ). In 1975, about 53.0% of individuals aged 65 and older were married and living together, and this percentage was slightly higher at 56.8% in 2017. Approximately 8.2% of married Americans aged 65 and older and living together had family incomes below the federal poverty threshold in 1975, and this rate declined to 4.4% in 2017. During the same period, the poverty rate among aged nonmarried Americans decreased from 23.4% to 15.5%. Figure 7 shows the poverty rate in 2017 by gender and marital status at the survey time. Married couples generally have significantly lower poverty rates than nonmarried individuals, and widowed and divorced women aged 65 or older are more likely to be in poverty than their male counterparts. Among women aged 65 and older, about 4.3% of married women had total incomes below the official poverty threshold in 2017, compared with 13.9% of widows, 15.8% of divorced women, and 21.5% of never-married women. In contrast with the widowed and divorced men in this age group, who are less likely to be poor than widowed and divorced women, poverty rates are also high among never-married men, at a rate of 22.5% in 2017. In 2017, roughly 10% of individuals aged 65 and older lived in families with children under 18 years old. Poverty rates among aged men and women varied by the presence of children in the family (see Figure 8 ), although not always in the same direction. Among married men and women, a relatively higher share of those with children lived in poverty (8.0% for men and 7.5% for women) than those without any child (4.2% for men and 4.1% for women). Similarly, among never-married individuals, those with children also had higher poverty rates (25.4% for men and 22.7% for women) than those without children (22.4% for men and 21.4% for women). However, while widows and divorced women with children had higher poverty rates (14.8% and 17.9%, respectively) than those without children (13.8% and 15.6%, respectively), among men the pattern was reversed: 8.1% of widowers with children and 7.9% of divorced men with children were in poverty, lower than their childless counterparts (10.1% and 13.2%, respectively). <4.3. Race and Hispanic Origin18> Poverty rates vary by race and Hispanic origin, as shown in Figure 9 . In surveys, Hispanic origin is asked separately from race; accordingly, persons identifying as Hispanic may be of any race. The poverty rate for Americans aged 65 and older has decreased among persons identifying as black or African American alone, non-Hispanic white alone, and Hispanic from 1975 to 2017. Among aged African Americans, the poverty rate decreased from 36.3% in 1975 to 19.3% in 2017; among the aged non-Hispanic white population, from 13.0% to 7.0%; and among the aged Hispanic population, from 27.7% to 17.0%. During the period for which data are available, the poverty rate for the aged Asian population ranged between 10.0% and 16.0% with no consistent directional trend. As shown in Figure 10 , among the racial and Hispanic origin groups, in 2017, the poverty rate was lowest among the aged non-Hispanic white population (5.8% for men and 8.0% for women) and highest among the aged black population (16.1% for men and 21.5% for women). <5. Federal Programs for the Aged Poor> Social Security and Supplemental Security Income (SSI) are the two main federal programs that provide cash benefits to the aged poor. In 2017, Social Security accounted for 78.3% of total money income among aged individuals whose family incomes were below 100% of the poverty threshold and 81.3% among those with family incomes below 125% of the poverty threshold (see Table 1 ). In the same year, SSI and other cash public assistance accounted for 11.0% of the total money income for aged individuals whose family incomes were below 100% of the poverty threshold and 7.6% for those with family incomes below 125% of the poverty threshold. Social Security is a federal social insurance program that provides benefits to insured workers and their eligible family members, provided the workers worked in jobs covered by Social Security for a sufficient number of years and meet certain other criteria. Social Security is not designed solely for the poor, but benefits are weighted to replace a greater share of career-average earnings for low-paid workers than for high-paid workers. One study suggests that increased Social Security benefits explained most of the decline in poverty among the aged that occurred during 1967 to 2000 (see Figure 1 ). Social Security benefits alone, however, would not be sufficient to eliminate poverty for a large number of older Americans. The poverty rate among Social Security beneficiaries aged 65 and older was 6.5% in 2017. Although the Social Security program contains a special minimum benefit provision that increases benefits to workers who have many years of low earnings and meet certain other criteria, this provision has virtually no effect on the benefits paid to today's new retirees. According to the Census Bureau's analysis, 30.0% of Americans aged 65 and older would live in poverty without Social Security benefits, holding other resources and expenses constant. SSI is a federal assistance program that provides monthly cash benefits to aged, blind, and disabled individuals who have limited income and assets. The program is intended to provide a minimum level of income to adults who have difficulty meeting their basic living expenses due to age or disability and who have little or no Social Security or other income. Some studies show that the SSI program does not provide effective income protection for the oldest Americans. For example, the maximum SSI benefit in 2017 was 75% of the poverty threshold for an elderly single person and 89% of the poverty threshold for an elderly married couple. Thus, aged SSI recipients may still be impoverished. Furthermore, the maximum SSI benefit is more generous for married couples, who are less likely to need assistance than elderly single individuals. Some researchers also suggest that restructuring the Social Security special minimum benefit provision could be more effective in alleviating poverty than making certain reforms to the SSI program, although a combination of reforms to both programs could be useful if regular Social Security benefits are greatly reduced in the future. The federal government also provides certain noncash benefits to help the elderly poor, such as housing subsidies and Supplemental Nutrition Assistance Program (SNAP) benefits. Congress funds housing subsidy programs, ranging from public housing to government subsidies to renters, to help poor and vulnerable populations meet their housing needs. SNAP is designed primarily to increase the food purchasing power of eligible low-income households to help them buy a nutritionally adequate low-cost diet. Individuals aged 65 and older may also receive a small portion of income from some other federal programs, including refundable tax credits, school meals, Temporary Assistance for Needy Families (TANF), the Low Income Home Energy Assistance Program (LIHEAP), unemployment insurance, workers' compensation, and the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). The official poverty measure is of limited value for analyzing various federal programs' effects on poverty status among the aged population, but the Supplemental Poverty Measure (SPM), discussed in the following section, addresses some of those impacts. <6. The Supplemental Poverty Measure> The official poverty measure was developed in the 1960s and was established by the Bureau of the Budget (later the Office of Management and Budget, OMB) for measuring the official poverty rate in the United States. Under the official poverty measure, an individual is counted as poor if his or her family's pretax money income falls below the poverty threshold. One of the main criticisms of the official poverty measure is that pretax money income excludes the value of government noncash benefits (such as health insurance, SNAP, or housing assistance) provided either privately or publicly. It also does not consider taxes paid to federal, state, or local governments, or tax benefits (such as the Earned Income Tax Credit) that families might receive. The Census Bureau's SPM was designed to address the official poverty measure's limitations and has been published since 2011. The SPM poverty thresholds measure a standard of living based on expenditures for food, clothing, shelter, and utilities (FCSU) and "a little more" for other expenses. Its thresholds dollar amounts related to the level of need for a family vary by whether the family rents, owns a home with a mortgage, or owns a home without a mortgage (the latter of which is more common among the aged population than it is among younger populations). It computes the amount of resources available after taxes, includes the values of noncash benefits, and subtracts some expenses (such as work-related expenses and medical out-of-pocket expenses, the latter of which tend to be higher among the aged than among younger populations). In 2017, the most recent data available, the SPM poverty rate for persons aged 65 and older was 14.1% in 2017, compared with 9.2% using the official poverty measure. This higher poverty rate results largely from higher medical out-of-pocket costs among the aged, in spite of lower housing expenses among the aged, who are more likely to have paid off their mortgages. <6.1. Income Sources' Impact on Poverty of the Aged Per the SPM> The data presented in Figure 11 illustrate how changing the definition of the SPM to exclude a particular resource or expenditure can affect the SPM poverty rate among Americans aged 65 and older. The data do not consider the behavioral effects that may occur if the resource or cost were to be eliminated in reality. Social Security has the greatest effect, by far, on the poverty status of the aged population. Removing Social Security as a resource while holding the other resources and expenditures constant would increase the SPM aged poverty rate by more than 34.6%. Among the other resources, SSI, housing subsidies, and SNAP had the next-largest impacts on the SPM poverty rate, but were a full order of magnitude smaller (around a single percentage point instead of tens of percentage points). The remaining resources affected the SPM poverty rate by much less than one percentage point. Three of the resources shown are related to child rearing (child support, school lunch, and WIC), and tax credits are often targeted to families with children. Households headed by people aged 65 and older are less likely than nonelderly households to have children present in the family. Among the expenses considered in the SPM but not considered in the official measure, medical out-of-pocket costs had the largest effect: deducting those costs from family income raised the SPM poverty rate by 5.4%. Given that the aged population tends to have greater medical need and higher out-of-pocket health care costs than younger populations, it is perhaps not surprising that medical costs had a larger effect than the other costs shown in the figure. The remaining costs were largely related to work, and, congruent with the aged population's lower likelihood to be working compared with younger populations, these costs affected the aged population's SPM poverty rate by less than one percentage point. <7. Additional Considerations> <7.1. Poverty Not Measured for Certain Populations> Approximately 1.2 million persons in nursing homes are aged 65 or older. Poverty status is not measured for the institutionalized population, which includes persons in nursing homes, prisons, or military personnel living on base. This exclusion is not trivial considering that the population in nursing homes is about one-fourth as large as the 4.7 million persons aged 65 or older who were in poverty in 2017. <7.2. Health Status Not Directly Included in Poverty Measures> Poverty is used as a measure of well-being, but it measures only economic well-being and does not directly include a person's health status. Health status may influence the amount and types of income a person receives (by affecting, for example, ability to work or receive disability benefits) and is thus considered indirectly. However, the noneconomic aspect of well-being that comes from good health is not considered in the poverty measures discussed in this report. Furthermore, in the SPM, medical out-of-pocket expenses are considered, but the overall value of health insurance programs to the individual, which may well exceed out-of-pocket costs for medical care or insurance premiums, is not. Considering that Medicaid is an important vehicle for long-term care, the benefits Medicaid provides to the aged population could be characterized as fulfilling needs that are not solely medical in nature, but have economic value as well.

The poverty rate among Americans aged 65 and older has declined by almost 70% in the past five decades. In 2017, approximately 9.2% of Americans aged 65 and older had income below the poverty thresholds. However, the number of aged poor has increased since the mid-1970s as the total number of elderly has grown. In 2017, 4.7 million people aged 65 and older lived in poverty. The poverty rate for Americans aged 65 and older historically was higher than the rates for younger groups, but the aged have experienced lower poverty rates than children under age 18 since 1974 and lower rates than adults aged 18 to 64 since the early 1990s. In 2017, the 9.2% poverty rate among Americans aged 65 and older was lower than the 11.2% poverty rate among adults aged 18 to 64 and the 17.5% poverty rate among children under 18 years old. Although the poverty rate has generally declined for older Americans in most demographic groups, certain aged people still live in poverty. For example, People aged 80 and older have a higher poverty rate than other elderly Americans. In 2017, approximately 11.6% of people aged 80 and older lived in poverty, compared with poverty rates of 9.3% among individuals aged 75-79, 8.6% among those aged 70-74, and 7.9% among those aged 65-69. Women aged 80 and older had the highest poverty rate among elderly women and men in all age groups, at 13.5% in 2017 for women aged 80 and older, and 18.6% for those living alone. Americans aged 65 and older who were married and living together with spouses at the time of the survey generally had a lower poverty rate than those who were not married. Among women aged 65 and older, about 4.3% of married women had total incomes below the official poverty threshold in 2017, compared with 13.9% of widows, 15.8% of divorced women, and 21.5% of never-married women. Among individuals aged 65 and older, poverty rates were also high among never-married men, at 22.5% in 2017. Poverty rates vary by race and Hispanic origin. Hispanic origin is distinct from race, and people may identify with one or more races. From 1975 to 2017, the poverty rate for Americans aged 65 and older has decreased for those identifying as non-Hispanic white alone, black alone, and Hispanic. In 2017, the poverty rate was lowest among the non-Hispanic white population (5.8% for men and 8.0% for women) and highest among those identifying as black or African American (16.1% for men and 21.5% for women). The official poverty measure is defined using cash income only, before taxes, and was computed based on food consumption in 1955 and food costs in 1961, indexed to inflation. That definition prevents the official measure from gauging the effects of noncash benefits, taxes, or tax credits on the low-income population, and it does not consider how certain other costs, such as housing or medical expenses, might affect them as well. After decades of research, the Supplemental Poverty Measure (SPM) was developed to address some of the official poverty measure's limitations. The SPM poverty rate for the aged population is higher than the official poverty rate (14.1% compared with 9.2% in 2017). This higher poverty rate results largely from higher medical out-of-pocket costs among the aged. Social Security and Supplemental Security Income (SSI) are the main federally funded programs that provide cash benefits to the aged poor; they accounted for almost 90% of total money income received by Americans aged 65 and older whose incomes were below the poverty thresholds in 2017. The federal government also provides certain noncash benefits to help the elderly poor, such as housing subsidies and Supplemental Nutrition Assistance Program (SNAP). The SPM poverty rate among individuals aged 65 and older would increase by more than 34 percentage points if Social Security benefits were excluded from their income resources, holding other economic behaviors constant. Among the other resources, eliminating SSI, housing subsidies, or SNAP from income would each increase the SPM poverty rate by about one percentage point.

crs_R40957

crs_R40957_0

<1. An Overview of UMRA, Its Origins, and Provisions> <1.1. Overview> The Unfunded Mandates Reform Act of 1995 (UMRA) established requirements for enacting certain legislation and issuing certain regulations that would impose enforceable duties on state, local, or tribal governments or on the private sector. UMRA refers to obligations imposed by such legislation and regulations as "mandates" (either "intergovernmental" or "private sector," depending on the entities affected). The direct cost to affected entities of meeting these obligations are referred to as "mandate costs," and when the federal government does not provide funding to cover these costs, the mandate is termed "unfunded." UMRA incorporates numerous definitions, exclusions, and exceptions that specify what forms and types of mandates are subject to its requirements, termed "covered mandates." Covered mandates do not include many federal actions with potentially significant financial impacts on nonfederal entities. This report's primary purpose is to describe the kinds of legislative and regulatory provisions that are subject to UMRA's requirements, and, on this basis, to assess UMRA's impact on federal mandates. The report also examines debates that occurred, both before and since UMRA's enactment, concerning what kinds of provisions UMRA ought to cover, and considers the implications of experience under UMRA for possible future revisions of its scope of coverage. This report also describes the requirements UMRA imposes on congressional and agency actions to establish covered mandates. For most legislation and regulations covered by UMRA, these requirements are only informational. For reported legislation that would impose covered mandates on the intergovernmental or private sectors, UMRA requires the Congressional Budget Office (CBO) to provide an estimate of mandate costs. Similarly, for regulations that would impose covered mandates on the intergovernmental or private sectors, UMRA requires that the issuing agency provide an estimate of mandate costs (although the specifics of the estimates required for legislation and for regulations differ somewhat). Also, solely for legislation that would impose covered intergovernmental mandates, UMRA establishes a point of order in each house of Congress through which the chamber can decline to consider the legislation. This report examines UMRA's implementation, focusing on the respective requirements for mandate cost estimates on legislation and regulations, and on the point of order procedure for legislation proposing unfunded intergovernmental mandates. <1.2. Origin> The concept of unfunded mandates rose to national prominence during the 1970s and 1980s primarily through the response of state and local government officials to changes in the nature of federal intergovernmental grant-in-aid programs and to regulations affecting state and local governments. Before then, the federal government had traditionally relied on the provision of voluntary grant-in-aid funding to encourage state and local governments to perform particular activities or provide particular services that were deemed to be in the national interest. These arrangements were viewed as reflecting, at least in part, the constitutional protections afforded state and local governments as separate, sovereign entities. During the 1970s and 1980s, however, state and local government advocates argued that a "dramatic shift" occurred in the way the federal government dealt with states and localities. Instead of relying on the technique of subsidization to achieve its goals, the federal government was increasingly relying on "new, more intrusive, and more compulsory" programs and regulations that required compliance under the threat of civil or criminal penalties, imposed federal fiscal sanctions for failure to comply with the programs' requirements, or preempted state and local government authority to act in the area. These new, more intrusive and compulsory programs and regulations came to be referred to as "unfunded mandates" on states and localities. State and local government advocates viewed these unfunded federal intergovernmental mandates as inconsistent with the traditional view of American federalism, which was based on cooperation, not compulsion. They argued that a federal statute was needed to forestall federal legislation and regulations that imposed obligations on state and local governments that resulted in higher costs and inefficiencies. UMRA's enactment in 1995 culminated years of effort by state and local government officials to control, if not eliminate, the imposition of unfunded federal mandates. Advocates of regulatory reform adapted the concept of unfunded mandates to their view that federal regulations often impose financial burdens on private enterprise. Critics of government regulation of business argued that these regulations impose unfunded mandates on the private sector, just as federal programs and regulations impose fiscal obligations on state and local governments. As a result, various business organizations subject to increased federal regulation came to support state and local government efforts to enact federal legislation to control unfunded federal intergovernmental mandates. Private-sector advocates argued that they, too, should be provided relief from what they viewed as burdensome federal regulations that hinder economic growth. Subsequently, proposals to control unfunded mandates that were developed in the early 1990s contained provisions addressing not only federal intergovernmental mandates, but federal private-sector mandates as well. During floor debate on legislation that became UMRA, sponsors of the measure emphasized its role in bringing "our system of federalism back into balance, by serving as a check against the easy imposition of unfunded mandates." Opponents argued that federal mandates may be necessary to achieve national objectives in areas where voluntary action by state and local governments or business failed to achieve desired results. See Appendix A for a more detailed examination of the rise of unfunded federal mandates as a national issue and of UMRA's legislative history. <1.3. Summary of UMRA's Provisions> The congressional commitment to reshaping intergovernmental relations through UMRA is reflected in its eight statutory purposes: (1) to strengthen the partnership between the Federal Government and State, local, and tribal governments; (2) to end the imposition, in the absence of full consideration by Congress, of Federal mandates on State, local, and tribal governments without adequate Federal funding, in a manner that may displace other essential State, local, and tribal governmental priorities; (3) to assist Congress in its consideration of proposed legislation establishing or revising Federal programs containing Federal mandates affecting State, local, and tribal governments, and the private sector by (A) providing for the development of information about the nature and size of mandates in proposed legislation; and (B) establishing a mechanism to bring such information to the attention of the Senate and the House of Representatives before the Senate and the House of Representatives vote on proposed legislation; (4) to promote informed and deliberate decisions by Congress on the appropriateness of Federal mandates in any particular instance; (5) to require that Congress consider whether to provide funding to assist State, local, and tribal governments in complying with Federal mandates, to require analyses of the impact of private sector mandates, and through the dissemination of that information provide informed and deliberate decisions by Congress and Federal agencies and retain competitive balance between the public and private sectors; (6) to establish a point-of-order vote on the consideration in the Senate and House of Representatives of legislation containing significant Federal intergovernmental mandates without providing adequate funding to comply with such mandates; (7) to assist Federal agencies in their consideration of proposed regulations affecting State, local, and tribal governments, by (A) requiring that Federal agencies develop a process to enable the elected and other officials of State, local, and tribal governments to provide input when Federal agencies are developing regulations; and (B) requiring that Federal agencies prepare and consider estimates of the budgetary impact of regulations containing Federal mandates upon State, local, and tribal governments and the private sector before adopting such regulations, and ensuring that small governments are given special consideration in that process; and (8) to begin consideration of the effect of previously imposed Federal mandates, including the impact on State, local, and tribal governments of Federal court interpretations of Federal statutes and regulations that impose Federal intergovernmental mandates. To achieve its purposes, UMRA's Title I established a procedural framework to shape congressional deliberations concerning covered unfunded intergovernmental and private-sector mandates. This framework requires CBO to estimate the direct mandate costs of intergovernmental mandates exceeding $50 million and of private-sector mandates exceeding $100 million (in any fiscal year) proposed in any measure reported from committee. It also establishes a point of order against consideration of legislation that contained intergovernmental mandates with mandate costs estimated to exceed the threshold amount. In addition, Title II requires federal administrative agencies, unless otherwise prohibited by law, to assess the effects on state and local governments and the private sector of proposed and final federal rules and to prepare a written statement of estimated costs and benefits for any mandate requiring an expenditure exceeding $100 million in any given year. All threshold amounts under these provisions are adjusted annually for inflation. In 2019, the threshold amounts are $82 million for intergovernmental mandates and $164 million for private sector mandates. In general, the requirements of Titles I and II apply to any provision in legislation, statute, or regulation that would impose an enforceable duty upon state and local governments or the private sector. However, UMRA does not apply to duties stemming from participation in voluntary federal programs, rules issued by independent regulatory agencies, or rules issued without a general notice of proposed rulemaking. Exceptions also exist for rules and legislative provisions that cover individual constitutional rights, discrimination, emergency assistance, grant accounting and auditing procedures, national security, treaty obligations, and certain elements of Social Security legislation. In most instances, UMRA also does not apply to conditions of federal assistance. UMRA's Title III also called for a review of federal intergovernmental mandates to be completed by the now-defunct U.S. Advisory Commission on Intergovernmental Relations (ACIR) within 18 months of enactment. ACIR completed a preliminary report on federal intergovernmental mandates in January 1996, but the final report was not released. Finally, UMRA's Title IV authorizes judicial review of federal agency compliance with Title II provisions. <2. What Is an Unfunded Federal Mandate?> One of the first issues Congress faced when considering unfunded federal mandate legislation was how to define the concept. For example, during a November 3, 1993, congressional hearing on unfunded mandate legislation, Senator Judd Gregg argued, Any bill reported out this committee [Governmental Affairs] should precisely define what constitutes an unfunded federal mandate.... An appropriate definition is crucial because it will drive almost everything else that occurs. Without a precise definition, endless litigation would likely ensue over what is and what is not an unfunded federal mandate. A true solution to the problem cannot allow it to become more cost-effective to pay the bills than to seek payment. Furthermore, the definition cannot be too restrictive. It would solve nothing to cut off one particular type of unfunded mandate, only to prompt Congressional use of another to accelerate. The difficulty Congress faced in defining the concept was that there were strong disagreements, among academics, practitioners, and elected officials, over how to define it. These disagreements appear motivated by concerns about which classes of costs incurred by state and local governments (or the private sector) should be identified and controlled for in the legislative or regulatory process. They have typically been conducted, however, as disputes about which classes of such costs are properly considered as obligatory requirements on the affected entities. The resulting focus on whether or not particular kinds of costs are "mandatory" has tended to obscure consideration of the core policy question concerning what kinds of costs should be subjected to informational requirements or procedural restrictions such as those that UMRA establishes. <2.1. Competing Definitions> In 1979, one set of federalism scholars defined unfunded federal intergovernmental mandates broadly as including "any responsibility, action, procedure, or anything else that is imposed by constitutional, administrative, executive, or judicial action as a direct order or that is required as a condition of aid." In 1984, ACIR offered a rationale for defining unfunded federal intergovernmental mandates which excluded conditions of aid. ACIR argued that defining unfunded federal intergovernmental mandates was difficult because federal grant-in-aid programs typically include both incentives and mandates backed by sanctions or penalties: Few federal programs affecting state and local governments are pure types.... Every grant-in-aid program, including General Revenue Sharing, the least restrictive form of aid, comes with federal "strings" attached. Here, as in other areas, there is no such thing as a free lunch.... In the intergovernmental sphere, then, [mandates] and subsidy are less like different parts of a dichotomy than opposing ends of a continuum. At one extreme is the general support grant with just a few associated conditions or rules; at the other is the costly, but wholly unfunded, national "mandate." In between are many programs combining subsidy and [mandate] approaches, in varying degrees and in various ways. ACIR argued that because federal grant-in-aid programs typically combine subsidy and mandate approaches, grant-in-aid programs should be classified according to their degree of compulsion. It argued that conditions of grant aid should not be classified as a mandate because "one of the most important features of the grant-in-aid is that its acceptance is still viewed legally as entirely voluntary" and "although it is difficult for many jurisdictions to forego substantial financial benefits, this option remains real." ACIR also argued that most grant conditions affect only the administration of those activities funded by the program, and "grants-in-aid generally provide significant benefits to the recipient jurisdiction." ACIR argued that federal grant-in-aid programs that "cannot be side-stepped, without incurring some federal sanction, by the simple expedient of refusing to participate in a single federal assistance program" should be considered mandates. ACIR provided four examples of federal activities that, in the absence of sufficient compensatory funding, could be an unfunded intergovernmental mandate: (1) direct legal orders that must be complied with under the threat of civil or criminal penalties; (2) crosscutting or generally applicable requirements imposed on grants across the board to further national social and economic policies; (3) programs that impose federal fiscal sanctions in one program area or activity to influence state and local government policy in another area; and (4) federal preemption of state and local government law. In 1994, several organizations representing state and local governments issued a set of unfunded mandate principles which defined unfunded federal intergovernmental mandates as any federal requirement that compels state or local activities resulting in additional state or local expenditures; any federal requirement that imposes additional conditions or increases the level of state and local expenditures needed to maintain eligibility for existing federal grants; any reduction in the rate of federal matching for existing grants; and any federal requirement that reduces the productivity of existing state or local taxes and fees and/or that increases the cost of raising state and local revenue (including the costs of borrowing). Also in 1994, ACIR introduced the term "federally induced costs" to replace what it described as "the pejorative and definitional baggage associated with the term 'mandates.'" ACIR identified the following types of federal activities that expose states and localities to additional costs: statutory direct orders; total and partial statutory preemptions; grant-in-aid conditions on spending and administration, including matching requirements; federal income tax provisions; federal court decisions; and administrative rules issued by federal agencies, including regulatory delays and nonenforcement. ACIR defended its inclusion of grant-in-aid conditions in its list of "federally induced costs," which it had excluded from its definition of federal mandates a decade earlier, by asserting that although the option of refusing to accept federal grants "seemed plausible when federal aid constituted a small and highly compartmentalized part of state and local revenues, it overlooks current realities. Many grant conditions have become far more integral to state and local activities and far less subject to voluntary forbearance than originally suggested by the contractual model." On April 28, 1994, John Kincaid, ACIR's executive director, testified at a congressional hearing that legislation concerning unfunded mandates "should recognize that unfunded Federal mandates include, in reality, a range of Federally-induced costs for which reimbursements may be legitimate considerations." State and local government officials generally advocated the inclusion of ACIR's "federally induced costs" in legislation placing conditions on the imposition of unfunded intergovernmental mandates. However, organizations representing various environmental and social groups, such as the Committee on the Appointment of People With Disabilities, the Natural Resources Defense Council, the American Federation of State, County, and Municipal Employees, and the Service Employees International Union, argued that ACIR's definition was too broad. These groups testified at various congressional hearings that some federal mandates, particularly those involving the environment and constitutional rights, should be retained, even if they were unfunded. <2.1.1. Statutory Direct Orders> With respect to definitions, there was, and continues to be, a general consensus among federalism scholars, state and local government officials, and other organizations that federal policies which impose unavoidable costs on state and local governments or business are, in the absence of sufficient compensatory funding, unfunded federal mandates. Because statutory direct orders, such as the Equal Employment Opportunity Act of 1972, which bars employment discrimination on the basis of race, color, religion, sex, and national origin, are compulsory, they are considered federal mandates. In the absence of sufficient compensatory funding, they are unfunded federal mandates. However, there was, and continues to be, a general consensus that some statutory direct orders, particularly those involving the guarantee of constitutional rights, should be exempt from legislation placing conditions on the imposition of unfunded federal mandates. For example, on April 28, 1994, then-Governor (and later Senator) Benjamin Nelson, testifying on behalf of the National Governors Association at a congressional hearing on unfunded mandate legislation, argued, At the outset, Mr. Chairman, I want to make it absolutely crystal clear that the Governors' position opposing unfunded environmental mandates must not be interpreted as an effort to discontinue environmental legislation and regulations or oppose any individual's civil or constitutional rights. The Governors consider the protection of public health and State natural resources as among the most important responsibilities of our office. We all take an oath of office to protect the health and safety of our citizens. In addition, we have worked with Congress over the years to enact strong Federal environmental laws. <2.1.2. Total and Partial Statutory Preemptions> Total and partial preemptions of state and local spending and regulatory authority by the federal government are compulsory, but there was, and continues to be, disagreement concerning whether they should be considered federal mandates, or whether they should be included in legislation designed to provide relief from unfunded federal mandates. Total preemptions in the intergovernmental arena prevent state and local government officials from implementing their own programs in a policy area. For example, states have been "stripped of their powers to engage in economic regulation of airlines, bus, and trucking companies, to establish a compulsory retirement age for their employees other than specified state policymakers and judges, or to regulate bankruptcies with the exception of the establishment of a homestead exemption." Partial preemption typically is a joint enterprise, "whereby the federal government exerts its constitutional authority to preempt a field and establish minimum national standards, but allows regulatory administration to be delegated to the states if they adopt standards at least as strict as the federal rules." Legally, the state decision to administer a partial preemption program is voluntary. States that do not have a program in a particular area or do not wish to assume the costs of administration and enforcement can opt out and allow the federal government to enforce the standards. Nonetheless, the federal standards apply. Total and partial statutory preemptions are distinct from unfunded federal intergovernmental mandates because they do not necessarily impose costs or require state and local governments to take action. Nonetheless, some federalism scholars and state and local government officials have argued that total and partial statutory preemptions should be included in legislation placing conditions on the imposition of unfunded federal mandates because they can have similar adverse effects on state and local government flexibilities and, in some instances, resources. A leading federalism scholar identified 557 federal preemption statutes as of 2005. Others argue that total and partial preemptions are distinct from unfunded federal mandates and, therefore, should not be included in legislation placing conditions on the imposition of unfunded federal mandates. In addition, some business organizations oppose including preemptions in any law or definition involving unfunded federal mandates because federal preemptions can result in the standardization of regulation across state and local jurisdictions, an outcome favored by some business interests, particularly those with interstate and global operations. <2.1.3. Grant-in-Aid Conditions> Conditions of grants-in-aid are generally not considered unfunded mandates because the costs they impose on state and local governments can be avoided by refusing the grant. However, federalism scholars and state and local government officials have argued that, in the absence of sufficient compensatory funding, grant conditions should be considered unfunded federal intergovernmental mandates, even though the grants themselves are voluntary. In their view, federal "grants often require major commitments of state resources, changes in state laws, and even constitutional provisions to conform to a host of federal policy and administrative requirements" and that some grant programs, such as Medicaid, are "too large for state and local governments to voluntarily turn down, or when new and onerous conditions are added some time after state and local governments have become dependent on the program." For example, on April 28, 1994, Patrick Sweeney, a Democratic Member of Ohio's state House of Representatives testifying on behalf of the National Conference of State Legislatures (NCSL), asserted at a congressional hearing on unfunded mandate legislation that A great majority of the current problem can be attributed to Federal entitlements that are defined but then not adequately funded, and the proliferation of a mandatory requirement for what previously were voluntary programs. Programs like Medicaid are voluntary in theory only. A State cannot unilaterally opt out of Medicaid at any time it wishes, once it is in the program, without having to obtain a Federal waiver or face certain lawsuits. <2.1.4. Federal Tax Provisions> Federalism scholars and state and local government officials argue that federal tax policies that preempt state and local authority to tax specific activities or entities are unfunded mandates, and should be covered under legislation placing restrictions on unfunded mandates, because the fiscal impact of preempting state or local government revenue sources cannot be avoided and "can be every bit as costly" as mandates ordering state or local government action. For example, P.L. 105-277 , the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (Title XI, Internet Tax Freedom Act) created a three-year moratorium preventing state and local governments from taxing internet access, or imposing multiple or discriminatory taxes on electronic commerce. A grandfather clause allowed states that had already imposed and collected a tax on internet access before October 1, 1998, to continue implementing those taxes. The moratorium on internet access taxation was extended eight times and made permanent by P.L. 114-125 , the Trade Facilitation and Trade Enforcement Act of 2015. The grandfather clause was temporarily extended through June 30, 2020. The NCSL has cited research suggesting that states could receive an additional $6.5 billion annually in state sales tax revenue if the moratorium was lifted. In addition, because most state and local income taxes have been designed purposively to conform to federal tax law, changes in federal tax policy can impact state and local government finances. For example, federal tax cuts adopted in 2001 and 2003 affecting depreciation, dividends, and estate taxes "forced states to acquiesce and accept their consequences or decouple from the federal tax base." Yet, federal tax changes are generally considered not to be unfunded mandates because states and localities can avoid their costs by decoupling their income tax from the federal income tax. Nevertheless, because federal tax changes can affect state and local government tax bases, most state and local government officials advocate their inclusion in federal legislation placing conditions on the imposition of unfunded federal mandates. <2.1.5. Federal Court Decisions; Administrative Rules Issued by Federal Agencies; and Regulatory Delays and Nonenforcement> Federalism scholars, state and local government officials, and other organizations argue that, in the absence of sufficient compensatory funding, court decisions and regulatory actions taken by federal agencies, including regulatory delays and nonenforcement, are unfunded mandates and should be included in legislation placing conditions on the imposition of unfunded mandates because these actions can impose costs on state and local governments that cannot be avoided. UMRA's provisions concerning administrative rules are discussed in greater detail later in this report (see the section on " UMRA and Federal Rulemaking (Title II) "). <2.2. UMRA's Definition of an Unfunded Federal Mandate> After taking various definitions into consideration, Congress defined federal mandates in UMRA more narrowly than state and local government officials had hoped. Federal intergovernmental mandates were defined as any provision in legislation, statute, or regulation that "would impose an enforceable duty upon State, local, or tribal governments" or "reduce or eliminate the amount" of federal funding authorized to cover the costs of an existing mandate. Provisions in legislation, statute, or regulation that "would increase the stringency of conditions of assistance" or "would place caps upon, or otherwise decrease" federal funding for existing intergovernmental grants with annual entitlement authority of $500 million or more could also be considered a federal intergovernmental mandate, but only if the state, local, or tribal government "lack authority under that program to amend their financial or programmatic responsibilities to continue providing required services that are affected by the legislation, statute, or regulation." Private-sector mandates were defined as "any provision in legislation, statute, or regulation that would impose an enforceable duty upon the private sector" or "reduce or eliminate the amount" of federal funding authorized "for the purposes of ensuring compliance with such duty." Key words in both definitions are "enforceable duty." Because statutory direct orders, total and partial preemptions, federal tax policies that preempt specific state and local tax policies, and administrative rules issued by federal agencies cannot be avoided, they are enforceable duties and are covered under UMRA. In contrast, because federal grants are voluntary, grant conditions are not considered enforceable duties and, therefore, are not covered under UMRA. Federal tax policies that impose costs on state and local governments that can be avoided by decoupling the state or local government's affected income tax provision from the federal income tax code are not enforceable duties, and, therefore, also are not covered under UMRA. UMRA considers a mandate unfunded unless the legislation authorizing the mandate fully meets its estimated direct costs by either (1) providing new budget authority (direct spending authority or entitlement authority) or (2) authorizing appropriations. If appropriations are authorized, the mandate is still considered unfunded unless the legislation ensures that in any fiscal year, either (1) the actual costs of the mandate are estimated not to exceed the appropriations actually provided; (2) the terms of the mandate will be revised so that it can be carried out with the funds appropriated; (3) the mandate will be abolished; or (4) Congress will enact new legislation to continue the mandate as an unfunded mandate. This mechanism for reviewing and revising mandates on the basis of their actual costs, which was introduced into UMRA in the "Byrd look-back amendment" (as described in Appendix A ), applies only to intergovernmental mandates enacted in legislation as funded through appropriations. <2.2.1. Exemptions and Exclusions> UMRA generally excluded preexisting federal mandates from its provisions, but, as mentioned previously, it did include any provision in legislation, statute, or regulation that "would increase the stringency of conditions of assistance" or "would place caps upon, or otherwise decrease" federal funding for existing intergovernmental grants with annual entitlement authority of $500 million or more. However, this provision applies "only if the state or locality lacks authority to amend its financial or programmatic responsibilities to continue providing the required services." On June 28, 2012, the Supreme Court ruled in National Federation of Independent Business (NFIB) v. Sebelius that the withdrawal of all Medicaid funds from the states for failure to comply with Medicaid's expansion under health care reform ( P.L. 111-148 ; the Patient Protection and Affordable Care Act) violated the Tenth Amendment. Prior to that ruling, CBO determined that large intergovernmental entitlement grant programs, such as Medicaid and Temporary Assistance to Needy Families, "allow states significant flexibility to alter their programs and accommodate new requirements," and, as a result, it determined that UMRA provisions generally did not apply to these programs. Subsequent to the Supreme Court's ruling, CBO has indicated that UMRA's provisions may apply to changes in "the stringency of conditions" or reductions in funding for "certain large mandatory programs if the affected governments lack the flexibility to alter the programs." Otherwise, UMRA's Title I does not apply to conditions of federal assistance; duties stemming from participation in voluntary federal programs; and legislative provisions that cover individual constitutional rights, discrimination, emergency assistance, grant accounting and auditing procedures, national security, treaty obligations, and certain parts of Social Security relating to the old-age, survivors, and disability insurance program under title II of the Social Security Act. UMRA did not indicate that these exempted provisions and rules were not federal mandates. Instead, it established that their costs would not be subject to its provisions requiring written cost estimate statements, or to its provisions permitting a point of order to be raised against the consideration of reported legislation in which they appear. The Senate Committee on Governmental Affairs report accompanying S. 1 , The Unfunded Mandates Reform Act of 1995, provided its reasoning for adopting the exempted provisions and rules: A number of these exemptions are standard in many pieces of legislation in order to recognize the domain of the President in foreign affairs and as Commander-in-Chief as well as to ensure that Congress's and the Executive Branch's hands are not tied with procedural requirements in times of national emergencies. Further, the Committee thinks that Federal auditing, accounting and other similar requirements designed to protect Federal funds from potential waste, fraud, and abuse should be exempt from the Act. The Committee recognizes the special circumstances and history surrounding the enactment and enforcement of Federal civil rights laws. During the middle part of the 20th century, the arguments of those who opposed the national, uniform extension of basic equal rights, protection, and opportunity to all individuals were based on a States rights philosophy. With the passage of the Civil Rights Acts of 1957 and 1964 and the Voting Rights Act of 1965, Congress rejected that argument out of hand as designed to thwart equal opportunity and to protect discriminatory, unjust and unfair practices in the treatment of individuals in certain parts of the country. The Committee therefore exempts Federal civil rights laws from the requirements of this Act. In addition, as will be discussed in the next section, UMRA does not require all legislative provisions that contain federal mandates, even those that contain mandates that meet UMRA's definition, to have a CBO written cost estimate statement. In some instances, CBO may determine that cost estimates may not be feasible or complete. In addition, UMRA only requires estimates of direct costs imposed by the legislation. Estimates of indirect, secondary costs, such as effects on prices and wages when the costs of a mandate imposed on one party are passed on to others, such as customers or employees, are not required. <3. UMRA and Congressional Procedure (Title I)> <3.1. UMRA's Procedures> Under Title I, which took effect on January 1, 1996, CBO was directed, to the extent practicable, to assist congressional committees, upon their request, in analyzing the budgetary and financial impact of any proposed legislation that may have (1) a significant budgetary impact on state, local, and tribal governments; (2) a significant financial impact on the private sector; or (3) a significant employment impact on the private sector. In addition, CBO was directed, if asked by a committee chair or committee ranking minority member, to conduct a study, to the extent practicable, of the budgetary and financial impact of proposed legislation containing a federal mandate. If reasonably feasible, the study is to include estimates of the future direct costs of the federal mandate "to the extent that such costs significantly differ from or extend beyond the 5-year period after the mandate is first effective." Although the actions noted above are technically discretionary, UMRA does contain mandatory directives. When an authorizing committee reports a public bill or joint resolution containing a federal mandate, UMRA requires the committee to provide the measure to CBO for budgetary analysis. CBO is required to provide the committee a cost estimate statement of a mandate's direct costs if those costs are estimated to equal or exceed predetermined amounts, adjusted for inflation, in any of the first five fiscal years the legislation would be in effect. In 2019, those threshold amounts are $82 million for intergovernmental mandates and $164 million for private-sector mandates. CBO is also required to inform the committee if the mandate has estimated direct costs below these thresholds and briefly explain the basis of the estimate. CBO must also identify any increase in federal appropriations or other spending that has been provided to fund the mandate. The federal mandate is considered unfunded unless estimated costs are fully funded. As described above, under " UMRA's Definition of an Unfunded Federal Mandate ," UMRA provides that mandate costs be considered as funded only if the legislation covers the mandate costs either by providing new direct spending or entitlement authority or by authorizing appropriations and incorporating a mechanism to provide for the mandate to be revised or abolished if the requisite appropriations are not provided. Direct costs for intergovernmental mandates are defined as "the aggregate estimated amounts that all State, local and tribal governments would be required to spend or would be prohibited from raising in revenues in order to comply with the Federal intergovernmental mandate." Direct costs for private-sector mandates are defined as "the aggregate estimated amounts that the private sector will be required to spend in order to comply with the Federal private sector mandate." To accomplish these tasks, CBO created the State and Local Government Cost Estimates Unit within its Budget Analysis Division to prepare intergovernmental mandate cost estimate statements as well as other studies on the budgetary effects of mandates. It also added new staff to its program analysis divisions to prepare private-sector mandate cost estimate statements. A congressional committee is required to include the CBO estimate of mandate costs in its report on the bill. If the mandate cost estimate is not available, or if the report is not expected to be in print before the legislation reaches the floor for consideration, the committee is to publish the mandate cost estimate in the Congressional Record in advance of floor consideration. In addition to identifying direct costs, the committee's report must also assess the likely costs and benefits of any mandates in the legislation, describe how they affect the competitive balance between the private and public sectors, state the extent to which the legislation would preempt state, local, or tribal law, and explain the effect of any preemption. For intergovernmental mandates alone, the committee is to describe in its report the extent to which the legislation authorizes federal funding for direct costs of the mandate, and detail whether and how funding is to be provided. <3.2. CBO Cost Estimate Statements> CBO submitted 13,310 estimates of mandate costs to Congress from January 1, 1996, when UMRA's Title I became effective, to May 20, 2019 (see Table 1 ). Each of these statements examined the mandate costs imposed on the private sector or state, local, and tribal governments by provisions in a specific bill, amendment, or conference report. About 11.5% of these cost estimate statements (1,537 of 13,310 cost estimate statements) identified costs imposed by intergovernmental mandates, and less than 1.0% of them (115 of 13,310 cost estimate statements) identified intergovernmental mandates that exceeded UMRA's threshold. CBO was unable to determine costs imposed by intergovernmental mandates in 79 bills, amendments, or conference reports. CBO has submitted 13,187 estimates to Congress that examined private-sector mandate costs imposed by provisions in a specific bill, amendment, or conference report from January 1, 1996, when UMRA's Title I became effective, to May 20, 2019 (see Table 2 ). The number of statements transmitted to Congress shown in Table 2 is less than the number shown in Table 1 because CBO is sometimes asked to review a specific bill, amendment, or conference report solely for intergovernmental mandates. About 15.3% of these private-sector estimates (2,022 of 13,187 cost estimate statements) identified costs imposed by mandates, and about 3.2% of them (427 of 13,187 cost estimate statements) identified costs that exceeded UMRA's threshold. CBO was unable to determine costs imposed by private-sector mandates in 299 bills, amendments, or conference reports. <3.3. Points of Order for Initial Consideration> UMRA provides for the enforcement of its informational requirements on legislation by establishing a point of order in each chamber against consideration of a measure on which the reporting committee has not published the required estimate of mandate costs. This point of order applies only to measures reported by committees (for which CBO estimates of mandate costs are required), but it applies for both intergovernmental and private-sector mandates. In addition, however, if the informational requirement is met, a point of order against consideration of a measure may still be raised, if, for any fiscal year, the estimated total mandate cost of unfunded intergovernmental mandates in the measure exceeds UMRA's threshold amount ($82 million in 2019). This point of order may be raised also if CBO reported that no reasonable estimate of the cost of intergovernmental mandates was feasible. Uniquely among the requirements established by UMRA, this substantive point of order addressing intergovernmental mandates contained in legislation constitutes a potential means of control over the actual imposition of mandate costs. Even in this case, however, the mechanisms established by UMRA provide a means of controlling mandates only on the basis of estimates of the costs that will be incurred in subsequent fiscal years. The only provision of UMRA that offers a possibility of controls based on costs actually incurred by affected entities is the requirement, mentioned earlier, that a mandate can be considered funded through appropriations only if it directs that, if insufficient appropriations are made, the mandate must be revised, abolished, or reenacted as unfunded. In several respects, the applicability of the substantive point of order differs from that of the informational point of order. First, it applies to any measure coming to the floor for consideration, whether or not reported by a committee, and also to conference reports. For a measure that has been reported, this point of order applies to the measure in the form reported, including, for example, to a committee amendment in the nature of a substitute. In addition, this point of order applies against an amendment or motion (such as a motion to recommit with amendatory instructions), and does so on the basis not that the mandate costs of the amendment or motion itself exceeds the threshold, but that the amendment or motion would cause the total mandate costs in the measure to do so. Finally, however, this point of order applies only against intergovernmental mandates. UMRA imposes no comparable control in relation to private-sector mandates. Because federal mandates are created through authorization bills, the UMRA points of order generally do not apply to bills reported by the House and Senate Committees on Appropriations. However, if an appropriation bill, resolution, amendment, or conference report contains legislative provisions that would either increase the direct costs of a federal intergovernmental mandate that exceeds the threshold, or cause those costs to exceed the threshold, a point of order may be raised against the provisions themselves. In the Senate, if this point of order is sustained, the provisions are stricken from the bill. In the House, the chair does not rule on a point of order raised under these provisions. Instead, the House, by majority vote, determines whether to consider the measure despite the point of order. To prevent dilatory use of the point of order, the chair need not put the question of consideration to a vote unless the Member making the point of order meets the "threshold burden" of identifying specific language that is claimed to contain the unfunded mandate. Also, if several points of order could be raised against the same measure, House practices under UMRA allow all of them to be disposed of at once by a single vote on consideration. If the Committee on Rules proposes a special rule for considering the measure that waives the point of order, UMRA subjects the special rule itself to a point of order, which is disposed of by the same mechanism. In the Senate, if questions are raised challenging the applicability of an UMRA point of order (e.g., to prevent its use for dilatory purposes), the presiding officer, to the extent practicable, consults with the Committee on Homeland Security and Governmental Affairs to determine if the measure contains an intergovernmental mandate and with the Senate Committee on the Budget to determine if the mandate's direct costs meet UMRA's threshold for allowing a point of order to be raised. The Senate Committee on the Budget may draw for this purpose on CBO cost estimate statements. If there are no such challenges, or the presiding officer rules against the challenge, the Senate determines whether to consider the measure despite the point of order. It may do so by voting on a motion to waive the point of order. Initially, a majority vote was sufficient to waive the point of order in the Senate. In 2005, the Senate increased its threshold to waive an UMRA point of order to three-fifths of Senators duly chosen and sworn (normally 60 votes), as was already required of many other Budget Act points of order. Two UMRA points of order were raised in the Senate that year, and both were sustained, defeating two amendments to an appropriations bill that would have increased the minimum wage (see Table 3 ). In 2007, the Senate returned its threshold for waiving an UMRA point of order to a majority vote. On April 2, 2009, the Senate approved, by unanimous consent, an amendment ( S.Amdt. 819 ) to S.Con.Res. 13 , the concurrent budget resolution for FY2010, which would have again increased the vote necessary in the Senate to waive an UMRA point of order to three-fifths of Senators duly chosen and sworn (normally 60 votes). The amendment was subsequently dropped in the final version of the concurrent budget resolution for FY2010. On March 23, 2013, the Senate agreed, by voice vote, to an amendment ( S.Amdt. 538 ) to S.Con.Res. 8 , the concurrent budget resolution for FY2014. It would have restored the requirement for waiving an UMRA point of order in the Senate to three-fifths of the full Senate (normally 60 votes). S.Con.Res. 8 was received in the House on April 15, 2013, and held at the desk. Because the House did not act on the measure, and no other legislation on the matter was approved by Congress, the simple majority requirement for appealing or waiving UMRA points of order in the Senate remained in effect. On May 5, 2015, the Senate agreed to the conference report on S.Con.Res. 11 , the concurrent budget resolution for FY2016, which the House had previously agreed to on April 30, 2015. The resolution included a provision that restored the requirement for waiving an UMRA point of order in the Senate to three-fifths of Senators duly chosen and sworn (normally 60 votes). Prior to the Senate's increasing the threshold necessary to waive an UMRA point of order, a scholar familiar with UMRA argued that, inasmuch as the general floor procedures of the Senate already allows Senators to force a majority vote on a mandate by moving to strike it from the bill, UMRA's enforcement procedure of waiving a point of order by majority vote meant that UMRA mattered only in the House. As evidence of this, the scholar noted that during UMRA's first 10 years of operation, when the threshold to waive an UMRA point of order was a majority vote in both the House and Senate, 13 UMRA points of order were raised, all in the House (see Table 3 ). As indicated in Table 3 , 62 UMRA points of order have been raised in the House. Only one of these points of order, the first one, which was raised on March 28, 1996, in opposition to a proposal to add a minimum wage increase to the Contract With America Advancement Act of 1996, resulted in the House voting to reject consideration of a proposed provision. During the 111 th -114 th Congresses, UMRA points of order in the House were often raised not to challenge unfunded federal mandates per se , but to use the 10 minutes of debate allowed each House Member initiating an UMRA point of order to challenge the pace of legislative consideration, limitations on the offering of amendments to appropriations bills, or the inclusion of earmarks in legislation. Also, as indicated in Table 3 , UMRA points of order have been raised in the Senate four times. In 2005, points of order were raised against two amendments relating to an increase in the minimum wage. In each case the Senate declined to waive the point of order, and the chair ruled that the amendment was out of order because it contained unfunded intergovernmental mandates in excess of the threshold. In 2009, an UMRA point of order was raised against intergovernmental mandates in a health care reform bill. The Senate voted to waive the point of order, 55-44. The Senate subsequently approved the bill with the mandates. In 2016, an UMRA point of order was raised against intergovernmental mandates in a bill designed to assist Puerto Rico in addressing its debt. The Senate voted to waive the point of order, 85-13. The Senate subsequently approved the bill with the mandates. <3.4. Impact on the Enactment of Statutory Intergovernmental and Private-Sector Mandates> Although UMRA points of order have been sustained just three times, most state and local government officials assert that UMRA has reduced "the number of unfunded federal mandates by acting as a deterrent to their enactment." For example, in 2001, Raymond Scheppach, then-NGA's executive director, testified before a House subcommittee that UMRA had slowed the growth of unfunded mandates and improved communications between federal policymakers and state and local government officials: Direct mandates have declined sharply in the wake of the Act. But I would venture that UMRA has had an even greater intangible benefit. As Congressman Portman once told us, he was certain this would be one of those bills that he could frame and hang on his wall, and it would become just another relic of history. But, to his surprise, the Act has led time and again to members asking his advice: "Do you think this bill will cause an UMRA problem? With whom should I work?" The very threat of a CBO report has engendered efforts to reach out to state and local leaders before the fact instead of after. It has changed the nature of our intergovernmental discussion in a very positive way. More recently, NCSL has argued that UMRA has brought increased attention to the fiscal effects of federal legislation on state and local governments, improved federal accountability, and enhanced consultation. In addition, there have been documented instances in which either sponsors of legislation have modified provisions to avoid a CBO statement that unfunded intergovernmental mandate costs exceeded the threshold, or measures with such costs estimated to exceed the threshold were altered prior to floor consideration to reduce their costs below the threshold. As mentioned previously, since UMRA's Title I became effective in 1996, CBO has submitted 13,310 written cost estimate statements to Congress that examined the costs imposed by provisions in a specific bill, amendment, or conference report on the private sector and/or state and local governments. It identified intergovernmental mandates in 1,537 of them (11.5%). CBO reports that, as of December 31, 2018, 15 laws (containing 21 intergovernmental mandates) have been enacted since UMRA became effective in 1996 that have costs estimated to exceed the statutory threshold. Those laws are as follows: Two increases in the minimum wage. P.L. 104-188 , the Small Business Job Protection Act of 1996, enacted in 1996, was estimated to cost state and local governments more than $1 billion during the first five years that it was in effect. P.L. 110-28 , the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, enacted in 2007, was estimated to cost state and local governments slightly less than $1 billion during the first five years that it was in effect. A reduction in federal funding for administering the food stamp program, now the Supplemental Nutrition Assistance Program, in P.L. 105-185 , the Agricultural Research, Extension, and Education Reform Act of 1998, enacted in 1998, was estimated to cost states between $200 million and $300 million annually. Preemption of state taxes on premiums for certain prescription drug plans in P.L. 108-73 , the Family Farmer Bankruptcy Relief Act of 2003, enacted in 2003, was estimated to cost states $70 million in revenue in 2006, the first year it was in effect, and increase to about $95 million annually by 2010. The temporary preemption of states' authority to tax certain internet services and transactions in P.L. 108-435 , the Internet Tax Nondiscrimination Act, enacted in 2004, was estimated to reduce state and local government tax revenue by at least $300 million. The extension of this preemption in P.L. 110-108 , the Internet Tax Freedom Act Amendments Act of 2007, enacted in 2007, was estimated to reduce state and local government tax revenue by about $80 million annually. Making the moratorium permanent (while allowing state and local governments that had been collecting such taxes prior to October 1, 1998 to continue to collect such taxes, but only through June 2020) in P.L. 114-125 , the Trade Facilitation and Trade Enforcement Act of 2015, enacted in 2016, was estimated to cost state and local governments more than $100 million in the final three months of fiscal year 2020 (July through September) and more than several hundred million dollars annually thereafter. The requirement that state and local governments meet certain standards for issuing driver's licenses, identification cards, and vital statistics documents in P.L. 108-458 , the Intelligence Reform and Terrorism Prevention Act of 2004, enacted in 2004, was estimated to cost state and local governments more than $100 million over 2005-2009, with costs exceeding the threshold in at least one of those years. The elimination of matching federal payments for some child support spending in P.L. 109-171 , the Deficit Reduction Act of 2005, enacted in 2006, was estimated to cost states more than $100 million annually beginning in 2008. The requirement that state and local governments withhold taxes on certain payments for property and services in P.L. 109-222 , the Tax Increase Prevention and Reconciliation Act of 2005, enacted in 2006, was estimated to cost state and local governments more than $70 million annually beginning in 2011. Requirements on rail and transit owners and operators to train workers and submit reports to the Department of Homeland Security in P.L. 110-53 , the Implementing Recommendations of the 9/11 Commission Act of 2007, enacted in 2007, was estimated to cost state and local governments more than UMRA's threshold in at least one of the first five years following enactment. The requirement that commuter railroads install train-control technology in P.L. 110-432 , the Railroad Safety Enhancement Act of 2008, enacted in 2008, was estimated to cost state and local governments more than UMRA's threshold in at least one of the first five years following enactment. The requirement that public entities that handle health insurance information comply with new regulations; health insurance plans pay an annual fee based on average number of people covered by the policy; public employers pay an excise tax on employer-sponsored health insurance coverage defined as having high costs; health insurance plans comply with new standards for extending coverage; and public entities must comply with new notice and reporting requirements on health insurance plans in P.L. 111-148 , the Patient Protection and Affordable Care Act, enacted in 2010, was estimated to have costs for state and local governments that would greatly exceed UMRA's thresholds in each of the first five years following enactment. The requirement that schools provide meals that comply with new standards for menu planning and nutrition and with nutrition standards for all food sold in schools in P.L. 111-296 , the Healthy, Hunger-Free Kids Act of 2010, enacted in 2010, was estimated to have costs for state and local governments that would exceed UMRA's threshold beginning the first year that the mandates take effect. The aggregate cost of requiring Puerto Rico and its instrumentalities to comply with the directives and processes of a federal oversight board tasked with overseeing the territory's fiscal affairs and to pay for the costs of the oversight board's staff and operating expenses in P.L. 114-187 , the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), enacted in 2016, was estimated to exceed UMRA's threshold. State and local government interest groups argue that these statistics confirm UMRA's effectiveness in serving as a deterrent to the enactment of new unfunded mandates that exceed UMRA's threshold and meet UMRA's definition of a federal mandate. However, they also argue that many mandates with costs below UMRA's threshold, or that do not meet UMRA's definition of a federal mandate, have been adopted since UMRA's enactment. CBO also reports that from January 1, 2006, to December 31, 2018, 217 laws were enacted with at least one intergovernmental mandate as defined under UMRA. These laws imposed 443 mandates on state and local governments, with 16 of these mandates exceeding UMRA's threshold, 14 with estimated costs that could not be determined, and 413 with estimated costs below the threshold. CBO reported that hundreds of other laws had an effect on state and local government budgets, but those laws did not meet UMRA's definition of a federal mandate. As mentioned previously, CBO has submitted 13,187 cost estimate statements to Congress that examined the costs imposed by provisions in a specific bill, amendment, or conference report that might impact the private sector. It identified private-sector mandates in 2,022 of them (15.3%). CBO reports that from January 1, 2006, to December 31, 2018, 330 laws were enacted with at least one private-sector mandate as defined under UMRA. These laws imposed 836 mandates on the private sector, with 128 of these mandates exceeding UMRA's threshold, 96 with estimated costs that could not be determined, and 612 with estimated costs below the threshold. <3.5. Congressional Issues for Title I> <3.5.1. Exemptions and Exclusions> State and local government officials argue that UMRA's exemptions and exclusions reduce its effectiveness in limiting the enactment of unfunded federal intergovernmental mandates. They argue that federal programs in the exempted and excluded areas can still result in the imposition of costs on state, local, and tribal governments. Also, because UMRA does not include these costs as "mandates," they are exempt even from the requirement for CBO to estimate these costs. For example, in 2008, NCSL asserted that "although fewer than a dozen mandates have been enacted that exceed the threshold established in UMRA, Congress has shifted at least $131 billion in costs to states over the past five years" and that during the 110 th Congress at least $31 billion in additional costs were imposed on states through new mandates. To reduce these costs, NCSL has recommended that UMRA's provisions on points of order and requirements for written cost estimate statements also apply to (1) all open-ended entitlement grant-in-aid programs, such as Medicaid, and legislative provisions that would cap or enforce a ceiling on the cost of federal participation in any entitlement or mandatory spending program; (2) new conditions of federal funding for existing federal grants and programs; (3) legislative provisions that reduce state revenues, especially when changes to the federal tax code are retroactive or otherwise provide states with little or no opportunity to prospectively address the impact of a change in federal law on state revenues; and (4) mandates that fail to exceed the statutory threshold only because they do not affect all states. For the most part, business interests have generally supported state and local government officials in their efforts to broaden UMRA's coverage of federal intergovernmental mandates. In perhaps the most extensive effort to obtain various viewpoints on UMRA, in 2005, the Government Accountability Office (GAO) held group meetings, individual interviews, and received written responses from 52 individuals and organizations, including academic centers and think tanks, businesses, federal agencies, public interest advocacy groups, and state and local governments, concerning unfunded mandates. GAO reported that UMRA's coverage was the issue most frequently commented on by parties from all five sectors, including business, and that most of the parties representing business viewed UMRA's relatively narrow coverage as a major weakness that leaves out many federal actions with potentially significant financial impacts on nonfederal parties. However, GAO also found that the business sector has "generally been in favor of federal preemptions for reasons such as standardizing regulation across state and local jurisdictions." Although GAO found that most of the parties it contacted viewed UMRA's coverage of intergovernmental mandates as being too narrow, it also reported that some of the participants opposed an expansion of UMRA's coverage: A few parties from the public interest sector and academic/think tank sectors considered some of the existing exclusions important or identified UMRA's narrow scope as one of the act's strengths.... Specifically, these parties argued in favor of maintaining UMRA's exclusions or expanding them to include federal actions regarding public health, safety, environmental protection, workers' rights, and the disabled.... [They also] focused on the importance of the existing exclusions, particularly those dealing with constitutional and statutory rights, such as those barring discrimination against various groups. With respect to private-sector mandates in legislation, UMRA allows a point of order to be raised only if UMRA's informational requirements are not met; that is, only if the committee reporting the measure fails to publish a CBO cost estimate statement of the private-sector mandate's costs. Over the years, various business organizations, including the U.S. Chamber of Commerce, have advocated the extension of UMRA's substantive point of order for intergovernmental mandates to the private sector, permitting a point of order to be raised against consideration of legislation that includes private-sector mandates with costs that exceed UMRA's threshold. The GAO report also noted that "parties primarily from the academic/think tank and state and local governments sectors ... noted that while much attention has been focused on the actual (direct) costs of mandates, it is important to consider the broader implications on affected nonfederal entities beyond direct costs, including indirect costs such as opportunity costs, forgone revenues, shifting priorities, and fiscal trade-offs." During the 114 th Congress, H.R. 50 , the Unfunded Mandates Information and Transparency Act of 2015, passed by the House on February 4, 2015, and its Senate companion bill, S. 189 , would have broadened UMRA's coverage to include both direct and indirect costs, such as foregone profits and costs passed onto consumers, and, when requested by the chair or ranking member of a committee, the prospective costs of legislation that would change conditions of federal financial assistance. The bills also would have made private-sector mandates subject to a substantive point of order and remove UMRA's exemption for rules issued by most independent agencies. H.R. 50 , and its Senate companion bill, S. 1523 , were reintroduced in the 115 th Congress as the Unfunded Mandates Information and Transparency Act of 2017. The House passed H.R. 50 on July 13, 2018. The House also passed similar legislation during the 112 th Congress ( H.R. 4078 , the Red Tape Reduction and Small Business Job Creation Act: Title IV, the Unfunded Mandates Information and Transparency Act of 2012), the 113 th Congress ( H.R. 899 , the Unfunded Mandates Information and Transparency Act of 2014; and H.R. 4 , the Jobs for America Act: Division III, the Unfunded Mandates Information and Transparency Act of 2014), and, as just mentioned, during the 114 th Congress ( H.R. 50 , the Unfunded Mandates Information and Transparency Act of 2015). During the 116 th Congress, H.R. 300, the Unfunded Mandates Information and Transparency Act of 2019, was introduced on January 8, 2019. <4. UMRA and Federal Rulemaking (Title II)> UMRA's Title II, which became effective on March 22, 1995, generally requires federal agencies, unless otherwise prohibited by law, to prepare written statements that identify costs and benefits of a federal mandate to be imposed through the rulemaking process that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year, before "promulgating any general notice of proposed rulemaking." In 2019, the threshold for preparing a written statement is $164 million. These informational requirements for regulations, like the Title I cost estimate requirements for legislation, apply to both intergovernmental and private-sector mandates. Title II establishes no equivalent to the point of order mechanism in Title I through which either house can decline to consider legislation proposing covered unfunded intergovernmental mandates above the applicable threshold level. The written assessments that federal agencies are to prepare for their regulations must identify the law authorizing the rule and include a qualitative and quantitative assessment of anticipated costs and benefits, the share of costs to be borne by the federal government, and the disproportionate budgetary effects upon particular regions, state, local, or tribal governments, or particular segments of the private sector. Assessments must also include estimates of the effect on the national economy, descriptions of consultations with nonfederal government officials, and a summary of the evaluation of comments and concerns obtained throughout the promulgation process. Impacts of "any regulatory requirements" on small governments must be identified, notice must be given to those governments, and technical assistance must be provided. Also, federal agencies are required, to the extent permitted in law, to develop an "effective process to permit elected officers of State, local, and tribal governments (or their designated employees with authority to act on their behalf) to provide meaningful and timely input in the development of regulatory proposals containing significant Federal intergovernmental mandates." UMRA also requires federal agencies to consider "a reasonable number" of regulatory alternatives and select the "least costly, most cost-effective or least burdensome alternative" that achieves the objectives of the rule. UMRA requires the Office of Management and Budget's (OMB's) director to collect the executive branch agencies' written cost estimate statements and periodically forward copies to CBO's director. It also directs OMB to establish pilot programs in at least two federal agencies to test innovative regulatory approaches to reduce regulatory burdens on small governments, and provide Congress a written annual report detailing compliance with the act by each agency for the preceding reporting period. OMB's director has delegated these responsibilities to its Office of Information and Regulatory Affairs (OIRA). Most of these provisions were already in place when UMRA was adopted. For example, Executive Order 12866, issued in September 1993, required agencies to provide OIRA with assessments of the costs and benefits of all economically significant proposed rules (defined as having an annual impact on the economy of $100 million or more), including some rules that were not mandates; identify regulatory alternatives and explain why the planned regulatory action is preferable to other alternatives; issue regulations that were cost-effective and impose the least burden on society; and seek the views of state, local, and tribal officials before imposing regulatory requirements that might significantly or uniquely affect them. <4.1. Title II's Exemptions and Exclusions> UMRA's requirement for federal agencies to issue written cost estimate statements for mandates issued through the rulemaking process that may result in expenditures of $100 million or more (adjusted annually for inflation) by state and local governments, in the aggregate, or by the private sector, in any one year, is subject to the exemptions and exclusions that apply to legislative provisions (e.g., conditions of federal assistance, duties arising from participation in a voluntary federal program, and constitutional rights of individuals). UMRA's requirements also do not apply (1) to provisions in rules issued by independent regulatory agencies; (2) if the agency is "otherwise prohibited by law" from considering estimates of costs in adopting the rule (e.g., under the Clean Air Act the primary air quality standards are health-based and the courts have affirmed that the U.S. Environmental Protection Agency is not to consider costs in determining air quality standards for ozone and particulate matter); or (3) to any rule for which the agency does not publish a general notice of proposed rulemaking in the Federal Register . GAO has found that about half of all final rules published in the Federal Register are published without a general notice of proposed rulemaking, including some rules with impacts over $100 million annually. In addition, UMRA's threshold for federal mandates in rules is limited to expenditures, in contrast to the thresholds in Title I which refer to direct costs. As a result, a federal rule's estimated annual effect on direct costs might meet Title I's threshold, but might not meet Title II's threshold if the rule does not compel nonfederal entities to spend that amount. For example, under Title I, direct costs include any amounts that state and local governments are prohibited from raising in revenue to comply with the mandate. These costs are not considered when determining whether a mandate meets Title II's threshold because funds not received are not expenditures. Also, in contrast to Title I, Title II does not require the agencies issuing regulations to address the question of whether federal funding is available to cover the costs to the private sector of mandates imposed by regulations. In general, agencies lack authority to provide such funding, which could be provided only by legislative action. Title II addresses the funding only of intergovernmental mandates, and only by requiring that agencies identify the extent to which federal resources may be available to carry out those mandates. The differences in the coverage of Title I and Title II may reflect a compromise reached with congressional Members who opposed using UMRA as a vehicle to address broader regulatory reform advocated by business interests. For example, Senator John Glenn argued in the Senate Committee on Governmental Affairs' committee report on UMRA: Another problematic change from S. 993 is the expansion of the "regulatory accountability and reform" provisions of Title 2 to go beyond intergovernmental mandates to address any and all regulatory effects on the private sector. The intended purpose of S. 1 is to control unfunded Federal mandates on State and local governments. I have always supported that goal. Moreover, I believe that if we keep the bill sharply focused on that purpose, we can get the legislation passed quickly and signed into law. If, however, we let the bill be stretched to cover other issues, we hurt prospects for enactment and we break our pledge to our friends in the State and local governments.... I believe that the bill should be brought back to its original purpose by limiting regulatory analysis to intergovernmental mandates.... In short, I support using this legislation to control intergovernmental regulatory costs. I oppose using this bill to address broader regulatory reform issues. <4.2. Federal Agency Cost Estimate Statements in Major Federal Rules> From March 22, 1995, when UMRA's Title II became effective, to the end of FY2016, OMB reviewed 1,060 final rules with estimated benefits and/or costs exceeding $100 million annually. Most (73.6%) of those "major" rules (780) did not contain provisions meeting UMRA's definition of a mandate. Whereas, as Table 1 and Table 2 show, CBO identified slightly more private-sector mandates than intergovernmental mandates, Table 4 shows that most of the mandates identified in regulations have been directed at the private sector. This emphasis appears consistent with the original concern of business advocates to extend the concept of mandates to the area of regulatory reform. As indicated in Table 4 , during the time period covered, 280 major rules met UMRA's definition of a mandate on the private sector and, therefore, were issued an UMRA cost estimate statement and 15 met UMRA's definition of a mandate on state, local, and tribal governments and, therefore, were issued an UMRA cost estimate statement. The 15 intergovernmental rules, 9 issued by the U.S. Environmental Protection Agency (EPA), were as follows: EPA's Rule on Standards of Performance for Municipal Waste Combustors and Emissions Guidelines (1995), with estimated costs of $320 million annually; EPA's Standards of Performance for New Stationary Sources and Guidelines for Control of Existing Sources: Municipal Solid Waste Landfills (1996), with estimated costs of $110 million annually; EPA's National Primary Drinking Water Regulations: Disinfectants and Disinfection Byproducts (1998), with estimated costs of $700 million annually; EPA's National Primary Drinking Water Regulations: Interim Enhanced Surface Water Treatment (1998), with estimated costs of $300 million annually; EPA's National Pollutant Discharge Elimination: System B Regulations for Revision of the Water Pollution Control Program Addressing Storm Water Discharges (1999), with estimated costs of $803.1 million annually; EPA's National Primary Drinking Water Regulations; Arsenic and Clarifications to Compliance and New Source Contaminants Monitoring (2001), with estimated costs of $189 million to $216 million annually; EPA's National Primary Drinking Water Regulations: Long Term 2 Enhanced Surface Water Treatment (2005), with estimated costs between $80 million and $130 million per year; EPA's National Primary Drinking Water Regulations: Stage 2 Disinfection Byproducts Rule (2006), with estimated costs of at least $100 million annually; U.S. Department of Health and Human Services' (DHHS's) Health Insurance Reform; Modifications to the Health Insurance Portability and Accountability Act (HIPAA) Electronic Transaction Standards (2009), with estimated costs of $1.1 billion per year; EPA's National Emission Standards for Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam Generating Units and Standards for Performance for Electric Utility Steam Generating Units (2011), with estimated costs of $9.6 billion annually; U.S. Department of Agriculture's (USDA's) Nutrition Standards in the National School Lunch and School Breakfast Programs (2012), with estimated costs of $479 million annually; DHHS's Patient Protection and Affordable Care Act; Benefit and Payment Parameters for 2014 (issued FY2013), 2015 (issued FY2014), 2016 (issued FY2015), and 2017 (issued FY2016). Although DHHS was unable to quantify the user fees that will be associated with these three rules, CBO found that the combined administrative cost and user fee impact for each of them may be high enough to constitute a state, local, or tribal government mandate under UMRA; and U.S. Department of Labor's Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees (2016) revised and indexed for inflation salary thresholds for determining overtime requirements for salaried workers. CBO found that employee enumeration impacts and compliance costs were estimated to be well over $100 million annually and that, in addition to private sector industries, some local government entities will be substantially affected by the rule. <4.3. Impact on the Rulemaking Process> In 1997, Senators Fred Thompson and John Glenn, chair and ranking minority member of the Senate Committee on Governmental Affairs, respectively, asked GAO to review federal agencies' implementation of UMRA's Title II. On February 4, 1998, GAO issued its report, concluding that "our review of federal agencies' implementation of Title II of UMRA indicates that this title of the act has had little direct effect on agencies' rulemaking actions during the first 2 years of its implementation." GAO concluded that Title II had limited impact on agencies' rulemaking primarily because of its limited coverage. For example, GAO noted that written mandate cost estimate statements were not on file at CBO for 80 of the 110 economically significant rules published in the Federal Register between March 22, 1995, and March 22, 1997. GAO examined the 80 economically significant rules that lacked a written mandate cost estimate statement and concluded that UMRA did not require a written mandate cost estimate statement for 78 of them because the rule either did not have an associated notice of proposed rulemaking (18 instances); did not impose an enforceable duty (3 instances); imposed such a duty but only as a condition of federal assistance (33 instances); imposed such a duty but only as part of a voluntary program (11 instances); did not involve an expenditure of $100 million in any single year by the private sector or by state, local, and tribal governments (12 instances); or incorporated requirements specifically set forth in law (1 instance). GAO concluded that written mandate cost estimate statements should have been filed at CBO for two of the rules that lacked one, but, in both instances, the rules appeared to satisfy UMRA's written statement requirements. Even where UMRA applied, GAO concluded that the act did not appear to have had much effect on federal agencies' rulemaking actions because UMRA does not require agencies to take the actions required in the statute if the agencies determine that the actions are duplicative of other actions or that accurate estimates of the rule's future compliance costs are not feasible. Because federal agencies' rules commonly contain an estimate of compliance costs, GAO found that most agencies rarely prepared a separate UMRA written cost estimate statement. Moreover, Executive Order 12866, which was issued more than a year before UMRA's enactment, already required federal agencies to provide OIRA with assessments of the costs and benefits of all economically significant rules. GAO also concluded that UMRA did not substantially change agencies' intergovernmental consultation processes. In 2001, OMB's director, Mitchell L. Daniels Jr., acknowledged at a House hearing coinciding with UMRA's fifth anniversary that UMRA's Title II had not resulted in major changes in federal agency rulemaking. He noted that, according to OMB's five annual reports to Congress on the implementation of Title II, 80 rules had required the preparation of a separate written mandate cost estimate statement (see Table 4 ). He said that "it was hard to believe that only 80 regulations had significant impacts on state, local, or tribal governments, or the private sector. In fact, it appears that agencies have attempted to limit their consultative processes, and ignored potential alternative remedies, by aggressively utilizing the exemptions outlined by the Act." He added that "when agencies fail to solicit or consider the views of states and localities, they deny themselves the benefit of state and local innovation and experience. This will not be accepted practice in this [George W. Bush] Administration." In 2004, GAO released a second study of UMRA's implementation of Title II (and the first for Title I), focusing on statutes enacted and rules published during 2001 and 2002. GAO found that 5 of 377 statutes enacted and 9 of 122 major or economically significant final rules issued in 2001 or 2002 were identified as containing federal mandates at or above UMRA's thresholds. GAO concluded its report by stating that "the findings raise the question of whether UMRA's procedures, definitions, and exclusions adequately capture and subject to scrutiny federal statutory and regulatory actions that might impose significant financial burdens on affected nonfederal parties." As noted earlier, in 2005, GAO sought and received input from participating parties about UMRA's strengths and weaknesses and potential options for reinforcing the strengths or addressing the weaknesses. It also held a symposium on federal mandates to examine those identified strengths and weaknesses in more depth. Although the symposium's participants viewed UMRA's coverage as its most significant issue, GAO reported that comments received concerning federal agency consultation with state and local governments under Title II "focused on the quality of consultations across agencies, which was viewed as inconsistent" and that "a few parties commented that UMRA had improved consultation and collaboration between federal agencies and nonfederal levels of government." At a Senate hearing held on April 14, 2005, OIRA's director, John Graham, testified that OMB includes summaries of agency consultations with state and local government officials in its annual report to Congress and that "this year's report shows an increased level of engagement." He added that there were "some very good examples of consultation that are documented in that report at the Department of Education, the Environmental Protection Agency and so forth, but I think that it would be fair to say that those best practices are not necessarily uniform across the federal government or across any particular agency." State and local government officials testifying at the hearing stated that federal agency consultation had improved somewhat, but remained "sporadic." <4.4. Congressional Issues for Title II> <4.4.1. Exemptions and Exclusions> State and local government public interest groups continue to advocate a broadening of Title II's coverage. For example, as mentioned previously, they advocate a broader definition of what UMRA considers a mandate, under the presumption that a broader definition would subject more rules to Title II. An alternative approach would be to separate debates concerning the definition of "mandate" and UMRA's coverage, and, instead, apply Title II's information requirements to whatever classes of federally induced costs Congress deems appropriate to cover. This approach might be implemented by incorporating coverage of various kinds of "federally induced costs," adopting the terminology proposed earlier by ACIR. In either case, inasmuch as Title II's requirements are informational only, their extension to new classes of regulations, or to new kinds of federally induced costs, would not affect the authority of agencies to issue regulations or the substance of the regulations that could be issued. As mentioned previously, UMRA's threshold for federal mandates in rules is limited to expenditures, in contrast to the thresholds in Title I that refer to direct costs. Introduced during the 116 th Congress, H.R. 300 , the Unfunded Mandates Information and Transparency Act of 2019, would broaden UMRA's coverage to include both direct and indirect costs, such as foregone profits and costs passed onto consumers, and, when requested by the chair or ranking member of a committee, the prospective costs of legislation that would change conditions of federal financial assistance. State and local government advocacy groups have also argued that Title II should apply to rules issued by independent regulatory agencies. Although OMB does not review rules issued by independent regulatory agencies, in recent years it has included information concerning independent regulatory agency rules in its annual UMRA report to Congress. According to those reports, independent regulatory agencies issued 271 major rules from FY1997 through FY2016. H.R. 300 would remove UMRA's exemption for rules issued by most independent agencies. The National Association of Counties (NACO) and other state and local government public interest groups have also advocated a strengthening of OMB's role in the enforcement of Title II to ensure consistent application of UMRA's provisions across federal agencies. For example, NCSL's current policy statement on unfunded mandates recommends that UMRA be amended to include "the creation of an office within the Office of Management and Budget that is analogous to the State and Local Government Cost Estimates Unit at the Congressional Budget Office." Business organizations, led by the U.S. Chamber of Commerce, also have advocated an independent review of federal agency cost estimates, recommending that the reviews be conducted by OMB or GAO. They also have advocated the permitting of early judicial challenges to an agency's failure to complete an UMRA cost estimate statement or for completing one that is deficient. During the 112 th Congress, H.R. 214 , the Congressional Office of Regulatory Analysis Creation and Sunset and Review Act of 2011, would have created a Congressional Office of Regulatory Analysis. The bill included a provision that would have transferred from CBO's director to the director of the proposed Congressional Office of Regulatory Analysis the responsibility to compare federal agency estimates of the cost of regulations implementing an act containing a federal mandate with the CBO's estimate of those costs. The Congressional Office of Regulatory Analysis would also have received federal agency statements that accompany significant regulatory actions. As mentioned previously, organizations representing various environmental and social groups have argued that UMRA has achieved its stated goals of strengthening the partnership between the federal government and state, local, and tribal governments by promoting informed and deliberate decisions by Congress on the appropriateness of federal mandates. In their view, broadening UMRA's coverage would dilute its impact. For example, a participant at GAO's 2005 symposium on federal mandates argued that eliminating any of UMRA's exclusions and exemptions might make the identification of mandates less meaningful, saying "The more red flags run up, the less important the red flag becomes." Also, some of the participants at the symposium from the academic, policy research institute, and public interest advocacy sectors argued that it was essential that some of the existing exclusions, such as those dealing with constitutional and statutory rights barring discrimination against various groups, be retained. They also advocated additional exclusions to include federal actions regarding public health, safety, environmental protection, workers' rights, and the disabled. <4.4.2. Federal Agency Consultation Requirements> State and local government public interest groups assert that enhanced requirements for federal agency consultation with state and local government officials during the rulemaking process are needed. For example, the NCSL has asserted that federal agency "consultation with state and local governments in the construction of these rules is haphazard." It recommends that Title II be amended to include "enhanced requirements for federal agencies to consult with state and local governments." OMB asserts that "federal agencies have been actively consulting with states, localities, and tribal governments in order to ensure that regulatory activities were conducted consistent with the requirements of UMRA." In addition, OMB notes that it has had guidelines in place since September 21, 1995, to assist federal agencies in complying with the act. The current guidelines suggest that (1) intergovernmental consultations should take place as early as possible, beginning before issuance of a proposed rule and continuing through the final rule stage, and be integrated explicitly into the rulemaking process; (2) agencies should consult with a wide variety of state, local, and tribal officials; (3) agencies should estimate direct benefits and costs to assist with these consultations; (4) the scope of consultation should reflect the cost and significance of the mandate being considered; (5) effective consultation requires trust and significant and sustained attention so that all who participate can enjoy frank discussion and focus on key priorities; and (6) agencies should seek out state, local, and tribal views on costs, benefits, risks, and alternative methods of compliance, and whether the federal rule will harmonize with and not duplicate similar laws in other levels of government. OMB often includes summaries of selected consultation activities by agencies whose actions affect state, local, and tribal governments in its annual draft and final UMRA reports to Congress. OMB has argued that the summaries are an indication that federal agencies are complying with the act. For example, in OMB's final 2015 UMRA report to Congress, OMB wrote in the introduction to these summaries: Four agencies subject to UMRA (the Departments of Energy, Health and Human Services, Interior, and Labor) provided examples of consultation activities that involved State, local, and tribal governments not only in their regulatory processes, but also in their program planning and implementation phases. These agencies have worked to enhance the regulatory environment by improving the way in which the Federal Government relates to its intergovernmental partners. Many of the departments and agencies not listed here (i.e., the Departments of Justice, State, Treasury, and Veterans Affairs, the Small Business Administration, and the General Services Administration) do not often impose mandates upon States, localities, or tribes, and thus have fewer occasions to consult with these governments. Other agencies, such as the National Archives and Records Administration, are exempt from UMRA's reporting requirements, but may nonetheless engage in consultation where their activities would affect State, local, and Tribal governments. As the following descriptions indicate, Federal agencies conduct a wide range of consultations. Agency consultations sometimes involve multiple levels of government, depending on the agency's understanding of the scope and impact of its rule or policy. As mentioned previously, H.R. 300 , the Unfunded Mandates Information and Transparency Act of 2019, would require federal agencies to enhance their consultation with UMRA stakeholders. <5. Concluding Observations> In 1995, UMRA's enactment was considered an historic, milestone event in the history of American intergovernmental relations. For example, when signing UMRA, President Bill Clinton said, Today, we are making history. We are working to find the right balance for the 21 st century. We are recognizing that the pendulum had swung too far, and that we have to rely on the initiative, the creativity, the determination, and the decisionmaking of people at the State and local level to carry much of the load for America as we move into the 21 st century. Since UMRA's enactment, parties participating in its implementation and researchers in the academic community, policy research institutes, and nonpartisan government agencies have reached different conclusions concerning the extent of UMRA's impact on intergovernmental relations and whether UMRA should be amended. State and local government officials and federalism scholars generally view UMRA as having a limited, though positive, impact on intergovernmental relations. In their view, the federal government has continued to expand its authority through the "carrots" of increased federal assistance and the "sticks" of grant conditions, preemptions, mandates, and administrative rulemaking. Facing what they view as a seemingly ever growing federal influence in American governance, they generally advocate a broadening of UMRA's coverage to enhance its impact, emphasizing the need to include conditions of grant assistance and a broader range of federal agency rulemaking, including rules issued by independent regulatory agencies. Other organizations, representing various environmental and social groups, argue that UMRA's coverage does not need to be broadened. In their view, UMRA has accomplished its goals of fostering improved intergovernmental relations and ensuring that when Congress votes on major federal mandates it is aware of the costs imposed by the legislation. They assert that UMRA's current limits on coverage should be maintained or reinforced by adding exclusions for mandates regarding public health, safety, workers' rights, environmental protection, and the disabled. During the 111 th Congress, UMRA received increased attention as Congress considered various proposals to reform health care. Governors, for example, expressed opposition to proposals that would have required states to contribute toward the cost of expanding Medicaid eligibility, asserting that the expansion could inflate state deficits and impose on states what Tennessee Governor Philip Bredesen reportedly described as the "mother of all unfunded mandates." As mentioned previously, at that time, CBO had determined that UMRA provisions did not apply to Medicaid's conditions of federal assistance because, in its view, states had "significant flexibility to make programmatic adjustments in their Medicaid programs to accommodate" new federal requirements. Following the Supreme Court's ruling in National Federation of Independent Business (NFIB) v. Sebelius (June 28, 2012), CBO indicated that UMRA's provisions may apply to changes in "the stringency of conditions" or reductions in funding for "certain large mandatory programs if the affected governments lack the flexibility to alter the programs." As discussed previously, H.R. 300 , the Unfunded Mandates Information and Transparency Act of 2019, would require CBO to assess the prospective costs of changes in conditions of federal financial assistance when requested by the chair or ranking member of a committee; broaden UMRA's coverage to include assessments of indirect as well as direct costs by amending the definition of direct costs to include forgone profits, costs passed onto consumers or other entities, and, to the extent practicable, behavioral changes; expand the scope of reporting requirements to include regulations imposed by most independent regulatory agencies; make private-sector mandates subject to a substantive point of order; establish principles for federal agencies to follow when assessing the effects of regulations on state and local governments and the private sector, including requiring the agency to identify the problem it seeks to address, determining whether existing laws or regulations could be modified to address the problem, identifying alternatives, and designing regulations in the most cost-effective manner available; expand the scope of cost statements accompanying significant regulatory actions to include, among other requirements, a reasonably detailed description of the need for the proposed rulemaking or final rule and an explanation of how the proposed rulemaking or final rule will meet that need; an assessment of the potential costs and benefits of the proposed rulemaking or final rule; estimates of the mandate's future compliance costs and any disproportionate budgetary effects upon any particular regions of the nation or state, local, or tribal governments; a detailed description of the agency's consultation with the private sector or elected representatives of the affected state, local, or tribal governments; and a detailed summary of how the agency complied with each of the regulatory principles included in the bill; no longer allow a federal agency to forgo UMRA analysis because the agency published a rule without first issuing a notice of proposed rulemaking; require federal agencies to meet enhanced levels of consultation with state, local, and tribal governments and the private sector before issuing a notice of proposed rulemaking or a final rule; and require federal agencies to conduct a retrospective analysis of the costs and benefits of an existing regulation when requested by the chair or ranking member of a committee. Advocates argue that these reforms will "improve the quality of congressional deliberations and ... enhance the ability of Congress, federal agencies, and the public to identify federal mandates that may impose undue harm on state, local, and tribal governments and the private sector." Opponents argue that these reforms are "an assault on the nation's health, safety, and environmental protections, would erect new barriers to unnecessarily slow down the regulatory process, and would give regulated industries an unfair advantage to water down consumer protections." Underlying disagreements over UMRA's future are fundamentally different values concerning American federalism. One view emphasizes the importance of freeing state and local government officials from the constraints brought about by the directives and costs associated with federal mandates so they can experiment with innovative ways to achieve results with greater efficiency and cost effectiveness. This view focuses on the positive effect active state and local governments can have in promoting a sense of state and community responsibility and self-reliance, encouraging participation and civic responsibility by allowing more people to become involved in public questions, adapting public programs to state and local needs and conditions, and reducing the political turmoil that sometimes results from single policies that govern the entire nation. Another view emphasizes the federal government's responsibility to ensure that all citizens are afforded minimum levels of essential government services. This view focuses on the propensity of states to restrict governmental services because they compete with one another for businesses and taxpaying residents; the variation in state fiscal capacities that makes it difficult for some states to provide certain governmental services even though they might have the political will to do so; and the propensity of states to have different views concerning what services are essential and what constitutes a sufficient level of essential government services. Given these disagreements over fundamental values, it is perhaps not surprising that there are differences of opinion concerning UMRA's future. Using President Clinton's words, debates over UMRA's future are more than just arguments over who will pay for what; they are also about finding "the right balance" for American federalism in the 21 st century. Appendix A. The Rise of Unfunded Mandates as a National Issue and UMRA's Legislative History Unfunded mandates became a national issue during the 1980s as state and local government officials and their affiliated public interest groups, led by the National League of Cities (NLC), U.S. Conference of Mayors (USCM), and National Association of Counties (NACO), began an intensive lobbying effort to limit unfunded intergovernmental mandates. Their efforts were supported by various business organizations, led by the U.S. Chamber of Commerce, which opposed the imposition of unfunded mandates on both state and local governments and the private sector, particularly mandates issued through federal rules. Increased Number and Cost of Unfunded Mandates State and local government officials became involved in the issue of unfunded federal mandates during the 1980s primarily because the number and costs of unfunded intergovernmental mandates were increasing and, by then, nearly every community in the nation had become subject to their effects. For example, ACIR reported that during the 1980s the costs of unfunded intergovernmental mandates were increasing at a rate faster than federal assistance. ACIR also identified 63 federal statutes as of 1990 that, in its view, imposed "major" restrictions or costs on state and local governments. Many of the statutes involved civil rights, consumer protection, improved health and safety, and environmental protection. Only 2 of the 63 statutes it identified, the Davis-Bacon Act of 1931 and Hatch Act of 1940, were enacted prior to 1964, 9 were enacted during the 1960s, 25 during the 1970s, 21 during the 1980s, and 6 in 1990. A study completed by the Clinton Administration's National Performance Review identified 172 laws in force that imposed requirements (regardless of the magnitude of their impact) on state and local governments as of December 1992. Some of the major federal statutes adopted during the 1970s that imposed relatively costly federal mandates on state and local governments were the Equal Employment Opportunity Act of 1972, which extended the prohibitions against discrimination in employment contained in the Civil Rights Act of 1964 to state and local government employment; the Fair Labor Standards Act Amendments of 1974, which extended the prohibitions against age discrimination in the Age Discrimination in Employment Act of 1967 to state and local government employment; and the Public Utilities Regulatory Policy Act of 1978, which established federal requirements concerning the pricing of electricity and natural gas. One of the more costly federal mandates enacted during the 1970s was Section 504 of the Rehabilitation Act of 1973. It prohibited discrimination against handicapped persons in federally assisted programs. CBO estimated that it would require states and localities to spend $6.8 billion over 30 years to equip buses with wheelchair lifts, to install elevators in subway systems, and to expand access to public transit systems for the physically disabled. Three of the more costly unfunded federal mandates adopted during the 1980s were the Safe Drinking Water Act Amendments of 1986 (which was estimated to impose an additional cost of between $2 billion and $3 billion on state and local governments to improve public water systems); the Asbestos Hazard Emergency Response Act of 1986 (which required schools to remove hazardous asbestos at an estimated cost of $3.15 billion over 30 years); and the Water Quality Act of 1987 (which was estimated to cost states and localities about $12 billion in capital costs for wastewater treatment). ACIR estimated that new federal mandates adopted between 1983 and 1990 cost state and local governments between $8.9 billion and $12.7 billion, depending on the definition of mandate used; in FY1991, federal mandates imposed estimated costs of between $2.2 billion and $3.6 billion on state and local governments; and additional mandates, not included in these estimates, were scheduled to take effect in the years ahead. ACIR suggested that the expansion of federal intergovernmental mandates during the 1960s, 1970s, and 1980s fundamentally changed the nature of intergovernmental relations in the United States: During the 1960s and 1970s, state and local governments for the first time were brought under extensive federal regulatory controls.... Over this period, national controls have been adopted affecting public functions and services ranging from automobile inspection, animal preservation and college athletics to waste treatment and waste disposal. In field after field the power to set standards and determine methods of compliance has shifted from the states and localities to Washington. State and Local Governments Seek Relief from Unfunded Mandates Edward I. Koch, then mayor of New York City and a former Member of Congress, was one of the first public officials to highlight the mandate issue. In 1980, he authored an article criticizing what he called "the mandate millstone." He noted that as a Member of Congress he voted for many federal mandates "with every confidence that we were enacting sensible permanent solutions to critical problems" but now that he was a mayor he had come to realize that "over the past decade, a maze of complex statutory and administrative directives has come to threaten both the initiative and the financial health of local governments throughout the country." The continued growth in the number and cost of federal mandates during the 1980s and early 1990s generated renewed and heightened opposition from state and local government officials and their affiliated public interest groups. This opposition culminated in the National Unfunded Mandates (NUM) Day initiative, sponsored by the NLC, USCM, NACO, and International City/County Management Association. Held on October 27, 1993, local government officials across the nation held press conferences and public forums criticizing unfunded mandates, and released a study of the costs imposed by federal mandates on local governments. Over 300 cities and 128 counties participated in the study, which, when extrapolated nationally, estimated that federal mandates imposed additional costs of $6.5 billion annually for cities and $4.8 billion annually for counties. The NUM Day methodology used to estimate the costs of unfunded federal mandates was later challenged because of the absence of independent validation of local government submissions and the nonrandom nature of the participating jurisdictions. However, politically, NUM Day was considered a success by its organizers for two reasons. First, it attracted unprecedented media attention to the issue of unfunded federal mandates. For example, the number of newspaper articles discussing unfunded federal mandates increased from 22 in 1992, to 179 in 1993, and to 836 in 1994. Second, it increased congressional awareness of state and local government concerns about unfunded mandates. For example, on January 5, 1995, Senator John Glenn mentioned NUM Day as having an impact on congressional awareness of unfunded mandates at a Senate congressional hearing on S. 1 The Unfunded Mandate Reform Act: On October 27, 1993, State and local elected officials from all over the Nation came to Washington and declared that day "National Unfunded Mandates Day." These officials conveyed a powerful message to Congress and the Clinton Administration on the need for Federal mandate reform and relief. They raised four major objections to unfunded Federal mandates. First, unfunded Federal mandates impose unreasonable fiscal burdens on their budgets; Second, they limit State and local government flexibility to address more pressing local problems like crime and education; Third, Federal mandates too often come in a "one-size-fits-all" box that stifles the development of more innovative local efforts efforts that ultimately may be more effective in solving the problem the Federal Mandate is meant to address; and Fourth, they allow Congress to get credit for passing some worthy mandate or program, while leaving State and local governments with the difficult tasks of cutting services or raising taxes in order to pay for it. State and local government officials continued to lobby Congress for mandate relief legislation and coordinated their efforts to increase public awareness of their concerns. For example, on March 21, 1994, state and local government officials across the nation held town hall meetings and their affiliated public interest groups sponsored a rally on the Capitol steps to draw media attention to their concerns about unfunded federal mandates. The NLC and state municipal leagues across the country also declared October 24-30, 1994, Unfunded Mandates Week, which also generated considerable media coverage. The Initial Congressional Response The efforts of state and local government officials appeared to have an effect on congressional legislative activity concerning unfunded federal mandates. During the 102 nd Congress (1991-1992), 12 federal mandate relief bills were introduced in the House and 10 were introduced in the Senate. All of these bills failed to be reported out of committee, and only one had a congressional hearing. During the first session of the 103 rd Congress (1993), 32 federal mandate relief bills were introduced and one of them, S. 993 , the Federal Mandate Accountability and Reform Act of 1994 cosponsored by Senators John Glenn and Dirk Kempthorne, was reported by the Senate Governmental Affairs Committee on June 16, 1994. It contained several provisions that were later in UMRA, and included an amendment offered by Senator Byron Dorgan "to include the private sector under the CBO and Committee mandate cost analysis requirements of Title I of S. 993 , and a Glenn amendment to allow CBO to waive the private-sector cost analysis if CBO cannot make a "reasonable estimate" of the bills cost." The bill was considered by the Senate on October 6, 1994, without a time agreement. After the introduction of several amendments and some debate, the Senate proceeded to other issues and adjourned without voting on the measure. The House Government Operations Committee also reported a bill, H.R. 5128 , the Federal Mandates Relief for State and Local Government Act of 1994, sponsored by Representative John Conyers Jr., on October 5, 1994. It was similar to S. 993 , but its approval was delayed, reportedly due to concerns raised by several senior Democratic Members worried that mandate legislation might make it more difficult to adopt laws to protect the environment and address social issues. Congress adjourned before the bill could move to the floor for consideration. Core Federalism Principles Debated During UMRA's Consideration The Republican Party gained control of the House of Representatives for the first time in 40 years following the congressional elections held on November 8, 1994. They also achieved a slim majority in the Senate as well. Mandate reform was a key provision in the Republican Party's "Contract With America." Perhaps reflecting its importance to the Republican leadership, the prospective Senate majority leader, Senator Robert Dole, designated a revised unfunded mandate relief bill, cosponsored by Senators Kempthorne and Glenn and introduced on January 4, 1995, the opening day of the new Congress, as S. 1 , the Unfunded Mandates Reform Act of 1995. The Senate Governmental Affairs Committee and Senate Budget Committee held a joint hearing on the bill the following day and it was reported out of the Senate Governmental Affairs Committee with three amendments (9 to 4) on January 9, 1995, and out of the Senate Budget Committee with four amendments (21-0) also on January 9, 1995. To expedite Senate floor consideration, neither committee filed a committee report. Instead, the committee chairs, Senator William Roth Jr. on behalf of the Senate Governmental Affairs Committee and Senator Pete Domenici on behalf of the Senate Budget Committee, each submitted a chairman's statement for insertion into the Congressional Record . When Senate floor consideration commenced on January 12, 1995, Senator Robert Byrd objected to several features of the way the legislation was being handled, including the absence of a committee report and the pace of consideration. In addition, Senators introduced 228 amendments to the bill. Floor debate lasted for more than two weeks. During floor debate, Senator Kempthorne argued that the bill should be adopted out of a sense of fairness to state and local governments and as a commitment to federalism principles: Under this legislation, we are acknowledging for the first time, in a meaningful way, that there must be limits on the Federal Government's propensity to impose costly mandates on other levels of government. As the representatives of those governments have very effectively demonstrated, this is a real problem. Cities, for example, generally are fortunate if they have adequate resources just to meet their own local responsibilities. Unfunded Federal mandates have put a real strain on those resources. This has been the practice of the Federal Government for the past several decades, but in recent years it has mushroomed into an intolerable burden. This has been due, at least in part, to the Federal Government's own budget crisis. In the past, if Congress felt that a particular problem warranted a national solution, it would often fund that solution with Federal dollars. Mandates imposed on State and local governments could frequently be offset with generous Federal grants. But the Federal Government no longer has the money to fund the governmental actions it wishes to see accomplished throughout the country. In fact, it hasn't had the money to do this for many years. Instead, it borrowed for a long time, to cover those costs. But now the Federal deficit is so large, that the only alternative left for imposing so-called national solutions is to impose unfunded mandates.... The State legislators and Governors know this. This is why they feel so strongly that legislation regarding this practice must first be in place, before they are asked to ratify a balanced budget amendment. Otherwise, in the drive to achieve a balance Federal budget, Congress might be tempted to mandate that State and local governments shall pick up many of the costs that were formerly Federal. This is why any effort to add a sunset provision to this bill ought to be opposed. Our commitment to protect federalism ought to be permanent. S. 1 is designed to put in place just such a mechanism. In this regard, it may truly be called balanced legislation. First of all, it helps bring our system of federalism back into balance, by serving as a check against the easy imposition of unfunded mandates. And, second, it does so in a way that strikes a balance between restraining the growth of mandates and recognizing that there may be legitimate exceptions. Senator Frank Lautenberg was among those opposing UMRA. He argued that the bill should be defeated because, among other things, the federal government has an obligation to set national standards to protect the environment and ensure the quality of life for all Americans: Halting interstate pollution is an important responsibility of the Federal Government. And I am concerned that this act may have a chilling effect on future Federal environmental legislation. Another issue that may get loss in this debate is the benefit that States and their citizens derive from Federal mandates even those not fully funded. States may say, we know how best to care for our citizens; a program that may be good for New Jersey, may not be good for Idaho or Ohio. But, I would argue that there is a broader national interest in some very fundamental issues which transcend that premise. I would argue that historically, not all States have provided a floor of satisfactory minimum decency standards for their citizens and that, as a democratic and fair society, we should worry about that. Further, as a practical matter, I would argue that the policies of one State in a society such as ours will certainly affect citizens and taxpayers of another State just as certainly as unfunded mandates can. Let us look at our welfare system. There has been a lot of discussion about turning welfare over to the States, with few or virtually no Federal guidelines or requirements. What would happen if we do that? Would we see a movement of the disadvantaged between States, putting a heavier burden on the citizens of a State that provides more generous benefits? Let us look at occupational safety, or environmental regulation. With a patchwork of differing standards across the States, would we see a migration of factories and jobs to States with lower standards? I think so. But by mandating floors in environmental and workplace conditions, the Federal Government ensures that States will comply with minimal standards befitting a complex, interrelated, and decent society. Or let us look at gun control. My State of New Jersey generally has strong controls on guns. But New Jerseyans still suffer from an epidemic of gun violence in no small measure because firearms come into New Jersey from other States. Without strong national controls, this will remain a problem. That is why we passed a ban on all assault weapons and why we passed the Brady bill. Currently the Federal Government discourages a scenario whereby a given State decides not to enforce some worker health and safety laws as a way of lowering costs and attracting industry. A State right next door might feel compelled to lower its standards in order to remain competitive. In the absence of a Federal Standard, we would likely see a bidding war that lowers the quality of life for all Americans. These are some of a host of very fundamental, very basic, and even profound questions raised by the notion that we should never have unfunded mandates. These are questions each Member of the Senate should consider long and hard, before moving to drastically curtail or make impossible any unfunded mandates. After voting on 44 amendments and several cloture motions, the Senate approved S. 1 on January 27, 1995, 86-10. One of the amendments approved by the Senate was the "Byrd look-back amendment," which is the only provision in UMRA that allows for the regulation of any mandates based on actual rather than estimated costs. It provided that legislation containing intergovernmental mandates would be considered funded, and hence not subject to a point of order, if it authorized appropriations to cover the estimated direct costs of the intergovernmental mandate and incorporated a prescribed mechanism requiring further review if, in any fiscal year, Congress did not appropriate funds sufficient to cover those costs. Under this mechanism, if the responsible federal agency determines that the appropriation provided was insufficient to cover the estimated direct costs of the mandate it shall notify the appropriate authorizing committees not later than 30 days after the start of the fiscal year and submit recommendations for either implementing a less costly mandate or making the mandate ineffective for the fiscal year. The statutory mechanism must also include expedited procedures for the consideration of legislative recommendations to achieve these outcomes not later than 30 days after the recommendations are submitted to Congress. Finally, the mechanism must provide that the mandate "shall be ineffective until such time as Congress has completed action on the recommendations of the responsible federal agency." After Senator Robert Byrd offered this amendment, the Senate adopted it on January 26, 1995, 100-0. The House companion bill to S. 1 was H.R. 5 , the Unfunded Mandate Reform Act of 1995, which was cosponsored by Representatives William F. Clinger Jr., Rob Portman, Gary A. Condit, and Thomas M. Davis. It was reported by the House Government Reform and Oversight Committee, on January 13, 1995, by voice vote and without hearings. Floor consideration began on January 20, 1995. Numerous amendments were introduced by Democratic Members to add various exemptions to the bill, such as the health of children and the disabled, the disposal of nuclear waste, and child support enforcement. These amendments were rejected on party-line votes. On February 1, 1995, H.R. 5 was adopted, 360-74, inserted into S. 1 as a House substitute, and sent to conference. There were two major differences between the House and Senate versions of S. 1 . The House version did not include the Byrd look-back amendment, and it permitted judicial review of federal agency compliance with the bill's provisions. Initially, House conferees refused to accept the Byrd look-back amendment and Senate conferees; worried that outside parties could delay regulations for years by filing lawsuits, refused to accept judicial review of federal agency compliance with the bill's provisions. Negotiations continued for six weeks. The deadlock over judicial review was ended by allowing judicial review of whether an appropriate analysis of mandate costs was done, but restricting the court's ability to second-guess the quality of the cost estimates. The deadlock over the Byrd look-back amendment ended when House conferees accepted its inclusion after being assured that its intent was to make certain that Congress, rather than an executive agency, retained responsibility for setting policy. The Senate adopted the conference report, which renamed the bill the Unfunded Mandates Reform Act of 1995, on March 15, 1995, 91-9, and the House adopted it the next day, 394-28. President Bill Clinton signed it on March 22, 1995. Appendix B. UMRA Points of Order 1. Representative Bill Archer, "Contract With America Advancement Act of 1996," House debate on motion to recommit H.R. 3136 , Congressional Record , vol. 142, part 5 (March 28, 1996), pp. 6931-6937. 2. Representative Rob Portman, "The Employee Commuting Act of 1996," House debate on H.R. 1227 , Congressional Record , vol. 142, part 9 (May 23, 1996), pp. 12283-12287. 3. Representative Bill Orton, "The Welfare Medicaid Reform Act of 1996," House debate on H.R. 3734 , Congressional Record , vol. 142, part 13 (July 18, 1996), p. 17668. 4. Representative Melvin Watt, "The Housing Opportunity and Responsibility Act," House debate on H.R. 2 , Congressional Record , vol. 143, part 5 (May 1, 1997), pp. 7006-7012. 5. Representative John Ensign, "The Nuclear Waste Policy Act of 1997," House debate on H.R. 1270 , Congressional Record , vol. 143, no, 148 (October 29, 1997), pp. H9655-H9657. 6. Representative Gerald Soloman, "The Agricultural Research, Extension, and Education Reform Act of 1998," House debate on the conference report for S. 1150 , Congressional Record , vol. 144, part 8 (June 4, 1998), pp. H9655-H9657. 7. Representative Jerrold Nadler, "The Bankruptcy Reform Act of 1998," House debate on H.R. 3150 , Congressional Record , vol. 144, part 8 (June 10, 1998), pp. 11853-11857. 8. Representative Steve Largent, "The Minimum Wage Increase Act," House debate on H.R. 3846 , Congressional Record , vol. 144, part 2 (March 9, 2000), pp. 2623-2624. 9. Representative James Gibbons, "The Nuclear Waste Policy Amendments Act of 2000," House debate on S. 1287 , Congressional Record , vol. 146, part 2 (March 22, 2000), pp. 3234-3236. 10. Representative John Conyers, "The Internet Nondiscrimination Act of 2000," House debate on H.R. 3709 , Congressional Record , vol. 146, part 6 (May 10, 2000), pp. 7483-7485. 11. Representative Charles Stenholm, "The Medicare RX 2000 Act," House debate on H.R. 4680 , Congressional Record , vol. 146, part 9 (June 28, 2000), pp. 12650-12653. 12. Representative Jim Moran, "The Department of Transportation Appropriations Act, 2002," House debate on H.R. 2299 , Congressional Record , vol. 147, part 9 (June 26, 2001), pp. 11906-11910. 13. Representative James Gibbons, "The Yucca Mountain Repository Site Approval Act," House debate on H.J.Res. 87 , Congressional Record , vol. 148, part 5 (May 8, 2002), pp. 7145-7148. 14. Representative Sheila Jackson-Lee, "The Real ID Act of 2005," House debate on H.R. 418 , Congressional Record , vol. 151, no. 13 (February 9, 2005), pp. H437-H442. 15. Representative James McGovern, "The Energy Policy Act of 2005," House debate on H.R. 6 , Congressional Record , vol. 151, no. 48 (April 20, 2005), pp. H2174-H2178. 16. Senator Kit Bond, "The Transportation, Treasury, HUD and Independent Agencies Appropriations Act, 2006," Senate debate on H.R. 3058 , Congressional Record , vol. 151, no. 133 (October 19, 2005), p. S11547. 17. Senator Ted Kennedy, "The Transportation, Treasury, HUD and Independent Agencies Appropriations Act, 2006," Senate debate on H.R. 3058 , Congressional Record , vol. 151, no. 133 (October 19, 2005), p. S11548. 18. Representative Jim McDermott, "The Deficit Reduction Act of 2005," House debate on H.R. 4241 , Congressional Record , vol. 151, no. 152 (November 17, 2005), pp. H10531-H10534. 19. Representative Jim McDermott, "The Deficit Reduction Act of 2005," House debate on H.Res. 653 , Congressional Record , vol. 152, no. 10 (February 1, 2006), pp. H37-H40. 20. Representative Tammy Baldwin, "The Communications Opportunity, Promotion, and Enhancement Act of 2006," House debate on H.R. 5252 , Congressional Record , vol. 152, no. 72 (June 8, 2006), pp. H3506-H3510. 21. Representative Jim McDermott, "The Federal Election Integrity Act of 2006," House debate on H.R. 4844 , Congressional Record , vol. 152, no. 118 (September 20, 2006), pp. H6742-H6745. 22. Representative Pete Sessions, "The Children's Health and Medicare Protections Act of 2007," House debate on H.R. 3162 , Congressional Record , vol. 153, no. 124-125 (August 1, 2007), pp. H9288-H9290. 23. Representative Pete Sessions, "The Children's Health Insurance Program Reauthorization Act of 2007," House debate on H.R. 3963 , Congressional Record , vol. 153, no. 163 (October 25, 2007), pp. H12027-H12029. 24. Representative Jeff Flake, "Senate Amendments to H.R. 6 , Energy Independence and Security Act of 2007," House debate on H.R. 6 , Congressional Record , vol. 153, no. 186 (December 6, 2007), pp. H4255-H4259. 25. Representative Mike Conaway, "The Renewable Energy and Energy Conservation Tax Act of 2008," House debate on H.R. 5351 , Congressional Record , vol. 154, no. 32 (February 27, 2008), pp. H1079-H1082. 26. Representative Paul Broun, "The Paul Wellstone Mental Health and Addiction Equity Act of 2007," House debate on H.R. 1424 , Congressional Record , vol. 154, no. 37 (March 5, 2008), pp. H1259-H1262. 27. Representative Jeff Flake, "The Food, Conservation, and Energy Act of 2008," House debate on H.R. 2419 , Congressional Record , vol. 154, no. 79 (May 14, 2008), pp. H3784-H3789. 28. Representative Eric Cantor, "The Comprehensive American Energy Security and Consumer Protection Act," House debate on H.R. 6899 , Congressional Record , vol. 154, no. 147 (September 16, 2008), pp. H8152-H8157. 29. Representative Jeff Flake, "The Consolidated Security, Disaster Assistance and Continuing Appropriations Act, 2009," House debate on H.R. 2638 , Congressional Record , vol. 154, no. 152 (September 24, 2008), pp. H9218-H9220. 30. Representative David Drier, "The American Recovery and Reinvestment Act," House debate on H.R. 1 , Congressional Record , vol. 155, no. 30 (February 13, 2009), pp. H1524-H1536. 31. Representative Jeff Flake, "The Omnibus Appropriations Act, 2009," House debate on H.R. 1105 , Congressional Record , vol. 155, no. 33 (February 25, 2009), pp. H2643-H2646. 32. Representative Jeff Flake, "The Agriculture, Rural Development, Food and Drug Administration Appropriations Act, 2010," House debate on H.R. 2997 , Congressional Record , vol. 155, no. 101 (July 8, 2009), pp. H7783-H7786. 33. Representative Jeff Flake, "The Military Construction and Veteran's Affairs Appropriations Act, 2010," House debate on H.R. 3082 , Congressional Record , vol. 155, no. 103 (July 10, 2009), pp. H7951-H7953. 34. Representative Jeff Flake, "The Energy and Water Development Appropriations Act, 2010," House debate on H.R. 3183 , Congressional Record , vol. 155, no. 106 (July 15, 2009), pp. H8107-H8109. 35. Representative Jeff Flake, "The Financial Services and General Government Appropriations Act, 2010," House debate on H.R. 3170 , Congressional Record , vol. 155, no. 107 (July 16, 2009), pp. H8191-H8193. 36. Representative Jeff Flake, "The Transportation, Housing and Urban Development Appropriations Act, 2010," House debate on H.R. 3288 , Congressional Record , vol. 155, no. 112 (July 23, 2009), pp. H8593-H8594. 37. Representative Jeff Flake, "The Departments of Labor, Health, and Human Services, and Education Appropriations Act, 2010," House debate on H.R. 3293 , Congressional Record , vol. 155, no. 113 (July 24, 2009), pp. H8593-H8594. 38. Representative Jeff Flake, "The Department of Defense Appropriations Act, 2010," House debate on H.R. 3326 , Congressional Record , vol. 155, no. 116 (July 29, 2009), pp. H8977-H8978. 39. Senator Robert Corker, " H.R. 3590 , the Service Members Home Ownership Act of 2009," remarks in the Senate, Congressional Record , daily edition, vol. 155, no. 199 (December 23, 2009), pp. S13803-S13804. 40. Representative Paul Ryan, "Providing for Consideration of Senate Amendments to H.R. 3590 , Service Members Home Ownership Tax Act of 2009, and Providing for Consideration of H.R. 4872 , Health Care and Education Reconciliation Act of 2010," House debate on H.Res. 1203 , Congressional Record , daily edition, vol. 156, no. 43 (March 21, 2010), pp. H1825-H1828. 41. Representative Jeff Flake, "Providing For Consideration of H.R. 5822 , Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2011," House debate on H.R. 5822 , Congressional Record , vol. 156, no. 112 (July 28, 2010), pp. H6206-H6209. 42. Representative Jeff Flake, "Providing For Consideration of H.R. 5850 , Transportation, Housing And Urban Development, and Related Agencies Appropriations Act, 2011," House debate on H.R. 5850 , Congressional Record , vol. 156, no. 113 (July 29, 2010), pp. H6298-H6290. 43. Representative Jeff Flake, "Providing For Consideration of Senate Amendment to House Amendment to Senate Amendment to H.R. 4853 , Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010," House debate on H.R. 4853 , Congressional Record , vol. 156, no. 157 (December 16, 2010), pp. H8525-H8526. 44. Representative Keith Ellison, "Providing For Consideration of H.R. 1255 , Government Shutdown Prevention Act of 2011," House debate on H.Res. 194 , Congressional Record , vol. 157, no. 46 (April 1, 2011), pp. H2219-H2222. 45. Representative John Garamendi, "Providing For Further Consideration of H.R. 1540 , National Defense Authorization Act for Fiscal Year 2012," House debate on H.R. 276 , Congressional Record , vol. 157, no. 73 (May 25, 2011), pp. H3423-H3424. 46. Representative Keith Ellison, "Providing For Consideration of H.R. 2017 , Department of Homeland Security Appropriations Act, 2012," House debate on H.Res. 287 , Congressional Record , vol. 157, no. 77 (June 1, 2011), pp. H3816-H3818. 47. Representative John Garamendi, "Providing For Further Consideration of H.R. 2021 , Jobs and Energy Permitting Act of 2011 and Providing for Consideration of H.R. 1249 , America Invents Act," House debate on H.Res. 316 , Congressional Record , vol. 157, no. 73 (June 22, 2011), pp. H4379-H.4380. 48. Representative Marcia Fudge, "Providing For Consideration of H.R. 1315 , Consumer Financial Protection Safety and Soundness Improvement Act of 2011," House debate on H.Res. 358 , Congressional Record , vol. 157, no. 110 (July 21, 2011), p. H5302. 49. Representative Gwen Moore, "Providing For Consideration of H.Res. 358 , Protect Life Act," House debate on H.Res. 430 , Congressional Record , vol. 157, no. 153 (October 13, 2011), pp. H6869, H6870. 50. Representative Gwen Moore, "Providing For Consideration of H.R. 3630 : Middle Class Tax Relief and Job Creation Act of 2011," House debate on H.Res. 491 , Congressional Record , vol. 157, no. 191 (December 13, 2011), pp. H8745-H8748. 51. Representative Gwen Moore, "Providing For Consideration of H.R. 4089 : Sportsmen's Heritage Act of 2012, and for Other Purposes," House debate on H.Res. 614 , Congressional Record , vol. 158, no. 55 (April 17, 2012), pp. H1860-H1862. 52. Representative Gwen Moore, "Providing For Consideration of H.R. 4970 , the Violence Against Women Reauthorization Act of 2012, and Providing For Consideration of H.R. 4310 , the National Defense Authorization Act for Fiscal Year 2013," House debate on H.Res. 656 , Congressional Record , vol. 158, no. 70 (May 16, 2012), pp. H2776-H2731. 53. Representative Gwen Moore, "Providing For Consideration of House Joint Resolution 118, Disapproving Rule Relating To Waiver and Expenditure Authority with Respect to the Temporary Assistance For Needy Families Program. Providing For Consideration of H.R. 3409 , the Stop The War On Coal Act of 2012; and Providing For Proceedings during the Period from September 22, 2012, through November 12, 2012," House debate on H.Res. 788 , Congressional Record , vol. 158, no. 128 (September 20, 2012), pp. H6165-H6173. 54. Representative Jared Polis, "Providing For Consideration of H.R. 273 , Elimination of 2013 Pay Adjustment, and for Other Purposes," House debate on H.Res. 66 , Congressional Record , vol. 159, no. 24 (February 14, 2013), pp. H517-H519. 55. Representative Donna Edwards, "Providing For Consideration of H.R. 1947 , Federal Agriculture Reform and Risk Management Act of 2013; and Providing for Consideration of H.R. 1797 , Pain-Capable Unborn Child Protection Act," House debate on H.Res. 266 , Congressional Record , vol. 159, no. 87 (June 18, 2013), pp. H3708-H3710. 56. Representative Jim McGovern, "Providing For Further Consideration of H.R. 1947 , Federal Agriculture Reform and Risk Management Act of 2013," House debate on H.Res. 271 , Congressional Recor d, vol. 159, no. 88 (June 19, 2013), pp. H3770-H3774. 57. Representative Jim McGovern, "Providing For Consideration of H.R. 7 , No Taxpayer Funding for Abortion and Abortion Insurance Full Disclosure Act of 2014, and Providing for Consideration of Conference Report on H.R. 2642 , Federal Agriculture Reform and Risk Management Act of 2013," House debate on H.Res. 465 , Congressional Recor d, vol. 160, no.16 (January 28, 2014), pp. H1443-H1445. 58. Representative Danny Davis, "Providing For Consideration of H.R. 4438 , American Research and Competitiveness Act of 2014," House debate on H.R. 4438 , Congressional Record , vol. 160, no. 68 (May 7, 2014), pp. H3465-H3466. 59. Representative Jim McGovern, "Providing For Further Consideration of H.R. 4435 , Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015; and Providing for Consideration of H.R. 3361 , USA FREEDOM Act," House debate on H.R. 4435 , Congressional Record , vol. 160, no.77 (May 21, 2014), pp. H4699-H4701. 60. Representative Jared Polis, "Providing For Further Consideration of H.R. 5 , Student Success Act," House debate on H.R. 5 , Congressional Record , vol. 161, no.33 (February 26, 2015), pp. H1180-H1182. 61. Representative Bonnie Watson Coleman, "Providing For Consideration of H.R. 1732 , Regulatory Integrity Protection Act of 2015; Providing for Consideration of Conference Report on S.Con.Res. 11 , Concurrent Resolution on the Budget, Fiscal Year 2016; and Providing for Consideration of H.J.Res. 43 , Disapproval of District of Columbia Reproductive Health Non-Discrimination Amendment Act of 2014," House debate on H.Res. 231 , Congressional Record , vol. 161, no.64 (April 30, 2015), pp. H2672-H2674. 62. Representative Louise Slaughter, "Providing For Consideration of the Senate Amendment to H.R. 2146 , Defending Public Safety Employees' Retirement Act," House debate on H.Res. 321 , Congressional Record , vol. 161, no. 98 (June 18, 2015), pp. H4497-H4507. 63. Representative Elizabeth Esty, "Providing For Consideration of H.R. 2130 , Red River Private Property Protection Act, and Providing for Consideration of Motions to Suspend the Rule," House debate on H.Res. 556 , Congressional Record , vol. 161, no. 178 (December 9, 2015), pp. H9092-H9095. 64. Representative Joaquin Castro, "Providing For Consideration of H.R. 5325 , Legislative Branch Appropriations Act, 2017," House debate on H.Res. 771 , Congressional Record , vol. 162, no. 91 (June 9, 2016), pp. H3586-H3588. 65. Senator Bernie Sanders, "National Sea Grant College Program Amendments of 2015 (Puerto Rico Oversight, Management, and Economic Stability Act PROMESA)," Senate debate on S. 2328 , Congressional Record , vol. 162, no. 105 (June 29, 2016), pp. S4691-S4702. 66. Representative Jim McGovern "Providing For Consideration of H.R. 5698, Protect and Serve Act of 2018; Providing For Consideration of S. 2372 , Veterans Cemetery Benefit Correction Act; and Providing For Consideration of H.R. 2, Agriculture and Nutrition Act of 2018," House debate on H.Res. 891 , Congressional Record , vol. 164, no. 80 (May 16, 2018), pp. H3991-H3993.

The Unfunded Mandates Reform Act of 1995 (UMRA) culminated years of effort by state and local government officials and business interests to control, if not eliminate, the imposition of unfunded intergovernmental and private-sector federal mandates. Advocates argued the statute was needed to forestall federal legislation and regulations that imposed obligations on state and local governments or businesses that resulted in higher costs and inefficiencies. Opponents argued that federal mandates may be necessary to achieve national objectives in areas where voluntary action by state and local governments and business failed to achieve desired results. UMRA provides a framework for the Congressional Budget Office (CBO) to estimate the direct costs of mandates in legislative proposals to state and local governments and to the private sector, and for issuing agencies to estimate the direct costs of mandates in proposed regulations to regulated entities. Aside from these informational requirements, UMRA controls the imposition of mandates only through a procedural mechanism allowing Congress to decline to consider unfunded intergovernmental mandates in proposed legislation if they are estimated to cost more than specified threshold amounts. UMRA applies to any provision in legislation, statute, or regulation that would impose an enforceable duty upon state and local governments or the private sector. It does not apply to duties stemming from participation in voluntary federal programs; rules issued by independent regulatory agencies; rules issued without a general notice of proposed rulemaking; and rules and legislative provisions that cover individual constitutional rights, discrimination, emergency assistance, grant accounting and auditing procedures, national security, treaty obligations, and certain elements of Social Security. In most instances, UMRA also does not apply to conditions of federal assistance. State and local government officials argue that UMRA's coverage should be broadened, with special consideration given to including conditions of federal financial assistance. During the 116th Congress, H.R. 300, the Unfunded Mandates Information and Transparency Act of 2019, would broaden UMRA's coverage to include both direct and indirect costs, such as foregone profits and costs passed onto consumers, and, when requested by the chair or ranking member of a committee, the prospective costs of legislation that would change conditions of federal financial assistance. The bill also would make private-sector mandates subject to a substantive point of order and remove UMRA's exemption for rules issued by most independent agencies. The House approved similar legislation during the 112th, 113th, 114th, and 115th Congresses. This report examines debates over what constitutes an unfunded federal mandate and UMRA's implementation. It focuses on UMRA's requirement that CBO issue written cost estimate statements for federal mandates in legislation, its procedures for raising points of order in the House and Senate concerning unfunded federal mandates in legislation, and its requirement that federal agencies prepare written cost estimate statements for federal mandates in rules. It also assesses UMRA's impact on federal mandates and arguments concerning UMRA's future, focusing on UMRA's definitions, exclusions, and exceptions that currently exempt many federal actions with potentially significant financial impacts on nonfederal entities. An examination of the rise of unfunded federal mandates as a national issue and a summary of UMRA's legislative history are provided in Appendix A. Citations to UMRA points of order raised in the House and Senate are provided in Appendix B.

crs_R46277

crs_R46277_0

<1. Introduction> Serious disruptions for certain industries caused by the COVID-19 (coronavirus) pandemic have led to calls for federal government assistance to affected industries. Although out of the ordinary, this would not be the first occasion on which the federal government has provided aid to troubled or financially distressed industries. To help inform congressional debate, this report examines selected past instances in which the government has aided troubled industries, providing information about the way in which such assistance was structured, the role of Congress, and the eventual cost. Assistance for distressed industries or businesses sometimes popularly referred to as "government bailouts" historically has taken different forms and has occurred under varying circumstances. Assistance has not been limited to outlays by the Treasury, or to actions explicitly authorized by Congress, or to measures which imposed a net cost on taxpayers on an unadjusted cash-flow basis. Sometimes, the industry distress was being driven by external shocks, such as the 9/11 terrorist attacks or the 2007-2009 financial crisis, and other times it was driven by long-term secular trends, such as changes in the economic outlook for the railroad industry. Past assistance has involved such instruments as loan guarantees, asset purchases, capital injections, direct loans, and regulatory changes, with the specific mix of policies varying significantly from case to case. These differences make it somewhat subjective what should be defined as a "bailout." In order to provide greater detail, the examples discussed in this report all involve cases in which federal assistance was (1) widely available to firms within an industry rather than being targeted to a particular firm; (2) extraordinary in nature rather than a type of assistance that is routinely provided; and (3) motivated primarily by a desire to prevent industry-wide business failures. For each case, the report provides data on the costs and income to government, to the extent that they are available. In some of the cases reviewed in this report, the government was able to recoup much or all of its assistance through fees, interest, warrants, and loan or principal repayments. In others, there were no arrangements made for recoupment or repayment. But the fact that a beneficiary of government assistance repaid a loan or gave the government shares that ultimately increased in value does not necessarily mean that the government "broke even" or "made a profit." The government had to borrow, incurring interest payments, to finance these programs, and adjusting federal outlays and receipts for inflation may not account fully for this. In most cases, although not all, government assistance was provided under the assumption that it would be repaid, exposing the government to risk of credit loss that is not accounted for simply by adding up expenditures and receipts. An economist would typically determine whether the government received full compensation for credit assistance by comparing the government's terms to what a private investor would have required for the loan or loan guarantee. Making such adjustments would increase the reported value of federal assistance and in some instances would indicate that taxpayers were not fully compensated although it is fair to question what terms would have been required, for example, by a hypothetical commercial lender in the depths of the 2007-2009 financial crisis, when private credit markets were not functioning normally. In any case, if such a standard were used, it would be a more demanding one than the government typically uses to measure the costs of federal credit and guarantee programs. The Congressional Budget Office (CBO) has provided assessments of the Troubled Asset Relief Program (TARP) adjusting for borrowing costs and market risk, but CBO has not offered such estimates of other government assistance. The final disposition of assets and liabilities arising from assistance often can take years. But not all sources continued to consistently report data long after the initial intervention. Thus, while the cost estimates presented here are based on official sources, they sometimes involve a degree of uncertainty. In some cases, precise information on the timing of outlays and recoupments is unclear and assumptions are necessary in order to compute the inflation adjustments. Where there is uncertainty about the timing of payments, we present a range of possible inflation-adjusted outcomes. There are broader policy concerns raised by government assistance that are difficult to quantify and do not get captured in tallies of the government's income and expenses. Potential benefits of assistance can include avoiding potentially long-lasting disruptions to consumers, workers, local communities, and the overall economy; averting losses to federally guaranteed retirement funds; and maintaining federal tax revenues. Potential drawbacks to assistance include the possibility that it may reduce competition by rewarding incumbents over new entrants and distort the affected product market by causing (or prolonging) overproduction; that it may cause "moral hazard" if firms respond to government assistance by acting with less financial prudence in the future; and that it can delay an industry's adjustment to structural problems such as high production cost and excess capacity. In every case, federal assistance to certain industries may raise questions about the fairness of providing assistance to some businesses but not to others. <1.1. Sources> Information on the various assistance programs comes primarily from reports from the Government Accountability Office (GAO), Congressional Research Service (CRS), and executive branch agencies involved in the assistance. Specific sources are cited in the individual sections. Reporting on the programs has varied significantly over the years as different agencies have undertaken the assistance under different statutory authority. In some cases, Congress has included specific reporting requirements when assistance is authorized or other specific oversight mechanisms. Historical vote totals are included from http://www.congress.gov and from Congressional Quarterly, CQ Almanac (various years). Various iterations of some bills received multiple votes; for brevity, we only include the final vote taken. Stock prices and market information are from the Wall Street Journal print and online versions. Inflation adjustments are based on gross domestic product (GDP) price index data from the Bureau of Economic Analysis. <2. Railroad Restructuring (1957-1987)7> <2.1. What Happened to the Company/Industry> Throughout the 1950s, the rail industry was in decline as federal spending on highways and the growth of the airline industry ate into railroads' ability to compete with those other modes of transportation. One large railroad, the New York, Ontario and Western, which had been in financial distress since the 1930s, was liquidated in 1957. Rail industry leaders advocated for one or more of the following in order to counter this trend: permission to shut down unprofitable routes, especially passenger routes; direct subsidies to continue operations; and/or encouragement of large-scale mergers to create economies of scale. Congress' initial legislative response, the Transportation Act of 1958 ( P.L. 85-625 ), created a loan guarantee program for railroads and gave the Interstate Commerce Commission (ICC) sole authority over proposals to curtail service, circumventing the previous role of state agencies. Still, the industry underwent a wave of mergers, consolidating from 110 Class I railroads in 1957 to 71 in 1970. The process culminated in the 1968 merger of arch-rivals Pennsylvania Railroad and New York Central Railroad into the Penn Central, the largest railroad in the world at the time. By this time, a wave of bankruptcies was well underway. The New York, New Haven and Hartford Railroad had gone into bankruptcy in 1961 and was merged into the Penn Central in 1969, its inclusion having been a condition of the Penn Central-New York Central merger's approval by the ICC. The Central Railroad of New Jersey failed in 1967. Then, in declining financial condition due to falling revenues, badly rundown infrastructure, high property taxes, incompatible systems, and high labor costs, the Penn Central itself declared bankruptcy in June 1970, less than three years after its creation. Other railroads operating in the Northeast and Midwest also went bankrupt and could not be reorganized, some having suffered severe damage caused by Hurricane Agnes in 1972. The other troubled carriers included the Ann Arbor Railroad, the Reading Railroad, the Lehigh Valley Railroad, the Boston and Maine Railroad, and the Erie Lackawanna Railroad, itself the result of a merger of former competitors completed in 1960. In addition to disrupting passenger and freight transportation, the railroad industry's distress exposed a number of major banks and financial institutions to large potential losses. The commercial paper market, in which firms issue short-term securities to meet near-term financial needs, experienced disruptions following the Penn Central bankruptcy, leading to concerns that the Penn Central's problems could endanger companies in other industries. <2.2. Executive or Regulatory Agency Action and Assistance> Several federal agencies, including the Department of Transportation, the Department of Defense, and the Federal Reserve, were unwilling or unable to assist troubled railroads with loan guarantees. The ICC sought to assist railroads by expediting approval of applications for mergers or abandonment of unprofitable lines, but this was not enough to forestall bankruptcies. <2.3. Congressional Action and Assistance> Congress enacted several measures throughout the 1970s to avert the collapse of the rail industry. These actions combined federal financial assistance, deregulation, and the creation of new quasi-governmental private companies. <2.3.1. The Rail Passenger Service and Emergency Rail Services Acts of 1970> The Rail Passenger Service Act of 1970 (P.L. 91-518), which was passed by voice vote in both houses of Congress, relieved all railroad companies of the obligation to provide intercity passenger service, creating a quasi-governmental private company called the National Railroad Passenger Corporation Amtrak to operate passenger trains over freight railroads' tracks with federal support. The act called for a "basic system" of key routes that the railroads would continue to operate until Amtrak began operations on May 1, 1971, and provided for railroad companies to transfer unneeded passenger rail equipment to Amtrak. The Emergency Rail Services Act of 1970 (P.L. 91-663) provided up to $125 million in loan guarantees to railroads to preserve essential service until a more permanent restructuring plan could be put in place. The law was passed in the Senate on a vote of 47-29 and in the House on a vote of 165-121. <2.3.2. The Regional Rail Reorganization Act of 1973> In March 1973, the bankruptcy court handling the Penn Central's case found that its finances were so precarious that it would likely need to cease all operations before October of that year. In December 1973, the Regional Rail Reorganization Act ( P.L. 93-236 ), also called the 3R Act, created the United States Railway Association (USRA) to provide additional emergency funding and prepare the restructuring and rehabilitation of Penn Central and other bankrupt railroads. The law passed the Senate on a vote of 45-16 and the House on a vote of 284-59. It provided for the creation of Conrail officially the Consolidated Rail Corporation as a quasi-private for-profit corporation that would take over operations of various bankrupt railroads in the Northeast and Midwest. USRA was charged with creating a "Final System Plan" that identified the lines that would be transferred to Conrail. <2.3.3. The Railroad Revitalization and Regulatory Reform Act of 1976> The Railroad Revitalization and Regulatory Reform (4R) Act of 1976 ( P.L. 94-210 ), which approved the USRA's "Final System Plan," was enacted on February 5, 1976. It passed the House on a vote of 353-62 and the Senate on a vote of 58-26. Conrail was incorporated five days later, beginning operations on April 1, 1976, at which point its predecessors including the Penn Central ceased to exist as railroad companies. In addition to taking responsibility for those railroads' physical infrastructure and freight operations, Conrail operated commuter services in several states. The 4R Act provided funding for Conrail, permitted and approved additional property designations under 3R, and facilitated the transfer of ownership of the Penn Central's Northeast Corridor line to Amtrak. Direct federal subsidies to Conrail took several forms including remuneration of direct operating losses, approximately $2.1 billion; capital rehabilitation, approximately $1.2 billion; and "lifetime protection" payments to employees of Conrail and its predecessors, approximately $650 million. Much of this flowed through USRA purchases of Conrail equity instruments. In addition, approximately $3 billion was paid to the estates of bankrupt railroads for property taken to create Conrail. Total assistance for Conrail was estimated at approximately $7 billion. The 4R Act also contained reforms aimed at easing ICC regulation of the railroad industry more broadly. Railroads were given greater flexibility to set shipping rates and were allowed for the first time to sign contracts with large shippers specifying rates and terms of service. The act gave the ICC the power to exempt certain types of freight traffic from rate regulation altogether. The act also created the Railroad Rehabilitation and Improvement Financing (RRIF) loan program, currently codified at 45 U.S.C. 821-838, to offer long-term, low-cost loans to railroad operators. The RRIF program was intended to assist "short line" railroads, which took over many small lines that were being abandoned by larger railroads, to finance improvements to infrastructure and investments in equipment. <2.3.4. Restructuring the Milwaukee and Rock Island Railroads> The restructuring of the eastern railroads did not put an end to the industry's difficulties. In the Midwest, the Chicago, Rock Island and Pacific Railroad filed for bankruptcy in 1975, and the Chicago, Milwaukee, St. Paul and Pacific Railroad in 1977. They were not incorporated into Conrail, but were the subject of separate federal legislation. Congress passed the Milwaukee Railroad Restructuring Act ( P.L. 96-101 ) in both the House and the Senate by voice vote in 1979 and the Rock Island Railroad Transition and Employee Assistance Act ( P.L. 96-254 ) in both the House and Senate by voice vote in 1980. Each law contained worker protection provisions and empowered bankruptcy courts to accelerate the sale or abandonment of parts of their networks as part of restructuring. The Chicago, Milwaukee, St. Paul and Pacific Railroad abandoned or sold roughly two-thirds of its network, with the rest ultimately acquired in 1985 by the Canadian Pacific Railroad through an American subsidiary. The case of the Chicago, Rock Island and Pacific Railroad was direr; by March 1980, before Congress had a chance to pass its transition assistance law, the railroad had been deemed incapable of continuing rail operations by the ICC, declared the property of a neutral party (pursuant to 3R), and ceased operations. Its former property was acquired by multiple buyers. <2.3.5. The Staggers Rail Act of 1980> With Conrail's profitability still not much improved, Congress passed the Staggers Rail Act of 1980 ( P.L. 96-448 ), by a 61-8 vote in the Senate and a voice vote in the House. The law expanded upon the deregulation begun in the 3R and 4R Acts. Among other provisions, the Staggers Act prevented the ICC from setting maximum shipping rates, permitted railroads to keep their rate agreements with customers secret, broadened the ICC's power to declare exemptions, and required the submissions of proposals for the future of Conrail. While many of its provisions were unpopular with some shippers, particularly those who could not readily move their freight by truck or barge if they found rail rates excessive, the law helped restore the freight rail sector to profitability and eventually led to increased capital investment in the industry. <2.3.6. The Northeast Rail Services Act of 1981> While the duty to provide intercity passenger rail had been transferred to Amtrak by the Rail Passenger Service Act of 1970, Conrail was still bound to operate the local commuter routes previously run by its predecessor railroads. The Northeast Rail Services Act of 1981 (NERSA; P.L. 97-35 ) was enacted as Subtitle E of the Omnibus Budget Reconciliation Act of 1981, approved by the Senate on a vote of 80-15 and by the House on a vote of 232-195. NERSA relieved Conrail of all obligations to provide commuter rail service beginning January 1, 1983, in order to improve its profitability. To ensure continuity of operations, however, NERSA required state- or locally-chartered commuter authorities to continue to operate all commuter rail lines previously operated by Conrail, and created a new subsidiary of Amtrak to take over such lines if any state declined to do so (none did). NERSA also stipulated that Conrail's status as a quasi-governmental corporation should be temporary and that the government's stake in the company should eventually be sold to one or more private buyers. <2.4. Repayment or Recoupment of Assistance> Following the reforms in the 3R and 4R Acts, the Staggers Act, and NERSA, Conrail reported a profit in 1981 and in subsequent years. The government's 85% stake in the company was sold through an initial public offering in 1987 after the government rebuffed attempts by other railroads to acquire it in ways that could have reduced rail competition in the Northeast. (The other 15% was owned by Conrail employees.) The government recouped a total of approximately $2 billion, including a $300 million dividend from Conrail and $1.65 billion from the public offering. This was approximately $5 billion less than total government outlays, when measured in nominal dollars, or $20 billion to $24 billion less than the government's outlays when adjusted for inflation ( Table 1 ). <2.5. Final Outcomes> Railroad profitability increased following implementation of the Staggers Act, and railroad companies, devoting themselves entirely to freight traffic, continued to consolidate and shed unprofitable lines. Some 70,000 miles of railroad have been abandoned since 1980, and the number of large railroads known as Class I railroads operating in the United States now stands at seven. Following its privatization, Conrail continued as an independent company until 1997, when it was acquired by Norfolk Southern Corporation and CSX Corporation in a joint stock purchase valued at approximately $10.3 billion. Norfolk Southern and CSX split most of the Conrail assets after the purchase. Amtrak has never generated an operating profit, and has received federal operating support every year since its creation. <3. Farm Credit System Crisis (1980s)15> <3.1. What Happened to the Industry> The federal government has a long history of assisting farmers with real estate and operating loans. This intervention has been justified by the presence of asymmetric information between lenders and farmers, lack of competition and resources in rural areas, and policies to target assistance to disadvantaged groups. The two agricultural lenders with the greatest federal connection are the Farm Service Agency (FSA) and the Farm Credit System (FCS), a private cooperative. The first, FSA, is part of the U.S. Department of Agriculture (USDA) and receives federal appropriations to make direct loans and guarantees to farmers who do not qualify for commercial credit. The second, FCS, is privately funded without federal appropriation as a cooperatively owned entity with a statutory mandate to serve only agriculture-related borrowers. The FCS is regulated by the Farm Credit Administration, an independent agency funded by assessments on system institutions. A severe downturn in the agricultural economy beginning in the early 1980s contributed to a financial crisis among many agricultural lenders and their farmer borrowers (the result of low farm income, high interest rates, and declining land prices). Since the FCS had exposure to only a single industry, it held a loan portfolio that developed large delinquencies, much of which was eventually written off as uncollectible. The farm financial crisis caused the FCS to experience operating losses of $2.7 billion in 1985 and $1.9 billion in 1986, for example, which jeopardized its financial stability, including its ability to repay bondholders in private capital markets. While FCS debt is not a government obligation nor guaranteed, many investors perceive its government-sponsored enterprise (GSE) status to imply that the Treasury would not allow FCS default. Moreover, FCS was an important lender to agriculture and held one-third of farm debt at the time. <3.2. Congressional Action and Assistance> <3.2.1. The Agricultural Credit Act of 1987> The Agricultural Credit Act of 1987 ( P.L. 100-233 ) was enacted on January 6, 1988, after being approved by the Senate by a vote of 85-2 and the House on a vote of 365-18. The law authorized a $4 billion financial assistance package. It created a new FCS entity, the FCS Financial Assistance Corporation, which utilized $1.26 billion in loans from the U.S. Treasury. The assistance stabilized the FCS by allowing it to repay its bonds and meet its debt obligations. The act required the FCS to work out a schedule for repaying the Treasury, mandated FCS organizational changes, protected FCS borrowers' stock investments in FCS institutions, and specified requirements for restructuring FCS problem farm loans. Among the notable organizational changes, FCS banks became jointly and severally liable for each other's debts (that is, the FCS banks together would be responsible for the cumulative debts of the individual FCS banks if any become insolvent). The act also created an FCS Insurance Corporation, similar to the Federal Deposit Insurance Corporation, to further ensure the ability of the FCS to repay its bonds. Although the primary purpose of the 1987 Act was to rescue and restructure the FCS, the act also led to the creation of a system of borrower rights for the FCS and the FSA. These borrower rights are somewhat unique to agriculture, compared to what was available to homeowners during the 2008 housing crisis. Before the FCS and FSA can initiate foreclosure proceedings, it must offer options to restructure delinquent farm loans when it would be less costly than taking foreclosure action, and it must offer rights of first refusal for an individual or extended family to repay a delinquent loan to avoid foreclosure and preserve a farm homestead. <3.3. Repayment or Recoupment of Government Assistance> The FCS Financial Assistance Corporation borrowed $1.26 billion from the U.S. Treasury during the farm financial crisis of the 1980s. The FCS made provisions in the early 1990s to systematically repay all of its financial assistance by collecting assessments on system banks and associations. The arrangement for the 15-year debt by the FCS Financial Assistance Corporation to the Treasury was that the government paid the interest for the first five years, FCS and the Treasury split the interest during the second five years, and FCS bore all of the interest during the final five years. In June 2005, the last of the bonds and interest was repaid on schedule to the U.S. Treasury. The FCS Financial Assistance Corporation was dissolved in December 2006. <3.4. Final Outcome> Farm Credit System financial performance steadily improved throughout the 1990s and into the present day. The Farm Credit System Insurance Corporation is fully funded to its capitalization goals. The borrowers' rights provisions continue to provide protection to farmers facing new financial difficulties, such as through the financial crisis in 2007-2009 and during the current period of lower farm income. <4. Savings and Loan Crisis (1980s-1990s)20> <4.1. What Happened to the Industry21> Savings and loan institutions (S&Ls) were state- or federally chartered deposit-taking institutions whose loans mainly took the form of residential mortgages. Some were mutual institutions owned by their depositors, while others had publicly traded shares. Federally chartered S&Ls were authorized in the 1930s to promote mortgage lending and were regulated by a separate regulator, the Federal Home Loan Bank Board (FHLBB), rather than by the agencies responsible for regulating commercial banks. The industry suffered a solvency crisis in the 1980s. When interest rates rose, S&Ls' floating-rate liabilities (e.g., deposits) had a higher interest cost than the industry was earning on fixed-rate assets that had been issued before rates rose (e.g., mortgages). In the presence of government deposit insurance, depositors had little incentive to withdraw their deposits from unprofitable S&Ls, since their deposits were safe even if their S&L failed. This allowed insolvent S&Ls to continue to access the funds needed to keep operating. According to a study by the Federal Deposit Insurance Corporation, "Net S&L income, which totaled $781 million in 1980, fell to negative $4.6 billion and $4.1 billion in 1981 and 1982 . In fact, tangible net worth for the entire S&L industry was virtually zero, having fallen from 5.3 percent of assets in 1980 to only 0.5 percent of assets in 1982." <4.2. Regulatory Agency Action and Assistance> Policymakers were slow to address the crisis because of concerns that resolving large numbers of S&Ls would have a negative effect on homeownership by disrupting mortgage lending. Government policy is generally viewed as exacerbating the crisis in two ways. First, the S&L regulator, the FHLBB, practiced "regulatory forbearance," allowing insolvent firms to keep operating in the hopes that they would eventually become profitable again. Forbearance made the problem larger because it arguably encouraged such "zombie S&Ls" to take on more risks, undermining more conservatively run competitors. Regulatory forbearance was motivated in part by the fact that the Federal Savings and Loan Insurance Corporation (FSLIC), the agency responsible for insuring S&L customers' deposits, lacked the funds to honor deposit insurance claims if all the undercapitalized S&Ls were rescued or closed down. Almost 1,000 thrifts still in operation, holding half of total industry assets, were insolvent or nearly insolvent by 1986. By 1987, the FSLIC itself was insolvent. In the meantime, zombie S&Ls incurred additional losses, which increased the ultimate cost to the government. Second, deregulation in the early 1980s gave the industry new opportunities to take risks that increased ultimate losses, which arguably occurred because deregulation took place in the context of an already undercapitalized industry with inadequate prudential regulation. <4.3. Congressional Action and Assistance> Deposit insurance is self-financing only if insurance premiums match expected losses. Because the FSLIC deposit insurance scheme was inadequate, a government "bailout" could only have been avoided if the government had reneged on its promise to guarantee deposits. The congressional response to the S&L crisis can be divided into two phases. From 1980 to 1982, legislation was enacted to attempt to restore industry solvency (or buy time to restore industry solvency) through forbearance and the removal of legal restrictions on industry activities. From 1987 on, legislation was enacted to attempt to resolve insolvent S&Ls by granting financial resources and to prevent future losses through new regulatory powers. Many of these bills contained wide-ranging provisions, and only the provisions relevant to the S&L crisis are highlighted here. <4.3.1. Competitive Equality Banking Act of 1987 (CEBA)> The Competitive Equality Banking Act of 1987 ( P.L. 100-86 ) was passed in the Senate on a vote of 96-2 and in House on a vote of 382-12. The law created the Financing Corporation (FICO) to provide funding to FSLIC by issuing $10.8 billion in long-term bonds to be repaid by assessments on savings and loans and the Federal Home Loan Banks. It also eased regulatory requirements for savings and loans in economically depressed areas. According to the FDIC study, "Although the Competitive Equality Banking Act of 1987 provided the FSLIC with resources to resolve insolvent institutions, the amount was clearly inadequate. Nevertheless, under the new FHLBB chairman, Danny Wall, the FSLIC resolved 222 S&Ls, with assets of $116 billion, in 1988.... But despite these resolutions, at year-end 1988 there were still 250 S&Ls, with $80.8 billion in assets that were insolvent based on regulatory accounting principles." <4.3.2. Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)> The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ( P.L. 101-73 ) was passed by the House on a vote of 201-175 and by the Senate by division vote (individual votes not recorded). The law abolished FSLIC and transferred its assets, liabilities, and operations to the FSLIC Resolution Fund (FRF). The act abolished FHLBB and transferred its authority to the newly created Office of Thrift Supervision with new regulatory powers, created the Savings Association Insurance Fund, administered by FDIC, created the Resolution Trust Corporation (RTC) to resolve troubled thrifts, and created the Resolution Funding Corporation (REFCORP) to issue debt to finance RTC to be repaid by industry assessments and the federal government. <4.3.3. Resolution Trust Corporation Funding Act of 1991> The Resolution Trust Corporation Funding Act of 1991 ( P.L. 102-18 ) , passed by the House on a vote of 225-188 and passed by the Senate by voice vote, provided $30 billion to the RTC to cover losses of failed thrifts in FY1991. <4.3.4. Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991> The Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 ( P.L. 102-233 ), passed by the Senate on a vote of 44-33 and passed in the House by division vote 112-63, provided the RTC up to $25 billion until April 1, 1992, to resolve failed savings and loan institutions. The law also restructured the RTC and terminated FICO. <4.3.5. Resolution Trust Corporation Completion Act of 1993> The Resolution Trust Corporation Completion Act of 1993 ( P.L. 103-204 ) passed the House on vote of 235-191 (with 1 Member voting present), and passed the Senate on a vote of 54-45. The law provided $18.3 billion to finish the savings and loan cleanup. It terminated the RTC on December 31, 1995, and authorized $8.5 billion for the Saving Association Insurance Fund (SAIF), to be spent only if the savings and loan industry could not pay for future failures itself through higher insurance premiums. <4.4. Repayment or Recoupment of Government Assistance> The cost of the S&L cleanup was spread among the federal government (through appropriations), government-sponsored enterprises (the Federal Home Loan Bank system), and the industry (through deposit insurance premiums). Two quasi-governmental entities (FICO and REFCORP) were created to provide financing. Measuring the cost of the S&L crisis poses unique challenges compared to the other episodes discussed in this report. The resolution of failing thrifts was not a one-time event. Thrifts may fail at any time, even when economic conditions are generally good, and the insurance fund may be called upon to repay depositors. What was unique during the crisis was the magnitude of the failures, which caused premiums to be inadequate for addressing the problem. Thus, a somewhat arbitrary date must be chosen for the beginning and the end of the cleanup. Different sources vary slightly on the overall net cost. In January 1995, CBO estimated the cost at $150 billion in 1990 dollars. In 1996, GAO estimated the cost at $160.1 billion. Table 2 presents an estimate from the FDIC Banking Review , as this source provides the most detailed information. It estimated expenses paid by the FRF and RTC to be $152.7 billion, with an additional $7.3 billion in indirect costs from 1986 to 1995. Of the $152.7 billion, direct appropriations covered $99.4 billion and FICO and REFCORP bond proceeds covered $38.3 billion. The government recouped $30.1 billion through industry assessments, interest on bonds paid by the industry, and the value of remaining assets seized from failed S&Ls as of the end of 1999, putting the net direct costs at $122.6 billion and the net total costs at $129.9 billion. (CRS classified the FHLBs as industry for purposes of this table, so their contributions are considered a recoupment rather than a government expense.) It should be noted that this source does not include interest costs on the federal debt used to finance appropriations or the FICO and REFCORP bonds issued to finance the cleanup. <4.5. Final Outcome> Cumulatively, 1,043 insolvent firms holding $519 billion in assets were resolved between 1986 and 1995. The industry's finances stabilized by the mid-1990s, by which time the number of S&Ls had fallen by half compared to 1986. The RTC ceased operations at the end of 1995. Some special bonds issued to finance the cleanup remain outstanding until 2030. S&Ls were renamed savings associations or thrifts and their regulation was reformed by FIRREA. Further problems with the regulation of the thrift industry in the 2007-2009 financial crisis led to the elimination of the Office of Thrift Supervision and the shifting of its powers to the federal banking regulators by the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ). <5. Airline Industry (2001-2014)34> <5.1. What Happened to the Company/Industry> The use of commercial airplanes as assault vehicles to wreak havoc on the United States has no precedent in aviation history. At the time of the September 11, 2001, terrorist attacks on the World Trade Center in New York and the Pentagon in Washington, the airline industry was already experiencing a difficult financial situation due to the recession. In the wake of the attacks, the federal government temporarily grounded all civil air traffic in the United States, including all commercial flights. The attacks contributed to a significant decline in both domestic and international passenger traffic in 2001 that resulted in major financial losses. <5.2. Congressional Action and Assistance> <5.2.1. The Air Transportation Safety and System Stabilization Act> In the aftermath of the 9/11 attacks, Congress moved to provide the airline industry with federal financial support. The Air Transportation Safety and System Stabilization Act (Stabilization Act; P.L. 107-42 ) passed in the House by a vote of 356-54, with two Members voting present, and in the Senate by a unanimous vote. It was signed into law on September 22, 2001, providing the airlines access to up to $15 billion in short-term assistance. This included $5 billion in emergency assistance to compensate the air carriers for losses incurred as a result of the attacks, and $10 billion in the form of guaranteed loans designed to provide longer-term stability to the industry and make it more creditworthy in private markets. The Stabilization Act also supported the airline industry by providing premium war risk insurance for 180 days. This insurance was extended multiple times until it expired in 2014. <5.3. Executive or Regulatory Agency Action and Assistance> The Secretary of Transportation and the Comptroller General were in charge of the $5 billion direct compensation to air carriers, while the distribution of the loan guarantees was controlled by an "air transportation stabilization board" (ATSB) consisting of three voting members the Chairman of the Federal Reserve Board, the Secretary of the Treasury, and the Secretary of Transportation, or their designees and a non-voting member, the Comptroller General. According to the April 2011 report of the President to the U.S. Congress, as required by the Stabilization Act, 407 air carriers were compensated for direct operating losses as the result of federal ground stop orders as well as any incremental losses incurred between September 11, 2001, and December 31, 2001. Payments totaled nearly $4.6 billion of the $5 billion initially made available. Portions of the remaining balance in the account were rescinded by Congress at various points, with all unobligated balances permanently rescinded by the Omnibus Appropriations Act, 2009 ( P.L. 111-8 , Title I). The ATSB was established to review and decide on airlines' applications for loan guarantee assistance. The ATSB received 16 loan guarantee applications from a range of air carriers, including large airlines, small airlines, low-fare airlines, and charter and cargo carriers. It approved and closed on six loan guarantee applications: American West, ATA Airlines (formerly American Trans Air), Aloha Airlines, Frontier Airlines, US Airways, and World Airways. The total amount of loan guarantees was $1,558,600,000. <5.4. Repayment or Recoupment of Assistance> Five of the six guaranteed loans were fully repaid by the carriers, while the ATA Airlines loan guarantee had to be exercised when ATA Airlines filed for bankruptcy under Chapter 11. In 2005, the ATSB paid approximately $125 million, the outstanding balance on the ATA loan which the ATSB had guaranteed, but eventually recouped $97.2 million of that amount. The ATSB also established that the government was to be compensated for the risks associated with the guarantees through fees and stock warrants. The six airlines paid more than $240 million in fees and interest; while proceeds of warrant sales totaled $142.6 million. Overall, after deducting ATSB expenses, the 2011 report of the President to the U.S. Congress concluded that the government recovered a net of $338.8 million from the carriers as a result of the ATSB loan guarantee activities (see Table 3 ). According to the Federal Aviation Administration's estimate, between September 2001 and December 2014, $1.8 billion in premiums were collected and the total amount of claims paid for three war risk occurrences was $10,107,874. The remaining balance in the Aviation Insurance Revolving Fund is used to back more than $20 billion of the non-premium aviation insurance program that provides critical support to national security and defense by making insurance available to air carriers contracted by the Department of Defense to support military operations. <5.5. Final Outcome> The uncommitted balance of the ATSB loan guarantee authority was $8,441,400,000 on June 28, 2002, the deadline for submitting applications. The Consolidated Appropriations Act of 2008 ( P.L. 110-161 , Division D, Title I) rescinded the unobligated balance of program funds. The War Risk Insurance program expansion expired in 2014. If direct assistance is excluded, the government recouped more than was paid out on both the loan guarantees and the war risk insurance program. Nevertheless, it was exposed to significant financial risks from both programs. <6. Troubled Asset Relief Program (TARP) Bank Support (2008-Present)38> <6.1. What Happened to the Industry> The financial crisis of 2007-2009 grew out of an unprecedented housing boom that turned into a housing bust. Much of the lending for housing during the boom was based on asset-backed securities that used the repayment of housing loans as the basis of these securities. As housing prices fell and mortgage defaults increased, these securities became illiquid and fell sharply in value. This caused capital losses for firms holding them, which threated many firms with insolvency. There was widespread lack of trust in financial markets as participants were unsure which firms might be holding so-called toxic assets that might now be worth much less than previously estimated, thus making these firms unreliable counterparties in financial transactions. This uncertainty prevented firms from accessing credit markets to meet their liquidity needs. The banking industry was at the center of the crisis, both as holders of mortgage backed securities and as lenders making mortgage loans. <6.2. Executive or Regulatory Agency Action and Assistance> The Federal Reserve was created in 1913 largely to act as a lender of last resort in liquidity crises, and its authority was augmented during the Great Depression. As the crisis developed in 2007 and 2008, the Federal Reserve took a variety of steps under its statutory authority to inject liquidity into the financial system. To the degree that the crisis caused solvency problems in financial firms, however, the Federal Reserve was unable to assist, as its authority is limited to lending funds, which offered little assistance to firms that were already highly leveraged and suffering from capital shortfalls. <6.3. Congressional Action and Assistance> <6.3.1. Emergency Economic Stabilization Act of 2008> The Emergency Economic Stabilization Act of 2008 (EESA), was brought to the floor of the House as a substitute amendment to H.R. 3997 on September 29, 2008 ; this amendment failed in the House by a vote of 205-228. Another version of EESA, which included the original EESA plus several other provisions not in the first bill, was offered on October 1 in the Senate as an amendment ( S.Amdt. 5685 ) to an unrelated bill, H.R. 1424 , which had previously passed the House. The amendment to H.R. 1424 was approved by a Senate vote of 74-25; it was then taken up by the House and passed by a vote of 263-171, on October 3, 2008. The President signed the amended version of H.R. 1424 , now P.L. 110-343 , the same day as House passage. EESA gave the Department of the Treasury broad authority under the newly created Troubled Asset Relief Program to use up to $700 billion to address the crises. The congressional debate was focused on purchasing the "toxic" assets from firms, thus replacing them with safer assets, but the statute also allowed the Treasury to guarantee assets or to directly augment firms' capital. Among the programs under the EESA authority, the Treasury created the Capital Purchase Program (CPP) to purchase up to $250 billion in preferred shares from banks, thus adding this amount to capital levels. More than 700 banks participated in the CPP and approximately $205 billion was actually disbursed. In addition, there was a relatively small ($570 million) Community Development Financial Institution program that also purchased preferred shares, but on less stringent terms than the CPP. The CPP was augmented with an additional Targeted Investment Program (TIP) preferred share purchases and asset guarantees for two of the most troubled banks, Bank of America and Citigroup. The share purchases were $20 billion to each bank. The asset guarantees were more complicated. Any losses were to be shared between the Treasury, FDIC, and Federal Reserve. The guarantee for Bank of America on $118 billion in assets was offered, but never officially closed. The Citibank guarantee was on $301 billion in assets, but funds were never paid out on any losses. EESA was amended in early 2009, specifically allowing earlier repayment of assistance than originally foreseen and adding additional executive compensation requirements on firms with outstanding assistance. P.L. 111-5 passed the House on a vote of 246-183 and the Senate on a vote of 60-38. <6.4. Repayment or Recoupment of Assistance> In most cases, the Treasury recouped money from sales of preferred shares, primarily back to the issuing banks, as dividends and from warrants that were issued along with the preferred shares and fees paid for the asset guarantees. The Citigroup preferred shares were converted into common equity and sold on the open market. Recoupment from the general TARP bank assistance was completed relatively quickly. For example, by the end of 2011, approximately $255.4 billion had been recouped in total with $17.35 billion of $245.5 billion still outstanding. By 2020, $271.4 billion had been recouped, with $0.04 billion of preferred shares still outstanding. The special assistance for Bank of America was completed by the end of 2009, with a $425 million termination fee paid for the uncompleted asset guarantee and repurchase of the $20 billion in TIP shares resulting in $22.7 billion in recoupment. Citigroup's special assistance finished in December 2009 with $21.8 billion in recoupment from the TIP shares and $3.9 billion in premiums paid for the asset guarantees. Despite the default risk that TARP was exposed to, the government recouped $30.5 billion more than it disbursed on the bank programs (see Table 4 ). <6.5. Final Outcome> The financial crisis passed relatively quickly for the banking industry once the panic conditions of fall 2008 passed. One marker of this is that originally banks were to be required to hold the CPP capital on their books for a minimum of three years, whereas banks began repurchasing CPP preferred shares by March 2009 when the program was still disbursing funds. The overall profitability levels in the banking system returned relatively quickly. <7. Auto Industry (2008-2014)40> <7.1. What Happened to the Industry> In 2008 and 2009, the financial crisis, rising gasoline prices, and a contracting global economy combined to create the worst market in decades for production and sale of motor vehicles in the United States and other industrial countries. While Ford Motor Company had negotiated an $18 billion line of credit in 2007, General Motors (GM) and Chrysler did not have similar long-term financing available when the financial crisis hit, which temporarily made it difficult for most firms to access borrowing markets. In 2009, GM's production dropped by 47% (compared to 2008), and Chrysler's by 57%; total U.S. production among all automakers fell by 34%. The prospect of GM and Chrysler bankruptcies raised other concerns: the failure of their parts suppliers also used by most other automakers could cascade financial difficulties throughout the sector; and those supplier failures could overwhelm the federal Pension Benefit Guaranty Corporation with abandoned pension plans. In addition, large affiliated financial companies (which provided auto loans to consumers and dealers) could fail if the automakers entered bankruptcy. <7.2. Congressional Action and Assistance> Congress never passed specific legislation to address auto industry issues. The George W. Bush Administration and congressional leaders differed on the type of assistance that should be offered the automakers: initially, the Administration recommended reprogramming a Department of Energy motor vehicle loan program to provide bridge loans. In December 2008, the House of Representatives passed H.R. 7321 , which would have authorized funds from the DOE Advanced Technology Vehicles Manufacturing program (ATVM) as bridge loans to GM and Chrysler. Although that bill passed the House 237-170, the Senate did not vote on it. When this legislation stalled, the George W. Bush Administration announced that it would use the Troubled Asset Relief Program to support the automakers, arguing that failure to provide assistance could make the recession worse and impose other federal costs, such as unemployment insurance for many displaced auto and auto parts employees. <7.3. Executive or Regulatory Agency Action and Assistance> The Bush Administration made initial TARP loans of $24.8 billion to GM, Chrysler, and two auto financing companies (GMAC and Chrysler Financial) in December 2008 and January 2009. When the Obama Administration took office in January 2009, it continued this loan program, bringing total loans to the auto industry to $79.7 billion. In addition, the Obama Administration established an Auto Task Force chaired by the Secretary of the Treasury to work with GM and Chrysler on restructuring plans with creditors, unions, dealers, and other stakeholders. The goal of the spring 2009 restructurings was to avoid bankruptcy filings, but all stakeholders did not agree to the major changes in the companies. Chrysler and GM filed for bankruptcy in April and June 2009, respectively. After about a month, both companies emerged from bankruptcy court, with new owners: the U.S. Treasury owned about 10% of Chrysler and nearly 61% of GM in return for forfeiting repayment of the previous loans. Other owners included the Canadian government, bondholders, and the United Auto Workers. The federal ownership was sold off over the following years. <7.4. Repayment or Recoupment of Assistance> The assistance was repaid or recouped beginning in 2009 in a variety of ways, including initial public offerings, gradual public offerings of other federal shares, and private sales of stock. Table 5 summarizes the amounts of government assistance and the amount of recoupment for auto industry assistance. <7.5. Final Outcome> The U.S. Treasury sold its last holdings of Chrysler in June 2011 and GM in December 2013. The proceeds from the sales were not enough to cover the original loans to Chrysler and GM. Chrysler Financial fully repaid its loan, and the federal government's recoupment from GMAC was greater than the amount of its assistance. After restructuring and bankruptcy, GM and Chrysler recovered their positions as major U.S. automakers; GM is independent and Chrysler is part of Fiat Chrysler Automobiles (FCA), a corporation based in Great Britain. Table 6 shows comparisons before and after restructuring and bankruptcy. <8. Money Market Mutual Fund Guarantee (2008-2009)44> <8.1. What Happened to the Industry> Money market mutual funds are a type of mutual fund that generally invest in high-quality, short-term assets. Often the value of a share is held at $1 per share and fund gains are paid out as dividends mimicking interest payment. Thus, they are seen as largely analogous to bank deposits, but are not guaranteed by the Federal Deposit Insurance Corporation (FDIC). As part of the market turmoil resulting from the bursting of a nationwide housing bubble, on September 16, 2008, a money market mutual fund called the Reserve Fund "broke the buck," meaning that the value of its shares had fallen below $1. This occurred because of losses it had taken on short-term debt issued by the investment bank Lehman Brothers, which filed for bankruptcy on September 15, 2008. Money market investors had perceived "breaking the buck" to be highly unlikely, and its occurrence set off a generalized run on money market mutual funds, as investors simultaneously attempted to withdraw an estimated $250 billion of their investments even from funds without exposure to Lehman Brothers. <8.2. Executive or Regulatory Agency Action and Assistance> To stop the run, the Treasury announced an optional program to guarantee deposits in participating money market funds. The Treasury would finance any losses from this guarantee with assets in the Exchange Stabilization Fund (ESF), funds intended to protect the value of the dollar. The Treasury announced this program without seeking specific congressional authorization, justifying the program on the grounds that guaranteeing money market funds would protect the value of the dollar. The program expired after one year in September 2009. <8.3. Congressional Action and Assistance> The Emergency Economic Stabilization Act of 2008 included language (Section 131) that directed the Treasury Secretary to reimburse the Exchange Stabilization Fund for any funds used for the money market guarantee program and prohibited usage of the ESF in the future for such a program. <8.4. Repayment or Recoupment of Assistance> Funds utilizing the guarantee program paid fees for the guarantee of between 0.015% and 0.022% of the amount guaranteed by the program. <8.5. Final Outcome> Over the life of the program, the Treasury reported that no money market mutual fund guarantees were invoked and $1.2 billion in fees had been collected (see Table 7 ). More than $3 trillion of deposits were guaranteed and, according to the Bank for International Settlements, 98% of U.S. money market mutual funds were covered by the guarantee, with most exceptions being funds that invested only in Treasury securities. <9. Agricultural Trade Aid (2018-2019)49> <9.1. What Happened to the Sector> In early 2018, the Trump Administration citing concerns over national security and unfair trade practices imposed increased tariffs on steel and aluminum from a number of countries and on a broad range of U.S. imports from China. Several of the affected foreign trading partners including China, Canada, Mexico, the European Union, and Turkey responded to the U.S. tariffs with their own retaliatory tariffs targeting various U.S. products, especially agricultural commodities. As a result of these retaliatory tariffs, both market prices and exports of affected U.S. agricultural products dropped sharply in the immediate aftermath of retaliation before gradually recovering as trade shifted to alternate markets. The most notable result of this trade dispute was a decline in trade between the United States and China. From 2010 through 2016, China was the top destination for U.S. agricultural exports based on value. In 2018, U.S. agricultural exports to China declined 53% in value to $9 billion from $19 billion in calendar year 2017. The retaliatory tariffs affected producers of several major U.S. commodities, including field crops like soybeans and sorghum, livestock products like milk and pork, and many fruits, nuts, and other specialty crops. Following the imposition of retaliatory tariffs in 2018, the United States began negotiations with several of the retaliating trade partners to resolve the disputes. However, several of the negotiations were protracted particularly the U.S.-China trade talks and trade failed to return to normal patterns during 2018 and 2019. <9.2. Executive or Regulatory Agency Action and Assistance> The Secretary of Agriculture used his authority under Section 5 of the Commodity Credit Corporation (CCC) Charter Act of 1948 (P.L. 80-806; 15 U.S.C. 714 et seq.), as amended, to initiate two ad hoc trade assistance programs in 2018 and 2019. Referred to as "trade-aid packages," these two initiatives represented the Administration's effort to provide short-term assistance to farmers in response to the foreign trade retaliation targeting U.S. agricultural products. The first trade-aid package was announced on July 24, 2018. It targeted production for nine agricultural commodities in 2018 and was valued at up to $12 billion. The second trade-aid package was announced on May 23, 2019. It targeted production for an expanded list of 41 commodities and was valued at up to an additional $16 billion. According to the U.S. Department of Agriculture (USDA), the two trade-aid packages are structured in a similar manner and include three principal components ( Table 8 ): The Market Facilitation Program (MFP) provides direct payments to producers of USDA-specified "trade damaged" commodities. USDA used different payment rate formulas to determine the MFP payment distribution for each of the 2018 and 2019 programs (described below). MFP payments are administered by USDA's Farm Service Agency (FSA). The Food Purchase and Distribution Program (FPDP) is for purchases of unexpected surpluses of affected commodities such as fruits, nuts, rice, legumes, beef, pork, milk, and other specified products for redistribution by USDA's Food and Nutrition Service through federal nutrition assistance programs including food banks, schools, and other outlets serving low-income individuals. It is administered by USDA's Agricultural Marketing Service. The Agricultural Trade Promotion (ATP) program provides cost-share assistance to eligible U.S. organizations for activities such as consumer advertising, public relations, point-of-sale demonstrations, participation in trade fairs and exhibits, market research, and technical assistance to boost exports for U.S. agriculture, including food, fish, and forestry products. It is administered by USDA's Foreign Agriculture Service in conjunction with the private sector. The two years of trade assistance, as announced by the Secretary of Agriculture, were valued at a potential combined $28 billion, the largest component being the MFP direct payments to producers valued at a combined $24.5 billion ( Table 8 ). The broad discretionary authority granted to the Secretary under the CCC Charter Act to implement the trade-aid package also allowed the Secretary to determine how the aid was calculated and distributed. Some important differences between the 2018 and 2019 trade aid packages include the following: Although the 2018 and 2019 MFP programs focused payments on the same three commodity groups non-specialty crops (grains and oilseeds), specialty crops (nuts and fruit), and animal products (hogs and dairy) the 2019 MFP included an expanded list of eligible commodities (41 eligible commodities in 2019 compared with nine in 2018). The 2018 MFP payments for eligible specialty and non-specialty crops were based on physical production in 2018, and calculated as per-unit payment rates. The 2019 MFP program based its payment rates for specialty crops on harvested acres, and non-specialty crops on planted acres. This change was done to avoid having MFP payments reduced by the lower yields that were expected to occur across major growing regions due to the widespread wet spring and delayed plantings. Then a weighted-average MFP payment-rate-per-acre was calculated at the county level. This was done to minimize influencing producer crop choices and avoid large payment-rate discrepancies across commodities grown within the same county. The end result was a single 2019 MFP payment rate for each county with eligible commodities. Under both 2018 and 2019 MFP programs, payments to dairy producers were based on historical production, while those to hog producers used mid-year inventory data. Payments were made in three tranches under both the 2018 and 2019 MFP programs; cumulative program receipts were subject to annual payment limits and adjusted gross income (AGI) eligibility requirements. The 2018 MFP payments were capped on a per-person or per-legal-entity basis at a combined $125,000 for eligible non-specialty crops, a combined $125,000 for animal products, and, separately, a combined $125,000 for specialty crops. In contrast, the 2019 package used expanded payment limits per individual per commodity group ($250,000) and an expanded maximum combined payment limit across commodity groups ($500,000 versus $375,000 in 2018). Both 2018 and 2019 MFP payment recipients were subject to an AGI eligibility threshold of $900,000, but with an exemption from the AGI criteria if at least 75% of a farm's AGI was from farming operations. There is a general consensus among farm policy analysts that the MFP payments provided a substantial income boost to the U.S. agricultural sector in the aggregate during what otherwise would have been a period of low commodity prices and low net farm income. However, an examination of MFP payments data reveals that they were unevenly distributed across both commodities and regions. <9.3. Congressional Action and Assistance> No congressional action was involved in the establishment, funding, or implementation of the 2018 and 2019 MFP programs. The ranking member of the Senate Committee on Agriculture, Nutrition, and Forestry, Debbie Stabenow of Michigan, has raised concerns about the methodology used to determine payment rates and the resultant distribution of payments across both commodities and regions. In January 2020, Senator Stabenow requested a comprehensive investigation by GAO into the integrity of USDA's trade aid to farmers affected by the Trump Administration's trade policies. <9.4. Repayment or Recoupment of Assistance> There is no provision for repayment or recoupment of any of the funds disbursed under the 2018 and 2019 trade-aid packages. President Trump has claimed that the tariffs imposed on products imported into the United States increased U.S. government revenue, and that these amounts, mainly paid by Chinese exporters, were used to offset the cost of the trade-aid packages. However, economic studies have generally found that the cost of tariffs on imported goods is borne largely by U.S. firms and consumers, not by foreign trading partners. <9.5. Final Outcome> USDA's use of CCC authority to initiate and fund agricultural support programs without congressional involvement is not without precedent, but the scope and scale of its use for the two trade-aid packages at a potential cost of up to $28 billion have increased congressional and public interest. On February 11, 2020, USDA Inspector General Phyllis Fong told the House Agriculture Appropriations Subcommittee that her office would be undertaking an investigation of the Administration's trade assistance programs, starting with whether USDA had the proper legal authority to make direct payments to farmers. It is also possible that other countries may challenge MFP payments as a violation of U.S. trade commitments to the World Trade Organization.

Serious disruptions for certain industries caused by the COVID-19 (coronavirus) pandemic have led to calls for federal government assistance to affected industries. Direct federal financial assistance to the private sector on a large scale is unusual, except for geographically narrow assistance following natural disasters. Nonetheless, assistance to business sectors affected by COVID-19 would not be the first occasion on which the federal government has aided troubled or financially distressed industries. Historically, aid—sometimes popularly referred to as "government bailouts"—has taken many forms and has occurred under a wide variety of circumstances. Past assistance has involved such instruments as loan guarantees, asset purchases, capital injections, direct loans, and regulatory changes, with the specific mix of policies varying significantly from case to case. These differences make it somewhat subjective as to what should be defined as a "bailout." To help inform congressional debate, this report examines selected past instances in which the government has aided troubled industries, providing information about the way in which such assistance was structured, the role of Congress, and the eventual cost. In order to provide greater detail, the examples all involve cases in which federal assistance was (1) widely available to firms within an industry rather than being targeted to a particular firm; (2) extraordinary in nature rather than a type of assistance that is routinely provided; and (3) motivated primarily by a desire to prevent industry-wide business failures. The coverage is not exhaustive, and excludes cases in which assistance was targeted at individual firms rather than at entire industries. In some of these cases, the government was able to recoup much or all of its assistance through fees, interest, warrants, and loan or principal repayments. In others, there were no arrangements made for recoupment or repayment. The episodes considered include the following: Railroad Restructuring (1957-1987) Farm Credit System Crisis (1980s) Savings and Loan Crisis (1980s-1990s) Airline Industry (2001-2014) Auto Industry (2008-2014) Troubled Asset Relief Program (TARP) Bank Support (2008-present) Money Market Mutual Fund Guarantee (2008-2009) Agricultural Trade-Aid (2018-2019) Assessing extraordinary assistance can be difficult as particular episodes may play out over decades and full data about assistance may be difficult to collect and analyze. Congress has sometimes included particular oversight and reporting requirements in statutes authorizing aid. In addition, there are broader policy concerns raised by government assistance that may be impossible to quantify and do not get captured in tallies of the government's income and expenses. Possible benefits of assistance may include avoiding potentially long-lasting disruptions to consumers, workers, local communities, and the overall economy; averting losses to federally guaranteed retirement funds; and maintaining federal tax revenues. Potential drawbacks to assistance include the possibility that it may reduce competition by rewarding incumbents over new entrants and distort the affected product market by causing (or prolonging) overproduction; that it may cause "moral hazard" if firms respond to government assistance by acting with less financial prudence in the future; and that it can delay an industry's adjustment to structural problems such as high production cost and excess capacity. In every case, federal assistance to certain industries may raise questions about the fairness of providing assistance to some businesses but not to others.

crs_R45897

crs_R45897_0

<1. Introduction> On July 2, 1862, with the passage of the first Morrill Act (12 Stat. 503; 7 U.S.C. 301 et seq.), the United States began a then novel policy of providing federal support for post-secondary education, specifically for agriculture and the mechanical arts. The national system of land-grant colleges and universities that has developed since then is recognized for its breadth, reach, and excellence in teaching, research, and extension. Located in every state, Washington, D.C., and many insular areas , these institutions educate the next generation of farmers, ranchers, and citizens, and form the backbone of a national network of agricultural extension and experiment stations. Later federal legislation expanded the scope and reach of the 1862 Morrill Act. Beyond providing initial resources for establishment of the land-grant institutions, the federal government contributes funds annually through a variety of capacity and competitive grants administered by the U.S. Department of Agriculture's (USDA) National Institute of Food and Agriculture (NIFA). Capacity grants, also known as formula funds, are allocated to states based on statutory formulas. Competitive grants are awarded to specific projects selected through peer-review processes. In many cases, the states and territorial governments complement federal appropriations through matching funds. Legislation has also expanded the land-grant system to include historically black colleges and universities (HBCUs) and tribal colleges and universities (TCUs). Additional institutional categories are recognized for specific programs. These categories include non-land-grant colleges of agriculture (NLGCAs), Hispanic-serving agricultural colleges and universities (HSACUs), and cooperating forestry schools. Looking forward, the scheduled fall 2019 relocation of NIFA from its current location in Washington, D.C.; the shifting balance of public and private investment in agricultural research; disparities in state matching funds among the different classes of land-grant institutions; and the funding of TCU land-grant institutions may invite congressional engagement. While state and local governments have roles in the U.S. land-grant university system, this report focuses on federal laws, appropriations, and other matters. <2. Overview: History, Institutions, and Mission> <2.1. History> Post-secondary education in the American colonies was available to a limited segment of society and focused on a few subject areas. Colonial colleges established in association with Christian denominations enrolled predominantly white men in classical and professional disciplines. New colleges created following independence of the United States from Great Britain broadened enrollment and fields of study. However, lack of reliable funding meant that many closed. In the early- to mid-19 th century, demand grew for post-secondary education in agricultural and technical disciplines, as did interest in educating the populace more broadly. Johnathan Baldwin Turner, a professor at Illinois College, championed a more accessible "industrial education." His "Plan for a State University for the Industrial Classes," presented at an academic conference in 1850, contained many elements of the yet-to-be established land-grant university system. In 1857, Representative Justin Smith Morrill of Vermont introduced a bill to establish colleges of agriculture through grants of land to the states. The bill proposed giving federal land, or rights to such land, to the states for the purpose of establishing these colleges. The federal government was already giving land to states to encourage the development of railroads, for example through the Land Grant Act of 1850 (9 Stat. 466). However, granting land to states to establish institutions of higher education was a novel prospect. Congress passed Morrill's bill in 1859 by a slim margin, largely along a North-South divide, and it could not overcome a Presidential veto by James Buchanan. Morrill, who had never attended college himself, presented the bill once again in 1862. The political landscape had changed by then, with onset of the Civil War and accompanying absence of Members of Congress from the southern states. Further, the second introduction of the bill expanded proposed areas of study at the colleges to include military strategy in addition to agricultural and mechanical arts. This bill passed overwhelmingly, and President Abraham Lincoln signed it on July 2, 1862. This first Morrill Act, described in greater detail below, marked the beginning of the U.S. land-grant university system. Notably, Lincoln signed the Morrill Act just seven weeks after signing legislation to establish USDA (12 Stat. 387, enacted May 15, 1862). Between 1872 and 1890, then Senator Morrill introduced twelve bills focused on strengthening the early land-grant university system. Congress passed the last of those bills, and President Benjamin Harrison signed into law the Morrill Act of 1890 (26 Stat. 417). This second Morrill Act provided funding for the land-grant university system and prohibited racial discrimination in admissions policies. It led to the establishment of a group of historically black colleges and universities (HBCUs) known as the 1890 Institutions. The land-grant university system further expanded in 1994 with the addition of a group of tribal colleges and universities (TCUs) now identified as the 1994 Institutions. Senator Jeff Bingaman of New Mexico introduced the Equity in Educational Land-Grant Status Act in 1993. This act became Sections 531-335 of the Elementary and Secondary Education Act reauthorization ( P.L. 103-382 ), and President William J. Clinton signed it into law on October 20, 1994. <2.2. What Is a Land-Grant College or University?> Land-grant institutions are colleges and universities designated to receive benefits of the Morrill Acts of 1862 and 1890. These acts promoted establishment of institutions of higher learning focused on the agricultural and mechanical arts, without excluding other scientific and classical studies. Land-grant institutions now address many academic fields in addition to those of their foundational colleges of agriculture. There is at least one land-grant institution in each U.S. state, the District of Columbia, the Federated States of Micronesia, and many U.S. territories (see Figure 1 for a map). In 2017, 1.7 million students were enrolled across 109 land-grant colleges and universities, with a portion of those enrolled in those institutions' colleges of agriculture. The federal government provides annual appropriations to U.S. states and territories, often with matching requirements, for use in the land-grant university system. <2.3. Types of Land-Grant Institutions> There are three categories of land-grant institution, named for the year in which legislation established them: 1862, 1890, and 1994. The " Foundational Legislation " section of this report discusses relevant establishment legislation for these institutions in detail. Most generally, 1862 Institutions are the original land-grant colleges and universities established through the Morrill Act of 1862, as amended. There are fifty-seven 1862 Institutions, located in each state, U.S. territory, and in the District of Columbia. The 1890 Institutions are HBCUs established as land-grant institutions as a result of the Morrill Act of 1890, as amended. There are nineteen 1890 Institutions, primarily in the southeastern states. The 1994 Institutions are TCUs recognized through the Equity in Educational Land-Grant Status Act of 1994, as amended. Congress has defined thirty-six 1994 Institutions through statute. The federal government recognizes additional categories of institutions that are not land-grant institutions, and yet support the mission of the land-grant university system (as discussed below). Cooperating forestry schools, HSACUs, and NLGCAs are eligible for federal funding through specific programs. <2.4. Three Pillars: Teaching, Research, and Extension> Federal legislation has given rise to the three functional pillars of land-grant institutions. First among them is the teaching function established through the Morrill Acts of 1862 and 1890. Later legislation added research and extension, establishing the roles of land-grant institutions in producing original agricultural research and in bringing that research to the non-university public through agricultural extension. <3. Foundational Legislation> The U.S. land-grant university system has evolved over the past 150 years. Multiple pieces of legislation have added to its original mission, expanded its reach, and adjusted its funding structure. This section identifies enacted legislation that is among the most significant for land-grant universities (see Table 1 for a summary of select statutes). Details regarding federal funding and state matching requirements are discussed in the section following this legislative overview (" Funding "). Funding discussed in this report is discretionary unless otherwise stated. <3.1. Teaching> The Morrill Act of 1862 (12 Stat. 503; 7 U.S.C. 301 et seq.) was officially titled, "An Act Donating Public Lands to the Several States and Territories which may provide Colleges for the Benefit of Agriculture and the Mechanic Arts" (see legislative excerpt in the text box below). It designated that each state would receive 30,000 acres of federal land for each member of the Senate and House of Representatives it had in Congress at the time. In cases in which insufficient public land was available, states would instead receive land scrip , or certificates of entitlement to such public lands. Money from the sale of this land or land scrip was to be used to support at least one college with the primary purpose of teaching agriculture and the mechanical arts, to "promote the liberal and practical education of the industrial classes in the several pursuits and professions in life." The act prohibited states from using the funds for constructing or maintaining buildings. The Morrill Act of 1890 (26 Stat. 417; 7 U.S.C. 321 et seq.) responded to the need to finance the institutions established through the first Morrill Act. Today, the second Morrill Act is most recognized for its role in the establishment of HBCU land-grant institutions. It provided each state and territory with annual appropriations for the endowment and maintenance of the land-grant colleges. This money was to be used for instruction in specific academic disciplines, and for facilities for such instruction. The second Morrill Act prohibited racial discrimination in admission policies of institutions receiving these funds ( 7 U.S.C. 323 ) . However, it permitted states and territories to meet this requirement by establishing separate institutions "of like character" for white and non-white students. In such cases, annual appropriations would be divided "equitably" between the two institutions in a manner proposed by the state or territory and reported to the Secretary of the Interior. This condition ultimately resulted in the establishment of 19 federally recognized 1890 Institutions, primarily in the southeastern states. Just over 100 years after the Morrill Act of 1890 facilitated the addition of HBCUs, the Equity in Educational Land-Grant Status Act of 1994 ( P.L. 103-382 531-535; 7 U.S.C. 301 note) added TCUs to the land-grant university system. This act originally designated twenty-nine 1994 Institutions, considered to be land-grant institutions established in accordance with the Morrill Act of 1862 except for the manner in which they would be funded. In lieu of land or land scrip, annual appropriations would endow and maintain them. The Native American Institutions Endowment Fund was created in the U.S. Treasury, and interest payments are distributed annually on a formula basis. Institutions may use these endowment payments at their discretion. The 1994 Institutions are eligible for some, but not all, research and extension funds that are available to 1862 Institutions established through the first Morrill Act. There are currently 36 TCUs designated as 1994 Institutions. <3.2. Research> Agricultural research in the land-grant university system impacts daily life. Among diverse areas of investigation, researchers at land-grant institutions explore best practices for livestock, fish, and plant breeding; analyze agricultural value chains; examine interactions among soil health, agricultural productivity, and water quality; and look for new and safer pesticides to protect crop production, human health, and the environment. Discoveries achieved through this research at land-grant institutions have improved the lives of producers and consumers in diverse ways. The Hatch Act of 1887 (24 Stat. 440; 7 U.S.C. 361a et seq.) instituted the research function of land-grant universities. It provided for establishment of "a department to be known and designated as an 'agricultural experiment station ... '" under the direction of each land-grant institution established under the first Morrill Act. They would aid " ... in acquiring and diffusing among the people of the United States useful and practical information on subjects connected with agriculture and to promote scientific investigation and experiment respecting the principles and applications of agricultural science ... " The Hatch Act provided for appropriations to support original agricultural research at these stations, distributed to the states based on a formula in the law. Federal funds distributed in this manner are referred to as capacity grants or formula funds. The Hatch Act ultimately led to development of State Agricultural Experiment Stations (SAES) in each U.S. state, insular area, and the District of Columbia. In the modern day, not all of these stations are physical places, and may be represented instead through individual or groups of researchers at 1862 Institutions, or at associated agricultural or research sites within the state. The 1890 Institutions are not eligible for Hatch Act appropriations. In 1977, the Evans-Allen Act ( P.L. 95-113 1445; 7 U.S.C. 3222 ) gave 1890 Institutions access to agricultural research capacity grants. The Evans-Allen Act is Section 1445 in the National Agricultural Research, Extension, and Teaching Policy Act of 1977 (NARETPA) ( P.L. 95-113 1440-1445; 7 U.S.C. 3222). Evans-Allen funds are appropriated and then distributed according to a statutory formula, in a manner similar to Hatch Act appropriations. The 1994 Institutions are not eligible for research capacity grants under the Hatch or Evans-Allen Acts. However, Section 251 of the Agricultural Research, Extension, and Education Reform Act (AREERA) of 1998 ( P.L. 105-185 ) gave these institutions access to separate competitive agricultural research funding. AREERA amended the Equity in Educational Land-Grant Status Act of 1994 to authorize USDA to award research grants to 1994 Institutions on a competitive basis. This provision requires that the 1994 Institution applying for these funds certify that the proposed research will be conducted in partnership with the USDA Agricultural Research Service (ARS), an 1862 or 1890 Institution, or a cooperating forestry school. Congress has provided appropriations for this competitive grants program. However, lack of predictable annual research funding on a formula basis has raised concerns that 1994 Institutions cannot build their institutional agricultural research capabilities, as 1862 and 1890 Institutions have done. For more, see " Funding of 1994 Institutions ." By the mid-20 th century, forestry science capacity was increasingly seen as falling behind national needs. The McIntire-Stennis Cooperative Forestry Act of 1962 (P.L. 87-788; 16 U.S.C. 582a-1 et seq.) authorized forestry research funds. This act encourages coordination of forestry research efforts among state colleges and universities and the federal government. These funds are apportioned to the states in amounts determined by the Secretary of Agriculture in consultation with an advisory council. These apportionments were originally available only to 1862 Institutions, their affiliated SAESs, or public colleges or universities offering graduate training in forestry. The 1890 Institutions were made eligible in Section 7412 of the Food, Conservation, and Energy Act of 2008, also known as the 2008 farm bill ( P.L. 110-246 ). The 1994 Institutions were made eligible in Section 7604 of the 2018 farm bill (Agriculture Improvement Act of 2018, P.L. 115-334 ). Additional federal legislation has authorized a variety of competitive research grants, and is addressed in " Funding ." <3.3. Extension> Agricultural extension brings agricultural research findings to the people who can put them into practice. Since passage of the Smith-Lever Act in 1914, the United States has developed an expansive Cooperative Extension System operated through the land-grant university system in partnership with federal, state, and local governments. Partners include NIFA, cooperative extension services at land-grant colleges and universities, and cooperative extension service offices in nearly each of the country's approximately 3,000 counties and its territories. Extension agents based at field offices and land-grant institutions work with local agricultural producers and community members to demonstrate or put into practice knowledge gained through agricultural research. Agriculture faculty at land-grant institutions may have appointments that are fully teaching, research, or extension, or some combination of the three. The extension function adds non-formal education to the land-grant mission. The Smith-Lever Act of 1914 (38 Stat. 372; 7 U.S.C. 341 et seq.) responded to interest in ensuring that agricultural research findings would make their way to producers and improve agricultural practices. This act provided for capacity funds annual appropriations, distributed to the states on a formula basis for cooperative extension. It led to establishment of the cooperative extension service associated with 1862 Institutions. The Smith-Lever Act, as amended, also contains competitive funding provisions. Smith-Lever capacity funds are not available to 1890 Institutions. The 1890 Institutions gained access to extension appropriations, distributed on a formula basis, in 1977 through the Section 1444 of NARETPA ( P.L. 95-113 1444; 7 U.S.C. 3221 ). Thus NARETPA provided 1890 Institutions access to appropriations for both agricultural research (via Section 1445, or the Evans-Allen Act) and extension (via Section 1444). The 1994 Institutions gained access to federal extension funding in 1998. Section 201 of AREERA ( 7 U.S.C. 343 (b)(3)) amended the Smith-Lever Act to authorize appropriations for USDA to distribute to 1994 Institutions on a competitive basis, with such funds to be administered in cooperation with an 1862 or 1890 Institution. Thus AREERA provided 1994 Institutions access to both competitive research (Section 251) and extension (Section 201) appropriations. <3.4. Land-Grant Institutions in the District of Columbia and Insular Areas> In addition to expanding the mission of the land-grant system, legislation also increased its geographical expanse. Beginning in 1908, modern U.S. territories began to participate in the land-grant system. Today, land-grant institutions are located in the District of Columbia and the insular areas of American Samoa, Guam, the Federated States of Micronesia, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. Whereas at the time of the Morrill Act in 1862, the United States had vast tracts of federal lands available for sale to endow new colleges and universities, this was not the case in the 20 th century. Land-grant institutions newly recognized in this time period were appropriated funds for their endowment and maintenance, in lieu of land or land scrip. Although classified as 1862 Institutions, their funding details vary according to specific legislation. The University of Puerto Rico, Mayaguez was established as a land-grant institution in 1908 after the benefits of the first and second Morrill Acts were extended to Puerto Rico. The University of the District of Columbia, at the time known as Federal City College, received land-grant status in 1968 through amendment (P.L. 90-354) of Title I of the District of Columbia Public Education Act of 1966 (P.L. 89-791). Colleges in the U.S. Virgin Islands and Guam became land-grant institutions through Section 506 of the Educational Amendments of 1972 (P.L. 92-318). Institutions in American Samoa and what is now the Federated States of Micronesia received similar recognition through the Educational Amendments of 1980 ( P.L. 96-374 1361). A college in the Northern Mariana Islands was added in 1986 ( P.L. 99-396 9). <3.5. Designation of New Land-Grant Institutions> Section 7111 of the 2018 farm bill prohibits designation of any new land-grant institution that would be eligible to receive capacity grants for agricultural research, extension, and related programs (e.g., Hatch Act, Smith-Lever Act, and McIntire-Stennis Act). This change does not affect the eligibility of 1994 Institutions certified in the future to receive McIntire-Stennis funds. Congress made this change with the primary intention of avoiding the duplication of administrative costs that would accompany any division of an existing land-grant institution into more than one entity. <3.6. Other Institutions> Certain public colleges and universities that are not 1862, 1890, or 1994 Institutions can participate in elements of the land-grant university system through specific grants programs administered by USDA. <3.6.1. Non-Land-Grant Colleges of Agriculture (NLGCAs)> The classification of non-land-grant college of agriculture (NLGCA) was defined in the 2008 farm bill ( P.L. 110-246 , 7101; 7 U.S.C. 3103(14) ), and this definition was revised in Section 7102 of the 2018 farm bill. Public colleges and universities are eligible to apply to USDA for NLGCA certification if they are not 1862, 1890, or 1994 Institutions and they offer bachelors, masters or doctoral degrees in food, agriculture, or natural resources in specified agriculturally relevant areas. As of July 2019, more than 40 certified NLGCAs are located in 23 states. The NLGCAs meet eligibility requirements for the Capacity Building Grants for Non-Land-Grant Colleges of Agriculture program administered by NIFA. This competitively funded program for NLGCAs was first authorized by the Agricultural Act of 2014 ( P.L. 113-79 ), also known as the 2014 farm bill, and was reauthorized in the 2018 farm bill. Private colleges and universities remain ineligible. <3.6.2. Hispanic-Serving Agricultural Colleges and Universities (HSACUs)> Section 7101 of the 2008 farm bill (7 U.S.C. 3103(10)) defined a group of Hispanic-serving agricultural colleges and universities (HSACUs) which could benefit from integrated research, education, and extension competitive grants offered through USDA. Certified HSACU institutions must demonstrate that 25% of full-time enrollment is Hispanic, that the institution offers accredited agriculture-related degree programs, and that Hispanic students received at least 15% of degrees awarded in agricultural programs over the most recent two-year period. The definition further clarifies that an HSACU cannot also be an 1862 Institution. As of 2019, USDA has certified more than 150 HSACUs. Section 7129 of the 2008 farm bill called for establishment of a Hispanic-Serving Agricultural Colleges and Universities Fund in the U.S. Treasury (7 U.S.C. 3243). It authorized annual appropriations for FY2008 and each fiscal year thereafter, and distribution of appropriations and income from the fund to HSACUs on a formula basis. Congress has not appropriated funds for the HSACU Fund since its establishment in 2008, and thus distributions have not been made. Section 7129 of the 2008 farm bill also authorized appropriations for annual payments to HSACU institutions; competitively distributed institutional capacity-building grants; and competitive research and extension grants programs specific to HSACU. These programs have not received appropriations. <3.6.3. Cooperating Forestry Schools> Cooperating forestry schools (defined at 7 U.S.C. 3103(5)) are those institutions that are eligible to receive funds under the McIntire-Stennis Act. These include 1862, 1890 and 1994 Institutions in addition to non-land-grant "State-supported colleges and universities offering graduate training in the sciences basic to forestry and having a forestry school." States must certify the institutions that are eligible for assistance, and determine the proportionate amounts of assistance to be extended to them if there is more than one cooperating forestry school within a state. Originally, an institution could not be certified as both a cooperating forestry school and an NLGCA. Section 7102 of the 2018 farm bill removed this restriction. <4. Funding> The USDA National Institute of Food and Agriculture (NIFA) administers federal capacity and competitive grants to partner institutions for research, education, and extension activities (see Table 2 for NIFA discretionary appropriation details). C a pacity grants are recurring federal appropriations allocated to states based on legislative formulas. States are generally required to contribute matching funds, and specific project decisions are made locally. Competitive grants are awarded to specific projects selected through peer-review processes, without consideration of the state of the sponsoring institution. Researchers and institutions must apply for these funds. <4.1. Capacity Grants, also known as Formula Funds> Federal legislation, as discussed earlier, provides capacity grants to land-grant institutions for research, education, and extension (see Table 1 ). NIFA administers these grants in collaboration with states, colleges, and universities. Land-grant colleges, universities, and associated state institutions use these funds to conduct research and extension in support of state agriculture, food, and forestry systems, as well as issues of socioeconomic welfare in communities and families in rural and urban areas. The Hatch Act, Smith-Lever Act, Evans-Allen Act, and McIntire-Stennis Act are the largest sources of capacity funds. <4.1.1. Hatch Act: Research Funding for 1862 Institutions> Funding for agricultural research under the Hatch Act of 1887 as amended is allocated to the SAES and associated agriculture colleges of the 50 states, the District of Columbia, and the insular areas. Eligible state institutions must submit a Plan of Work to NIFA for approval before these funds are distributed. The Hatch Act identifies the distribution of federal payments to states for FY1955 as a fixed base, and any sums appropriated in excess of the 1955 level are to be distributed in the following manner: 3% to the USDA for administration of the Hatch Act; 20% equally to each state; 26% to each state in amounts proportionate to the relative rural population of each state to the total rural population of all states; 26% to each state in amounts proportionate to the relative farm population of each state to the total farm population of all states; and 25% to the Hatch Multistate Research Fund for multi-disciplinary, multi-institutional research activities to solve problems concerning more than one state. Federal funds provided under the Hatch Act to state institutions must be matched with non-federal funding on a dollar-for-dollar basis. Section 7213 of the 2002 farm bill (Farm Security and Rural Investment Act, P.L. 107-171 ) and Section 7404 of the 2008 farm bill amended the Hatch Act such that the insular areas and the District of Columbia, respectively, are required to provide matching funds of an amount equal to not less than 50% of the Hatch Act funds they receive. These amendments also provided that the Secretary of Agriculture may waive the matching requirement of an insular area or the District of Columbia for any fiscal year if the Secretary determines that its government is unlikely to meet the matching requirement for that fiscal year. Other provisions of interest within the Hatch Act include: Multistate research. In accordance with provisions of AREERA, at least 25% of available Hatch Act funds must be used to support multi-state research. Integrated activities. States must also expend 25% or twice the level spent in FY1997 (whichever is less) on activities that integrate cooperative research and extension. Carryover. Section 7(c) permits SAES to carry over unexpended funds for use during the following fiscal year. If those funds that have been carried over are not spent by the end of the second year, they are deducted from the following year's allotment. <4.1.2. Evans-Allen Act: Research Funding for 1890 Institutions> The Evans-Allen Act provides capacity funding for food and agricultural research at 1890 Institutions in a manner similar to the distribution of Hatch Act funds to 1862 Institutions. As with Hatch Act fund recipients, Evans-Allen recipients are required to submit a Plan of Work to NIFA for approval before the funds are distributed. Section 1445(a)(2) of NARETPA (7 U.S.C. 3222(a)(2)), as amended by Section 7122 of the 2008 farm bill, requires that Evans-Allen appropriations shall not be less than 30% of the annual Hatch Act appropriations. However, Evans-Allen appropriations have not met this threshold. They equaled approximately 22% of Hatch Act appropriations in FY2019 (see Table 2 ). Three percent of Evans-Allen funds are reserved for NIFA administrative, technical, and other services. The balance of the funds is distributed as follows: 20% equally to each state; 40% in an amount proportionate to the rural population of the state in which the eligible institution is located to the total rural population of all states in which eligible institutions are located; and 40% in an amount proportionate to the farm population of the state in which the eligible institution is located to the total farm population of all the states in which eligible institutions are located. Section 1449(c) of NARETPA as amended (7 U.S.C. 3222d) requires that federal funds for research and for extension at 1890 Institutions be matched by the state from non-federal sources on a dollar-for-dollar basis. The Secretary may waive the matching funds requirement above the 50% level for an eligible institution if the Secretary determines that the state will be unlikely to satisfy the matching requirement for a given fiscal year. This waiver, while allowing institutions to receive federal funding, has raised questions about overall funding equities. For additional details see " Disparity in State Matching Funds ." <4.1.3. McIntire-Stennis Act: Forestry Research Funding> The McIntire-Stennis Cooperative Forestry Act of 1962 as amended authorizes research appropriations for certified cooperating forestry schools, including 1862 Institutions. The 1890 Institutions were made eligible for McIntire-Stennis funding through Section 7412 of the 2008 farm bill. The 1994 Institutions that offer associate or baccalaureate degrees in forestry were made eligible in Section 7604 of the 2018 farm bill. Unlike the statutorily designated formulas under the Hatch and Smith-Lever Acts, funding apportionments under the McIntire-Stennis Act are made by the Secretary of Agriculture in consultation with a 16-member council (fulfilled through the Forestry Research Advisory Council of the USDA Forest Service), which includes representatives of relevant forestry research institutions. Three statutorily defined factors are considered in making apportionments (16 U.S.C. 582a-4): 1. total non-federal expenditures for forestry research by state-certified institutions; 2. total state acreage in non-federal commercial forest land; and 3. volume of timber from growing stock cut annually in the state. The federal apportionment also requires a dollar-for-dollar match of non-federal funds that, unlike Hatch and Evans-Allen, cannot be waived. <4.1.4. Smith-Lever Act: Extension Funding for 1862 Institutions> The Smith-Lever Act of 1914 (38 Stat. 372) as amended authorizes the Cooperative Extension System and provides capacity grants to 1862 Institutions for their cooperative extension education activities. Capacity grants are distributed according to Smith-Lever sections 3(b) and 3(c) (7 U.S.C. 343(b) and 7 U.S.C. 343(c)). Smith-Lever capacity grants provide about 65% of total federal funding for extension activities. Competitive funding provisions within the Smith-Lever Act, including section 3(d) (7 U.S.C. 343(d)) and specific provisions within section 3(b), are addressed in the " Competitive Smith-Lever Provisions for Extension at 1862, 1890, and 1994 Institutions " section of this report. States can use Smith-Lever 3(b) and 3(c) capacity grants for locally determined projects as well as for high priority regional and national concerns. Eligible state institutions must submit a Plan of Work to NIFA for approval before these funds are distributed. Smith-Lever 3(b) capacity funds are distributed based on the FY1962 distribution of cooperative extension funds. For Smith-Lever 3(c) funds, 4% are reserved for NIFA administrative, technical, and other services, and the balance is distributed to the states in the following proportions: 20% equally to each state; 40% in amounts proportionate to the relative rural population of each state to the total rural population of all states; and 40% in amounts proportionate to the relative farm population of each state to the total farm population of all states. Federal funds provided under the Smith-Lever Act to state institutions must be matched with non-federal funds on a dollar-for-dollar basis. Matching requirements for the District of Columbia and the insular areas are subject to matching requirements of at least 50% of the Smith-Lever funds they receive. Further, the Secretary of Agriculture may waive the matching requirement for the District of Columbia or an insular area for any fiscal year if the Secretary determines that it is unlikely to meet the matching requirement for that fiscal year. Smith-Lever requires states to expend 25% of federal Smith-Lever 3(b) and 3(c) capacity grants, or twice the level spent in FY1997 (whichever is less), on cooperative extension activities in which two or more states cooperate to address issues facing more than one state. They must expend the same percentage or amount on activities that integrate cooperative research and extension. Institutions receiving Smith-Lever capacity grants can carry over unexpended funds from one fiscal year to the next. <4.1.5. NARETPA Section 1444: Extension Funding for 1890 Institutions> Section 1444 of NARETPA (7 U.S.C. 321-329) provides capacity grants for extension education programs at 1890 Institutions in a manner similar to Smith-Lever Act funding for 1862 Institutions. Section 7121 of the 2008 farm bill amended Section 1444(a)(2) of NARETPA so that an amount equal to at least 20% of the total annual appropriation under the Smith-Lever Act sections 3(b) and 3(c) shall be allocated to 1890 Institutions for their extension activities. However, 1890 Institution extension appropriations have not met this threshold. They equaled approximately 15% of Smith-Lever appropriations in FY2019 (see Table 2 ). Funds are distributed according to the same formula used for Evans-Allen 1890 Institution research funds, except that 4%, rather than 3%, of total funds are reserved to NIFA for administrative, technical, and other services. State matching requirements for 1890 Institution extension funds are the same as described for 1890 Institution research funds (see " Evans-Allen Act: Research Funding for 1890 Institutions " and " Disparity in State Matching Funds " for additional details). Before the 2018 farm bill, 1890 Institutions could carry over no more than 20% of their extension appropriations from one fiscal year into the next. The 1862 Institutions have no such limitation. Section 7114 of the 2018 farm bill (7 U.S.C. 3221(a)) allows 1890 Institutions to carry over up to 100% of their extension appropriations. This change may allow 1890 Institutions greater flexibility to plan long-term projects. <4.1.6. Native American Institutions Endowment Fund: Capacity Funding for 1994 Institutions> Section 533(c) of the Equity in Educational Land-Grant Status Act of 1994 (7 U.S.C. 301 note) requires annual distributions of interest on the Native American Institutions Endowment Fund. The 1994 Institutions receive payments, based on a statutorily established formula, from the interest earned on the endowment corpus. No withdrawals are made from the corpus of the endowment. There is no matching requirement, and endowment funds do not expire. The institutional recipients may use funds at their discretion, for the support and maintenance of the colleges for the benefit of the agricultural and mechanical arts. In FY2019, the endowment fund produced about $4.6 million in interest. Four percent of the available funds are reserved to NIFA for administrative services. The balance of the interest income is distributed to the 1994 Institutions according to the following formula: 40% in equal shares to the 1994 Institutions and 60% to be distributed among the 1994 institutions based on the "Indian student count" for each institution for the fiscal year. <4.1.7. Hispanic-Serving Agricultural Colleges and Universities Fund: Research, Education, and Extension Funding for HSACUs> Section 1455 of NARETPA as amended requires annual distributions of interest on the HSACU Fund. No interest has accrued to date, as Congress has not provided appropriations for the HSACU Fund. Four percent of available funds are to be reserved to NIFA for administrative services. The balance of the interest income is to be distributed to the HSACUs according to the following formula (7 U.S.C. 3243): 40% in equal shares to the HSACUs and 60% to be distributed among the HSACUs on a pro rata basis based on the Hispanic enrollment count of each institution. <4.2. Competitive Grants> Many provisions in various laws authorize competitive grants for agriculture and forestry research, education, and extension. The following highlights some major provisions relevant to the land-grant university system, as well as two new programs authorized in the 2018 farm bill. <4.2.1. Agriculture and Food Research Initiative (AFRI)> The Agriculture and Food Research Initiative (AFRI) (7 U.S.C. 3157) is USDA's largest competitive grants program for agricultural science research. The 2008 farm bill established AFRI, and subsequent farm bills reauthorized it. AFRI is authorized to be appropriated $700 million annually, from FY2008 to FY2023. Its appropriation has grown from $202 million in FY2009 ( P.L. 111-8 ) to $415 million for FY2019 ( P.L. 116-6 ). See Table 2 for appropriation levels in recent years. AFRI funds are not reserved specifically for land-grant institutions. Eligible recipients of AFRI awards include State Agricultural Experiment Stations (SAES); colleges and universities; university research foundations; other research institutions and organizations; federal agencies; national laboratories; private organizations or corporations; individuals; or any combination of the aforementioned entities. AFRI grants support research, education, and extension activities in six priority areas identified in the farm bill: plant health and production and plant products (27% of estimated AFRI funds); animal health and production and animal products (22%); food safety, nutrition, and health (15%); bioenergy, natural resources, and environment (12%); agriculture systems and technology (13%); and agriculture economics and rural communities (12%). <4.2.2. Competitive Smith-Lever Provisions for Extension at 1862, 1890, and 1994 Institutions> Section 201 of AREERA amended the Smith-Lever Act to authorize agricultural extension appropriations for 1994 Institutions, awarded on a competitive basis. This is included as a separate competitive funding provision within Smith-Lever section 3(b) (7 U.S.C. 343(c)). A 1994 Institution may administer such funds in cooperation with an 1862 or 1890 Institution. NIFA awards these funds through the Tribal Colleges Extension Program (TCEP). In addition, Smith-Lever 3(d) funds, originally distributed via formula and reserved for 1862 Institutions, address special programs or concerns of regional or national importance. Smith-Lever 3(d) funds support the (1) Farm Safety and Youth Safety Education Program, (2) Children, Youth, and Families at Risk, (3) Federally-Recognized Tribes Extension Program, and (4) New Technology for Agricultural Extension Program. Section 7403 of the 2008 farm bill extended eligibility for Smith-Lever 3(d) funds to 1890 Institutions and required that all 3(d) funding be awarded on a competitive basis. Section 7609 of the 2018 farm bill authorized 1994 Institutions to compete for and receive funds for two of the four 3(d) programs: Children, Youth, and Families at Risk funding, and the Federally-Recognized Tribes Extension Program. <4.2.3. Competitive Research Grants for 1994 Institutions> In 1998 Congress, through passage of AREERA, amended the Equity in Educational Land-Grant Status Act of 1994 to authorize a competitive research grants program for 1994 Institutions, and to authorize appropriations for the program. Later farm bills amended some of the original provisions. As amended, the program allows scientists at 1994 Institutions to participate in agricultural research activities that address tribal, national, and multi-state priorities. The 1994 Institutions may conduct this work in cooperation with the Agricultural Research Service, an 1862 or 1890 Institution, an NLGCA, or a cooperating forestry school. NIFA administers the Tribal Colleges Research Grants Program (TCRGP). <4.2.4. New Competitive Grants for 1890 Institutions in the 2018 Farm Bill> Section 7117 of the 2018 farm bill authorizes grants for students enrolled in 1890 Institutions who intend to pursue careers in the food and agricultural sciences. It makes $40 million of mandatory funding from the Commodity Credit Corporation available until expended. In addition, it authorizes $10 million in annual discretionary funding. Section 7213 calls for USDA to recognize at least three centers of excellence at 1890 Institutions. Each center of excellence should focus on research and extension activities in at least one of six specified areas: student success and workforce development; nutrition, health, wellness, and quality of life; farming systems, rural prosperity, and economic sustainability; global food security and defense; natural resources, energy and the environment; and emerging technologies. It authorizes annual appropriations of $10 million. <5. Issues for Congress> <5.1. 2019 Relocation of NIFA> NIFA is USDA's extramural research agency, meaning that it funds research conducted at other institutions. It provides scientific leadership and administers federal grant programs for the land-grant university system. Since its creation in 2008, staff entirely based in Washington, D.C. have carried out NIFA program coordination and planning. Its predecessor agency, the Cooperative State Research, Education, and Extension Service (CSREES), was also located entirely in Washington, D.C. In August, 2018, the Secretary of Agriculture announced the intention to relocate the majority of NIFA and employees out of the National Capital Region. A cost-benefit analysis released on June 13, 2019, indicated that 294 of 315 NIFA positions would be required to relocate. While the cost-benefit analysis references 315 NIFA positions, NIFA has 412 permanent full-time positions. Staffing of 315 at the time of the cost-benefit analysis indicates an initial vacancy rate of 24.6%, before relocation plans were developed. Concurrent with the release of the cost-benefit analysis, the Secretary announced that NIFA would be moved to the Kansas City Region. USDA has reported that 73 NIFA employees accepted relocation by the July 15 decision deadline. These data suggest that NIFA may start its work in Kansas City with 75% or more of positions located there empty or filled by recent hires. Reduced staffing levels have the potential to affect NIFA's ability to manage the congressionally mandated programs that fund the land-grant university system. For more information, see CRS In Focus IF11166, Proposed Relocation/Realignment of USDA's ERS and NIFA , by Tadlock Cowan. <5.2. Shifting Balance of Public versus Private Research Funding> Public investment in agricultural research in the United States has declined in inflation-adjusted dollars since 2008, while private funding has steadily increased. The share of food and agriculture research funded by the public sector decreased from around 50% between 1970 and 2008 to less than 25% in 2013. Figure 2 provides an overview, prepared by the USDA Economic Research Service, of agricultural research funding in 2013 from federal, state, and non-governmental sources. Many factors have influenced this shift in funding sources. These include expansion of markets and increasing globalization of trade; laws and legal decisions since the 1970s that paved the way for intellectual property rights for biological innovations and commercial products derived from federally sponsored research; technical advances in biotechnology innovation that have increased potential profitability of agricultural research; and declining state investment in agricultural research since the 1990s. A 2012 report by President's Council of Advisors on Science and Technology (PCAST) states that private industry has an important role in agricultural research, and that public funding is essential to meeting agricultural research challenges. In May, 2019, the Association of Public and Land-Grant Universities and the Charles Valentine Riley Memorial Foundation called for increased public funding of agricultural research, in part to ensure that the United States remains globally competitive in agricultural technology and productivity. Whereas public funding pursues public goods, with the exception of some private foundations, private funding is typically oriented to generating profit. Thus the shift from predominantly public funding of agricultural research to more private funding has the potential to shape agricultural research towards crops, livestock, and technologies with the greatest profit potential and away from smaller crops or technologies that may not prove to be as profitable. Increasing federal appropriations for agricultural research or requiring increases in state matching funds may bolster basic research and research on agricultural products and activities that are important to some agricultural constituencies, yet currently have limited economic incentives. <5.3. Disparity in State Matching Funds> Federal research and extension capacity grants to the land-grant system generally require one-to-one non-federal matching funds. All states meet the matching requirements for their 1862 Institutions, which are predominantly white. In contrast, ten of the nineteen 1890 Institutions, which are predominantly black, received a full match from their states in FY2016. Those 1890 Institutions that do not meet the 100% matching funds requirement must apply to USDA for a waiver or forfeit their federal capacity funding. While receiving a waiver allows an 1890 Institution to receive its allocation of federal funding, such a waiver reduces the total public support for the institution, from the combination of federal and state funding, compared with what it would receive if a complete match was provided. This opens a disparity between 1890 and 1862 Institutions. If states had contributed 100% matching funds, overall state contributions for research and extension at 1890 Institutions would have been $17.8 million higher in FY2015, and in $18.5 million higher in FY2016 than actual matching contributions.. In 1977 when Congress, through NARETPA, originally created the Evans-Allen research and NARETPA Section 1445 extension capacity funding for 1890 Institutions, it did not require state matching funds. Through AREERA in 1998, Congress instituted an initial 30% state matching requirement for FY2000 that increased to 50% by FY2002. At that time, Congress gave USDA the ability to waive the state matching requirement for FY2000, but not thereafter. The 2002 farm bill ( P.L. 107-171 ) increased the matching requirement over time until it reached 100% in FY2007. The 2002 farm bill reintroduced the ability for USDA to issue waivers, above the 50% level, if a state was unlikely meet the matching requirement. Eliminating the opportunity to apply for a waiver may result in some states increasing their matching funds to ensure that their 1890 Institutions qualify for federal funding. However, this change may result in other institutions becoming ineligible to receive any federal funds if their states do not increase their matching contributions. Another option that may incentivize increased non-federal matching is to increase the waiver threshold above 50%. Section 7116 of the 2018 farm bill (7 U.S.C. 3221(a)) addresses concerns about disparities in state matching funds through a transparency requirement. It requires that USDA report annually "the allocations made to, and matching funds received by, 1890 Institutions and 1862 Institutions ... for each of the agricultural research, extension, education, and related programs ... " under the relevant statutes (Smith-Lever 3(b) and 3(c), Hatch, and Sections 1444 and 1445 of NARETPA). Supporters of the 1890 Institutions voice hope that the new transparency requirement will encourage states to provide 100% matching funding for those institutions. <5.4. Funding of 1994 Institutions> The 1994 Institutions, which are all tribal colleges and universities, make up the newest class of land-grant institution. Significant institutional differences among the 1862, 1890, and 1994 Institutions, in terms of numbers of students served, types of degrees awarded, and focal missions, factor into federal funding allocations. While land-grant designation gave 1994 Institutions new access to federal funding, this access is more limited than that of 1862 and 1890 Institutions. Table 3 illustrates differences in federal research funding among land-grant institution types. In FY2018, 1994 Institutions as a group received appropriations equal to about 1.2% of the research funds, through the Tribal College Research Grants Program, as 1862 Institutions received through Hatch Act appropriations. They received about 2% of the extension funds, through the Tribal Colleges Extension Program, as 1862 Institutions received through Smith-Lever capacity grant programs. In comparison, there were 61.5% as many 1994 Institutions as 1862 Institutions in FY2018. The American Indian Higher Education Consortium (AIHEC), a non-profit group representing TCUs, has consistently requested increased appropriations for 1994 Institutions, characterizing the difference in funding between 1994 and 1862 Institutions as an inequity. Others might argue that funding differences are appropriate to the different academic structures and institutional missions of 1994 and 1862 Institutions. Section 7120 of the 2018 farm bill included 1994 Institutions in one new avenue for competitive funding. This section, titled "New Beginning for Tribal Students," authorizes USDA to make competitive grants, with a one-to-one matching funds requirement, to land-grant institutions targeting support for tribal students. Institutions may use such funds to support tribal students through recruiting, tuition and related fees, experiential learning, and student services. No state may receive more than $500,000 per year through this program. <5.4.1. Appendix. List of Land-Grant Institutions by State>

With the passage of the first Morrill Act in 1862, the United States began a then-novel policy of providing federal support for post-secondary education, focused on agriculture and the mechanical arts. The national system of land-grant colleges and universities that has developed since then is recognized for its breadth, reach, and excellence in teaching, research, and extension. Land-grant institutions are located in every U.S. state and many territories. These institutions educate the next generation of farmers, ranchers, and citizens, and form the backbone of a national network of agricultural extension and experiment stations. The land-grant university system has continued to evolve through federal legislation. The federal government provides funds, often with state matching requirements, to execute the system's three-fold mission of agricultural teaching, research, and extension. The U.S. Department of Agriculture's (USDA) National Institute of Food and Agriculture (NIFA) distributes these funds to the states as capacity grants, on a formula basis as determined by statute, or to participating institutions on a competitive basis. The Morrill Acts of 1862 (12 Stat. 503) and 1890 (26 Stat. 417), and the Equity in Educational Land-Grant Status Act of 1994 ( P.L. 103-382 §531-535), established the three institutional categories of the land-grant system, now known as the 1862, 1890, and 1994 Institutions. The 1862 Institutions are the first land-grant institutions; 1890 Institutions are historically black colleges and universities (HBCUs); and 1994 Institutions are tribal colleges and universities (TCUs). Later legislation also recognized additional institutional categories, including non-land-grant colleges of agriculture (NLGCAs) and Hispanic-serving agricultural colleges and universities (HSACUs), for specific programs. The Hatch Act of 1887 (24 Stat. 440), Evans-Allen Act of 1977 ( P.L. 95-113 §1445), and provisions of the Agricultural Research, Extension, and Education Reform Act of 1998 (AREERA, P.L. 105-185 ) provide the framework for funding research at land-grant institutions. State Agricultural Experiment Stations (SAES) associated with 1862 Institutions receive federal research capacity funds with a one-to-one non-federal matching requirement. The 1890 Institutions also receive federal research capacity funds with this matching requirement, yet USDA can waive up to 50% of their matching requirement. The 1994 Institutions can receive federal research funds through competitive grants programs. They may also use interest distributions from the Native American Institutions Endowment Fund, allocated on a formula basis, at their discretion. The land-grant university system operates the U.S. Cooperative Extension Service (CES) in partnership with federal, state, and local governments. The CES provides non-formal education to agricultural producers and communities through its network of offices located in most of the more than 3,000 U.S. counties and territories. The Smith-Lever Act of 1914 (38 Stat. 372), National Agricultural Research, Education, and Teaching Policy Act of 1977 (NARETPA, P.L. 95-113 §1444-1445), and AREERA extension provisions guide agricultural extension funding in the land-grant university system. The 1862 and 1890 Institutions receive federal capacity funds, according to separate formulas with non-federal matching requirements. USDA may waive up to 50% of the matching requirement for 1890 Institutions. The 1994 Institutions may receive federal extension funding through competitive grants. Looking forward, the scheduled fall 2019 relocation of NIFA from its current location in Washington, D.C.; the decades-long shifting balance of public and private investment in agricultural research; disparities in state matching funds among the different classes of land-grant institutions; and the funding of TCU land-grant institutions may invite congressional engagement.

crs_R41510

crs_R41510_0

The House pay-as-you-go (PAYGO) rule is generally intended to discourage or prevent Congress from taking certain legislative action that would increase the deficit. It prohibits the consideration of direct spending and revenue legislation that is projected to increase the deficit over either a 6-year or an 11-year period. In effect, the rule requires legislation that includes provisions projected to increase direct spending or reduce revenues to also include offsetting provisions over the two specified periods. The House PAYGO rule was first established at the beginning of the 110 th Congress and modified in the 111 th Congress. It was replaced by the cut-as-you-go (CUTGO) rule, which applied only to direct spending legislation, at the beginning of the 112 th Congress. The PAYGO rule was reinstated, with modifications, replacing the CUTGO rule, at the beginning of the 116 th Congress. This report explains the House PAYGO rule's features, describes its legislative history, and discusses how it compares to statutory PAYGO requirements. It updates the previous version (dated November 30, 2010), largely with information about the CUTGO rule and the PAYGO rule, as adopted in the 116 th Congress. The full text of the House PAYGO rule is provided in the Appendix . <1. Features of the House PAYGO Rule> The House PAYGO rule adopted for the 116 th Congress prohibits the consideration of legislation affecting direct spending and revenues that is projected to increase the deficit, or reduce the surplus, over either of two time periods: (1) the 6-year period consisting of the current fiscal year, the budget year, and the 4 ensuing fiscal years; or (2) the 11-year period consisting of the current year, the budget year, and the ensuing 9 fiscal years. The House PAYGO rule applies to legislation affecting direct spending and revenues . Direct spending, also referred to as mandatory spending, has two distinguishing features: (1) it is provided or controlled in authorizing legislation; and (2) it generally continues without any annual legislative action. Examples of programs funded through direct spending include Medicare, unemployment compensation, and federal retirement. Direct spending is within the jurisdiction of the respective authorizing committees. Revenues are the funds collected from the public primarily as a result of the federal government's exercise of its sovereign taxing power. They consist of receipts from individual income taxes, payroll taxes, corporate income taxes, excise taxes, duties, gifts, and miscellaneous receipts. Revenues are within the jurisdiction of the Committee on Ways and Means in the House. The House PAYGO rule does not apply to discretionary spending , which is provided and controlled through the annual appropriations process. Discretionary spending is not counted for purposes of determining whether legislation increases the deficit under the House PAYGO rule. The rule generally requires that each measure affecting direct spending and revenues not increase the deficit over either of the two time periods specified. That is, to comply with the rule, each measure that includes provisions projected to increase direct spending or reduce revenues must also include offsetting provisions projected to reduce direct spending, increase revenues, or both, by equivalent amounts. A projected deficit reduction resulting from a measure previously passed by the House, or one to be considered subsequently by the House, cannot be used to offset a deficit increase due to provisions in a measure currently under consideration. The rule provides one exception to this measure-by-measure application. Under clause 10(b) of House Rule XXI, savings from a previously passed measure may be included in determining a separate measure's PAYGO compliance if a special rule provides that the two measures are to be combined upon engrossment. The rule specifies that a determination of the effect of direct spending and revenue legislation on the deficit or surplus is to be based on estimates made by the Committee on the Budget relative to the Congressional Budget Office (CBO) baseline estimates. In producing its baseline estimates, CBO projects revenues, spending, and deficit or surplus levels under existing law (i.e., assuming no legislative changes). Under the rule, such baseline estimates are to be consistent with Section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. The House PAYGO rule does not apply to direct spending increases or revenue reductions that occur under existing law. That is, if direct spending increases because more individuals qualify for benefits under existing law, for example, any increase in the deficit is not counted for PAYGO purposes and is beyond the rule's control. The House PAYGO rule exempts provisions designated as an emergency from being counted in determining compliance with the rule. Under clause 10(c) of House Rule XXI, a determination as to whether legislation increases the deficit, or reduces the surplus, shall exclude any provision "expressly designated as an emergency for the purposes of pay-as-you-go principles." If legislation contains such a designation, the chair must put the question of consideration to the full House prior to its consideration. That is, the House must vote on whether or not to consider the legislation, even though all or certain budgetary effects would be exempt from the House PAYGO rule. If the question is decided in the affirmative (by simple majority), the legislation may then be considered. Alternatively, if the question is decided in the negative, the legislation may not be considered. The House PAYGO rule is enforced by a point of order to prevent the consideration of legislation that does not meet the requirement. If legislation brought up on the House floor violates the rule (i.e., increases the deficit, or reduces the surplus, in either of the two fiscal-year periods), a Member may raise a point of order against it. If the point of order is sustained, the legislation may not be considered (in the case of an amendment, the amendment falls). The House rule, however, is not self-enforcing: a Member must raise the point of order to enforce it. In addition, the House rule may be waived by a special rule reported by the House Rules Committee and agreed to by the House by majority vote, by considering the legislation under the suspension of the rules procedures, or by unanimous consent. Finally, the House PAYGO rule, as part of the standing rules of the House, is effective for the current Congress for which it is adopted. <2. Legislative History of the House PAYGO Rule> The House PAYGO rule was first established at the beginning of the 110 th Congress. It was modified at the beginning of the 111 th Congress, as part of the opening-day rules package, and again in the second session of the 111 th Congress, as part of a special rule providing for the consideration of an unrelated measure. In addition, its application to certain legislation was modified during the first session of the 111 th Congress, as part of the FY2010 budget resolution ( S.Con.Res. 13 ). At the beginning of the 112 th Congress, it was replaced with the CUTGO rule, which focused exclusively on the mandatory spending effects of legislation, eliminating any revenue effects from the budgetary evaluation under the rule. Most recently, at the beginning of the 116 th Congress, the PAYGO rule was reinstituted, covering both mandatory spending and revenues, with certain modifications. <2.1. Actions in the 110th Congress> Even before the 110 th Congress began, the new Democratic leadership in both chambers indicated an intention to "restore" PAYGO rules. Accordingly, the House adopted its own PAYGO rule as part of its opening-day rules package. The original House PAYGO rule generally prohibited the consideration of legislation affecting direct spending and revenues that was projected to increase the deficit or reduce the surplus over a 6-year and an 11-year period. In this original form, as it does in its current form, the rule counted on-budget and off-budget entities (such as Social Security) in determining the effect on the deficit (referred to as the unified budget deficit ). The rule also directed the Budget Committee to use the following particular baseline estimates when determining the effect of legislation on the deficit: after the beginning of a new calendar year but before the consideration of a budget resolution, the Budget Committee was to use the most recent baseline estimates supplied by CBO; and after the consideration of the budget resolution, the Budget Committee was to use the most recent baseline estimates supplied by CBO used in considering the budget resolution. Lastly, the original rule provided no explicit exemptions, such as adopted in the 116 th Congress. <2.2. Actions in the 111th Congress> At the beginning of the 111 th Congress, following the customary practice, the House adopted its rules by adopting the preceding Congress's rules, including the House PAYGO rule, with certain amendments. Three changes were made to the PAYGO rule. First, the rule was modified to require the Budget Committee to use baseline estimates supplied by CBO, replacing the particular baseline estimates specified in the original rule. Second, a provision was added to the rule to allow for an exception to its measure-by-measure application. Under this exception, which is still in the rule in the 116 th Congress, the budgetary effects of a House-passed bill may be used to determine compliance with the PAYGO requirement of a separate measure if a special rule provides that the two measures are to be combined upon engrossment. Lastly, the rule was amended to exempt provisions designated as an emergency and to provide for a question of consideration for legislation containing such a designation. Later in the 111 th Congress, during the second session, the House further amended clause 10 of Rule XXI generally to align the House PAYGO rule with the Statutory Pay-As-You-Go Act of 2010, which was enacted earlier in the year. The changes were included in Section 5 of H.Res. 1500 , a special rule providing for the consideration of an unrelated measure. The changes largely related to scoring issues what budgetary effects would count and not count for purposes of determining if legislation increased the deficit (or reduced the surplus). First, the rule was amended to focus on the "on-budget deficit," excluding any "off-budget" effects, such as those affecting the Social Security trust funds. Second, the rule was amended to require that determinations of the budgetary effects of legislation were consistent with the Statutory PAYGO Act. Specifically, the following scoring requirements were incorporated into the House PAYGO rule. Included in estimates: budgetary effects resulting from "outyear modifications" of direct spending laws contained in appropriations acts. Excluded from estimates: budgetary effects due to "timing shifts" from inside to outside the 11-year period covered by the PAYGO rule; and budgetary effects resulting from legislation extending current policy (referred to as "adjustments for current policies"), which were scheduled by statute to expire at the time, in four areas: (1) Medicare payments to physicians; (2) the estate and gift tax; (3) the alternative minimum tax (AMT); and (4) middle-class tax cuts. <2.3. Actions in the 112th Congress> At the beginning of the 112 th Congress, in adopting the rules of the House, the new Republican majority replaced the PAYGO rule with a new Cut-As-You-Go (CUTGO) rule. In general, the CUTGO rule focused on the net effect of new legislation on mandatory spending only, excluding any effects on revenues. Specifically, the rule prohibited the consideration of any legislation that would have the net effect of increasing mandatory spending over the same 6-year and 11-year periods as the previous PAYGO rule. Excluding the projected revenue effects had at least two implications: (1) the House could consider legislation reducing revenues, regardless of whether it would increase the projected deficit, without being vulnerable to a point of order under the rule; and (2) legislation projected to increase mandatory spending could not be offset by an increase in revenues, in order to comply with the rule. The CUTGO rule also did not continue the "adjustments for current policies," as provided in the Statutory PAYGO Act. It is worth noting that these statutory adjustments were set to expire at the end of 2011 and were not extended beyond 2011. Other than these changes, the CUTGO rule generally retained the procedures related to the operation of the previous PAYGO rule. For example, the budgetary effects designated as emergency requirements under the Statutory PAYGO Act were excluded and also required a vote on the question of consideration, as provided in the new PAYGO rule, as described above. The CUTGO rule was renewed, without change, in each subsequent Congress, through the 115 th Congress (i.e., through 2018). <2.4. Actions in the 116th Congress> At the beginning of the 116 th Congress, in adopting the rules of the House, the new Democratic majority reinstituted the PAYGO rule, replacing the previous CUTGO rule. Most significantly, the PAYGO rule reincorporates the projected revenue effects of legislation into the evaluation of determining a violation. The new rule, however, is not exactly the same PAYGO rule that existed at the end of the 111 th Congress. In particular, unlike the previous PAYGO rule, it includes off-budget effects, such as those that affect the receipts and outlays of the Social Security trust funds. In general, other than these changes, the new House PAYGO rule retains the procedures related to the operation of the former CUTGO and PAYGO rules. For example, the new PAYGO rule continues to provide for combining the budgetary effects of two measures, under particular circumstances, and for excluding budgetary effects designated as an emergency, as described in the " Features of the House PAYGO Rule ," section above. <3. Comparison to Statutory PAYGO Requirements> The House PAYGO rule exists alongside similar PAYGO requirements in statute. Like the House rule, the Statutory Pay-As-You-Go Act of 2010 (Title I of P.L. 111-139 , 124 Stat. 8-29), enacted on February 12, 2010, is intended to discourage or prevent Congress from taking certain legislative action that would increase the on-budget deficit. It generally requires that legislation affecting direct spending or revenues not increase the deficit over the 6-year and 11-year time periods, as in the House rule. Notably, the Statutory PAYGO Act relates only to the on-budget effects of legislation, excluding any off-budget effects, such as those affecting the Social Security trust funds. While the House PAYGO rule and the statutory requirements are similar, they are different in significant ways relating to when and how they are enforced. The House rule applies during the consideration of legislation on the House floor. That is, the House rule prohibits the consideration of the legislation on the House floor if it does not comply with the requirement. In addition, under the House PAYGO rule, each measure affecting direct spending and revenues must comply with the requirement, with the one exception of two measures combined upon engrossment, as explained above. The Statutory PAYGO Act, in contrast, applies the requirement to legislation after it has been enacted. Moreover, instead of requiring that each enacted bill not increase the deficit, the statutory rule requires that the net effect of all bills affecting direct spending and revenues (referred to as PAYGO legislation or PAYGO acts) enacted during a session of Congress not increase the deficit. That is, under the statutory rule, the net effect of all PAYGO acts enacted during a session of Congress must not increase the deficit over either a 5-year or a 10-year period. In other words, Congress can enact legislation increasing the deficit and still comply with the statutory rule as long as separate legislation offsetting such increases in the deficit is enacted during the same year. Reflecting the difference in when the PAYGO requirement is applied, the congressional and statutory rules also differ in how they are enforced. As noted above, the House PAYGO rule is enforced by a point of order to prevent the consideration of legislation that does not meet the requirement. In contrast, the statutory PAYGO rule is enforced by sequestration the cancellation of budgetary resources provided by laws affecting direct spending to eliminate an increase in the deficit resulting from the enactment of legislation. The former is an internal procedure of the House, whereas the latter involves actions taken by the President and the Office of Management and Budget. The statutory PAYGO rule provides that if the net effect of direct spending and revenue legislation enacted during a year increases the deficit (i.e., violates the PAYGO requirement), budgetary resources in certain direct spending programs are cut in order to eliminate the increase in the deficit. Specifically, the average budgetary effects (i.e., any increase or decrease in the deficit) over 5-year and 10-year periods of each PAYGO act are placed on 5-year and 10-year scorecards, respectively. The PAYGO requirement effectively is applied to the balances on each of these scorecards 14 days after Congress adjourns at the end of a session. If either scorecard shows a positive balance (referred to as a debit ) for the budget year, the President is required to issue a sequestration order cancelling budgetary resources in non-exempt direct spending programs sufficient to eliminate the balance (the larger balance if both scorecards show a positive balance). Finally, although the House PAYGO rule must be adopted anew at the beginning of each new Congress, the Statutory PAYGO Act does not include any expiration date. <3.1. Appendix. Text of the House Pay-As-You-Go (PAYGO) Rule: Clause 10 of House Rule XXI (116th Congress)> 10. (a)(1) Except as provided in paragraphs (b) and (c), it shall not be in order to consider any bill, joint resolution, amendment, or conference report if the provisions of such measure affecting direct spending and revenues have the net effect of increasing the deficit or reducing the surplus for either the period comprising (A) the current fiscal year, the budget year, and the four fiscal years following that budget year; or (B) the current fiscal year, the budget year, and the nine fiscal years following that budget year. (2) The effect of such measure on the deficit or surplus shall be determined on the basis of estimates made by the Committee on the Budget relative to baseline estimates supplied by the Congressional Budget Office consistent with section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985. (b) If a bill, joint resolution, or amendment is considered pursuant to a special order of the House directing the Clerk to add as new matter at the end of such measure the provisions of a separate measure as passed by the House, the provisions of such separate measure as passed by the House shall be included in the evaluation under paragraph (a) of the bill, joint resolution, or amendment. (c)(1) Except as provided in subparagraph (2), the evaluation under paragraph (a) shall exclude a provision expressly designated as an emergency for purposes of pay-as-you-go principles in the case of a point of order under this clause against consideration of (A) a bill or joint resolution; (B) an amendment made in order as original text by a special order of business; (C) a conference report; or (D) an amendment between the Houses. (2) In the case of an amendment (other than one specified in subparagraph (1)) to a bill or joint resolution, the evaluation under paragraph (a) shall give no cognizance to any designation of emergency. (3) If a bill, joint resolution, an amendment made in order as original text by a special order of business, a conference report, or an amendment between the Houses includes a provision expressly designated as an emergency for purposes of pay-as-you-go principles, the Chair shall put the question of consideration with respect thereto. (d) For the purpose of this clause, the terms "budget year" and "current year" have the meanings specified in section 250 of the Balanced Budget and Emergency Deficit Control Act of 1985, and the term "direct spending" has the meaning specified in such section 250 except that such term shall also include provisions in appropriations Acts that make outyear modifications to substantive law as described in section 3(4)(C) of the Statutory Pay-As-You-Go Act of 2010.

The House pay-as-you-go (PAYGO) rule is generally intended to discourage or prevent Congress from taking certain legislative action that would increase the deficit. The rule requires that legislation affecting direct spending or revenues not increase the projected deficit over either a 6-year or an 11-year period. In effect, the rule requires that any legislation projected to increase direct spending or reduce revenues must be offset by equivalent amounts of direct spending cuts, revenue increases, or a combination of the two, over the two specified periods. The House PAYGO rule applies to legislation affecting direct spending and revenues . It does not apply to discretionary spending . This rule exempts provisions designated as an emergency from being counted in determining compliance with the PAYGO rule. First established at the beginning of the 110 th Congress, the House PAYGO rule was modified during the 111 th Congress: at the beginning of the 111 th Congress, as part of the opening-day rules package; and again in the second session of the 111 th Congress, as part of a special rule providing for the consideration of an unrelated measure. At the beginning of the 112 th Congress, it was replaced with the Cut-As-You-Go (CUTGO) rule, which focused exclusively on the mandatory spending effects of legislation, eliminating any revenue effects from the budgetary evaluation under the rule. Most recently, at the beginning of the 116 th Congress, the PAYGO rule was reinstituted, covering both direct spending and revenues, with certain modifications. The House PAYGO rule exists alongside similar PAYGO requirements in statute, but with some significant differences. The House rule (1) applies the PAYGO requirement during the consideration of legislation on the House floor, (2) applies generally to each measure individually, and (3) is enforced by a point of order on the House floor. The Statutory PAYGO Act, in contrast, (1) applies the requirement to legislation after it has been enacted, (2) applies to the net effect of all legislation enacted during a session of Congress, and (3) is enforced by sequestration—the cancellation of budgetary resources provided by laws affecting direct spending—to eliminate an increase in the deficit resulting from the enactment of legislation. This report updates the previous version (dated November 30, 2010) with descriptions of the changes instituted by the CUTGO rule, adopted at the beginning of the 112 th Congress, and the current PAYGO rule, adopted at the beginning of the 116 th Congress.

crs_R46341

crs_R46341_0

<1. Introduction> The 116 th Congress continues its interest in U.S. research and development (R&D) and in evaluating support for federal R&D activities. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the internet to communications satellites, shale gas extraction, and defenses against disease. In recent years, federal budget caps have driven executive and legislative branch decisions about the prioritization of R&D, both in the context of the entire federal budget and among competing needs within the federal R&D portfolio. The Bipartisan Budget Act of 2019, among other things, increased the previously established FY2020 and FY2021 discretionary spending limits for defense and nondefense spending. This act reduced some of the budgetary constraints affecting R&D decisions. The U.S. government supports a broad range of scientific and engineering R&D. Its purposes include addressing national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness in the global economy. Most of the R&D funded by the federal government is performed in support of the unique missions of individual funding agencies. The federal R&D budget is an aggregation of the R&D activities of these agencies. There is no single, centralized source of R&D funds. Agency R&D budgets are developed internally as part of each agency's overall budget development process. R&D funding may be included either in accounts that are entirely devoted to R&D or in accounts that also include funding for non-R&D activities. Agency budgets are subjected to review, revision, and approval by the Office of Management and Budget (OMB) and become part of the President's annual budget submission to Congress. The federal R&D budget is then calculated by aggregating the R&D activities of each federal agency. Congress plays a central role in defining the nation's R&D priorities as it makes decisions about the level and allocation of R&D funding overall, within agencies, and for specific programs. In recent years, some Members of Congress have expressed concerns about the level of federal spending (for R&D and for other purposes) in light of the federal deficit and debt. Other Members of Congress have expressed support for increased federal spending for R&D as an investment in the nation's future competitiveness. As Congress acts to complete the FY2021 appropriations process, it faces two overarching issues: the amount of the federal budget to be spent on federal R&D and the prioritization and allocation of the available funding. This report begins with a discussion of the overall level of R&D in President Trump's FY2021 budget request, followed by analyses of R&D funding in the request from a variety of perspectives and for selected multiagency R&D initiatives. The remainder of the report discusses and analyzes the R&D budget requests of selected federal departments and agencies that, collectively, account for approximately 98% of total federal R&D funding. Selected terms associated with federal R&D funding are defined in the text box on the next page. Appendix A provides a list of acronyms and abbreviations. <2. The President's FY2021 Budget Request> On February 10, 2020, President Trump released his proposed FY2021 budget. President Trump is proposing $142.2 billion for R&D for FY2021, a decrease of $13.8 billion (8.8%) below the FY2020 level of $156.0 billion. Adjusted for inflation to FY2021 dollars, the President's FY2021 R&D request represents a constant-dollar decrease of 10.6% from the FY2020 actual level. The President's request includes continued R&D funding for existing single-agency and multiagency programs and activities, as well as new initiatives. This report provides government-wide, multiagency, and individual agency analyses of the President's FY2021 request as it relates to R&D and related activities. Additional information and analysis will be included as the House and Senate act on the President's budget request through appropriations bills. It is not yet clear how the national response to the Coronavirus Disease 2019 (COVID-19) pandemic will affect Administration and congressional priorities for FY2021 R&D funding, or the congressional authorization and appropriations processes for enacting that funding. <3. Federal R&D Funding Perspectives> Federal R&D funding can be analyzed from a variety of perspectives that provide different insights. The following sections examine the data by agency, by the character of the work supported, and by a combination of these two perspectives. <3.1. Federal R&D by Agency> Congress makes decisions about R&D funding through the authorization and appropriations processes primarily from the perspective of individual agencies and programs. Table 1 provides data on R&D funding by agency for FY2019 (actual), FY2020 (enacted), and FY2021 (request). Under the request, eight federal agencies would receive nearly 98% of total federal R&D funding in FY2021: the Department of Defense (DOD), 42.1%; Department of Health and Human Services (HHS), primarily the National Institutes of Health (NIH), 26.6%; Department of Energy (DOE), 11.3%; National Aeronautics and Space Administration (NASA), 9.4%; National Science Foundation (NSF), 4.5%; Department of Agriculture (USDA), 1.9%; Department of Commerce (DOC), 1.1%; and Department of Veterans Affairs (VA), 1.0%. This report provides an analysis of the R&D budget requests for these agencies, as well as for the Department of Homeland Security (DHS), Department of the Interior (DOI), Department of Transportation (DOT), and Environmental Protection Agency (EPA). All but one federal agency would see their R&D funding decrease under the President's FY2021 request compared to their FY2020 enacted level. The only agency that would see an increase in R&D funding in FY2021 relative to the FY2020 level would be the VA (up $38 million, 2.9%). The agencies with the largest R&D funding declines (measured in dollars) in the FY2021 request compared to FY2020 enacted level are DOD (down $4.713 billion), DOE (down $3.168 billion), HHS (down $2.943 billion), NASA (down $723 million), and DOT (down $540 million). See Table 1 . The agencies with the largest percentage declines in R&D funding in the FY2021 request compared to FY2020 enacted level are DOT (down 47.6%), EPA (down 35.4%), DOI (down 25.5%), DOC (down 22.7%), and DOE (down 16.5%). See Table 1 . <3.2. Federal R&D by Character of Work, Facilities, and Equipment> Federal R&D funding can also be examined by the character of work it supports basic research, applied research, or development and by funding provided for construction of R&D facilities and acquisition of major R&D equipment. (See Table 2 .) President Trump's FY2021 request includes $40.638 billion for basic research, down $2.822 billion (6.5%) from FY2020 enacted level; $38.805 billion for applied research, down $5.125 billion (11.7%); $59.112 billion for development, down $3.466 billion (5.5%); and $3.630 billion for facilities and equipment, down $2.375 billion (39.6%). <3.3. Federal Role in U.S. R&D by Character of Work> A primary policy justification for public investments in basic research and for incentives (e.g., tax credits) for the private sector to conduct research is the view, widely held by economists, that the private sector will, left on its own, underinvest in basic research from a societal perspective. The usual argument for this view is that the social returns (i.e., the benefits to society at large) exceed the private returns (i.e., the benefits accruing to the private investor, such as increased revenues or higher stock value). Other factors that may inhibit corporate investment in basic research include long time horizons for achieving commercial applications (diminishing the potential returns due to the time value of money), high levels of technical risk and uncertainty, shareholder demands for shorter-term returns, and asymmetric and imperfect information. The federal government is the nation's largest supporter of basic research, funding 42% of U.S. basic research in 2018 (the most recent year for which comprehensive data are available). Business funded 29% of U.S. basic research in 2018, with state governments, universities, and other nonprofit organizations funding the remaining 30%. For U.S. applied research, business is the primary funder, accounting for an estimated 54% in 2018, while the federal government accounted for an estimated 34%. State governments, universities, and other nonprofit organizations funded the remaining 11%. Business also provides the vast majority of U.S. funding for development. Business accounted for 85% of development funding in 2018, while the federal government provided 13%. State governments, universities, and other nonprofit organizations funded the remaining 2% (see Figure 1 ). <3.4. Federal R&D by Agency and Character of Work Combined> Federal R&D funding can also be viewed from the combined perspective of each agency's contribution to basic research, applied research, development, and facilities and equipment. Table 3 lists the three agencies with the most funding in each of these categories as proposed in the President's FY2021 budget. The overall federal R&D budget reflects a wide range of national priorities, including supporting advances in spaceflight, developing new and affordable sources of energy, and understanding and deterring terrorist groups. These priorities and the mission of each individual agency contribute to the composition of that agency's R&D spending (i.e., the allocation of R&D funding among basic research, applied research, development, and facilities and equipment). In the President's FY2021 budget request, the Department of Health and Human Services, primarily NIH, would account for nearly half (47.1%) of all federal funding for basic research. HHS would also be the largest federal funder of applied research, accounting for about 47.3% of all federally funded applied research in the President's FY2021 budget request. DOD would be the primary federal funder of development, accounting for 88.0% of total federal development funding in the President's FY2021 budget request. DOE would be the primary federal funder of facilities and equipment, accounting for 58.7% of total federal facilities and equipment funding in the President's FY2021 budget request. <4. Multiagency R&D Initiatives> For many years, presidential budgets have reported on multiagency R&D initiatives. Often, they have also provided details of agency funding for these initiatives. Some of these efforts have a statutory basis for example, the Networking and Information Technology Research and Development (NITRD) program, the National Nanotechnology Initiative (NNI), and the U.S. Global Change Research Program (USGCRP). These programs generally produce annual budget supplements identifying objectives, activities, funding levels, and other information, usually published shortly after the presidential budget release. Other multiagency R&D initiatives have operated at the discretion of the President, without such a basis, and may be eliminated at the discretion of the President. President Trump's FY2021 budget is largely silent on funding levels for these efforts and whether any or all of the nonstatutory initiatives will continue. Some activities related to these initiatives are discussed in agency budget justifications and may be addressed in the agency analyses later in this report. This section provides available multiagency information on these initiatives and will be updated as additional information becomes available. <4.1. Networking and Information Technology Research and Development Program (NITRD)8> Established by the High-Performance Computing Act of 1991 ( P.L. 102-194 ), the Networking and Information Technology Research and Development program is the primary mechanism by which the federal government coordinates its unclassified networking and information technology R&D investments in areas such as supercomputing, high-speed networking, cybersecurity, software engineering, and information management. According to NITRD, it coordinates the information technology R&D activities of 24 federal agency members and more than 45 other participating agencies with program interests and activities in IT R&D. NITRD efforts are coordinated by the National Science and Technology Council (NSTC) Subcommittee on Networking and Information Technology Research and Development. P.L. 102-194 , as reauthorized by the American Innovation and Competitiveness Act of 2017 ( P.L. 114-329 ), requires the director of NITRD to prepare an annual report to be delivered to Congress along with the President's budget request. This annual report, often referred to as a budget supplement, is to include, among other things, detailed information on the program's budget for the current and previous fiscal years and the proposed budget for the next fiscal year. The latest annual report was published in September 2019 and related to the FY2020 budget request. President Trump requested $5.506 billion for NITRD research in FY2020, a decrease of $195 million (3.4%) from the estimated FY2019 level (see Table 4 ). For additional information on the NITRD program, see CRS Report RL33586, The Federal Networking and Information Technology Research and Development Program: Background, Funding, and Activities , by Patricia Moloney Figliola. Additional NITRD information also can be obtained at https://www.nitrd.gov . <4.2. U.S. Global Change Research Program (USGCRP)11> The U.S. Global Change Research Program coordinates and integrates federal research and applications to understand, assess, predict, and respond to human-induced and natural processes of global change. The program seeks to advance global climate change science and to "build a knowledge base that informs human responses to climate and global change through coordinated and integrated Federal programs of research, education, communication, and decision support." In FY2019, 10 departments and agencies received appropriations for their USGCRP participation. USGCRP efforts are coordinated by the NSTC Subcommittee on Global Change Research. Each agency develops and carries out its activities as its contribution to the USGCRP, and funds are appropriated to each agency for those activities; those activities may or may not be identified as associated with the USGCRP in agency budget justifications or other program materials available publicly. Complementing USGCRP activities are many federal climate change or global change-related activities with programmatic missions, not predominantly scientific. These are reported separately in budget justifications. The Global Change Research Act of 1990 (GCRA) ( P.L. 101-606 ) requires each federal agency or department involved in global change research to report annually to Congress on each element of its proposed global change research activities, as well as the portion of its budget request allocated to each element of the program. The President is also required to identify those activities and the annual global change research budget in the President's annual budget request. The President's budget requests for years later than FY2017 do not report these budget data required by the GCRA, although some agencies report their contributions in their budget justifications to Congress. In addition, in the 20 years prior to FY2018, language in appropriations laws required the President to submit a comprehensive report to the appropriations committees "describing in detail all Federal agency funding, domestic and international, for climate change programs, projects, and activities including an accounting of funding by agency ." As these are no longer reported by the Office of Management and Budget, Table 5 presents data compiled by CRS from communications with departments and agencies that participated in the USGCRP in FY2018. For additional information on the USGCRP, see CRS Report R43227, Federal Climate Change Funding from FY2008 to FY2014 , by Jane A. Leggett, Richard K. Lattanzio, and Emily Bruner. Additional USGCRP information can be obtained at http://www.globalchange.gov . <4.3. National Nanotechnology Initiative (NNI)15> Launched in FY2001, the National Nanotechnology Initiative is a multiagency R&D initiative to advance understanding and control of matter at the nanoscale, where the physical, chemical, and biological properties of materials differ in fundamental and sometimes useful ways from the properties of individual atoms or bulk matter. In 2003, Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ), providing a legislative foundation for some of the activities of the NNI. NNI efforts are coordinated by the NSTC Subcommittee on Nanoscale Science, Engineering, and Technology (NSET). For FY2020, the President's request included NNI funding for 15 federal departments and independent agencies and commissions with budgets dedicated to nanotechnology R&D. The NSET includes other federal departments and independent agencies and commissions with responsibilities for health, safety, and environmental regulation; trade; education; intellectual property; international relations; and other areas that might affect or be affected by nanotechnology. P.L. 108-153 requires the NSTC to prepare an annual report to be delivered to Congress at the time the President's budget request is sent to Congress. This annual report, often referred to as a budget supplement, is to include detailed information on the program's budget for the current fiscal year and the program's proposed budget for the next fiscal year, as well as additional information and data related to the performance of the program. The latest annual report was published in August 2019 and related to the FY2020 budget request. President Trump requested $1.469 billion for NNI research in FY2020, a decrease of $103 million (6.6%) from the estimated FY2019 level. For additional information on the NNI, see CRS Report RL34401, The National Nanotechnology Initiative: Overview, Reauthorization, and Appropriations Issues , by John F. Sargent Jr. Additional NNI information can be obtained at http://www.nano.gov . <4.4. Other Highlighted R&D in the President's FY2021 Budget> The President's FY2021 budget highlights R&D spending in several areas discussed in the following sections. <4.4.1. Science and Technology Supporting the "Industries of the Future"> The President's FY2021 budget states the Administration's prioritization for areas of science and technology that it asserts will underpin the Industries of the Future (IotF), among other prioritizations and reallocations in lower priority areas. For 2021, the Administration is prioritizing the science and technology that underpin the Industries of the Future (IotF) artificial intelligence (AI), quantum information science (QIS), 5G/advanced communications, biotechnology, and advanced manufacturing. Relative to the 2020 President's Budget, this includes major increases in QIS and non-defense AI R&D as part of a commitment to double Federal AI and QIS R&D investments by 2022. R&D investments in AI and QIS, in particular, act as innovation multipliers and employment drivers, not only by promoting S&T progress across many disciplines, but also by helping to build a highly-skilled American workforce. Other IotF areas, such as biotechnology and advanced manufacturing, are poised for potentially transformative advances. Together, IotF investments are vital to the Nation's global competitiveness and the health, prosperity, and security of the American people. <4.4.1.1. Artificial Intelligence (AI)20> On February 11, 2019, President Trump issued Executive Order 13859, "Maintaining American Leadership in Artificial Intelligence," launching the American AI Initiative and later that year defined the effort's priority investment areas in The National Artificial Intelligence Research and Development Strategic Plan: 2019 Update . The FY2021 budget states that AI "is transforming every segment of American life, with applications ranging from medical diagnostics and precision agriculture, to autonomous transportation, job reskilling and upskilling and national defense, and beyond." The FY2021 budget includes increases in the AI R&D budget as part of its efforts to double non-defense AI R&D funding by FY2022. The President's proposed AI R&D funding for FY2021 includes A 76% increase in the AI R&D budget of the National Science Foundation to $868 million over the FY2020 level, for AI-related research and the creation of several National AI Research Institutes, in collaboration with USDA, DHS, DOT, and VA. The institutes are to support multisector, multidisciplinary research and workforce efforts among academia, industry, federal agencies, and nonprofits. An additional $100 million for the USDA Agriculture and Food Research Initiative (AFRI) for AI and machine learning research to promote advanced manufacturing in the food and agricultural sciences, as well as to continue efforts in robotics and the application of big data to precision agriculture. $125 million for DOE's Office of Science, a $54 million increase over the FY2020 request. $50 million for NIH research on chronic diseases using AI and related approaches. $459 million for DARPA AI R&D, an increase of $50 million from the FY2020 request. $290 million for DOD's Joint AI Center, up from $242 million in FY2020. <4.4.1.2. Quantum Information Science25> The FY2021 budget seeks an increase of more than 50% for federal quantum information science (QIS) funding over the FY2020 budget as part of the Administration's goal of doubling funding for QIS by FY2022. The President's proposed QIS R&D funding for FY2021 includes $230 million for NSF to support the National Quantum Initiative, $120 million above the FY2020 level. $237 million for the DOE Office of Science, an increase of approximately $75 million, for QIS work at the national laboratories and in academia and industry. $25 million for the DOE Office of Science to support early stage research for a quantum internet. Additionally, the budget provides funding for NIST work in QIS standards and engineering efforts in quantum systems; funding for the defense and intelligence community for QIS science and technology, new applications, and industrial engagement; and initial funding for NASA to explore the potential for a space-based quantum entanglement experiment. The President's budget also includes an additional $50 million for NSF, compared to the 2020 budget, for education and workforce development for AI and QIS, with focused outreach efforts to community colleges, Historically Black Colleges and Universities (HBCUs), and Minority Serving Institutions (MSIs). <4.4.2. National Security> The President's FY2021 budget also highlights investments in national security-related R&D, including more than $59 billion in research, engineering, and prototyping activities in FY2021 to enable advanced military capabilities, including work in "offensive and defensive hypersonic weapons capabilities, resilient national security space systems, and modernized and flexible strategic and nonstrategic nuclear deterrent capabilities." The FY2021 budget request for Department of Homeland Security R&D includes $83 million for detection and defense against radiological, nuclear, chemical, and biological threats; $44 million for improving resilience to natural disasters and physical threats, for first responder technologies and public safety, and for cross-border threat screening and supply chain defense; and $38 million for cybersecurity. <5. Department of Defense28> The mission of the Department of Defense is to provide "the military forces needed to deter war and ensure our nation's security." Congress supports research and development activities at DOD primarily through the department's Research, Development, Test, and Evaluation (RDT&E) funding. These funds support the development of the nation's future military hardware and software and the science and technology base upon which those products rely. Most of what DOD spends on RDT&E is appropriated in Title IV of the annual defense appropriations bill. (See Table 7 .) Title IV RDT&E funds support activities such as R&D performed by academic institutions, DOD laboratories, and companies, as well as test and evaluation activities at specialized DOD facilities, among other things. However, RDT&E funds are also appropriated in other parts of the bill. For example, RDT&E funds are appropriated as part of the Defense Health Program, the Chemical Agents and Munitions Destruction Program, and the National Defense Sealift Fund. The Defense Health Program (DHP) supports the delivery of health care to DOD personnel and their families. DHP funds (including the RDT&E funds) are requested through the Defense-wide Operations and Maintenance appropriations request. The program's RDT&E funds support congressionally directed research on breast, prostate, and ovarian cancer; traumatic brain injuries; orthotics and prosthetics; and other medical conditions. Congress appropriates funds for this program in Title VI (Other Department of Defense Programs) of the defense appropriations bill. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program are requested through the Defense-wide Procurement appropriations request. Congress appropriates funds for this program also in Title VI. The National Defense Sealift Fund supports the procurement, operation and maintenance, and research and development associated with the nation's naval reserve fleet and supports a U.S. flagged merchant fleet that can serve in time of need. In some fiscal years, RDT&E funding for this effort is requested in the Navy's Procurement request and appropriated in Title V (Revolving and Management Funds) of the appropriations bill. RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support efforts in what the George W. Bush Administration termed the Global War on Terror (GWOT) and what the Obama and Trump Administrations have referred to as Overseas Contingency Operations (OCO). In appropriations bills, the term Overseas Contingency Operations/Global War on Terror (OCO/GWOT) has been used; President Trump's FY2021 budget uses the term Overseas Contingency Operations. Typically, the RDT&E funds appropriated for OCO activities go to specified Program Elements (PEs) in Title IV. According to the Comptroller of the Department of Defense, the FY2021 OCO request is divided into two requirement categories direct and enduring war, and OCO for base requirements. For purposes of this report, these categories of OCO funding requests are reported collectively. In addition, OCO/GWOT-related requests/appropriations have included money for a number of transfer funds. In the past, these have included the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund, the Afghanistan Security Forces Fund, and the Pakistan Counterinsurgency Capability Fund. Congress typically has made a single appropriation into each such fund and authorized the Secretary of Defense to make transfers to other accounts, including RDT&E, at his discretion. These transfers are eventually reflected in Title IV prior-year funding figures. For FY2021, the Trump Administration is requesting $106.555 billion for DOD's Title IV RDT&E PEs (base plus OCO), $1.159 billion (1.1%) above the enacted FY2020 level. (See Table 7 .) In addition, the FY2021 request includes $562.5 million in RDT&E through the Defense Health Program (DHP; down $1.744 billion, 75.6% from FY2020), $782.2 million in RDT&E through the Chemical Agents and Munitions Destruction program (down $93.7 million, 10.7% from FY2020), and $1.1 million for the Inspector General for RDT&E-related activities (down $1.9 million, 63.0% from FY2020). The FY2021 budget includes no RDT&E funding via the National Defense Sealift Fund, the same as the FY2020 enacted level. RDT&E funding can be analyzed in different ways. RDT&E funding can be characterized organizationally. Each military department requests and receives its own RDT&E funding. So, too, do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), collectively aggregated within the Defense-Wide account. RDT&E funding also can be characterized by budget activity (i.e., the type of RDT&E supported). Those budget activities designated as 6.1, 6.2, and 6.3 (basic research, applied research, and advanced technology development, respectively) constitute what is called DOD's Science and Technology (S&T) program and represent the more research-oriented part of the RDT&E program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components for which an operational need has been determined and an acquisition program established. Budget activity 6.6 provides management support, including support for test and evaluation facilities. Budget activity 6.7 supports the development of system improvements in existing operational systems. Budget activity 6.8 was added in the FY2021 budget and supports software and digital technology pilot programs. Many congressional policymakers are particularly interested in DOD S&T program funding, since these funds support the development of new technologies and the science that underlies them. Some in the defense community see ensuring adequate support for S&T activities as imperative to maintaining U.S. military superiority into the future. The knowledge generated at this stage of development may also contribute to advances in commercial technologies. The FY2021 request for Title IV S&T funding (base plus OCO) is $14.070 billion, $1.991 billion (12.4%) below the FY2020 enacted level. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities, as over half of DOD's basic research budget is spent at universities. The Trump Administration is requesting $2.319 billion for DOD basic research for FY2021, $284.2 million (10.9%) below the FY2020 enacted level. While DOD is not the largest federal funder of basic research, it is a substantial source of federal funds for university R&D in certain fields, such as aerospace, aeronautical, and astronautical engineering (60%); electrical, electronic, and communications engineering (58%); industrial and manufacturing engineering (48%); mechanical engineering (46%); computer and information sciences (44%); metallurgical and materials engineering (39%); and materials science (33%). <6. Department of Health and Human Services> The mission of the Department of Health and Human Services (HHS) is "to enhance and protect the health and well-being of all Americans ... by providing for effective health and human services and fostering advances in medicine, public health, and social services." This section focuses on HHS research and development funded through the National Institutes of Health (NIH), an HHS agency that accounts for nearly 97% of total HHS R&D funding. Other HHS agencies that support R&D include the Centers for Disease Control and Prevention (CDC), Centers for Medicare and Medicaid Services (CMS), Food and Drug Administration (FDA), Agency for Healthcare Research and Quality (AHRQ), Health Resources and Services Administration (HRSA), and Administration for Children and Families (ACF); additional R&D funding is attributed to departmental management. <6.1. National Institutes of Health36> NIH is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. It also has major roles in training biomedical researchers and disseminating health information. The NIH mission is "to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability." The agency consists of the NIH Office of the Director (OD) and 27 institutes and centers (ICs). Each IC plans and manages its own research programs in coordination with OD. As shown in Table 8 , separate appropriations are provided to 24 of the 27 ICs, as well as to OD, the Innovation Account (established by the 21 st Century Cures Act in 2016, P.L. 114-255 ), and an intramural Buildings and Facilities account. The other three centers, which perform centralized support services, are funded through transfers from the other ICs. According to NIH, about 10% of the NIH budget supports intramural research projects conducted by the nearly 6,000 NIH federal scientists, most of whom are located on the NIH campus in Bethesda, MD. All research ICs have an intramural research program of varying sizes. More than 80% of NIH's budget goes to the extramural research community in the form of grants, contracts, and other awards. This funding supports research performed by more than 300,000 nonfederal scientists and technical personnel who work at more than 2,500 universities, hospitals, medical schools, and other research institutions. Funding for NIH comes primarily from the annual Labor, HHS, and Education (LHHS) appropriations act, with an additional amount for Superfund-related activities from the Interior/Environment appropriations act. Those two appropriations acts provide NIH's discretionary budget authority. In addition, NIH received mandatory funding of $150 million annually until FY2019 provided in the Public Health Service Act (PHSA), Section 330B, for a special program on type 1 diabetes research. A temporary funding extension has been enacted for FY2020, and under current law, no new funding will be available for this program after May 22, 2020. Some funding is also pursuant to the "PHS Evaluation Tap" transfer authority, under Section 241 of the PHS Act (42 U.S.C. 238j). This provision allows the Secretary of HHS, with the approval of appropriators, to redistribute a portion of eligible PHS agency appropriations across HHS for program evaluation purposes. Although the PHS Act limits the tap to no more than 1% of eligible appropriations, in recent years, annual LHHS appropriations acts have specified a higher amount (2.5% in FY2020, P.L. 116-94 ) and have typically directed specific amounts of funding from the tap for transfer to a number of HHS programs. The assessment has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. NIH, with the largest budget among the PHS agencies, has historically been the largest "donor" of program evaluation funds; until recently, it had been a relatively minor recipient. Provisions in recent LHHS appropriations acts have directed specific tap transfers to NIH, making NIH a net recipient of tap funds. President Trump's FY2021 budget request would provide NIH with a total program level of $38.694 billion, a decrease of $2.992 billion (-7.2%) from FY2020 enacted levels. The proposed FY2020 program level would be made up of $37.630 billion in LHHS budget authority, $741 million pursuant to the PHS Evaluation Tap authority, $74 million for the Superfund Research Program in Interior/Environment appropriations, and $150 million in proposed annual funding for the mandatory type 1 diabetes program. Under the President's FY2021 request, all existing IC accounts would receive a decrease compared to FY2020 enacted levels (see Table 8 ). The Building and Facilities account would receive an increase in terms of LHHS budget authority, from $200 million in FY2020 to $300 million in FY2021. In addition, the full amount ($404 million) authorized by the 21 st Century Cures Act for FY2021 ( P.L. 114-255 ; see text box ) would be appropriated to the Innovation Account. Additionally, the FY2021 budget request proposes consolidating the Agency for Healthcare Research and Quality (AHRQ) into NIH, forming a 28 th IC the National Institute for Research on Safety and Quality (NIRSQ). The creation of a new NIH institute would require amendments to the PHSA, especially Section 401(d), which specifies that "[i]n the National Institutes of Health, the number of national research institutes and national centers may not exceed a total of 27." Under the FY2021 request, NISRQ would receive a total appropriation of $355.1 million, including $256.7 million in discretionary LHHS budget authority and $98.5 million in mandatory appropriations from the Patient-Centered Outcomes Research Trust Fund (PCORTF) in Social Security Act Section 1181. Congress did not adopt the Administration's similar proposals to consolidate AHRQ into NIH as NIRSQ in FY2018, FY2019, or FY2020. Additionally, the budget request proposes select specified FY2021 funding levels for programs and activities within and across the NIH accounts based on the Administration's research priorities. For instance, for FY2021, the Administration's budget proposes specific funding levels for the opioid and methamphetamine epidemic ($1.4 billion across the NIH ICs), a childhood cancer data initiative ($50 million), influenza research ($423 million), and tick-borne diseases research ($115 million), among others. If adopted, these funding levels would likely be specified in report and/or explanatory statement language accompanying LHHS appropriations bills. For the most part, Congress does not specify NIH funding for particular diseases or areas of research, instead allowing the ICs to award funding on a competitive basis through various funding mechanisms intended to balance scientific opportunity with health priorities. <7. Department of Energy48> The Department of Energy was established in 1977 by the Department of Energy Organization Act ( P.L. 95-91 ), which combined energy-related programs from a variety of agencies with defense-related nuclear programs that dated back to the Manhattan Project. Today, DOE conducts basic scientific research in fields ranging from nuclear physics to the biological and environmental sciences; basic and applied R&D relating to energy production and use; and R&D on nuclear weapons, nuclear nonproliferation, and defense nuclear reactors. The department has a system of 17 national laboratories around the country, mostly operated by contractors, that together account for about 40% of all DOE expenditures. The Administration's FY2021 budget request for DOE includes about $13.853 billion for R&D and related activities, including programs in three broad categories: science, national security, and energy. This request is about 19.1% less than the comparable enacted FY2020 amount of $17.124 billion. (See Table 9 for details.) The request for the DOE Office of Science is $5.838 billion, a decrease of 16.6% from the FY2020 appropriation of $7.000 billion. Funding would decrease for five of the office's six major research programs. In the largest program, Basic Energy Sciences, almost two-thirds of the proposed 16.6% decrease would result from spending less on facility construction. Most of the remainder would result from spending less on existing scientific user facilities, in some cases by reducing hours of operation. Funding for Biological and Environmental Research would decrease by 31.1%, with reductions concentrated in the Earth and Environmental Systems Sciences subprogram as proposed in other recent Administration budgets. Funding for Fusion Energy Sciences would decrease by 36.6%. Within Fusion Energy Sciences, the U.S. contribution to construction of the International Thermonuclear Experimental Reactor (ITER), a fusion energy demonstration and research facility in France, would be $107 million (down from $242 million in FY2020). The one major research program receiving an increase would be Advanced Scientific Computing Research (up 0.8%). Within Advanced Scientific Computing Research, an increase of $109 million for research would be partly offset by a decrease of $81 million for facilities; the Office of Science Exascale Computing Project would receive $169 million, down from $189 million in FY2020. The request for DOE national security R&D is $5.066 billion, an increase of 6.3% from $4.765 billion in FY2020. In Weapons Activities, the request for Stockpile Research, Technology, and Engineering would be an increase of 9.0% above the comparable FY2020 amount. The bulk of the increase would be for Assessment Science ($773 million, up from $595 million in FY2020) and Weapon Technology and Manufacturing Maturation ($298 million, up from $222 million in FY2020). A proposed increase of 7.2% for R&D in the Defense Nuclear Nonproliferation account reflects $40 million requested for a program in National Technical Nuclear Forensics R&D, formerly funded in DHS. The request for DOE energy R&D is $2.949 billion, a decrease of 45.0% from $5.360 billion in FY2020. Many of the proposed reductions in this category are similar to the Administration's FY2019 and FY2020 budget proposals. Funding for energy efficiency and renewable energy R&D would decrease by 70.1%, with reductions in all major research areas and a shift in emphasis toward early-stage R&D rather than later-stage development and deployment. In the Fossil Energy R&D account, an increase of $172 million for Advanced Energy Systems would be largely offset by decreases for carbon capture, utilization, and storage ($123 million, down from $218 million in FY2020), natural gas technologies ($15 million, down from $51 million), and oil technologies ($17 million, down from $46 million). The request for nuclear fuel cycle R&D is $187 million (down from $305 million), and nuclear energy as a whole would decrease by 20.1%, with no funding requested for the Integrated University Program ($5 million in FY2020) or the Supercritical Transformational Electric Power (STEP) R&D initiative ($5 million in FY2020). The Advanced Research Projects Agency-Energy (ARPA-E), which is intended to advance high-impact energy technologies that have too much technical and financial uncertainty to attract near-term private-sector investment, would be terminated. <8. National Aeronautics and Space Administration51> The National Aeronautics and Space Administration (NASA) was created in 1958 by the National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. NASA has research programs in planetary science, Earth science, heliophysics, astrophysics, and aeronautics, as well as development programs for future human spacecraft and for multipurpose space technology such as advanced propulsion systems. In addition, NASA operates the International Space Station (ISS) as a facility for R&D and other purposes. The Administration has requested about $22.243 billion for NASA R&D in FY2021. This would be 14.4% more than the FY2020 level of about $19.439 billion. For a breakdown of these amounts, see Table 10 . NASA R&D funding comes through five accounts: Science; Aeronautics; Space Technology (called Exploration Technology in the Administration's budget request); Exploration (Deep Space Exploration Systems in the request); and the ISS, Commercial Crew, and Commercial Low Earth Orbit (LEO) Development portions of Space Operations (called LEO and Spaceflight Operations in the request). The OMB figures presented in Table 1 indicate a substantially smaller amount for NASA R&D than the figures presented in this section, and a decrease in the FY2021 request relative to FY2020 rather than an increase. The main reason for this appears to be that OMB treats only about half of the Exploration account as R&D (somewhat more than half in FY2020, somewhat less than half in FY2021). As systems being developed under that account move from R&D to testing and ultimately operations, the share of the account spent on R&D may decrease. In order to allow consistent tracking as Congress acts on FY2021 appropriations legislation, this section treats the entirety of the Exploration account as R&D. The FY2021 request for Science is $6.307 billion, a decrease of 11.7% from FY2020. Within this total, funding for Earth Science would decrease by $204 million (10.4%) and funding for Astrophysics would decrease by $475 million (36.4%). In Earth Science, the Administration proposes to terminate the Pre-Aerosol, Clouds, and Ocean Ecosystem (PACE) and Climate Absolute Radiance and Refractivity Observatory (CLARREO) Pathfinder missions ($131 million and $26 million respectively in FY2020). In Astrophysics, it proposes to terminate the Wide Field Infrared Space Telescope (WFIRST) and Stratospheric Observatory for Infrared Astronomy (SOFIA) missions ($511 million and $85 million in FY2020). PACE and CLARREO Pathfinder were also proposed for termination in the FY2018 through FY2020 budgets, and WFIRST was also proposed for termination in the FY2019 and FY2020 budgets, but in each case they were funded by Congress. The Planetary Science request includes $404 million (down from $593 million in FY2020) for a mission to orbit Jupiter's moon Europa. Despite direction otherwise in the FY2020 explanatory statement, the Europa mission would be launched on a commercial rocket and would not include a lander. The FY2021 request for Aeronautics is $819 million, an increase of 4.5% from $784 million in FY2020. As projected in prior budgets, the request includes $79 million for the Low Boom Flight Demonstrator program, intended to demonstrate quiet supersonic flight. The FY2021 request for Exploration Technology (currently Space Technology) is $1.578 billion, an increase of 43.5% from FY2020. The combined RESTORE-L/SPIDER mission to demonstrate in-space satellite servicing and robotic manufacturing would receive $134 million (down from $227 million in FY2020). A newly integrated Space Nuclear Technologies portfolio would receive $100 million for development of space nuclear power and propulsion technologies. The budget justification emphasizes Exploration Technology's support of NASA's Artemis human exploration initiative and its plans for a human lunar landing in 2024. In contrast, FY2020 congressional report language emphasized "broad technology development goals independent of mission-specific needs" ( H.Rept. 116-101 ) and technologies that "can serve all NASA mission directorates and are not solely focused on enabling human spaceflight" ( S.Rept. 116-127 ). The FY2021 request for Deep Space Exploration Systems (currently Exploration) is $8.762 billion, an increase of 45.6% from FY2020. Within this account, the request for Exploration Systems Development includes $1.401 billion for the Orion crew capsule (down from $1.407 billion in FY2020) and $2.257 billion for the Space Launch System heavy-lift rocket (SLS, down from $2.586 billion in FY2020). The proposed 228.9% increase for Exploration R&D reflects a request for $3.370 billion for development of a human lunar landing system. Exploration R&D funding would also include $739 million (up from $450 million in FY2020) for development of the Gateway lunar-orbiting platform, intended to support human and robotic missions to the lunar surface. In the LEO and Spaceflight Operations account (currently Space Operations), the request includes $1.401 billion for the ISS; $100 million for the Commercial Crew program (down from $102 million in FY2020); and $150 million for Commercial LEO Development (up from $15 million in FY2020). Commercial crew activities are transitioning from development to operations (which is funded separately); following additional test flights to obtain safety certification from NASA, the first post-certification crewed commercial flight to the ISS is expected during 2020. The Commercial LEO Development program, intended to stimulate a commercial space economy in low Earth orbit, was initiated in the FY2019 budget. The Administration has requested $150 million for it each year since then; Congress has so far appropriated a total of $55 million. <9. National Science Foundation52> The National Science Foundation supports basic research and education in the nonmedical sciences and engineering. Congress established the foundation as an independent federal agency in 1950 and directed it to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." The NSF is a primary source of federal support for U.S. university research, especially in computer science, biology, mathematics and the social and psychological sciences. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. NSF has six appropriations accounts: Research and Related Activities (RRA, the main research account), Education and Human Resources (EHR, the main education account), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), the National Science Board (NSB), and the Office of Inspector General (OIG). Appropriations are generally provided at the account level, while program-specific direction may be included in appropriations acts, or accompanying conference reports or explanatory statements. Funding for R&D is included in the RRA, EHR, and MREFC accounts. (The RRA and EHR accounts also include non-R&D funding.) Together, these three accounts comprise over 95% of the total requested funding for NSF. Actual R&D obligations for each account are known after NSF allocates funding appropriations to specific activities and reports those figures. The budget request specifies R&D funding for the conduct of research, including basic and applied research, and for physical assets, including R&D facilities and major equipment. Funding amounts for FY2019 actual and FY2021 requested levels are reported by account, including amounts for R&D conduct and physical assets where applicable, in Table 11 . Funding for NSF for FY2020 was enacted on December 20, 2019. Funding details below the account level were not available at the time the FY2021 budget request was prepared. Therefore, at the account level, the FY2021 request amounts are compared to the FY2020 enacted amounts, as well as to the FY2019 actual amounts in this analysis; below the account level and for R&D totals, the FY2021 request amounts are compared to FY2019 actual amounts. This section will be updated when FY2020 R&D breakouts and subaccount funding amounts are available for comparison. FY2019 actual, FY2020 enacted, and FY2021 requested amounts are reported by account in Table 11 ; funding for R&D conduct and facilities and equipment is included for FY2021 requested and FY2019 actual amounts. Overall . The Administration is requesting $7.741 billion for the NSF in FY2021, $537 million (6.5%) less than the FY2020 enacted amount, and $409 million (5.0%) less than the FY2019 actual amount. The request would decrease budget authority in all three of the R&D accounts relative to the FY2020 enacted level: RRA by $524 million (7.8%), EHR by $9.1 million (1.0%), and MREFC by $13.5 million (5.5%). Overall, NSF estimates that, under the FY2021 request, agency-wide funding rates (i.e., the percentage of submitted proposals that are successfully awarded funding) would decrease slightly from 27% to 25%, with 500 fewer new competitive awards, compared to FY2019. As a proportion of NSF's total funding, R&D activities account for approximately 80%. For FY2021, $6.33 billion is requested for R&D activities, a 4.8% decrease from FY2019 actual funding for R&D of $6.65 billion. The total request includes $5.80 billion (92%) for the conduct of R&D, and $523 million (8%) for R&D facilities and major equipment. Of funding requested for the conduct of R&D, 86% is requested for basic research, and 14% for applied research. Overall funding for R&D facilities and major equipment supports not only the construction and acquisition phases, funded through MREFC ($230 million requested), but also the planning, design, and postconstruction operations and maintenance, funded through RRA ($293 million requested). Research . The Administration seeks $6.21 billion for RRA in FY2021, a $524 million (7.8%) decrease compared to the FY2020 enacted funding, and a $365 million (5.6%) decrease compared to FY2019 actual funding. Compared to the FY2019 actual levels, the FY2021 request includes decreases for 8 of the 10 RRA subaccounts. The largest percentage decrease would go to the Office of Polar Programs (14.1%, down $69 million). The Computer and Information Science and Engineering (CISE) subaccount would receive the largest dollar increase (7.8%, up $77 million). The FY2021 request also includes $164 million for the RRA Established Program to Stimulate Competitive Research (EPSCoR) program, a $12 million (6.8%) decrease compared to FY2019 actual funding. Within the RRA account, the FY2021 request includes $5.61 billion for R&D, a decrease of $284 million (4.8%) compared to the FY2019 actual amount. Of this amount, the majority ($5.32 billion, 95%) is requested for the conduct of research, including $4.85 billion for basic research and $469 million for applied research. Education . The FY2021 request for the EHR account is $931 million, $9.1 million (1.0%) less than the FY2020 enacted amount and $3.6 million (0.4%) less than the FY2019 actual level. By program division, the Division of Graduate Education would receive an increase of $28.7 million (11.3%) over the FY2019 actual level. The Divisions of Research on Learning in Formal and Informal Settings, and Undergraduate Education would receive decreases of 2.1% ($224 million requested), and 10.7% ($237 million requested), respectively. The Division on Human Resource Development would receive approximately the same amount of funding ($189 million requested). EHR programs of particular interest to congressional policymakers include the Graduate Research Fellowship Program (GRFP) and National Research Traineeship (NRT) programs. The FY2021 request for GRFP is $275 million, a reduction of $9.27 million (3.3%) from the FY2019 actual level. The FY2021 request for NRT is $61.9 million, a $7.78 million increase (14.4%) from FY2019. Within EHR, requested funding for R&D is $485 million, which is $17.9 million (3.8%) more than the FY2019 actual funding amount and accounts for approximately 7.7% of the agency's total R&D request. All of the requested funding would support the conduct of R&D, including $167 million for basic research and $318 million for applied research. Construction . The MREFC account supports large construction projects and scientific instruments, with all of the funding supporting R&D facilities. The construction phases of such large-scale projects tend to span multiple years; therefore, NSF provides out-year estimates of funding for major facilities for the duration of the anticipated timeline, which are updated annually. This section of the analysis includes comparisons to FY2020 estimated funding, based on these projections. The Administration is seeking $230 million for MREFC in FY2021, $13.5 million (5.5%) less than the FY2020 enacted amount, and $55.5 million (19.5%) less than the FY2019 actual amount. Requested MREFC funding would support continued construction of the Vera C. Rubin Observatory ($40.8 million requested, down 12.1% from the FY2020 estimate) previously called the Large Synoptic Survey Telescope (LSST) and the Antarctic Infrastructure Modernization for Science project (AIMS, $90.0 million requested, down 8.1% from FY2020 estimate). The request includes $33.0 million for upgrades to the Large Hadron Collider in Switzerland, which would represent the second year of a five-year project. Additionally, $65.0 million is requested for Mid-scale Research Infrastructure projects (those projects with funding amounts in the $20 million to $70 million range); this was a new funding line-item in the MREFC account as of FY2020, meant to manage support for upgrades to major facilities and stand-alone projects in this range as a portfolio. Other initiatives . The FY2021 NSF budget request includes funding for multiple agency-wide investments, including the Big Ideas and Convergence Accelerator, as well as three multiagency initiatives. This funding is included in multiple NSF appropriations accounts, and R&D amounts are not separately provided. The Big Ideas, which include six Research and three Enabling Big Ideas, first proposed in 2016, "endeavor to break down the silos of conventional scientific research to define and push the frontiers of global science and engineering leadership and to invest in fundamental research." Requested funding amounts for each of the Big Ideas compared to the FY2019 actual amounts include the following: Harnessing the Data Revolution for 21 st -Century Science and Engineering (HDR): $45 million requested, up $15 million (50%) from FY2019. The Future of Work at the Human Technology Frontier (FW-HTF): $45 million requested, up $15 million (50%) from FY2019. The Quantum Leap (QL): Leading the Next Quantum Revolution: $50 million requested, up $20 million (67%) from FY2019. Navigating the New Arctic (NNA): $30 million requested, equal to FY2019. Understanding the Rules of Life (URoL): Predicting Phenotype: $30 million requested, equal to FY2019. Windows on the Universe (WoU): The Era of Multi-Messenger Astrophysics: $30 million requested, equal to FY2019. Inclusion across the Nation of Communities of Learners of Underrepresented Discoverers in Engineering and Science (NSF INCLUDES): $18.9 million requested, down $1.3 million (6.3%) from FY2019. Growing Convergence Research at NSF (GCR): $15.2 million requested, down $0.6 million (3.8%) from FY2019. Mid-Scale Research Infrastructure: $97.7 million requested, up $37.6 million (62.7%) from FY2019. The Convergence Accelerator (CA) is an organizational framework that stands separately from the NSF research directorates, with its own budget, staff, and initiatives. Each CA research track will be a time-limited entity focused on specific research topics and themes. Therefore, CA research tracks will evolve over time and will be informed by external stakeholder input. The CA will reward high-risk, innovative thinking by multidisciplinary teams of researchers who want to accelerate discovery and innovation. The CA is a way of achieving rapid lab-to-market or research outcomes. The initial CA research tracks have focused on a subset of the Big Ideas, though the CA investments "are distinguished from the corresponding Big Ideas by the nature of the research, the time scale of the activities supported, and the more hands-on, agile approach to project management and support that is envisioned [by the CA program]." NSF has requested $70 million for the CA in FY2021, which is $28.6 million more than the FY2019 actual amount. The budget request states that NSF anticipates financial contributions from external partners to begin in FY2021 (amount unspecified). The budget request also includes three multi-agency initiatives. The National Nanotechnology Initiative would receive $454 million, $67.2 million (12.9%) less than in FY2019. The Networking and Information Technology Research and Development program would receive $1.57 billion, an increase of $151 million (10.7%). The U.S. Global Change Research Program would receive $217 million, $24 million (9.8%) less than in FY2019. <10. Department of Agriculture59> The U.S. Department of Agriculture (USDA) was created in 1862 to support agricultural research in an expanding, agriculturally dependent country. Today, USDA conducts intramural research at federal facilities with federally employed scientists and supports extramural research at universities and other facilities through competitive grants and capacity (formula-based) funding. The breadth of contemporary USDA research spans traditional agricultural production practices, organic and sustainable agriculture, bioenergy, nutritional needs and food composition, food safety, animal and plant health, pest and disease management, economic decisionmaking, and other social sciences affecting consumers, farmers, and rural communities. The four agencies of USDA's Research, Education, and Economics (REE) mission area carry out the Department's research and education activities. These agencies are the Agricultural Research Service (ARS), the principal intramural research agency; the National Institute of Food and Agriculture (NIFA), the principal extramural research agency; the National Agricultural Statistics Service (NASS), which undertakes a variety of surveys to capture relevant data; and the Economic Research Service (ERS), which applies economic analysis to a wide range of topics related to food and agriculture. In addition to the four REE agencies, the Office of the Chief Scientist (OCS), a staff office within the Office of the Under Secretary of REE, coordinates science activities across the department. The FY2020 enacted appropriations ( P.L. 116-94 ) provide a total of $3,399.5 million in discretionary spending for the REE agencies. The Administration is requesting a total of $3,248.3 million for these agencies in FY2021, a 4.4% reduction ($151.2 million). The Administration request reflects a reduction of $189.2 million for ARS. The overall reduction also includes proposed decreases in certain activities at NIFA, NASS, and ERS. The Administration is requesting increases for NIFA competitive research grants ($175.0 million) and NASS's Census of Agriculture ($1.0 million). USDA's FY2020 enacted discretionary appropriations and the Administration's FY2021 request for the four research agencies and OCS are discussed below, with funding amounts presented in Table 12 . In addition to discretionary appropriations, agricultural research is funded by state matching contributions and private donations or grants, as well as certain mandatory funding authorized by the 2018 farm bill ( P.L. 115-334 ). <10.1. Agricultural Research Service> The Agricultural Research Service is USDA's in-house basic and applied research agency, and it has major responsibilities for conducting and leading the national agricultural research effort. ARS operates approximately 90 laboratories in the United States and abroad, with about 5,000 permanent employees, including approximately 2,000 research scientists. ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective controls for pest management, and support of USDA regulatory and technical assistance programs. ARS also operates the National Agricultural Library (NAL). NAL is the world's largest agricultural research library, and is a primary information repository for food, agriculture, and natural resource sciences. For FY2020, P.L. 116-94 provides $1,414.4 million for ARS salaries and expenses, and $192.7 million for buildings and facilities. For FY2021, the Administration is requesting $1,367.9 million for ARS salaries and expenses, a decrease of $46.5 million (3.3%) from the FY2020 appropriation. For FY2021, the request for the buildings and facilities account is $50.0 million, a reduction of $142.7 million (74.1%), from the FY2020 appropriation, largely due to eliminating funds for ARS co-located facilities (as opposed to those facilities owned and operated by ARS). The FY2020 explanatory statement accompanying the FY2020 appropriations bill ( H.R. 1865 ) does not support the Administration's request to terminate or redirect various ARS research programs, and it encourages ARS to fill numerous vacant positions. ARS has been coordinating with the Department of Homeland Security on the new National Bio and Agro-Defense Facility (NBAF), which DHS is constructing to replace the outdated Plum Island Animal Disease Center (PIADC). In January 2019, USDA and DHS signed a Memorandum of Agreement to govern the transition of NBAF from DHS to USDA, with ownership to transfer upon its completion and commissioning in December 2022 . The FY2020 appropriations for ARS provide $13.1 million to address one-time costs associated with the transfer of operations from PIADC to NBAF, in addition to $66.0 million for operations and maintenance, as reported by USDA. For FY2021, the Administration is requesting a total of $81.3 million within ARS Salaries and Expenses for NBAF operations, and maintenance, a $15.3 million increase from the FY2020 appropriation. The FY2021 budget request for ARS also includes an $8 million increase for NBAF research under ARS's livestock research program. <10.2. National Institute of Food and Agriculture> The National Institute of Food and Agriculture is USDA's principal extramural research agency. It provides federal funding for research, education, and extension projects conducted in partnership with land-grant colleges and universities (LGUs), State Agricultural Experiment Stations, the Cooperative Extension System, other research and education institutions, private organizations, and individuals. NIFA partnerships include the three types of LGUs 1862 (original) Institutions, 1890 (historically black) Institutions, and 1994 (tribal) Institutions as well as other higher education institutions. Federal funds awarded through NIFA capacity (formula-based) and competitive grants enhance research capacity at these institutions. NIFA headquarters are located in Washington, DC. In October 2019, USDA relocated the majority of NIFA staff positions to Kansas City, MO. For FY2020, P.L. 116-94 provides $1,527.4 million in discretionary funds for NIFA activities. For FY2021, the Administration requests $1,590.8 million, an increase of $63.4 million (4.2%). Research and Education. Hatch Act and Evans-Allen Act funds support capacity grants for research and education activities at 1862 and 1890 Institutions, respectively. For Hatch Act programs, the enacted FY2020 bill provides $259.0 million, and the Administration is requesting $243.2 million for FY2021, a 6.1% reduction. For Evans-Allen programs, the FY2020 appropriation provides $67.0 million, and for FY2021 the Administration is requesting $53.8 million, a 19.7% reduction. For competitive research grants at 1994 Institutions, the FY2020 appropriation provides $3.8 million, and the Administration requests the same funding level for FY2021. For education grant programs for the insular areas and for Alaska native and native Hawaiian-serving institutions, the FY2020 appropriation provides $2.0 million and $3.2 million, respectively. For FY2021, the Administration requests $0 for both programs, and in lieu of these it proposes to create a new, combined program with requested funding of $5.0 million. The McIntire-Stennis program provides capacity funds for forestry research. For FY2020, P.L. 116-94 provides $36.0 million, and for FY2021 the Administration is requesting $28.9 million, a 20% reduction. The Agriculture and Food Research Initiative (AFRI) is USDA's flagship competitive research grants program, and currently represents about 31% of the total of NIFA's discretionary budget. The FY2020 enacted bill provides $425.0 million for AFRI, and the Administration is requesting $600.0 million for FY2021, a 41.2% increase. NIFA also funds the Sustainable Agriculture Research and Education (SARE) program. For FY2020, P.L. 116-94 provides $37.0 million for SARE, and the Administration requests the same level of funding for FY2021. Extension. Smith-Lever Act 3(b) and 3(c) programs provide capacity grants to 1862 Institutions to support cooperative extension. The FY2020 enacted appropriation provides $315.0 million for these programs, and the Administration requests $299.4 million for them in FY2021, a reduction of 4.9%. Smith-Lever 3(d) programs provide competitive grants to 1862, 1890, and 1994 Institutions to support cooperative extension. These programs include grants for food and nutrition education; new technologies for agricultural extension; federally recognized tribes; children, youth, and families at risk; and farm safety education. For FY2020, P.L. 116-94 provides $87.8 million for Smith-Lever 3(d) programs. For FY2021, the Administration is requesting $83.6 million, a reduction of 4.8%. Of this total, $69.0 million would support the Expanded Food and Nutrition Education Program (EFNEP), and $3.0 million would support the Federally-Recognized Tribes Extension Program. <10.3. National Agricultural Statistics Service> The National Agricultural Statistics Service conducts the quinquennial Census of Agriculture and provides official statistics on agricultural production and indicators of the economic and environmental status of the farm sector. NASS is one of the 13 principal statistical agencies of the Federal Statistical System of the United States. For FY2020, P.L. 116-94 provides $180.3 million to NASS, of which up to $45.3 million is reserved to support the Census of Agriculture. The Administration is requesting $177.5 million for NASS in FY2021, of which up to $46.3 million is to support the Census of Agriculture. NASS has begun preparing for the 2022 Census of Agriculture. The explanatory statement accompanying FY2020 appropriations ( H.R. 1865 ) commented on the Administration's FY2020 budget request, rejecting its proposals to eliminate and reduce specific ongoing activities. The Administration's request for FY2021 proposes increases for some programs, as well as reductions for the Acreage, Crop Production, and Grain Stocks program (reduced by $13.2 million) as well as the Chemical Use Program (reduced by $3.5 million). <10.4. Economic Research Service> The Economic Research Service supports economic and social science analysis about agriculture, rural development, food, commodity markets, and the environment. It also collects and disseminates data concerning USDA programs and policies. Like NASS, ERS is one of the 13 principal statistical agencies of the Federal Statistical System of the United States. ERS headquarters is located in Washington, DC. In October 2019, USDA relocated the majority of ERS staff positions to Kansas City, MO. For FY2020, P.L. 116-94 provides $84.8 million for ERS activities. The Administration is requesting $62.1 million for FY2021, a 26.7% decrease. The Administration's budget request attributes $11.3 million of this decrease to its proposal to "discontinue research relative to farm, conservation and trade policy, and returns on investments in agricultural research and development." It proposes to eliminate research on special initiatives that include "research innovations for policy effectiveness, new energy sources ..., local and regional food markets, beginning farmers and ranchers, invasive species, and markets for environmental services." The Administration's budget request attributes $8.4 million of this decrease (and 52 staff years) to elimination of some research on food assistance, nutrition, and diet quality. <10.5. Office of the Chief Scientist> Congress created the Office of the Chief Scientist in 2008 when it established the dual role of the Under Secretary for REE as the USDA Chief Scientist (7 U.S.C. 6971). The OCS purpose is to coordinate research programs and activities across USDA. Administratively, because it is situated within the Office of the Under Secretary of REE, OCS is a component of the Office of the Secretary (OSEC). Since its establishment, OCS has not received an independent appropriation. Rather, it has been funded via interagency agreement among the four REE agencies. The FY2021 President's budget request for OSEC includes the first separate request for OCS, in the amount of $6 million and 29 staff years. <11. Department of Commerce> Two agencies of the Department of Commerce have major R&D programs: the National Institute of Standards and Technology (NIST) and the National Oceanic and Atmospheric Administration (NOAA). <11.1. National Institute of Standards and Technology70> The mission of the National Institute of Standards and Technology is "to promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life." NIST research provides measurement, calibration, and quality assurance methods and techniques that support U.S. commerce, technological progress, product reliability, manufacturing processes, and public safety. NIST's responsibilities include the development, maintenance, and custodial retention of the national standards of measurement; providing the means and methods for making measurements consistent with those standards; and ensuring the compatibility of U.S. national measurement standards with those of other nations. The President is requesting $737.5 million for NIST in FY2021, a decrease of $296.5 million (28.7%) from the FY2020 enacted appropriation of $1,034.0 million. (See Table 13 .) NIST discretionary funding is provided through three accounts: Scientific and Technical Research and Services (STRS), Industrial Technology Services (ITS), and Construction of Research Facilities (CRF). The President's FY2021 request includes $652 million for R&D, standards coordination, and related services in the STRS account, a decrease of $102.0 million (13.5%) from the FY2020 enacted level. According to NIST, the reductions would be necessary to address the President's priorities: To meet the topline funding levels proposed in the FY 2021 President's Budget request and support the Administration's stated priorities for Industries of the Future (IoTF) in quantum information science, artificial intelligence, advanced communications, advanced manufacturing, and biotechnology NIST will have to make substantial reductions to its current R&D and program portfolio that impact work in advanced materials, physical infrastructure and resilience, and areas across NIST. The funding for the NIST laboratory programs will be reduced by $115.5 million and this reduction proposes the elimination of 391 employees. In particular, the budget proposes funding reductions in the following areas: Advanced Manufacturing and Material Measurements, down $37.5 million (31.3%) from FY2020, including a reduction of 178 positions. Fundamental Measurement, Quantum Science, and Measurement Dissemination, down $17.8 million (9.3%) from FY2020, including a reduction of 73 positions. According to NIST, "to prioritize work focused on advancing quantum science (including efforts focused on quantum networking) and transforming how NIST disseminates measurements through the NIST-on-A-Chip program, NIST will discontinue several measurement service and dissemination activities that are currently provided to our stakeholders in industry, government and academia." Advanced Communications, Networks, and Scientific Data Systems, down $35.8 million (52%) from FY2020, including 83 positions. Health and Biological Systems Measurements, down $3 million (8.6%) from FY2020. Physical Infrastructure and Resilience, down $16.4 million (28%) from FY2020, including 42 positions. NIST User Facilities, down $5 million (9.2%) from FY2020, including 15 positions. NIST is requesting $27.4 million for its Measurement Tools and Testbeds to Power the Industries of the Future (IotF) efforts, to create measurement tools and testbeds to support deployment of IotF technologies at scale. Of these funds, $25 million would support acceleration of the development and adoption of artificial intelligence, $1.4 million would support 5G standards development for telecommunication, and $1 million would support acceleration of efforts to develop profiles for Position, Navigation, and Timing. The FY2021 request would provide $25.3 million for the ITS account, down $136.7 million (84.4%) from the FY2020 enacted level. Within the ITS account, the request would provide no funding for the Manufacturing Extension Partnership (MEP) program, a reduction of $146.0 million from the FY2020 enacted level; MEP centers in each state would be required to become entirely self-supporting. In his FY2019 and FY2020 requests, President Trump also proposed ending federal funding for MEP; in his FY2018 request, the President sought $6.0 million "for an orderly shutdown of the program." The FY2021 request for ITS consists of $25.3 million for Manufacturing USA (also referred to as the National Network for Manufacturing Innovation or NNMI), $9.3 million (58.1%) higher than the FY2020 enacted level of $16.0 million. Of these funds, $11.2 million would be for continued support of NIST's first Manufacturing USA institute, the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL); $9.1 million would be for the award of a second Manufacturing USA institute; and $5.0 million would be for coordination of the Manufacturing USA network. The President is requesting $60.2 million for the NIST CRF account for FY2021, down $57.8 million (49.0%) from the FY2020 enacted level. Part of the decrease ($36.5 million) in requested FY2021 funding is due to a proposed deferral of safety, capacity, maintenance, and major repairs projects from FY2021 to FY2022. The balance of the decrease would result from the effect of the Administration's proposed new funding approach on the renovation of NIST Building 1, in Boulder, CO. <11.2. National Oceanic and Atmospheric Administration78> The National Oceanic and Atmospheric Administration conducts scientific research in areas such as ecosystems, atmosphere, global climate change, weather, and oceans; collects and provides data on the oceans and atmosphere; and manages coastal and marine organisms and environments. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization was intended to unify elements of the nation's environmental programs and to provide a systematic approach for monitoring, analyzing, and protecting the environment. NOAA's administrative structure is organized into six line offices: the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); National Environmental Satellite, Data, and Information Service (NESDIS); National Weather Service (NWS); Office of Oceanic and Atmospheric Research (OAR); and the Office of Marine and Aviation Operations (OMAO). The line offices are supported by an additional office, Mission Support, which provides cross-cutting administrative functions related to education, planning, information technology, human resources, and infrastructure. Congress provides most of the discretionary funding for the line offices and Mission Support through two accounts: (1) Operations, Research, and Facilities, and (2) Procurement, Acquisition, and Construction. In 2010, NOAA published its Next Generation Strategic Plan . The strategic plan is organized into four categories of long-term goals: (1) climate adaptation and mitigation, (2) a weather-ready nation, (3) healthy oceans, and (4) resilient coastal communities and economies. The strategic plan also lists three groups of enterprise objectives related to (1) stakeholder engagement, (2) data and observations, and (3) integrated environmental modeling. The strategic plan serves as a guide for NOAA's R&D plan. The most recent R&D plan was published in 2013, and includes R&D objectives to reach strategic plan goals and objectives and targets to track progress toward R&D objectives over time. NOAA released a draft 2020-2026 R&D plan in June 2019. The draft plan identifies three vision areas: (1) reducing societal impacts from severe weather and other environmental phenomena, (2) sustainable use and stewardship of ocean and coastal resources, and (3) a robust and effective research, development, and transition enterprise. It is unclear when the draft plan will be finalized. For FY2021, President Trump requested $670.3 million in discretionary appropriations for NOAA R&D funding, a decrease of $301.6 million (31%) below the FY2020 enacted level of $972.0 million, and an increase of $19.2 million (3%) from the FY2020 request of $651.1 million. The President's FY2021 request for NOAA R&D was 14.5% of the total FY2021 NOAA requested amount of $4.634 billion. The FY2021 request includes $378.6 million for research (56.5% of the total requested for NOAA R&D), $94.9 million for development (14.1%), and $197.0 million (29.4%) for R&D equipment and facilities. Table 14 provides R&D amounts enacted in FY2020 and requested by the Administration for FY2021. OAR accounts for the majority of NOAA R&D in most years, including FY2021. The Administration requested $352.7 million for OAR R&D in FY2021, a decrease of $199.9 million (36.2%) below the FY2020 enacted funding level of $552.6 million and an increase of $17.6 million (5.3%) from the FY2020 request of $335.1 million. OAR conducts research in three major areas: (1) weather and air chemistry; (2) climate; and (3) oceans, coasts, and the Great Lakes. A significant portion of these efforts is implemented through OAR's laboratories and cooperative research institutes. The President requested $167.6 million for OAR labs and cooperative institutes in FY2021, $16.5 million (8.9%) less than the FY2020 enacted amount of $184.0 million and $2.1 million (1.2%) less than the FY2020 requested amount. Among other R&D activities, the Administration requested to terminate federal support of the National Sea Grant College Program and its related Marine Aquaculture Research program in FY2021, as it had in FY2020. The National Sea Grant College Program is composed of 33 university-based state programs and supports scientific research and stakeholder engagement to identify and solve problems faced by coastal communities. Congress provided $74 million to the National Sea Grant College Program and $13 million to the Marine Aquaculture Research program in FY2020. <12. Department of Veterans Affairs93> The Department of Veterans Affairs operates and maintains a national health care delivery system to provide eligible veterans with medical care, benefits, and social support. As part of the agency's mission, it seeks to advance medical R&D in areas most relevant to the diseases and conditions that affect the health care needs of veterans. The President is proposing $1.456 billion for VA R&D in FY2021, an increase of $58 million (4%) from FY2020 enacted levels. (See Table 15 .) According to the President's request, FY2021 strategic priorities for VA R&D include increasing the access of veterans to clinical trials; increasing the transfer and translation of VA R&D; and the effective use of VA data for veterans. Additionally, crosscutting priorities for VA R&D include efforts to treat veterans at risk of suicide and research to address chronic pain and opioid addiction, posttraumatic stress disorder, traumatic brain injury, precision oncology, and Gulf War illness and military exposures. VA R&D is funded through two accounts the Medical and Prosthetic Research account and the Medical Care Support account. The Medical Care Support account also includes non-R&D funding, and the amount of funding that will be allocated to support R&D through appropriations legislation is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels from the Medical Care Support account are only known after the VA allocates its appropriations to specific activities and reports those figures. The FY2021 request includes $787 million for VA's Medical and Prosthetic Research account, a decrease of $37 million (5%) compared to FY2020 enacted levels. The request includes $669 million in funding for research supported by the agency's Medical Care Support account, an increase of $21 million (3%) compared to FY2020. The Medical Care Support account provides administrative and other support for VA researchers and R&D projects, including infrastructure maintenance. The Medical and Prosthetics R&D program is an intramural program managed by the Veteran Health Administration's Office of Research and Development (ORD) and conducted at VA Medical Centers and VA-approved sites nationwide. According to ORD, the mission of VA R&D is "to improve Veterans' health and well-being via basic, translational, clinical, health services, and rehabilitative research and to apply scientific knowledge to develop effective individualized care solutions for Veterans." ORD consists of four main research services, each headed by a director: Biomedical Laboratory R&D conducts preclinical research to understand life processes at the molecular, genomic, and physiological levels. Clinical Science R&D supports clinical trials and other human subjects research to determine the feasibility and effectiveness of new treatments such as drugs, therapies, or devices; compare existing therapies; and improve clinical care and practice. Health Services R&D conducts studies to identify and promote effective and efficient strategies to improve the quality and accessibility of the VA health system and patient outcomes, and to minimize health care costs. Rehabilitation R&D conducts research and develops novel approaches to improving the quality of life of impaired and disabled veterans. In addition to intramural support, VA researchers are eligible to obtain funding for their research from extramural sources, including other federal agencies, private foundations and health organizations, and commercial entities. According to the President's FY2021 budget request, these additional R&D resources are estimated at $540 million in FY2021. However, unlike other federal agencies, such as the National Institutes of Health and the Department of Defense, VA does not have the authority to support extramural R&D by providing research grants to colleges, universities, or other non-VA entities. Table 15 summarizes R&D program funding for VA in the Medical and Prosthetic Research and the Medical Care Support accounts. Table 16 details amounts to be spent in Designated Research Areas (DRAs), which VA describes as "areas of importance to our veteran patient population." Funding for research projects that span multiple areas may be included in several DRAs; thus, the amounts in Table 16 total to more than the appropriation or request for VA R&D. <13. Department of Transportation98> The Department of Transportation was established by the Department of Transportation Act (P.L. 89-670) on October 15, 1966. The primary purposes of DOT research and development activities as defined by Section 6019 of the Fixing America's Surface Transportation Act ( P.L. 11 4-94 ) are improving mobility of people and goods; reducing congestion; promoting safety; improving the durability and extending the life of transportation infrastructure; preserving the environment; and preserving the existing transportation system. Funding for DOT R&D is generally included in appropriations line items that also include non-R&D activities. The amount of funding provided by appropriations legislation that is allocated to R&D is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOT agencies allocate their final appropriations to specific activities and report those figures. In FY2021, the Administration is requesting a total of $593.8 million for DOT R&D activities and facilities at the Federal Aviation Administration (FAA), the National Highway Traffic Safety Administration (NHTSA), the Federal Railroad Administration (FRA), the Pipeline and Hazardous Materials Safety Administration (PHMSA), and the Office of the Secretary (OST) (see Table 17 ). The Administration is not requesting funding for DOT R&D activities and facilities associated with the Federal Highway Administration (FHWA), the Federal Transit Administration (FTA), or the Federal Motor Carrier Safety Administration (FMCSA), citing the need for surface transportation reauthorization legislation. In FY2020, three DOT agencies FAA, NHTSA, and FHWA accounted for nearly 90% of DOT R&D funding. <13.1. Federal Aviation Administration> The President's FY2021 request of $446.9 million for R&D activities and facilities at FAA would be a decrease of $86 million (16.1%) from the FY2020 enacted amount. The request includes $170 million for the agency's Research, Engineering, and Development (RE&D) account, a reduction of $22.7 million (11.8%) from FY2020. Funding within the RE&D account seeks to improve aircraft safety through research in fields such as fire safety, advanced materials, propulsion systems, aircraft icing, and continued airworthiness, in addition to safety research related to unmanned aircraft systems and the integration of commercial space operations into the national airspace. <13.2. National Highway Traffic Safety Administration> The President is requesting $62.9 million in R&D and R&D facilities funding in FY2021 for NHTSA, $15.0 million (19.3%) below FY2020. NHTSA R&D focuses on automation and the study of human machine interfaces, advanced vehicle safety technology, ways of improving vehicle crashworthiness and crash avoidance, reducing unsafe driving behaviors, and alternative fuels vehicle safety. <13.3. Other DOT Components> R&D activities are also supported by several other DOT components or agencies (see Table 17 ). The President's FY2021 request includes DOT R&D activities and facilities funding for: the Federal Railroad Administration, totaling $41.0 million, $0.4 million (1.0%) above the FY2020 enacted level of $40.6 million; the Pipeline and Hazardous Materials Safety Administration, totaling $24.5 million, the same amount as FY2020; and the Office of the Secretary, totaling $18.4 million, $8.5 million (31.7%) below the FY2020 level of $27.0 million. <14. Department of the Interior100> The Department of the Interior (DOI) was created to conserve and manage the nation's natural resources and cultural heritage, to provide scientific and other information about those resources, and to uphold "the nation's trust responsibilities or special commitments to American Indians, Alaska Natives, and affiliated island communities to help them prosper." DOI has a wide range of responsibilities, including, among other things, mapping, geological, hydrological, and biological science; migratory bird, wildlife, and endangered species conservation; surface-mined lands protection and restoration; and historic preservation. The Administration is requesting $12.8 billion in net discretionary funding for DOI in FY2021. Of that amount, $725 million is proposed for R&D, $248 million (25%) below the FY2020 estimated level of $973 million. The U.S. Geological Survey (USGS) is the only DOI component that conducts basic research. Funding for DOI R&D is generally included in appropriations line items that also include non-R&D activities. How much of the funding provided in appropriations legislation is allocated to R&D specifically is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOI components allocate their appropriations to specific activities and report those figures. <14.1. Other DOI Components> The President's FY2021 request also includes R&D funding for the following DOI components, none of which would receive an increase: Bureau of Reclamation (BOR): $76 million for FY2021, down $39 million (34%) from the FY2020 estimate. Bureau of Ocean Energy Management (BOEM): $93 million for FY2021, down $7 million (7%) from the FY2020 estimate. Fish and Wildlife Service (FWS): $15 million for FY2021, equal to the FY2020 estimate. National Park Service (NPS): $26 million for FY2021, equal to the FY2020 estimate. Bureau of Safety and Environmental Enforcement (BSEE): $25 million for FY2021, down $2 million (7%) from the FY2020 estimate. Bureau of Land Management (BLM): $21 million for FY2021, equal to the FY2020 estimate. Bureau of Indian Affairs (BIA): $5 million for FY2021, equal to the FY2020 estimate. Wildland Fire Management (WFM): No funding requested for R&D for FY2021. Office of Surface Mining Reclamation and Enforcement (OSMRE): $1 million for FY2021, equal to the FY2020 estimate. Table 18 summarizes FY2020 estimated R&D funding and the President's FY2021 R&D funding request for DOI components. <15. Department of Homeland Security107> The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development can contribute to achieving all these goals. The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. Other components, such as the Countering Weapons of Mass Destruction Office, the U.S. Coast Guard, and the Transportation Security Administration, conduct R&D relating to their specific missions. The President's FY2021 budget request for DHS includes $439 million for activities identified as R&D. This would be a reduction of 19.6% from $546 million in FY2020. The total includes $340 million for the R&D account in the S&T Directorate and smaller amounts for four other DHS components. See Table 19 . The S&T Directorate performs R&D in several laboratories of its own and funds R&D performed by the DOE national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components. The Administration's FY2021 request of $340 million for the S&T Directorate R&D account would be a decrease of 19.5% from $422 million in FY2020. Five of the six thrust areas in the S&T Directorate's Research, Development, and Innovation budget line would decrease, by amounts ranging from 18.3% (Cyber Security/Information Analysis) to 32.4% (Chemical, Biological, and Explosives Defense), while funding for the sixth thrust area, Innovative Research and Foundational Tools, would increase by 35.2%. Funding for university centers of excellence would decrease from $37 million in FY2020 to $18 million in FY2021 (Congress rejected a similar proposal in the FY2020 budget). In addition to its R&D account, the S&T Directorate receives funding for laboratory facilities and other R&D-related expenses through two other accounts (not shown in the table). The total request for the directorate is $644 million, a decrease of 12.7% from $737 million in FY2020. The directorate's Procurement, Construction, and Improvements account would receive $19 million in the Administration's request (versus zero in FY2020) for closure of the Plum Island Animal Disease Center which is being replaced by the National Bio and Agro-Defense Facility (NBAF) and for preparation of Plum Island itself for sale. The request for R&D in the Countering Weapons of Mass Destruction Office is $58 million, down from $69 million in FY2019. No funding is requested for the National Technical Nuclear Forensics program ($7 million in FY2020), which the Administration is proposing to transfer to the DOE National Nuclear Security Administration. <16. Environmental Protection Agency109> The U.S. Environmental Protection Agency (EPA), the federal regulatory agency responsible for administering a number of environmental pollution control laws, funds a broad range of R&D activities to provide scientific tools and knowledge that support decisions relating to preventing, regulating, and abating environmental pollution. Since FY2006, Congress has funded EPA through the Interior, Environment, and Related Agencies appropriations acts. Appropriations for EPA R&D are generally included in line-items that also include non-R&D activities. Annual appropriations bills and the accompanying committee reports do not identify precisely how much funding provided in appropriations bills is allocated to EPA R&D alone. EPA determines its R&D funding levels in operation through allocating its appropriations to specific activities and reporting those amounts. The agency's Science and Technology (S&T) appropriations account funds much of EPA's scientific research activities, which include R&D conducted by the agency at its own laboratories and facilities, and R&D and related scientific research conducted by universities, foundations, and other nonfederal entities that receive EPA grants. The S&T account receives a base appropriation and a transfer from the Hazardous Substance Superfund (Superfund) account for research on more effective methods for remediating contaminated sites. EPA's Office of Research and Development (ORD) is the primary manager of R&D at EPA headquarters and laboratories around the country, as well as external R&D. A large portion of the S&T account funds EPA R&D activities managed by ORD, including research grants. Programs implemented by other offices within EPA also may have a research component, but the research component is not necessarily the primary focus of the program. As with the President's FY2020 budget request, the FY2021 request proposes reductions and eliminations of funding for FY2021 across a number of EPA programs and activities. The President's FY2021 request includes a total of $6.66 billion for EPA (after rescissions ), $2.40 billion (26.5%) less than the total $9.06 billion FY2020 enacted appropriations (no rescissions ) for EPA provided in Title II of the Further Consolidated Appropriations Act, 2020 ( P.L. 116- 94 ), and $435.6 million (7.0%) more than the FY2020 request of $6.22 billion for EPA (after rescissions ). Reductions proposed in the President's FY2021 request are distributed across EPA operational functions and activities as well as grants for states, tribes, and local governments. With the exception of the Building and Facilities account, the President's FY2021 request proposes funding reductions below FY2020 enacted levels for the nine other EPA appropriations accounts, although funding for some program areas within the accounts would remain constant or increase. Some Members of Congress expressed concerns regarding proposed reductions of funding for EPA scientific research programs during hearings on the President's FY2021 budget request. Similar proposed reductions in the FY2020 budget request were generally not included in the FY2020 enacted appropriations. Including a $19.1 million transfer from the Superfund account, the President's FY2021 budget request proposes $503.8 million for EPA's S&T account, $243.4 million (32.6%) less than the FY2020 enacted $747.2 million for the S&T account provided in P.L. 116-94 , which included a $30.7 million transfer from the Superfund. The FY2021 request would provide an increase of 4.8% for the S&T account compared to the FY2020 request of $480.8 million, which included a $17.8 million transfer from the Superfund account. Table 20 at the end of this section includes the President's FY2021 request for program areas and activities within EPA's S&T account as presented in EPA's FY2021 Congressional Budget Justification compared to the FY2020 enacted appropriations as reported in the Explanatory Statement accompanying P.L. 116-94 that includes the Department of Interior, Environment, and Related Agencies appropriations. House and Senate Appropriations Committee reports and explanatory statements accompanying recent fiscal year EPA proposed and enacted appropriations have not specified funding for all subprogram areas reported in EPA's budget justifications. S&T subprogram areas not directly reported in House and Senate Appropriations Committee reports are noted in Table 20 as "NR" (not reported). Additionally, the President's FY2018 through FY2021 budget requests and EPA's associated congressional budget justifications have modified the titles for some of the program areas relative to previous Administrations' budget requests and congressional committee reports' presentations. The House and Senate Appropriations Committees have generally adopted the modified program area titles as presented in the recent budget requests. As shown in Table 20 , with few exceptions the requested FY2021 amount for individual EPA program area and activity line items within the S&T account would be less than the FY2020 enacted appropriations. The FY2021 request did not propose to completely eliminate funding for the broader program areas; however, eliminations (no funding is requested for FY2021) are proposed for line-item activities below the program areas as indicated in Table 20 . These program areas include Atmospheric Protection Program (formerly GHG [greenhouse gas] Reporting Program and Climate Protection Program), Indoor Air Radon Program, and Reduce Risks from Indoor Air. For other program areas, proposed reductions in funding included eliminations of certain activities within those program areas. For example, the proposed reduction in funding for Research: Air and Energy, Research: Safe and Sustainable Water Resources, Research: Sustainable and Healthy Communities, and Research: Chemical Safety and Sustainability program areas for FY2021 included the proposed elimination of funding for the Science to Achieve Results (STAR) program. The FY2020 enacted appropriations for the S&T account included $6.0 million for Research: National Priorities within the S&T account for FY2020, an increase compared to $5.0 million included for FY2019. As in the previous Administration's fiscal year requests, the President's FY2021 budget request did not include funding for Research: National Priorities. The size and structure of the EPA's workforce has been a topic of debate during congressional committee hearings, particularly in recent fiscal years. "Workforce reshaping" was introduced in the FY2018 request and described as agency-wide organizational restructuring, "reprioritization of agency activities," and reallocation of resources. Workforce reshaping was most recently proposed in the FY2020 request. As with the FY2018 and FY2019 enacted appropriations, P.L. 116-94 did not fund the President's FY2020 request for EPA workforce reshaping for FY2020. The FY2021 request does not include similar funding for EPA workforce reshaping; however, according to the EPA's FY2021 Congressional budget justification, the number of full-time-equivalents (FTEs) would be reduced from 14,172.0 FTEs in FY2020 to 12,610.2 FTEs in FY2021. Appendix A. Acronyms and Abbreviations Appendix B. CRS Contacts for Agency R&D The following table lists the primary CRS experts on R&D funding for the agencies covered in this report.

President Trump's budget request for FY2021 includes approximately $142.2 billion for research and development (R&D) for FY2021, $13.8 billion (8.8%) below the FY2020 enacted level of $156.0 billion. In constant FY2020 dollars, the President's FY2021 R&D request would result in a decrease of $16.6 billion (10.6%) from the FY2020 level. F ederal Research and Development Funding, FY2019-FY2021 In billions of dollars In 2017, the Office of Management and Budget (OMB) adopted a change to the definition of development, applying a more narrow treatment that it describes as "experimental development." This change was intended to harmonize the reporting of U.S. R&D funding data with the approach used by other nations. The new definition is used in this report. Funding for R&D is concentrated in a few departments and agencies. In FY2020, five federal agencies received 93.2% of total federal R&D funding, with the Department of Defense (DOD, 41.4%) and the Department of Health and Human Services (HHS, 26.2%) combined accounting for more than two-thirds of all federal R&D funding. In the FY2021 request, the top five R&D agencies would account for 93.8%, with DOD accounting for 42.1% and HHS for 26.6%. Under the President's FY2021 budget request, nearly all federal agencies would see their R&D funding decline relative to FY2020. The only exception is the Department of Veterans Affairs, which would increase by $38 million (2.9%) in FY2021 to $1.351 billion. The largest dollar reductions in R&D funding would be made to the DOD (down $4.713 billion), the Department of Energy (down $3.168 billion), and HHS (down $2.843 billion). The largest percentage declines in R&D funding would be at the Department of Transportation (down 47.6%), the Environmental Protection Agency (down 35.4%), and Department of the Interior (down 25.5%) The President's FY2021 budget request would reduce funding for basic research by $2.822 billion (6.5%), applied research by $5.125 billion (11.7%), development by $3.466 billion (5.5%), and facilities and equipment by $2.375 billion (39.6%). Several multiagency R&D initiatives continue under the President's FY2021 budget. Some activities supporting these initiatives are discussed in agency budget justifications and are reported in the agency analyses in this report. However, comprehensive aggregate budget information on these initiatives will likely not be available until budget supplements for each are released later in the year. The request represents the President's R&D priorities. Congress may opt to agree with none, part, or all of the request, and it may express different priorities through the appropriations process. In recent years, Congress has completed the annual appropriations process after the start of the fiscal year. Completing the process after the start of the fiscal year and the accompanying use of continuing resolutions can affect agencies' execution of their R&D budgets, including the delay or cancellation of planned R&D activities and the acquisition of R&D-related equipment. It is not yet clear how the national response to the Coronavirus Disease 2019 (COVID-19) pandemic will affect Administration and congressional priorities for FY2021 R&D funding, or the congressional authorization and appropriations processes for enacting that funding.

crs_R45992

crs_R45992_0

The Constitution contains three provisions that mention the term "emolument": 1. The Foreign Emoluments Clause . Article I, Section 9, Clause 8 provides that "no Person holding any Office of Profit or Trust under [the United States], shall, without the Consent of Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State"; 2. The Domestic Emoluments Clause . Article II, Section 1, Clause 7 provides that "[t]he President shall, at stated Times, receive for his Services, a Compensation, which shall neither be encreased nor diminished during the Period for which he shall have been elected, and he shall not receive within that Period any other Emolument from the United States, or any of them"; and 3. The Ineligibility Clause. Article I, Section 6, Clause 2 provides (among other things) that no Member of Congress shall "be appointed" during his or her term "to any civil Office under the Authority of the United States, which shall have been created, or the Emoluments whereof shall have been encreased during such time[.]" The first two of these Clauses are the focus of this report. For most of their history, the Foreign and Domestic Emoluments Clauses (collectively, the Emoluments Clauses or the Clauses) were little discussed and largely unexamined by the courts. Recent litigation involving the President, however, has led to multiple federal court decisions more fully addressing the Clauses' scope and application. This report accordingly provides an overview of the Emoluments Clauses as they relate to the President, focusing on the legal issues that have been central to the recent litigation. More specifically, this report discusses (1) the history and purpose of the Clauses; (2) whether the President is a person holding an "Office of Profit or Trust under [the United States]" for purposes of the Foreign Emoluments Clause; (3) the scope of the Emoluments Clauses, focusing specifically on disputes over the breadth of the term "emolument"; and (4) how the Clauses may be enforced. <1. History and Purpose of the Emoluments Clauses> <1.1. Founding Era> <1.1.1. Foreign Emoluments Clause> The Foreign Emoluments Clause's basic purpose is to prevent corruption and limit foreign influence on federal officers. At the Constitutional Convention, Charles Pinckney of South Carolina introduced the language that became the Foreign Emoluments Clause based on "the necessity of preserving foreign Ministers & other officers of the U.S. independent of external influence." The Convention approved the Clause unanimously without noted debate. During the ratification debates, Edmund Randolph of Virginia a key figure at the Convention explained that the Foreign Emoluments Clause was intended to "prevent corruption" by "prohibit[ing] any one in office from receiving or holding any emoluments from foreign states." The Clause reflected the Framers' experience with the then-customary European practice of giving gifts to foreign diplomats. Following the example of the Dutch Republic, which prohibited its ministers from receiving foreign gifts in 1651, the Articles of Confederation provided that "any person holding any office of profit or trust under the United States, or any of them" shall not "accept of any present, emolument, office, or title of any kind whatever, from any king, prince, or foreign state." The Foreign Emoluments Clause largely tracks this language from the Articles, although there are some differences. During the Articles period, American diplomats struggled with how to balance their legal obligations and desire to avoid the appearance of corruption, against prevailing European norms and the diplomats' wish to not offend their host country. A well-known example from this period, which appears to have influenced the Framers of the Emoluments Clause, involved the King of France's gift of an opulent snuff box to Benjamin Franklin. Concerned that receipt of this gift would be perceived as corrupting and violate the Articles of Confederation, Franklin sought (and received) congressional approval to keep the gift . Following this precedent, the Foreign Emoluments Clause prohibits federal officers from accepting foreign presents, offices, titles, or emoluments, unless Congress consents. <1.1.2. Domestic Emoluments Clause> The Domestic Emoluments Clause's purpose is to preserve the President's independence from Congress and state governments. To accomplish this end, the Clause contains two key provisions. First, it provides that the President shall receive a compensation for his services, which cannot be increased or decreased during his term, thus preventing Congress from using its control over the President's salary to exert influence over him. To preserve presidential independence further, the Clause provides that, apart from this fixed salary, the President shall not receive "any other Emolument" from the United States or any state government. In light of its purpose, the Domestic Emoluments Clause unlike the Foreign Emoluments Clause does not permit Congress to assent to the receipt of otherwise prohibited emoluments from the state or federal governments. The Domestic Emoluments Clause, which drew upon similar provisions in state constitutions, received little noted debate at the Constitutional Convention. Its meaning, however, was elucidated by Alexander Hamilton in The Federalist No. 73 . Hamilton wrote that the Domestic Emoluments Clause was designed to isolate the President from potentially corrupting congressional influence: because the President's salary is fixed "once for all" each term, the legislature "can neither weaken his fortitude by operating on his necessities, nor corrupt his integrity by appealing to his avarice." Similarly, Hamilton explained that because "[n]either the Union, nor any of its members, will be at liberty to give . . . any other emolument," the President will "have no pecuniary inducement to renounce or desert the independence intended for him by the Constitution." Other Framers echoed this sentiment during the ratification debates. <1.2. Nineteenth and Twentieth Century Practice> The Foreign Emoluments Clause provides a role for Congress in determining the propriety of foreign emoluments, in that receipt of an emolument otherwise prohibited by the Clause is permitted with the consent of Congress. Under this authority, Congress has in the past provided consent to the receipt of particular presents, emoluments, and decorations through public or private bills, or by enacting general rules governing the receipt of gifts by federal officers from foreign governments. For example, in 1966, Congress enacted the Foreign Gifts and Decorations Act, which provided general congressional consent for foreign gifts of minimal value, as well as conditional authorization for acceptance of gifts on behalf of the United States in some cases. Several Presidents in the 19th century such as Andrew Jackson, Martin Van Buren, John Tyler, and Benjamin Harrison notified Congress of foreign presents that they had received, and either placed the gifts at its disposal or obtained consent to their receipt. Other 19th century Presidents treated presents that they received as "gifts to the United States, rather than as personal gifts." Thus, in one instance, President Lincoln accepted a foreign gift on behalf of the United States and then deposited it with the Department of State. In the 20th century, some Presidents have sought the advice of the Department of Justice's Office of Legal Counsel (OLC) on whether acceptance of particular honors or benefits would violate the Emoluments Clauses. Three such OLC opinions addressed whether (1) President Kennedy's acceptance of honorary Irish citizenship would violate the Foreign Emoluments Clause; (2) President Reagan's receipt of retirement benefits from the State of California would violate the Domestic Emoluments Clause; and (3) President Obama's acceptance of the Nobel Peace Prize would violate the Foreign Emoluments Clause. <2. Persons Subject to the Emoluments Clauses> An important threshold issue in examining the Emoluments Clauses is determining who is subject to their terms. The scope of the Domestic Emoluments Clause is clear: it applies to "[t]he President." The Clause prohibits the President from receiving emoluments from state or federal governments, aside from his fixed federal salary. The Foreign Emoluments Clause applies to any person holding an "Office of Profit or Trust under [the United States]." OLC, which has developed a body of opinions on the Emoluments Clauses, has opined that the President "surely" holds an "Office of Profit or Trust" under the Constitution. OLC opinions are generally considered binding within the executive branch. There has been significant academic debate about whether OLC's conclusion comports with the original public meaning of the Foreign Emoluments Clause. Some legal scholars have argued that the Foreign Emoluments Clause does not apply to elected officials such as the President, but only to certain appointed federal officers. Other scholars support OLC's view that the President holds an office of profit and trust under the United States under the original meaning of the Foreign Emoluments Clause. In addition to textual and structural arguments, these scholars debate the significance of Founding-era historical evidence. To support the view that the Foreign Emoluments Clause does not apply to the President, academics have observed that, among other things, (1) a 1792 list produced by Alexander Hamilton of "every person holding any civil office or employment under the United States" did not include elected officials such as the President and Vice President; (2) George Washington accepted gifts from the Marquis de Lafayette and the French Ambassador while President without seeking congressional approval; and (3) Thomas Jefferson similarly received and accepted diplomatic gifts from Indian tribes and foreign nations, such as a bust of Czar Alexander I from the Russian government, without seeking congressional approval. On the other side of the debate, scholars have observed that, among other things, (1) during Virginia's ratification debates, Edmund Randolph directly stated that the Foreign Emoluments Clause applies to the President; (2) George Mason, another Framer, articulated a similar view in those same debates; and (3) Alexander Hamilton, discussing the dangers of foreign influence on republics in The Federalist No. 22 , stated that this concern extends to a republic's elected officials. Beyond examining contemporaneous historical evidence of the Foreign Emoluments Clause's original public meaning, other evidence (such as text, precedent, and settled practice) is often used at least by some jurists to inform constitutional meaning and interpretation. As a textual matter, both the Constitution itself and contemporaneous sources refer to the Presidency as an "Office." The President receives compensation for his service in office (that is, "Profit") and is tasked with many important constitutional duties (that is, "Trust"). Furthermore, as discussed earlier, historical practice from the 19th and 20th centuries could support the view that the President is subject to the Foreign Emoluments Clause. Unlike Washington's and Jefferson's actions, several 19th century Presidents notified Congress or sought congressional approval upon receipt of gifts by foreign governments. Finally, the common practice among recent Presidents of placing their financial interests in a blind trust or its equivalent could reflect a concern that presidential financial holdings may implicate the Foreign Emoluments Clause. The parties in recent litigation involving the Emoluments Clauses have not disputed that the Foreign Emoluments Clause applies to the President. A single district court decision has reached the merits of this issue. Weighing the evidence discussed above, that court held that "the text, history, and purpose of the Foreign Emoluments Clause, as well as executive branch precedent interpreting it, overwhelmingly support the conclusion" that the Foreign Emoluments Clause applies to the President. This case is currently on appeal before the full Fourth Circuit. <3. The Meaning of "Emolument"> A key disputed issue regarding the scope of the Emoluments Clauses is what constitutes an "emolument." This question has divided legal scholars and has only recently been addressed by any federal courts. Scholars, courts, and executive branch agencies have offered several potential definitions of "emolument": 1. Office-related definitions . Black's Law Dictionary defines an "emolument" as an "advantage, profit, or gain received as a result of one's employment or one's holding of office." Some scholars argue that this employment- or office-centric definition of the term is the definition encompassed by the Emoluments Clauses, meaning that the Clauses prohibit covered officials from receiving compensation "for the personal performance of services" as an officer or employee but do not bar "ordinary business transactions" between a covered official and government. 2. Any "profit, gain, advantage, or benefit . " Others argue that the term "emolument" is broader in scope, applying to any profit, gain, advantage, or benefit. Under this broader conception, even "ordinary, fair market value transactions" between a covered official and foreign or domestic governments would be prohibited. Two recent district court decisions adopted this broader definition of "emolument." 3. Functional or purpose-based d ef initions. Both the Department of Justice's OLC and the Comptroller General of the United States, on behalf of the Government Accountability Office (GAO), have issued opinions on whether the acceptance of particular payments, benefits, or positions would implicate the Emoluments Clauses. These opinions have at times appeared to adopt a fact-specific, functional view of the Clauses, focusing on the purpose and potential effect of the specific payments or benefits at issue as they relate to the Clauses' goals of limiting influence on the President and federal officers. The relevant assessment in some of these opinions has appeared to be whether the payments or benefits are intended to or could "influence . . . the recipient as an officer of the United States" under the totality of the circumstances. At least one commentator has asserted that the OLC and GAO opinions support a middle view that Presidents or other federal officers may receive "certain fixed benefits" without those benefits being considered emoluments so long as they are not "subject to foreign or domestic government manipulation or adjustment in connection with" the office. Debates over the scope of the Clauses have largely centered on their text, their history and purpose, and historical practice. With respect to text, for instance, proponents of a broad definition emphasize the use of the word "any" in both Clauses and the phrase "any kind whatever" in the Foreign Emoluments Clause. They also contrast those provisions with the limiting term "whereof" that links emoluments to "civil Office" in the Ineligibility Clause (the provision that limits the ability of Members of Congress to hold dual positions). But proponents of a narrower, office- or employment-limited definition note that the word "any" in the Clauses may simply be read as extending coverage to multiple forms of emoluments (beyond just monetary remuneration). They further assert that the use of "emolument" in the Ineligibility Clause is clearly tied to an office-based definition and supports applying the same definition to the other provisions. As for the Clauses' history and purpose, both sides point to dictionary definitions and other uses of the word (including by Framers) contemporaneous with the Constitution's drafting to support their preferred definition. Proponents of a broad definition also argue that statements about the general anti-corruptive purpose of the Clauses support reading it expansively, while proponents of an office- or employment-limited definition assert that the Clauses were the product of a "balancing of values" that included attracting candidates for federal service who may have had conflicting commercial interests. As for the corpus of OLC and GAO opinions interpreting the Clauses, proponents of the broader and narrower definitions both cite opinions that they argue support their favored definitions. In 2018 and 2019, two federal district courts substantively addressed the Emoluments Clauses' scope for the first time. Both courts concluded that the term "emolument" as used in the Clauses "is broadly defined as any profit, gain, or advantage." As to the Clauses' text, the courts found significant the use of "expansive modifiers" like "any other" and "any kind whatever," and rejected the proposition that the term's office-related use in the Ineligibility Clause should control its use in the other Clauses. With respect to the Clauses' history and purpose, the courts, while acknowledging that broader and narrower definitions of "emolument" both existed at the time of ratification, found the weight of the historical evidence and the Clauses' "broad anti-corruption" purpose supported the more expansive definition. Finally, the courts viewed executive branch precedent and practice as "overwhelmingly consistent with . . . [an] expansive view of the meaning of the term 'emolument,'" observing that "OLC pronouncements repeatedly cite the broad purpose of the Clauses and the expansive reach of the term 'emolument.'" The recent court decisions construing the Emoluments Clauses are not final, however. In fact, as discussed below, one of the decisions was reversed by a panel of the Fourth Circuit on a separate issue regarding the standing of the plaintiffs to sue, and the full Fourth Circuit has agreed to consider the district court's rulings. The other decision has been certified for an immediate appeal to the District of Columbia Circuit. Thus, the import of these decisions is uncertain. <4. Enforcement of the Clauses> Separate from issues regarding the scope of the Emoluments Clauses is how the provisions' mandates are enforced, including whether and to what extent the federal courts and Congress have a role in addressing violations of the Clauses. A principal hurdle in recent litigation involving the President has been the doctrine of standing. Standing is a threshold limitation concerning whether the person or entity suing in federal court has a "right to make a legal claim or seek judicial enforcement of a duty or right." The limitation includes a constitutional component stemming from Article III of the U.S. Constitution, which limits the exercise of federal judicial power to "Cases" or "Controversies." The Supreme Court has interpreted this "case-or-controversy limitation" to require, among other things, that a litigant have "a personal stake in the outcome of the controversy" before the court. At a minimum, a plaintiff must establish that he or she has suffered a personal injury (often called an "injury-in-fact") that is actual or imminent and concrete and particularized. In other words, the injury cannot be "abstract," must affect the plaintiff in a "personal and individual way," and must actually exist or at least be "certainly impending" rather than merely possible in the future. The plaintiff must also show "a sufficient causal connection between the injury and the conduct complained of" (causation) and "a likelihood that the injury will be redressed by a favorable decision" (redressability). Recent lawsuits over the Emoluments Clauses have been filed in three federal courts by (1) private parties who argue they compete for business with properties related to the alleged violations of the Clauses, as well as a public interest organization (the "SDNY litigation"); (2) the State of Maryland and the District of Columbia (the "Maryland litigation"); and (3) over 200 Members of Congress (the "Congressional litigation"). Each set of plaintiffs implicate distinct legal issues and precedents related to standing. Private-party competitor plaintiffs rely on the notion of "competitor standing," which holds that an economic actor may have standing to challenge unlawful action that benefits a direct competitor in a way that increases competition in the relevant market. State plaintiffs also rely on a competitor standing theory and additionally assert harms to certain sovereign and "quasi-sovereign" interests of the state related to tax revenue, diminution of their sovereign authority, and the economic well-being of state residents in general. Finally, Members of Congress assert standing stemming from the alleged deprivation of their constitutionally prescribed opportunity to vote on the permissibility of particular emoluments under the Foreign Emoluments Clause, which implicates a unique set of standing principles that apply specifically to legislative plaintiffs. More broadly, regardless of the status or classification of the plaintiffs, the fact that a lawsuit involving the Emoluments Clauses seeks a court ruling on the constitutionality of the conduct of an official within another branch of the federal government means that courts must conduct an "especially rigorous" standing inquiry given underlying separation-of-powers concerns. Attempts by these various plaintiffs to sue for alleged violations of the Emoluments Clauses have thus far met with mixed results. With respect to private-party competitor plaintiffs, the district court in the SDNY litigation concluded that several such plaintiffs lacked standing because it was "wholly speculative" that any loss of business or increase in competition could be traced to alleged violations of the Emoluments Clauses rather than "government officials' independent desire to patronize [the] businesses" allegedly involved in those violations based on factors such as service and location. But the Second Circuit recently reversed the district court's ruling regarding the competitor plaintiffs, concluding that "a plaintiff-competitor who alleges a competitive injury caused by a defendant's unlawful conduct that skewed the market in another competitor's favor [has standing] notwithstanding other possible, or even likely, causes for the benefit going to the plaintiff's competition." As for state plaintiffs, a different district court concluded in the Maryland litigation that the State of Maryland and the District of Columbia (D.C.) had standing to sue as competitors based on their interests, along with the interests of their citizens, in hotels and event spaces that competed with a hotel in D.C. related to the alleged unconstitutional conduct. The court reasoned that, based on specific factual allegations regarding diversion of business to that hotel, the plaintiffs were "placed at a competitive disadvantage" because of violations of the Clauses that "unfairly skew[ed] the hospitality market" against them. Yet a panel of the Fourth Circuit reversed this decision, concluding that the theory of standing hinged on the proposition that government customers were patronizing the relevant hotel "because the [h]otel distributes profits or dividends" in violation of the Clauses "rather than due to any of the [h]otel's other characteristics." In the panel's view, such a proposition required "speculation into the subjective motives of independent actors . . . not before the court, undermining a finding of causation." The Fourth Circuit panel's decision has itself now been vacated, however, with the full Fourth Circuit agreeing to hear the case. Finally, as to Members of Congress, the district court in the Congressional litigation determined in 2018 that over 200 Members had standing to sue under the Foreign Emoluments Clause based on the deprivation of their "opportunity to exercise their constitutional right to vote on whether to consent prior to . . . acceptance of prohibited emoluments." Faced with Supreme Court precedent indicating that individual legislators generally lack standing to sue for institutional injuries that amount to "abstract dilution of institutional legislative power," but may have standing when their votes on specific items "have been completely nullified," the district court concluded that the Members alleging violations of the Foreign Emoluments Clause fell into the latter category. Central to the district court's decision in the Congressional litigation was its view that the Member-plaintiffs lacked an adequate legislative remedy for the alleged violations without court intervention. According to the court, although Congress as a whole could pass "legislation on the emoluments issue" to consent to or reject perceived emoluments, the political process would do nothing to address the deprivation of the Members' opportunity to give advance approval or disapproval of particular emoluments in the first instance. As with the court rulings on the definition of the term "emolument," the judicial decisions on standing to enforce the Emoluments Clauses are all subject to further review by the respective circuit courts. It is thus possible that the outcomes in some or all the opinions just described could change. If the effective split between the Second and Fourth Circuits on the viability of competitor standing theories as they relate to alleged violations of the Emoluments Clauses endures, Supreme Court review is also possible. Beyond standing, other doctrines may present potential roadblocks to judicial enforcement of the Clauses. For instance, though its continued vitality is questionable, the Supreme Court has traditionally applied a "zone of interests" test as a prudential aspect of the standing inquiry, which "denies a right of review if the plaintiff's interests are marginally related to or inconsistent with the purposes implicit in the constitutional provision" at issue. Applying this test in the context of the Emoluments Clauses, the district court in the SDNY litigation involving private competitors concluded that such competitors fell outside the zone of interests of the Clauses, because the Emoluments Clauses stemmed from "concern with protecting the . . . government from corruption and undue influence" and were not "intended . . . to protect anyone from competition." Another potential barrier is the political question doctrine, a separation-of-powers-based limitation on the ability of courts to hear disputes where there is, among other things, a "textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it." In the SDNY litigation, the district court concluded that Congress's authority to "consent to violations" of the Foreign Emoluments Clause meant that Congress, rather than the judiciary, would be "the appropriate body to determine whether" the alleged conduct "infringes on that power." Reversing both these rulings, however, the Second Circuit recently concluded that (1) "a plaintiff who sues to enforce a law that limits the activity of a competitor satisfies the zone of interests test even though the limiting law was not motivated by an intention to protect entities such as plaintiffs from competition," and (2) the judiciary's responsibility to adjudicate alleged violations of the Constitution was not lessened by the "mere possibility that Congress might grant consent" to particular emoluments. The district courts in the Maryland litigation and the Congressional litigation likewise agreed that the zone of interests test and political question doctrine did not bar those suits. But like the other issues raised in recent litigation involving the Emoluments Clauses, further review of the application of these doctrines is possible. Ultimate resolution of the issues is thus uncertain and will likely depend on the nature of the plaintiff involved. If the courts lack jurisdiction to enforce the Emoluments Clauses, the political process would be the remaining avenue for enforcement. In this vein, Congress could seek to enforce the Emoluments Clauses through legislation, political pressure, or potentially impeachment and removal. For instance, given that the Foreign Emoluments Clause explicitly provides a role for Congress in evaluating the propriety of the receipt of foreign emoluments by federal officers, Congress may be empowered to create civil or criminal remedies for violations or establish prophylactic reporting requirements through legislation. Indeed, one bill from the 115th Congress would have required certain reports and divestiture of personal financial interests of the President posing a potential conflict of interest, among other things. Resolutions have also been introduced in the 115th and 116th Congresses objecting to perceived violations of the Foreign Emoluments Clause, as well as calling on the President to take certain actions based on alleged potential violations. That said, it is unclear whether legislative actions would provide an effective means to enforce the Emoluments Clauses against the President, given the possibility of veto and potential separation-of-powers objections. As noted above, the adequacy of these legislative options has been a central issue in the Congressional litigation as it relates to Members' standing, and the issue is subject to further review at the appellate level.

Recent litigation involving the President has raised legal issues concerning formerly obscure constitutional provisions that prohibit the acceptance or receipt of "emoluments" in certain circumstances. First, the Foreign Emoluments Clause (Article I, Section 9, Clause 8 of the Constitution) prohibits any person "holding any Office of Profit or Trust under" the United States from accepting "any present, Emolument, Office, or Title, of any kind whatever" from a foreign government unless Congress consents. Second, the Domestic Emoluments Clause (Article II, Section 1, Clause 7) prohibits the President from receiving "any other Emolument [beyond a fixed salary] from the United States, or any of them." These two provisions (collectively, the Emoluments Clauses) have distinct, but related, purposes. The purpose of the Foreign Emoluments Clause is to prevent corruption and limit foreign influence on federal officers. The Clause grew out of the Framers' experience with the European custom of gift-giving to foreign diplomats, which the Articles of Confederation prohibited. The purpose of the Domestic Emoluments Clause is to preserve the President's independence by preventing the legislature and the states from exerting influence over him "by appealing to his avarice." An important threshold issue in examining the Emoluments Clauses is determining who is subject to their terms. The scope of the Domestic Emoluments Clause is clear: it applies to "[t]he President." The scope of the Foreign Emoluments Clause is less clear. By its terms, the Clause applies to any person holding an "Office of Profit or Trust under" the United States. The prevailing view is that this language reaches only federal, and not state, officeholders. According to the Department of Justice's Office of Legal Counsel (OLC), which has a developed body of opinions on the Foreign Emoluments Clause, offices "of profit" include those that receive a salary, while offices "of trust" require discretion, experience, and skill. There is some disagreement over whether elected federal officers, such as the President, are subject to the Foreign Emoluments Clause. Some legal scholars have argued that, as a matter of original public meaning, the Foreign Emoluments Clause reaches only appointed officers (and not elected officials). Other legal scholars dispute that argument, however, and OLC has presumed that the Foreign Emoluments Clause applies to the President. A recent district court opinion on this issue came to the same conclusion. Another key disputed issue over the scope of the Emoluments Clauses is what constitutes an "emolument." This question has divided legal scholars, and federal courts have only recently addressed the issue. Debate has largely centered on whether the Emoluments Clauses restrict private, arm's-length market transactions between covered officials and governments, or whether the Clauses are limited to office- or employment-based compensation. For its part, OLC has at times appeared to adopt a fact-specific, functional view of the Clauses, focusing on the purpose and potential effect of the specific payments or benefits at issue as they relate to the Clauses' goals of limiting influence on the President and federal officers. The only two courts to decide the issue adopted a broad definition of "emolument" as reaching any benefit, gain, or advantage of more than de minimis value, but those decisions are not final. Courts are divided over whether the Emoluments Clauses may be enforced through civil litigation. Among other things, the doctrine of standing may present a significant limitation on the ability of public officials or private parties to seek judicial enforcement of the Emoluments Clauses. Standing, grounded in Article III of the Constitution, requires a plaintiff to identify a personal injury (known as an "injury-in-fact") that is actual or imminent, concrete, and particularized. The injury must also be "fairly traceable" to allegedly unlawful conduct of the defendant and "likely to be redressed by the requested relief." Different plaintiffs in ongoing Emoluments Clause cases have relied on various theories to support standing, with mixed results. States and private parties, including business competitors to an office holder, have asserted injuries in the form of increased competition and loss of business from the alleged constitutional violations. Some Members of Congress have relied on the alleged deprivation of their opportunity to vote on the acceptance of emoluments under the Foreign Emoluments Clause to support their standing to sue. The lower courts have reached different conclusions on these standing issues, and the Supreme Court has yet to weigh in on the matter. If the courts lack jurisdiction to enforce the Emoluments Clauses, the political process would be the remaining avenue to enforce the provisions, such as through legislation or political pressure. The adequacy of those options is, however, disputed.

crs_R46185

crs_R46185_0

<1. Introduction> Under the terms of the U.S. Constitution, it is the responsibility of the House to impeach (meaning, formally accuse) a federal officer of high crimes and misdemeanors, and the responsibility of the Senate to try and then possibly convict that officer. The Senate therefore does not initiate impeachment proceedings, but instead acts after the House has charged a federal officer with wrongdoing. The Constitution grants the Senate the sole power to try all impeachments, and establishes four requirements for an impeachment trial in the Senate: (1) the support of two-thirds of Senators present is necessary to convict; (2) Senators must take an oath or an affirmation; (3) the punishments the Senate can issue cannot extend further than removal from office and disqualification from holding future office; and (4) in the case of a presidential impeachment trial, the Chief Justice, and not the Vice President or a Senator, is the presiding officer. All other trial procedures are left to the Senate to determine itself. Indeed, in 1993, the Supreme Court ruled in response to a claim by an impeached federal judge that his trial was unconstitutional because the Senate relied, in part, on a committee to collect evidence that the judicial branch did not have a role to play in assessing the validity of Senate impeachment procedures. According to the Supreme Court, the Constitution placed a few specific requirements on the trial, and "their nature suggests that the Framers did not intend to impose additional limitations on the form of the Senate proceedings." In each of the 15 impeachment trials the Senate has completed since 1789, the Senate has therefore determined its method of proceeding. Although attention was certainly paid to past precedent, the Senate established unique procedures for each trial to some extent, and sometimes the decisions reached regarding process were consensual or even unanimous. Notably, of the 5 full trials conducted in the last 80 years, 4 were of federal judges. In these four cases the Senate appointed a trial committee, composed of an equal number of Senators from each party, to hear and consider evidence and report it to the Senate. This history did not provide the Senate with a robust set of precedents to look to for guidance on how to conduct a modern trial, particularly if a committee will not be used. Trial committees were not intended to be used for presidential impeachments, and the only trial since 1936 conducted without a committee was that of President William Jefferson Clinton. That trial illustrates the many procedural decisions reached that were tailored for that particular set of circumstances. This report summarizes the existing rules and some past practices of the Senate related to an impeachment trial of a federal official. It does not discuss possible grounds for impeachment or other Constitutional or legal issues which are addressed in CRS Report R46013, Impeachment and the Constitution , by Legislative Attorneys Jared P. Cole and Todd Garvey. The information presented in this report is drawn from published sources of congressional rules and precedents, as well as the public record of past impeachment trial proceedings. It provides an overview of the procedures and should not be treated or cited as an authority on congressional proceedings. Consultation with the Office of the Senate Parliamentarian is always advised regarding the possible application of rules and precedents. <2. History of the Impeachment Rules of the Senate> The Senate adopted a set of impeachment rules in 1868, recommended by a select committee appointed for that purpose, in anticipation of the trial of President Andrew Johnson. These were not the first rules regarding impeachment ever agreed to in the Senate. The Senate had agreed to rules for its two earliest impeachment trials (Senator William Blount, 1798-1799, and District Judge John Pickering, 1803-1804), but it seems to have considered the rules to apply only to the trial of that particular individual. For the third impeachment trial, that of Supreme Court Justice Samuel Chase (1804-1805), the Senate approved 19 impeachment rules, and these rules appear to have been used in the next two trials (District Judge James H. Peck, 1831-1832, and District Judge West H. Humphreys, 1862). The 1868 select committee in the Johnson impeachment was explicit in its intent to recommend permanent rules, deeming it "proper, to report general rules for the trial of all impeachments." The select committee recommended 25 rules, many of which were the same as those adopted for the Chase trial, and some of which codified practices from previous trials. The rules reported by the 1868 select committee in the Johnson impeachment chiefly concerned the mode and manner of preparing for a trial. Some Senators argued that impeachment rules should not be too prescriptive regarding the actual trial proceedings, believing such decisions to be best made after the Senate had convened for the trial. They recognized that the outcome of a trial could depend "upon the rulings and mode of proceeding during the trial." But the lack of detail in the rules also reflected the nature of Senate proceedings in the middle of the 19 th century. Without designated party floor leaders and with very few staff, Senators were accustomed to discussing procedures on the floor, effectively working out a method of proceeding on legislation as they went along. The Senate adopted the rules reported by the select committee, and they have operated as the rules for impeachment trials since 1868, with very few changes. During the Johnson trial, when disputes arose about the interpretation of the rules, the Senate agreed to three changes to clarify their intent. Despite calls to revise the rules for the impeachment trials conducted early in the 20 th century, the impeachment rules were not changed again until 1935. At that time, the Senate, in response to reported low attendance by Senators during the 1933 trial of district judge Harold Louderback, agreed to the current Rule XI, which allows for the establishment of a committee to receive evidence and hear testimony from witnesses (see discussion of trial committees below). The Senate next reviewed its impeachment rules in 1974, when the House was expected to impeach President Richard Nixon. (The House had not impeached a federal officer since 1936.) At that time, the Senate directed the Committee on Rules and Administration to examine Senate impeachment rules and precedents with a view toward recommending necessary revisions for the conduct of a trial. The Committee met twice to discuss the rules and to pose questions to the Senate Parliamentarian and his assistant, and over two additional days it also heard testimony from Senators regarding the rules. The Majority Leader wrote a letter to the Rules Committee proposing significant changes to the impeachment rules, and the Committee discussed these proposed changes as well. The Rules Committee reported an original resolution (S.Res. 390, 93 rd Congress) proposing adjustments to 13 of the 26 rules. Of the suggested changes, nearly all were meant to clarify the meaning of the rule or to codify what had been the practice in past trials. The Committee did not recommend any major changes to the rules or report any new rules. As the accompanying committee report explained, "there appeared to be a consensus among the Members that for the most part the existing rules should be retained and that amendments thereto should be proposed only with the most valid justification." The Senate, however, never took up the resolution reported by the Rules Committee in 1974 because President Nixon resigned before being impeached by the House. Twelve years later, when the House next impeached an officer, the Senate again directed the Rules and Administration Committee to review the rules. The Rules Committee in 1986 recommended the changes that had been approved by the committee in 1974, and the Senate agreed to them. No further changes have been made to the impeachment rules. The rules, formally titled the "Rules of Procedure and Practice in the Senate When Sitting on the Trial of Impeachments" are printed in the Senate Manual as well as in a 1986 Senate document that also describes precedents and practices at an impeachment trial, Procedure and Guidelines for Impeachment Trials in the United States Senate. <3. Impeachment Trial Procedures and Practice> <3.1. Brief Overview> When the Senate conducts an impeachment trial, it does so in a procedural mode that is distinct both from legislative session (where bills and resolutions are considered) and from executive session (where nominations and treaties are considered). The differences are significant, but precedent does dictate that if the impeachment rules are silent, the regular Standing Rules of the Senate, where applicable, may guide proceedings. The impeachment rules prescribe a series of steps for the start of the trial, which are described below. The Senate follows these steps to organize itself for the trial and then requests written statements from the impeached officer and from the House regarding the charges. The next stage is the receipt and presentation of evidence, and the impeachment rules provide little guidance regarding this process. Actions taken at this stage have varied from trial to trial. Arguments are made on the Senate floor by House managers (Members of the House selected to prosecute the case in the Senate) and counsel for the impeached officer (an attorney or attorneys who were chosen by the accused). The Senate could decide to request documents and hear testimony from witnesses, who could receive questions from the House managers, counsel for the impeached officer, and Senators. Senators are expected to attend the trial, but their individual participation in open session is limited. They can submit questions in writing for a witness, House manager, or counsel for the impeached officer but the Presiding Officer of the trial, not the Senator, reads the question, announcing which Senator posed it. Debate among Senators is not allowed during the trial unless the Senate, by majority vote, goes into closed session, where the length of time each Senator can speak is limited. The Senate impeachment rules refer to opportunities for both Senators and the parties to the case to place proposals before the Senate for a vote; in modern practice, however, the Senate has structured the order of considering proposals, either by unanimous consent or by agreeing to a resolution by majority vote. Votes can occur in open or closed session on procedural questions, such as those that might set the schedule for the trial, structure time for arguments and questions, and arrange for witnesses. In previous trials, the vote on the final question of whether or not to convict has always occurred in open session. Conviction requires a vote of two-thirds of Senators present on any article of impeachment. <3.2. Receipt and Presentation of Articles of Impeachment> The impeachment rules establish a timeline for the Senate to take several actions after it receives formal notice from the House regarding an impeachment. Specifically, under Impeachment Rule I, Senate action is triggered by the receipt of notice from the House "that managers are appointed" and "are directed to carry articles of impeachment to the Senate." The House, in modern practice, first agrees to articles of impeachment in the form of a simple resolution (H.Res.), and then agrees to another privileged resolution (or sometimes multiple resolutions) that serves to instigate action in the Senate as prescribed by the rule. In this second resolution (or series of resolutions), the House selects Representatives who serve as "impeachment managers." These Members of the House will argue the case for impeachment before the Senate. The resolution also grants authority to the House managers to take actions to prepare and conduct the trial in the Senate. Finally, the resolution directs that a message be sent to the Senate to inform them that managers have been appointed. In practice, after receipt of the message from the House, the following actions take place in the Senate: The Senat e, by unanimous consent, establishes a time for the House Managers to prese nt the articles of impeachment to the Senate . Impeachment Rule I provides that the "Secretary of the Senate shall immediately inform the House of Representatives that the Senate is ready to receive the managers." Instead of following the letter of the rule, however, the Senate reaches a unanimous consent agreement that sets a specific time for the Secretary to invite the House managers to appear. The time agreed upon in modern trials has been within a day or two of receipt of the House message. Scheduling a time is more convenient for all Senators, and these unanimous consent agreements have been reached within the context of a rule that appears to require immediate action. A House manager reads the articles of impeachment aloud on the Senate floor, sometimes after a live quorum call to bring Senators into the chamber. The impeachment rules require that the articles of impeachment be "exhibited," which means read before the Senate. At a time arranged by unanimous consent, and sometimes after a live quorum call to ascertain the presence of Senators, the House Managers arrive on the floor of the Senate, are announced by the Secretary to the Majority or the Sergeant at Arms, and are escorted by the Sergeant at Arms to seats assigned to them in front of the Senate rostrum. The Presiding Officer then directs the Sergeant at Arms to make a proclamation required by Impeachment Rule II: "All persons are commanded to keep silence, on pain of imprisonment, while the House of Representatives is exhibiting to the Senate of United States articles of impeachment against _____." A House Manager, typically the Chair of the House Judiciary Committee, then reads the articles in full before the Senate. The House Manager also makes a statement that the House reserves the right to amend the articles of impeachment. The Presiding Officer then announces, again using language from Impeachment Rule II, that the Senate will "take proper order on the subject of impeachment" and notify the House. The House Managers then exit the Senate chamber. <3.3. Organizing for the Trial> Impeachment Rule III provides that after the articles are presented by the House managers, the Senate will proceed to consider the articles at 1 o'clock the next day (unless the next day is a Sunday), or sooner if ordered by the Senate. In modern trials, the Senate has most often taken the steps necessary to organize for an impeachment trial on the same day that the articles of impeachment were read on the floor. After the presentation of the articles, the Senate takes the following steps to organize for a trial: The Presiding Officer of the trial takes the oath of office. The Constitution requires that Senators be "on Oath or Affirmation" when sitting for the purpose of trying an impeachment. The Senate developed the practice of first swearing in the presiding officer of the trial, who then administers the oath to all Senators. In the case of a presidential impeachment, the Chief Justice acts as presiding officer. Impeachment Rule IV requires that notice be given to the Chief Justice of the time and place of the trial. It further provides that the Chief Justice is to be administered the oath by the "Presiding Officer of the Senate." The Chief Justice takes the same oath as the Senators (see below for text). Although the Vice President of the United States, as President of the Senate, could act as Presiding Officer of the Senate and administer the oath to the Chief Justice, in the Clinton impeachment trial, the President Pro Tempore of the Senate administered the oath to the Chief Justice. In the Clinton trial the Senate also agreed by unanimous consent that a bipartisan group of six Senators escort the Chief Justice to the dais. Senators are administered the oath of office. The Presiding Officer of the Trial administers the following oath to Senators, as provided in Impeachment Rule XXV: [Do you] solemnly swear (or affirm, as the case may be) that in all things appertaining to the trial of the impeachment of____, now pending, [you] will do impartial justice according to the Constitution and laws: So help [you] God. In modern practice, the Chief Justice asks all Senators, who are standing at their desks, to raise their right hands as he reads the oath, and Senators respond, all together, "I do." Senators also sign an official oath book, which serves as the permanent record of the administration of the oath. Senators are required to take the oath before participating in the trial, and Senators who might be absent at the time the oath is administered en masse inform the presiding officer as soon as possible so that they can take the oath separately. At this point, any Senator wishing to be excused from participating in the trial could ask to be excused from this service. In the past, the Senate has excused Senators from service in an impeachment trial only at their request. The Senate issues a " s ummons" and request s an "answer" from the impeached official and a "replication" (or response) from the House Managers. It is a necessary early step of an impeachment trial that the impeached officer be informed of the charges through an official process. Impeachment Rule VIII states that after the articles have been presented and the Senate has organized for a trial, " a writ of summons shall issue to the person impeached " The Senate accomplishes this by agreeing to an "order," sometimes in the form of a resolution, directing that a summons be issued. Impeachment Rule XXV provides the language of the summons, which, in accordance with Rule VIII, includes the articles of impeachment. The Senate, when it adopts an order for a summons, also directs the accused official to file a written answer to the articles of impeachment. The Senate determines the date by which this answer must be filed. Under long-standing practice, the Senate also sets a date by which the House Managers can file a formal written response to the impeached officer's answer which is called a "replication" with the Senate. The length of time the Senate provides for the impeached officer to file an answer and for the House managers to file a replication has varied in modern practice, from a few days to several weeks. An order or resolution regarding the summons and replication is not subject to debate, pursuant to Impeachment Rule XXIV, but is subject to amendment. The order or resolution can be approved by a majority of Senators voting, a quorum being present. On the day that the Senate majority has established for the return of the summons, Impeachment Rule IX provides that the Senate convene the trial at 12:30 p.m. The officer who served the summons (typically the Sergeant at Arms under Impeachment Rule VI) swears an oath, administered by the Secretary of the Senate, that the service was performed. Other administrative and organization al decisions. Impeachment Rule VII states that "The Presiding Officer of the Senate shall direct all necessary preparations in the Senate Chamber." Note that this is the regular presiding officer of the Senate, as these arrangements could be made in advance of the trial. In practice, the Senate, through a unanimous consent agreement or a resolution, makes decisions regarding such matters as staff access to the floor and the placement of furniture and equipment in the well to be used for trial presentations. The Senate might take such actions in legislative session before the trial, or the actions could be taken shortly after the Senate convenes for the trial. For example, in the Clinton impeachment trial, the Senate agreed to guidelines specifying which Senate staff with official impeachment duties would have access to the floor. It did so by unanimous consent in legislative session before the start of the trial. Additional unanimous consent agreements granted privileges of the floor to the counsel and assistants to counsel for the President, as well as to assistants to the Chief Justice and to the House Managers. The Senate also, by unanimous consent, established a method for allocating tickets to the Senate gallery. <3.4. Determining Trial Proceedings: Orders of the Senate> While the previously identified steps have occurred, with minor variations, in every Senate impeachment trial, actions subsequent to organization have varied considerably. To establish impeachment trial procedures, the Senate could reach unanimous consent agreements or vote on propositions offered by Senators, House Managers, or counsel for the impeached officer. When adopted, these procedural agreements are referred to as "orders" of the Senate. Impeachment Rule XXIV contains the provision that, when the Senate is convened to conduct a trial, "orders and decisions" of the Senate shall be voted on "without debate." This prohibition on debate applies when the Senate trial is meeting in open session; if a majority of Senators wished to discuss a proposed order, they could agree to do so in closed session, and in that forum each Senator would be limited to speaking only once, and for a maximum of 10 minutes. (See "Closed Deliberations by Senators" section below.) Furthermore, Impeachment Rule XXI provides further that "all preliminary or interlocutory questions, and all motions, shall be argued for not exceeding one hour (unless the Senate otherwise orders) on each side," which means that, in some cases, the Senate could hear arguments from House Managers and counsel for the impeached on procedural proposals for up to two hours. In contrast, under the regular rules of the Senate, most matters are not subject to any debate restrictions. As a result, a cloture process requiring the support of three-fifths of the Senate on legislation and most other items is sometimes necessary to end debate and reach a vote. It is for this reason that the support of three-fifths of the Senate (or 60 Senators, assuming no more than one vacancy) is usually considered to be necessary for the Senate to reach a decision that cannot be reached by consensus. The limits on debate when the Senate is sitting for an impeachment trial, however, allow the Senate to reach decisions without the threat of a filibuster. Without the need for cloture, most questions voted on during a Senate impeachment trial can be approved with the support of a majority of Senators voting. The major exception to this, of course, is that conviction requires the support of two-thirds of Senators present. Because cloture is not required, a Senate majority can agree to orders that affect the proceedings in a trial. It is not clear, however, how quickly a majority could do so in the absence of broad agreement among Senators and the parties to the case. Orders proposed by Senators are subject to amendment offered by other Senators. For example, in the trial of Secretary of War William W. Belknap, Senators offered multiple amendments to a series of orders that the Senate considered. In a more recent example, during the Clinton impeachment trial, the Minority Leader offered two amendments to a resolution ( S.Res. 30 ) to establish trial procedures offered by the Majority Leader. (Both amendments, which attempted to shorten the trial, failed.) Senators cannot, in open session, debate amendments to orders proposed by Senators. Furthermore, in past trials Senators have demanded the division of an "order," and the division of amendments to an order, that contained substantive, separate directions for a trial. Under regular Senate procedures, both amendments and resolutions containing separate provisions are susceptible to division. If any single Senator demanded a division, each provision would be considered separately for amendment and voted upon. Finally, there is little guidance in Senate published precedents as to what constitutes a proper "order" that would be eligible to be called up expeditiously and decided by majority vote during an impeachment trial. The impeachment rules mention several rules that could be altered by an "order": the time the Senate meets for the first day of the trial (Rule XII), and other days of meeting thereafter (Rule XIII); the length of time for the House Managers and counsel for the impeached officer to argue propositions before the Senate (Rule XXI); the number of people who may make opening and closing arguments (Rule XXII); and who may serve a summons (Rule XXV). Impeachment Rule XXVI permits the Senate to adopt a non-debatable order to fix the date and time for considering articles, even if it had missed a previously scheduled meeting. Impeachment Rule XI, which, as noted above, the Senate approved in 1935 to allow the use of committees to receive evidence, also states such committees can be created by order. The Senate, however, while sitting for an impeachment trial, has agreed to many other orders that are not directly mentioned in the impeachment rules. During the Clinton trial in the 106 th Congress, for example, the Senate agreed to S.Res. 16 and S.Res. 30 , which structured most aspects of proceedings by establishing deadlines for filings, allotting time for arguments, and making certain motions in order at specific points in the trial. If these resolutions constituted "orders" under Impeachment Rule XXIV, they were among the most comprehensive orders agreed to for a trial. Thus, based on Senate practice, it appears that "orders" of the Senate during impeachment trials can affect many more procedures than those specifically delineated in the impeachment rules. Senate precedents, however, might limit what can be included in such an order. In the absence of broad agreement regarding how to proceed with a trial, Senators might contest the inclusion of particular provisions of an order for example, those that appear to be in direct conflict with the impeachment rules or past practice, or those that Senators argue are unconstitutional. While Senators can be expected to consult the precedents for guidance, ultimately a Senate majority will decide these questions, using the process for interpreting procedures discussed below. If all Senators are voting, the majority necessary to approve an order of the Senate is 51 Senators; tie votes fail in the Senate. If all Senators are not voting, however, this number changes. The vote necessary for approval is a majority of those voting, assuming a quorum is present. The quorum required for an impeachment trial is 51 Senators the same as in regular Senate proceedings. During impeachment trials, however, the party leaders often implore Senators to attend all sessions, and committee meetings are unlikely to be scheduled during times the Senate is expected to be sitting for the trial. This is due to past criticisms of the Senate for light attendance at trials when evidence was presented, including from counsel of impeached officers who feel Senators must be present to listen to arguments before they vote. <3.5. Consideration and Collection of Evidence> The actions taken by the Senate to consider and collect evidence in each trial have varied considerably. The impeachment rules provide guidance only on a few particulars, necessitating that the Senate determine, each time it organizes for a trial, the manner of proceeding from that point forward. It is therefore not possible to describe, in the same manner as above, the parliamentary steps the Senate is expected to take to consider evidence in a trial. This section instead reviews the impeachment rules related to this stage of the trial, how these rules have been interpreted, and how their terms have been modified in past practice. Because in most modern trials the Senate has relied on a trial committee to consider and collect evidence, it then describes how these committees are established and some of their practices. <3.5.1. What the Impeachment Rules Provide> <3.5.1.1. Opening and Closing Arguments by the House Managers and Counsel for the Impeached Officer> During an impeachment trial in the Senate, Senators spend most of the time listening to arguments presented by the House Managers and the counsel for the impeached officer. Impeachment Rule XV states that counsel for the parties "shall be admitted to appear and be heard upon an impeachment." The impeachment rules further reference both opening and closing arguments that would be made by the parties to the case. Specifically, Impeachment Rule XXII states that the House of Representatives will provide opening remarks first, followed by the counsel for the impeached. It also provides that the case shall be opened "by one person" on each side, but in practice opening remarks have been divided among multiple managers and multiple counsel for the impeached. With regard to closing arguments, Rule XXII provides that the House Managers will speak last, and permits two House Managers and two people for the impeached officer to make closing arguments. The number of individuals allowed to participate in closing arguments has been modified in past trials by order of the Senate. The impeachment rules do not place a time limit on opening and closing statements, although in past trials the Senate has agreed to place such limits on the parties. The Senate has also allowed the side speaking first to reserve time for rebuttal. <3.5.1.2. Arguments by the House Managers and Counsel for the Impeached Officer on Questions and Motions> Impeachment Rule XXI limits the time for arguments that can be made during the trial on any "questions" or "motions" that might arise to one hour on each side, unless otherwise ordered by the Senate. The impeachment rules provide no guidance regarding what particular questions or motions can be raised by the parties to the case. Rule XVI simply requires that all such motions (and "objections, requests, or applications") should be addressed to the Presiding Officer and put in writing if demanded by any Senator or the Presiding Officer. Examples of questions that have been argued pursuant to this rule include, from the 1868 trial of President Johnson, a motion by the defense that the trial be postponed for 40 days to allow for preparation of the answer to the articles of impeachment and, from the 1936 trial of Judge Ritter, a motion by the counsel for the impeached to strike an article deemed repetitive. In general, in past trials, the Senate has controlled, through the adoption of orders, what propositions can be placed before the body and voted on while it is sitting for an impeachment trial. The impeachment rules do not address which side speaks first on questions and motions, but it is by practice the side proposing the motion. The Senate has altered the time available for such arguments by unanimous consent or other order of the Senate. The side speaking first has asked to reserve time for rebuttal. It is important to note that there appears to be a distinction between motions filed and argued by the parties to the case in an impeachment trial, and motions offered by Senators. When House managers or counsel for an impeached officer propose a "motion," they are requesting that the Senate reach a judgement (perhaps by agreeing to an order on the subject). They are not necessarily forcing Senate action on their proposal as written. During an impeachment trial, the Senate, at least in modern practice, has generally controlled when and what motions are proposed before the full Senate by the parties to the case, and it also determines the method of responding to such motions (which might not be a direct vote on the question). For example, in the 2010 trial of Judge Porteous, counsel for the impeached filed three motions that were argued by the parties to the case: a motion to dismiss Article 1, a motion to dismiss Article 2, and a motion to dismiss all articles because they aggregated multiple charges. The Senate heard arguments from each side (pursuant to a unanimous consent agreement that limited arguments on all motions to two hours, equally divided) and deliberated in closed session. When the Senate reconvened in open session, rather than act directly on the propositions as presented, the Majority Leader moved to hold preliminary votes on individual allegations within the articles. This motion was defeated 94-0. Effectively, it served as a response to the three motions filed by the defense and argued by the parties to the case. In another modern example, the Senate heard arguments by the parties, under the terms of a unanimous consent agreement, regarding a motion by the impeached officer that Impeachment Rule XI, allowing the creation of a trial committee, was unconstitutional and that there be a full and free trial before the Senate and witnesses be subpoenaed for that purpose. After deliberating in closed session, the Senate returned to open session and the Majority Leader moved that the Senate not hear additional witnesses in the case. The motion was agreed to 61-32 (7 Senators not voting), and served as a response to the arguments by counsel for the impeached officer that the full Senate, not the trial committee, should receive evidence. <3.5.1.3. Motions or Orders Offered by Senators Are Not Debatable in Open Session and Are Acted upon Without Objection or by the Yeas and the Nays> Impeachment Rule XXIV refers to "orders and decisions" of the Senate, which in practice have been proposed by Senators, not by the parties to the case. As discussed above, such "orders" are sometimes offered in the form of resolutions. In impeachment trials, however, it appears that such resolutions were proposed as if they were motions and were not subject to layover requirements, or taken up by a motion to proceed, which is the usual way that the Senate would process a resolution. Impeachment Rule XIX requires any motion or order proposed by a Senator (except a motion to adjourn) be in writing and put by the Presiding Officer. Impeachment Rule XXIV prohibits debate on orders of the Senate in open session, but the Senate could vote to go into closed session, in which case each Senator could speak for up to 10 minutes on the motion or order. Impeachment Rule XXIV also provides that orders of the Senate can be agreed to by unanimous consent but, short of unanimous consent, the vote on an order must be by the yeas and the nays (a roll call vote). An exception is made for the motion to adjourn, which could be voted on by voice vote or division (or if the yeas and nays are ordered, by roll call vote, as under regular Senate procedures). Otherwise, the impeachment rules do not reference proposals offered by Senators. In the 19 th and early 20 th century trials, it appears that a variety of propositions regarding procedure were proposed by Senators. In the modern trials, some motions were permitted pursuant to a previously-agreed-to resolution, or under the terms of a unanimous consent agreement. For example, in the 1999 trial of President Clinton, a Senator offered a motion to dismiss the articles that was permitted under the terms of S.Res. 16 . Similarly, later in the same trial, the Minority Leader offered a motion that the Senate proceed to closing arguments, and this motion appears to have been permitted under the terms of S.Res. 30 . In other modern instances, however, Senators appear to have offered motions that were not explicitly allowed under a previous order and presumably were permitted by the standing impeachment rules and precedents. For example, during the trial of President Clinton, a Senator moved that Senators be permitted to insert statements they made in the closed session into the Congressional Record . In another example, during the 1986 trial of Judge Harry Claiborne, a Senator moved to postpone the decision on motions filed by the defendant. It is also possible that such motions were effectively offered by a kind of tacit unanimous consent, and if any Senator had objected, they could not have been considered. Unanimous consent cannot always be required for a Senator to propose a motion or order, however, as that would allow a single Senator to block procedural decisions. Neither the impeachment rules nor the published precedents provide explicit guidance on what propositions can be offered by Senators while sitting on an impeachment trial. There is also no guidance regarding precedence among the various motions, although the Senate precedents establishing that the Majority Leader is entitled to priority in recognition, followed by the Minority Leader, presumably continue to apply in an impeachment trial. Still other motions have been offered pursuant to the regular standing rules of the Senate. In 1999, for example, several Senators moved to suspend certain impeachment rules (to allow for unlimited debate on questions in open session). To suspend the rules, Senators must provide one calendar day's notice in writing of their intent to offer a motion to suspend. Adoption of such a motion requires a two-thirds affirmative vote. During the Clinton trial, the Senate considered motions to suspend under the terms of a unanimous consent agreement or a resolution, and it is not entirely clear from the proceedings or published precedents when such motions would otherwise be in order. <3.5.1.4. Witnesses> The impeachment rules contain little guidance in relation to the calling and questioning of witnesses. Impeachment Rule XVII states that witnesses shall be examined first by the side who requested them, and then cross-examined by the other side. It also specifies that only one person from each side shall conduct the examination and cross-examination. Witnesses are also required to be sworn by the Secretary of the Senate or other authorized person, in a form provided by Senate Rule XXV: "You, ______, do swear (or affirm, as the case may be) that the evidence you shall give in the case now pending between the United States and ______, shall be the truth, the whole truth, and nothing but the truth, so help you God." Impeachment Rule VI is intended to grant the Senate the ability to compel the attendance of witnesses (and, more generally, to enforce any "orders, mandates, writs, precepts, and judgments" deemed "essential or conducive to the ends of justice"). In modern practice, the Senate has relied on the other branches of government to enforce its subpoenas, as discussed in detail in other CRS reports. For example, in the 1989 trial of Judge Alcee Hastings, when a key witness refused to testify, the Senate in legislative session took up and approved by unanimous consent a resolution directing the Senate Legal Counsel to bring a civil action to enforce the subpoena. Senate Legal Counsel obtained an order from the U.S. District Court for the District of Columbia directing the witness to testify, and when the witness continued to refuse to do so, he was incarcerated until the end of the trial. The Senate impeachment rules do not address the selection of witnesses. In practice, the Senate determines which witnesses will be heard, if any. (If a trial committee is used, the trial committee selects and subpoenas the witnesses.) The parties to the case do not have the right under the rules to call whom they choose. To be clear, it is the House Managers and counsel for the impeached who know the charges and know what evidence they would like to present, and, in practice, the Senate weighs their requests heavily. In some recent trials, the Senate has requested pretrial statements or trial memoranda from both parties, which discuss possible evidence to be presented, including desired witnesses. On the basis of such requests, the Senate (or the trial committee) decides which witnesses to hear and possibly subpoena. In the modern judicial trials, witnesses were examined in the trial committees, and not on the floor before the full Senate. In the Clinton trial in 1999, the Senate agreed to an order that depositions from three witnesses be taken, but did not agree to hear testimony from any witness on the floor. The last time witnesses were examined and cross-examined on the Senate floor was during the impeachment trial of Judge Ritter in 1936. <3.5.1.5. Questions by Senators> During the presentation of evidence by the House Managers and counsel for the impeached officer, Senators are generally expected to attend, but not speak. Impeachment Rule XIX, however, does allow a Senator to question a witness, manager, or counsel of the person impeached. The Senator must put the question in writing and submit it to the Presiding Officer, who then reads the question out loud. In practice, the Presiding Officer identifies the Senator posing the question before reading it. As noted, witnesses have not testified before the full Senate since the 1936 trial of Judge Ritter, so there are no modern examples to look to concerning Senators questioning witnesses on the floor. In trial committees, Senators have submitted questions for witnesses. In addition, resolutions establishing trial committees have explicitly authorized the chair of the trial committee to "waive the requirement that questions by a Senator to a witness, a manager, or counsel shall be reduced to writing and put by the presiding officer." In modern trials, Senators have posed questions to House managers and counsel for the impeached. In the 1999 trial of President Clinton, the Senate agreed to a resolution ( S.Res. 16 , 106 th Congress) that established procedures in addition to the impeachment rules to structure a period of questioning by Senators. S.Res. 16 provided that after opening arguments by the House Managers and the President's counsel, "Senators may question the parties for a period of time not to exceed 16 hours." During the Clinton trial, Senators directed their questions to one side or the other, and the party leaders asked that questions be submitted to them first, so that they could identify duplications and structure the order of questions (which alternated between Republican and Democratic Senators' questions). The Chief Justice announced that he thought five minutes would be a sufficient time to answer each question, and an effort was made to keep the time used by each side roughly equal. Over 100 questions were posed by Senators over the course of two days. In other modern trials, Senators asked questions of the House Managers and counsel for the accused on the floor, apparently without a unanimous consent agreement or other order of the Senate structuring the questioning process. During the 2010 trial of Judge Porteous, for example, after the trial committee had issued its report, the Senate agreed by unanimous consent to limit the time for arguments on all motions filed by Judge Porteous to one hour for each side, and to limit the time for final arguments on all four articles of impeachment to one and a half hours for each side. The agreement did not explicitly address time for questions. Senators, during the arguments, sent questions in writing to the Presiding Officer, who asked the clerk to read them at a time deemed appropriate, including after the expiration of the time limits set by unanimous consent. In this trial, Senators' questions were sometimes directed to both sides. <3.5.2. Creation of a Trial Committee> Impeachment Rule XI allows for the appointment of a trial committee of Senators to receive evidence and take testimony on behalf of the Senate for an impeachment. Rule XI does not contain language explicitly limiting the application of trial committees; however, the 1974 Rules and Administration Committee report regarding amendments to the impeachment rules stated that, "nothing but action by the full Senate on all aspects of a presidential impeachment was conceivable" and that the legislative history to the proposed amendments should "clearly reflect" this understanding by members of the Committee. The Senate has chosen to appoint trial committees for every modern impeachment of a judge since the 1980s. Trial committees serve to relieve the full Senate of the potentially lengthy process of these early trial tasks and instead devote time to its legislative workload. Transcripts of all proceedings conducted and evidence received by the trial committee are transmitted to the full Senate when the committee's work is completed. This material provides a potential opportunity to move quickly to closing arguments and deliberation on the final question of whether an impeached officer is guilty or not guilty. Trial committees are typically created by a simple resolution that authorizes the majority and minority leaders to each recommend six Senators, including, more recently, a chair and vice chair, respectively. Impeachment Rule XI does not fix the membership or size of a trial committee, nor does it require party balance; in modern practice, however, the Senate has routinely agreed to a bipartisan 12-member committee. Resolutions creating trial committees also typically include a funding provision, and may authorize a committee to waive certain impeachment rules, direct a committee on what it should report to the Senate, or establish a date at which the committee will terminate. In addition to receiving evidence and testimony, trial committees can reach decisions concerning certain pre-trial requests and motions filed by the parties to the case, and they can question witnesses. Trial committees process motions filed by House Managers in a fashion similar to that which the Senate would use when sitting as a court of impeachment. The committee holds a hearing to receive oral arguments from the trial parties, allots time for questioning by committee members, deliberates in closed session, and ultimately votes to make a determination in relation to the request. Modern trial committees have routinely declined to consider motions to dismiss an article or articles of impeachment, citing a lack of authority to do so. Trial committees also have examined witnesses called by House managers and counsel to the accused. Typically, a witness is first examined by the trial parties, after which committee members have been able to ask their own questions. Under the impeachment rules, questions by Senators are to be submitted in writing, although the Senate has waived this rule to allow for direct questioning by Senators in trial committees. Once a trial committee has completed its work, as previously discussed, it will issue a report to the Senate compiling all evidence, exhibits, and witness testimony it received. That material is considered as having been received and taken before the full Senate for the purposes of delivering a final vote on articles of impeachment. The trial committee's work does not preclude the Senate itself from calling additional witnesses, hearing further testimony, or revisiting motions raised by House managers and counsel for the accused. The full Senate did not choose to hear witnesses or request any further evidence in any of the four completed trials in which a committee was used. <3.6. Closed Deliberations by Senators> Closed door deliberation by the Senate while sitting for an impeachment trial is established through Impeachment Rules XX and XXIV. Rule XX states that a Senate impeachment trial is to be conducted in open session, except for when the doors shall be closed for deliberation. A motion to go into closed door session can be acted upon without objection, or if an objection is raised, by a roll call vote without debate. Note that this method of entering closed session when the Senate is sitting for an impeachment trial approving a motion by majority vote is different from the method used during regular Senate session. Outside of an impeachment trial, a single Senator can move that the Senate go into closed session, and, if the motion is seconded by another Senator, the Senate will proceed to secret session. Rule XXIV specifies, in part, that during closed door deliberations, each Senator may speak only once on each question. Such remarks are limited to 10 minutes per Senator on "interlocutory" questions and to 15 minutes on "the final question," (i.e., whether the impeached officer is guilty or not guilty), regardless of the number of articles of impeachment. In other words, in the final debate, regardless of whether the Senate is considering one article of impeachment or many, each Senator has only one opportunity to speak for no more than 15 minutes. When the Senate enters a closed session, the specific procedures followed are guided by the Senate's standing rules, rather than its impeachment rules. The Sergeant at Arms clears the chamber and galleries of everyone except for Senators and staff designated under Senate Rule XXIX, paragraph 2, who are sworn to secrecy. The Senate rule further provides access for the Senate Secretary, the Assistant Secretary, the Principal Legislative Clerk, the Parliamentarian, the Executive Clerk, the Minute and Journal Clerk, the Sergeant at Arms, and the Secretaries to the Majority and Minority, as well as other individuals the Presiding Officer "shall think necessary." During impeachment trials, the Senate has, in practice, extended floor privileges in closed session to additional designated staff by unanimous consent agreement. A record of closed session deliberations is kept, as with all proceedings of impeachment trials, pursuant to Impeachment Rule XIV. Unlike open session records, which are made available to the public, closed session transcripts are kept under an injunction of secrecy unless lifted by the Senate by resolution or unanimous consent. Accordingly, Senators and staff are expected to refrain from public discussion of closed door deliberations. Senate Standing Rule XXIX, paragraph 5, provides for possible expulsion from the Senate (if a Senator) or dismissal from service (if an officer or employee) as punishment for divulging closed door proceedings. In recent Senate impeachment trials, the Senate has allowed Senators to insert their closed session remarks into the Congressional Record . As mentioned above, in the 1999 trial of President Clinton, Senators attempted to allow for open deliberation and debate in an impeachment trial by moving to suspend the impeachment rules. No such proposals were agreed to by the Senate during the Clinton trial, and all deliberation throughout the trial occurred in closed sessions. <3.7. Voting on Articles of Impeachment> Conviction requires a guilty vote on at least one article of impeachment by two-thirds of Senators present. Assuming 100 Senators present, the support of 67 Senators is needed to convict on an article. If fewer Senators are present, the threshold to convict will accordingly be reduced as well (e.g., 97 Senators present would require 65 votes to convict). A response of "present" effectively supports acquittal, as it counts in the denominator against which the threshold to convict is calculated. Following closed door deliberations on the final question of whether to convict or acquit an impeached officer, the Senate reconvenes in open session to vote on the articles of impeachment. Articles are typically voted on in the order they were exhibited by House Managers. It is not in order to further divide an article. Pursuant to Impeachment Rule XXIII, the Presiding Officer puts the question on each article separately, and each vote is required to be by roll call. The legislative clerk is directed to read the article of impeachment aloud and then the roll is called, to which Senators must rise from their seats and answer "guilty" or "not guilty" on the question of impeachment. Voting on the articles of impeachment is to continue without interruption, pursuant to Rule XXII, unless the Senate adjourns the trial. After voting has commenced, adjournments of the trial can be for only one day, or sine die , that is, without a specific date to return, if ever. Under the rule, a motion to reconsider a vote on an article of impeachment is not in order. Under Senate Standing Rule XII, Senators are required to vote upon call of their name unless excused by the Senate or due to a conflict of interest. The question of excusing a Senator from voting is disposed of after the call of the roll is completed but before the result is announced. Senators have been excused from voting on articles of impeachment in past trials due to their absences from arguments or owing to their participation as a witness in the trial. (Senators have also been excused from participating in the trial at all; see above "Organizing for the Trial.") If an officer is convicted by two-thirds of Senators present, "such a vote operates automatically and instantaneously to separate the person impeached from office." The Senate may then choose to take the additional action to move to disqualify a convicted officer from holding further office, although this step is not required. The Senate has established that a vote to disqualify requires a simple majority voting affirmatively, and not two-thirds as with conviction. <4. Senate Interpretation of the Impeachment Rules and the Role of the Presiding Officer> The Presiding Officer of an impeachment trial does not possess any more independent control over proceedings than the Presiding Officer does during the more common Senate deliberations on legislation or nominations. While the Presiding Officer, in either case, may rule on the proper interpretation of the rules and procedures of the Senate, that ruling can be challenged by any Senator. In legislative or executive sessions of the Senate, if any Senator appeals a ruling by the Presiding Officer, the full Senate considers the question, "Shall the decision of the Chair stand as the judgment of the Senate?" Impeachment Rule VII lays out the process of challenging a ruling as it applies during an impeachment trial. It states in part And the Presiding Officer on the trial may rule on all questions of evidence including, but not limited to, questions of relevancy, materiality, and redundancy of evidence and incidental questions, which ruling shall stand as the judgment of the Senate, unless some Member of the Senate shall ask that a formal vote be taken thereon, in which case it shall be submitted to the Senate for decision without debate; or he may at his option, in the first instance, submit any such question to a vote of the Members of the Senate. In other words, while the impeachment rules grant the Presiding Officer the authority to rule on questions, they also state that a single Senator could instead request that the full Senate vote on any such question. In that case, pursuant to this rule, the question is not debatable, and a majority of Senators voting would determine the outcome. (By precedent, House Managers or counsel for the impeached could not ask that a question be submitted to the Senate. ) The published precedents state that all decisions of the Chair are subject to appeal. If a ruling concerning the admissibility of evidence is appealed (or if the Presiding Officer submits such a question), the question put to the Senate is: "Is the evidence admissible?" In the case of other procedural issues the Senate would vote on, the phrasing of the question put to the Senate could vary with the question. For example, in 1986, during the trial of Judge Claiborne, the Presiding Officer ruled, in response to a motion by the defense counsel and at the request of the Majority Leader, "It is the Chair's determination that the question of standard of evidence is for each Senator to decide individually when voting on Articles of Impeachment." A Senator requested that the Senate vote on the question instead, and the Presiding Officer put the question on whether the motion of the counsel for the impeached judge that the Senate establish a "beyond a reasonable doubt" standard of proof in the trial was "well taken." By a vote of 17 yeas and 75 nays (8 Senators not voting), the Senate voted that the motion was not well taken, effectively agreeing with the ruling of the Presiding Officer. The Senate, in short, is the final arbiter on any procedural questions. Impeachment Rule VII states that "the vote shall be taken in accordance with the Standing Rules of the Senate." That means these questions could be settled by roll call vote, but only if that request for the yeas and nays is supported by 1/5 of a quorum (11 Senators), or, if the Senate recently voted, 1/5 of the Senators who voted. The impeachment rules make several other references to the Presiding Officer of the trial. Impeachment Rule IV restates the constitutional requirement that when the President of the United States has been impeached, the Chief Justice of the United States shall serve as the Presiding Officer. Impeachment Rule III tasks the Presiding Officer with administering the oath to Senators. Rule V grants him general power to execute decisions of the Senate where necessary (which would include, for example, signing a summons the Senate ordered to be issued to the person impeached, or signing a subpoena that the Senate had agreed to issue). Rule XIII directs the Presiding Officer to cause the proclamation to be declared at the start of each day commanding those present to keep silent. Rule XVI requires that the parties to the case the House Managers and the impeached officer and his counsel address the Presiding Officer when proposing motions, objecting to proceedings, or making any request related to the trial. As mentioned above, Rule XIX requires the Presiding Officer to read aloud any question submitted in writing by a Senator. The Presiding Officer also puts the question on the vote on the articles of impeachment, pursuant to Rule XXIII and as described above. The Presiding Officer of the trial can vote when he or she is a Senator. If the Vice President is presiding over a trial, and if there is a tie vote, then the Vice President may vote. In presidential impeachment trials, however, the Vice President cannot preside and cannot vote. The Chief Justice, when presiding over an impeachment trial, would not be expected to vote, even in the case of a tie. If a vote on a question results in a tie, the question is decided in the negative. <5. Conducting Legislative and Executive Business> When the Senate convenes as a Court of Impeachment, it is in a distinct procedural mode, different from legislation session, where it considers bills and resolutions, and executive session, where it considers treaties and nominations. In addition to having its own set of rules, the Court of Impeachment also keeps a separate Journal. (The Journal is the Constitutionally-required record of parliamentary actions taken by the Senate.) Business in these distinct procedural modes is kept entirely separate. For example, bills and resolutions cannot be introduced when the Senate is in the mode of sitting for the trial, and committee reports cannot be filed. This might mean that the Senate chooses to spend some period of a day meeting in legislative or executive session and also spend a period meeting as Court of Impeachment, in order to provide an opportunity for other actions to occur. For some legislative actions, unanimous consent may effectively be required. Notably, the Senate must have a period for "morning business" in legislative session for various actions to occur including the introduction of legislation and the filing of committee reports. In modern practice, this is provided for in unanimous consent agreements for each day the Senate meets. The Senate would need to reach a similar unanimous consent agreement for legislative sessions held on days during the trial in order for these actions to be allowed. Alternatively, the Senate could agree by unanimous consent to arrange other methods for these actions to occur, even though the Senate has not met that day in legislative session. The impeachment rules provide for the Senate to convene for an impeachment trial at noon (Rule XIII) every day except Sunday after a trial has begun (Rule III). While this might have been the expected schedule in the middle of the 19 th century, the impeachment rules also provide for the Senate to modify this schedule by "order." In modern practice, the Senate has adjusted the meeting days and times. Most often, the Senate agreed by unanimous consent to the time of the next meeting. Alternatively, a motion to adjourn the Senate sitting in a trial of impeachment to a time certain is subject to amendment, but it is not debatable and could be agreed to by majority vote. The Senate also could agree to an order altering the default time for the Senate to sit for the trial each day, and this order would not be subject to debate. In short, a numerical majority can determine the day and times of meeting for an impeachment trial. Impeachment Rule XIII also provides that, when the trial adjourns, the Senate resumes consideration of legislative (or executive) business. The Rule states, "(t)he adjournment of the Senate sitting in said trial shall not operate as an adjournment of the Senate." As a result, it is possible for the Senate to convene to conduct business in legislative (or executive) session before noon, convene the trial at noon pursuant to the rules (or at some other time if decided by the Senate), adjourn the impeachment trial for the day and return to legislative (or executive) session to conduct more business. The Senate could also meet for other purposes on days the Senate is not meeting for the trial. In the modern judicial trials and during the Clinton trial, the Senate did conduct other business on some of the days on which it also considered articles of impeachment. Limited legislative business was accomplished during the six weeks of the Clinton trial, but that trial occurred at the very start of the 106 th Congress (1999-2000), while committees were still organizing and legislation may have still been developing. Other factors could certainly affect the ability of the Senate to approve legislation while a trial is being conducted. Bipartisan support is generally necessary to take up most legislation in the Senate, and forming such coalitions could be challenging if the impeachment proceedings are contentious. The attention of Senators and their staff might also be expected to be directed toward impeachment proceedings. In addition, it is not clear how some procedures that apply to the consideration of legislation and nominations in the Senate are impacted when the Senate sits for an impeachment trial. For example, if cloture was filed on a matter in legislative session, and the Senate was sitting in trial when the cloture motion matured, it is not clear if the Senate would vote on the cloture motion at that time, or instead not until it adjourned the trial for the day. It is also not clear how legislation to be considered under expedited procedure statutes, such as the Congressional Review Act, the War Powers Resolution, or the Trade Act (each of which provide for specific Senate actions at times certain) could be impacted by a Senate trial.

After the House impeaches a federal officer, the Senate conducts a trial to determine if the individual should be removed from office. The Senate has a set of rules specific to the conduct of an impeachment trial, most of which originated in the early 19 th century. The impeachment rules lay out specific steps that the Senate takes to organize for a trial. House managers (Members of the House who present the case against the impeached officer in the Senate) read the articles of impeachment on the Senate floor. The Presiding Officer and Senators take an oath to do impartial justice, and the Senate issues a "summons" to the accused and requests that a written answer be filed. The House Managers are also invited to respond to the answer of the impeached officer. Actions after these organizing steps, however, are not specified in the impeachment rules. The impeachment rules mention some actions that are common in judicial trials, such as opening and closing statements by the parties to the case and the examination of witnesses, but provide little specific guidance. Instead, the rules allow the Senate, when sitting for a trial, to set particular procedures through the approval of "orders." Some orders of the Senate are unanimous consent agreements, but others are proposals adopted by the Senate. If such a proposal is considered while the Senate is sitting for the trial, then debate is limited by the impeachment rules. As a result, the support of three-fifths of the Senate to invoke cloture is not necessary to reach a vote to approve a procedural proposal. In previous trials, such proposals have been subject to amendment. Senate published precedents do not provide guidance on what can or cannot be included in such an order. Compared to when the Senate meets in legislative and executive session, the opportunity for individual participation by Senators in a Senate trial is limited. The rules require that any debate among Senators take place in closed session. Senators can make motions under the impeachment rules, but these rules are silent on what motions can be offered, and when. In modern trials, when Senators proposed motions, it was often pursuant to a previously-agreed-to order of the Senate. Senators can also submit written questions during the trial—to House Managers, counsel for the impeached officer, or witnesses—that the Presiding Officer presents on their behalf. Orders of the Senate, however, might structure the time and process for posing questions. During the open portion of an impeachment trial, Senators spend most of the time listening to arguments presented by House Managers and counsel for the impeached officer. Impeachment Rule XI allows the Senate to create trial committees to hear and consider evidence and report it to the Senate. Such committees were not intended to be used for presidential impeachments, but four of the five impeachment trials completed since 1936 concerned federal judges, and in each of these cases the Senate established a trial committee. When the Senate meets in closed session to deliberate, each Senator may speak only once on each question. Such remarks are limited to 15 minutes on the final question—whether the impeached officer is guilty or not guilty—and to 10 minutes on other questions. On the final question, Senators respond "guilty" or "not guilty" on each article of impeachment. The support of two-thirds of Senators present on an article is necessary to convict. The Presiding Officer of a trial operates much like the Presiding Officer in regular Senate session, in that the Chair may issue an initial ruling, but any Senator could request that the full Senate vote instead. Because of the debate limitations in the impeachment rules, procedural decisions appealed or submitted by the Chair can be reached with majority support. In a presidential impeachment trial, the Chief Justice of the United States is the Presiding Officer. Although the impeachment rules prescribe that the Senate convene at noon for a trial, six days a week, a Senate majority can alter this schedule. It is possible for the Senate to conduct legislative and executive business on the same calendar days that it meets for a trial, but it must meet in legislative or executive session to do so. When the Senate is sitting as a Court of Impeachment, legislative and executive business cannot occur. The information presented in this report is drawn from published sources of congressional rules and precedents, as well as the public record of past impeachment trial proceedings. It provides an overview of the procedures, and some past actions, but should not be treated or cited as an authority on congressional proceedings. Authoritative guidance on the interpretation and possible application of rules and precedents can be obtained only through consultation with the Office of the Senate Parliamentarian.

crs_R45749

crs_R45749_0

<1. Overview> The remnants of the Vietnam War (1963-1975) and other regional conflicts have left mainland Southeast Asia as a region heavily contaminated with unexploded ordnance, or UXO. More than 45 years after the United States ceased its extensive bombing of Cambodia, Laos, and Vietnam, hundreds of civilians are still injured or killed each year by UXO from those bombing missions or by landmines laid in conflicts be tween Cambodia and Vietnam (1975-1978), China and Vietnam (1979-1990) and during the Cambodian civil war (1978-1991). While comprehensive surveys are incomplete, it is estimated that more than 20% of the land in Cambodia, Laos, and Vietnam are contaminated by UXO. Over more than 25 years, Congress has appropriated more than $400 million to assist Cambodia, Laos, and Vietnam in clearing their land of UXO. More than 77% of the assistance has been provided via programs funded by the Department of State. In addition, the United States has provided treatment to those individuals maimed by UXO through U.S. Agency for International Development (USAID) programs and the Leahy War Victims Fund. Despite ongoing efforts by the three countries, the United States, and other international donors, it reportedly could take 100 years or more, at the current pace, to clear Cambodia, Laos, and Vietnam of UXO. During that time period, more people will likely be killed or injured by UXO. In addition, extensive areas of the three nations will continue to be unavailable for agriculture, industry, or habitation, hindering the economic development of those three nations. In 2016, President Obama pledged $90 million over a three-year period for UXO decontamination programs in Laos an amount nearly equal to the total of U.S. UXO assistance to that nation over the previous 20 years. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provides $196.5 million globally for "conventional weapons destruction," including $159.0 million for "humanitarian demining," under the Department of State's International Security Assistance programs. Of the humanitarian demining funds, $3.85 million is appropriated for Cambodia, $30.0 million for Laos, and $15.0 million for Vietnam. The act also provides $13.5 million for global health and rehabilitation programs under the Leahy War Victims Fund. Moving forward, the 116 th Congress will have an opportunity to consider what additional efforts, if any, the U.S. government should undertake to address the war legacy issue of UXO in mainland Southeast Asia in terms of the decontamination of the region and the provision of medical support or assistance to UXO victims. Beyond the immediate assistance such UXO-related programs would provide to Cambodia, Laos, and Vietnam, U.S. aid on this war legacy issue may also foster better bilateral ties to those nations. For example, some observers view U.S. assistance to Vietnam for the war legacy issue of Agent Orange/dioxin contamination as playing an important role in improving bilateral relations. <2. Background on Unexploded Ordnance> <2.1. What Is Unexploded Ordnance (UXO)?> Unexploded ordnance (UXO) is defined as military ammunition or explosive ordnance which has failed to function as intended. UXO is also sometimes referred to as Explosive Remnants of War (ERW) or "duds" because of their failure to explode or function properly. UXO includes mines, artillery shells, mortar rounds, hand or rocket-propelled grenades, and rocket or missile warheads employed by ground forces (see Figure 1 ). Aerial delivered bombs, rockets, missiles, and scatterable mines that fail to function as intended are also classified as UXO. While many of these weapons employ unitary warheads, some weapons primarily certain artillery shells, rocket and missile warheads and aerial bombs employ cluster munitions, which disperse a number of smaller munitions as part of their explosive effect. Often times, these submunitions fail to function as intended. In addition, abandoned or lost munitions that have not detonated are also classified as UXO. The probability of UXO detonating is highly unpredictable; it depends on whether or not the munition has been fired, the level of corrosion or degradation, and the specific arming and fusing mechanisms of the device. "Similar items may respond very differently to the same action one may be moved without effect, while another may detonate. Some items may be moved repeatedly before detonating and others may not detonate at all." In all cases, UXO poses a danger to both combatants and unaware and unprotected civilians. <2.2. Military Use> Military munitions are used in a variety of ways. Some are used in direct force-on-force combat against troops, combat vehicles, and structures. Others, such as emplaced anti-personnel and anti-vehicle mines or scatterable mines, can be used to attack targets, deny enemy use of key terrain, or establish barriers to impede or influence enemy movement. Cluster munitions can either explode on contact once dispensed or can remain dormant on the ground until triggered by human or vehicular contact. The military utility of cluster weapons is that they can create large areas of destruction, meaning fewer weapons systems and munitions are needed to attack targets. <2.3. Mines and Cluster Munitions> Two particular classes of ordnance mines and cluster munitions have received a great deal of attention. Emplaced mines by their very nature pose a particular threat because they are often either buried or hidden and, unless their locations are recorded or some type of warning signs are posted, they can become easily forgotten or abandoned as the battlefield shifts over time. Cluster munitions are dispersed over an area and are generally smaller than unitary warheads, which can make them difficult to readily identify (see Figure 2 ). Since the conclusion of the Vietnam War, many of the newer mines and cluster munitions have a self-destruct or disarming capability. However, as long as their explosive charge remains viable, they pose a hazard to people. Both mines and cluster munitions have been subject to international protocols to limit or ban their development, transfer, and use. The 1999 Ottawa Convention "prohibits the use, stockpiling, production, and transfer of anti-personnel landmines (APLs). It requires states to destroy their stockpiled APLs within four years and eliminate all APL holdings, including mines currently planted in the soil, within 10 years." The 2010 Convention on Cluster Munitions prohibits all use, stockpiling, production and transfer of cluster munitions. The United States has refused to sign either convention, citing the military necessity of these munitions. The United States has, however, been a States Party to the Convention on the Use of Certain Conventional Weapons (CCW) since 1995, which "aims to protect military troops from inhumane injuries and prevent noncombatants from accidentally being wounded or killed by certain types of arms." In 2009, the United States ratified Protocol V of the CCW, Explosive Remnants of War. Protocol V "covers munitions, such as artillery shells, grenades, and gravity bombs, that fail to explode as intended, and any unused explosives left behind and uncontrolled by armed forces." Under Protocol V "the government controlling an area with explosive remnants of war is responsible for clearing such munitions. However, that government may ask for technical or financial assistance from others, including any party responsible for putting the munitions in place originally, to complete the task. No state-party is obligated to render assistance." The United States has undertaken a variety of initiatives including mandating changes to munitions design and adopting federal safeguards and policy regulating their usage to help limit the potential hazards posed to noncombatants by these UXO. <2.4. U.S. Policy on Cluster Munitions> On June 19, 2008, then-Secretary of Defense Robert Gates issued a new policy on the use of cluster munitions. The policy stated that "[c]luster munitions are legitimate weapons with clear military utility," but it also recognized "the need to minimize the unintended harm to civilians and civilian infrastructure associated with unexploded ordnance from cluster munitions." To that end, the policy mandated that after 2018, "the Military Departments and Combatant Commands will only employ cluster munitions containing submunitions that, after arming, do not result in more than 1% unexploded ordnance (UXO) across the range of intended operational environments." On November 30, 2017, then-Deputy Secretary of Defense Patrick Shanahan issued a revised policy on cluster munitions. The revised policy reverses the 2008 policy that established an unwaiverable requirement that cluster munitions used after 2018 must leave less than 1% of unexploded submunitions on the battlefield. Under the new policy, combatant commanders can use cluster munitions that do not meet the 1% or less unexploded submunitions standard in extreme situations to meet immediate warfighting demands. Furthermore, the new policy does not establish a deadline to replace cluster munitions exceeding the 1% rate, and these munitions are to be removed only after new munitions that meet the 1% or less unexploded submunitions standard are fielded in sufficient quantities to meet combatant commander requirements. However, the new DOD policy stipulates that the Department "will only procure cluster munitions containing submunitions or submunition warheads" meeting the 2008 UXO requirement or possessing "advanced features to minimize the risks posed by unexploded submunitions." <3. UXO in Southeast Asia> <3.1. Overview> Although UXO in Southeast Asia can date back to World War II, the majority of the hazard is attributed to the Vietnam War. While an undetermined amount of UXO associated with the Vietnam War was from ground combat and emplaced mines, an appreciable portion of UXO is attributed to the air war waged by the United States from 1962 to 1973, considered by some to be one of the most intense in the history of warfare. One study notes the United States dropped a million tons of bombs on North Vietnam. Three million more tons fell on Laos and Cambodia supposedly "neutral" countries in the conflict. Four million tons fell on South Vietnam America's ally in the war against communist aggression. When the last raid by B-52s over Cambodia on August 15, 1973, culminated American bombing in Southeast Asia, the United States had dropped more than 8 million tons of bombs in 9 years. Less than 2 years later, Cambodia, Laos, and South Vietnam were communist countries. The U.S. State Department in 2014 characterized the problem by country. Cambodia: Nearly three decades of armed conflict left Cambodia severely contaminated with landmines and unexploded ordnance (UXO). The Khmer Rouge, the Royal Cambodian Armed Forces (RCAF), the Vietnamese military, and, to a lesser extent, the Thai army, laid extensive minefields during the Indochina wars. These minefields are concentrated in western Cambodia, especially in the dense "K-5 mine belt" along the border with Thailand, laid by Vietnamese forces during the 1980s. UXO mostly from U.S. air and artillery strikes during the Vietnam War and land battles fought along the border with Vietnam contaminates areas in eastern and northeastern Cambodia. While the full extent of contamination is unknown, the Landmine and Cluster Munition Monitor reports that a baseline survey completed in 2012 of Cambodia's 124 mine-affected districts found a total of 1,915 square kilometers (739 square miles) of contaminated land. Laos: Laos is the most heavily bombed country per capita in the world as a result of the Indochina wars of the 1960s and 1970s. While landmines were laid in Laos during this period, UXO, including cluster munitions remnants (called "bombies" in Laos), represents a far greater threat to the population and account for the bulk of contamination. UXO, mostly of U.S. origin, remains in the majority of the country's 18 provinces. Vietnam: UXO contaminates virtually all of Vietnam as a result of 30 years of conflict extending from World War II through the Vietnam War. The most heavily contaminated provinces are in the central region and along the former demilitarized zone (DMZ) that divided North Vietnam and South Vietnam. Parts of southern Vietnam and areas around the border with China also remain contaminated with UXO. <3.2. The Situation in Cambodia> The Kingdom of Cambodia is among the world's most UXO-afflicted countries, contaminated with cluster munitions, landmines, and other undetonated weapons. U.S. bombing of northeastern Cambodia during the Vietnam War, the Vietnamese invasion in 1979, and civil wars during 1970s and 1980s all contributed to the problem of unexploded ordnance. In 1969, the United States launched a four-year carpet-bombing campaign on Cambodia, dropping 2.7 million tons of ordnance, including 80,000 cluster bombs containing 26 million submunitions or bomblets. Up to one-quarter of the cluster bomblets failed to explode, according to some estimates. In addition, the Vietnamese army mined the Cambodia-Thai border as it invaded the country and took control from the Khmer Rouge in 1979. The Vietnamese military, Vietnam-backed Cambodian forces, the Khmer Rouge, and Royalist forces reportedly all deployed landmines during the 1979-1989 civil war period. Cambodian Prime Minister Hun Sen occasionally has referred to the U.S. bombing of Cambodia, which occurred between 1969 and 1973, when criticizing the United States; however, the historical event has not been a major issue in recent U.S.-Cambodian relations. <3.2.1. Contamination and Casualties> There have been over 64,700 UXO casualties in Cambodia since 1979, including over 19,700 deaths. The Cambodia Mine/ERW Victim Information System (CMVIS) has recorded an overall trend of significant decreases in the number of annual casualties: 58 in 2017 compared to 111 in 2015, 186 in 2012 and 286 in 2010. Despite progress, the migration of poor Cambodians to the northwestern provinces bordering Thailand, one of the most heavily mined areas in the world, has contributed to continued casualties. Cambodia, with 25,000 UXO-related amputees, has the highest number of amputees per capita in the world. The economic costs of UXO include obstacles to infrastructure development, land unsuitable for agricultural purposes, and disruptions to irrigation and drinking water supplies. Open Development Cambodia, a website devoted to development-related data, reports that since the early 1990s, about 580 square miles (1,500 square kilometers) of land has been cleared of UXO. Estimates of the amount of land still containing UXO vary. According to some reports, about 50% of contaminated land has been cleared, and an estimated 630 square miles (1,640 square kilometers) of land still contain UXO. Many of the remaining areas are the most densely contaminated, including 21 northwestern districts along the border with Thailand that contain anti-personnel mines laid by the Vietnamese military and that account for the majority of mine casualties. <3.2.2. Cleanup Efforts> Between 1993 and 2017, the U.S. government contributed over $133.6 million for UXO removal and disposal, related educational efforts, and survivor assistance programs in Cambodia. These activities are carried out largely by U.S. and international nongovernmental organizations (NGOs), in collaboration with the Cambodian Mine Action Center, a Cambodian NGO, and the Cambodian government. USAID's Leahy War Victims Fund has supported programs to help provide medical and rehabilitation services and prosthetics to Cambodian victims of UXO. Nonproliferation, Anti-terrorism, Demining and Related Programs (NADR) funding for demining activities was $5.5 million in both 2015 and 2016, $4.2 in 2017, and $2.9 million in 2018. Global donors contributed over $132 million between 2013 and 2017, mostly for clearance efforts. In 2017, the largest contributors of demining and related assistance were the United States, United Kingdom, Australia, Japan, and Germany, providing approximately $10.6 million in total. In 2018, the Cambodian government and Cambodian Mine Action and Victim Assistance Authority (CMAA), a government agency, launched the National Mine Action Strategy (NMAS) for 2018-2025. The goal of removing UXO from all contaminated areas by 2025 would require the clearance of 110 square kilometers per year at a cost of about $400 million. The NMAS estimated that at the current rate of progress, however, Cambodia would need a little over 10 years to complete clearance of all known mined areas. Some experts are concerned that declining international assistance could jeopardize clearance goals. In 2017, total international demining support to Cambodia decreased by 61%, largely due to lower contributions from Australia and Japan. <3.3. The Situation in Laos> From 1964 through 1973, the United States military reportedly flew 580,000 bombing runs and dropped over 2 million tons of cluster munitions, including over 270 million cluster bombs, on the small land-locked country. The total was more than the amount dropped on Germany and Japan combined in World War II. An estimated one-third of these munitions failed to explode. The Lao government claims that up to 75-80 million submunitions or bomblets released from the cluster bombs remain in over one-third of the country's area. Military conflicts during the French colonial period and the Laotian Civil War during the 1960s and 1970s have also contributed to the problem of UXO/ERW. The U.S. bombing campaign in Laos was designed to interdict North Vietnamese supply lines that ran through Laos. The bombing campaign also supported Lao government forces fighting against communist rebels (Pathet Lao) and their North Vietnamese allies. Cluster munitions were considered the "weapon of choice" in Laos because they could penetrate the jungle canopy, cover large areas, and successfully attack convoys and troop concentrations hidden by the trees. The most heavily bombed areas in Laos were the northeastern and southern provinces, although UXO can be found in 14 of the country's 17 provinces. The bombings in the northeast were intended to deny territory, particularly the Plain of Jars, to Pathet Lao and North Vietnamese forces and, in the south, to sever the Ho Chi Minh Trail, which crossed the border into eastern Laos. The northeastern part of Laos was also used as a "free drop zone" where planes that had taken off from bases in Thailand and had been unable to deliver their bombs, could dispose of them before returning to Thailand. <3.3.1. Contamination and Casualties> According to the Geneva-based Landmine and Cluster Munition Monitor , since 1964, there have been over 50,000 mine and ERW casualties in Laos, including over 29,000 people killed. An estimated 40% of victims are children. In 2012, the Lao government's Safe Path Forward Strategic Plan II set a target to reduce UXO-related casualties to 75 per year by 2020, from levels between 100-200 victims annually during the 2000s. The country has already met these goals: in 2017, the number of reported casualties was 41, including four killed. Cluster munitions have hampered economic development in the agricultural country. UXO contamination affects one-quarter of all Lao villages, and 22% of detonations occur through farming activities. Unexploded ordnance adversely affects not only agricultural production, but also mining, forestry, the development of hydropower projects, and the building of roads, schools, and clinics. Expenditures on demining efforts and medical treatment divert investment and resources from other areas and uses. Many injured UXO survivors lose the ability to be fully productive. According to the Lao government, there appears to be a significant correlation between the presence of UXO and the prevalence of poverty. <3.3.2. Cleanup Efforts> Lao PDR officials state that the country needs $50 million annually for ongoing UXO/ERW clearance, assistance to victims, and education, of which the Lao government contributes $15 million. International assistance comes from numerous sources, including Japan, the United States, and the United Nations Development Program (UNDP). The United States has contributed a total of $169 million for UXO clearance and related activities since 1995, with funding directed to international NGOs and contractors. That makes Laos the third largest recipient of conventional weapons destruction funding over that period, after Afghanistan and Iraq. In 2016, the United States announced a three-year, $90 million increase in assistance covering FY2016-FY2018. Half the amount, or $45 million, is aimed at conducting the first nationwide cluster munitions remnant survey, while the other half is aimed at clearance activities. Since the early 1990s, the U.S. Department of Defense (DOD) has been involved in training Lao personnel in demining techniques. U.S. UXO clearance and related humanitarian aid efforts, administered by the State Department (DOS), began in 1996. U.S. support also helped to establish the Lao National Demining Office, the UXO Lao National Training Center, and the Lao National Regulatory Authority. The United States finances the bulk of its mine clearance operations through the NADR foreign aid account. NADR demining programs constitute the largest U.S. assistance activity in Laos, which receives little U.S. development aid compared to other countries in the region. It has been channeled primarily to international nongovernmental organizations (NGOs), the UNDP's trust fund for UXO clearance, and the Lao National Unexploded Ordnance Program (UXO Lao). Laos also has received humanitarian assistance through the USAID Leahy War Victims Fund for prosthetics, orthotics, and rehabilitation ($1.4 million in 2011-2013). For many years in the 1990s and 2000s, UXO-related clearance programs were one of the primary areas of substantive cooperation between the United States and Laos. Some argue that such activity has helped foster bilateral ties with a country whose authoritarian government is deeply inward looking. When President Obama became the first U.S. President to visit Laos in 2016, announcing the $90 million UXO aid package, he said: "Given our history here, I believe that the United States has a moral obligation to help Laos heal. And even as we continue to deal with the past, our new partnership is focused on the future." <3.4. The Situation in Vietnam> War Legacy issues Agent Orange/dioxin contamination, MIAs, and UXO played an important role in the reestablishment of diplomatic relations between the United States and Vietnam, and it led to the development of a comprehensive partnership between the two nations. Vietnam's voluntary effort to locate and return the remains of U.S. MIAs was a significant factor in the restoration of diplomatic relations. U.S. assistance to decontaminate Da Nang airport of Agent Orange/dioxin likely contributed to the two nations' move to a comprehensive partnership. While not as prominent, U.S. UXO assistance to Vietnam most likely has been a factor in establishing trust between the two governments. The UXO in Vietnam are remnants from conflicts spanning more than a century, potentially as far back as the Sino-French War (or Tonkin War) of 1884-1885 and as recent as the Cambodian-Vietnamese War (1975-1978) and the border conflicts between China and Vietnam from 1979 to 1991. According to one account, during Vietnam's conflicts with France and the United States (1945-1975), more than 15 million tons of explosives were deployed four times the amount used in World War II. It is generally presumed, however, that the majority of the UXO in Vietnam are from the Vietnam War, also known in Vietnam as "the Resistance War Against America" (1955-1975). <3.4.1. Contamination and Casualties> Estimates of the amount of UXO in Vietnam vary. According to one source, "at least 350,000 tons of live bombs and mines remain in Vietnam." Another source claims "around 800,000 tons of unexploded ordnance remains scattered across the country." Viewed in terms of land area, the Vietnamese government estimates that between 6.1 and 6.6 million hectares (23,500-25,500 square miles) of land in Vietnam or 19% to 21% of the nation is contaminated by UXO. An official Vietnamese survey started in 2004 and completed in 2014 estimated that 61,308 square kilometers (23,671 square miles) was contaminated with UXO. According to the survey, UXO is scattered across virtually all of the nation, but the province of Quang Tri, along the previous "demilitarized zone" (DMZ) between North and South Vietnam, is the most heavily contaminated (see Figure 3 ). Figures on the number of UXO casualties in Vietnam also vary. One source says, "No one really knows how many people have been injured or killed by UXO since the war ended, but the best estimates are at least 105,000, including 40,000 deaths." In its report on UXO casualties in Vietnam, however, the Landmine and Cluster Munition Monitor listed the casualty figures for 1975-2017 as 38,978 killed and 66,093 injured. For 2017 only, the Landmine and Cluster Munition Monitor reported eight deaths and six injured. A survey of UXO casualties determined that the three main circumstances under which people were killed or injured by UXO were (in order): scrap metal collection (31.2%); playing/tampering (27.6%); and cultivating or herding (20.3%). In some of Vietnam's poorer provinces, people proactively seek out and collect UXO in order to obtain scrap metal to sell to augment their income, despite the inherent danger. <3.4.2. Cleanup Efforts> On March 8, 2018, Vietnam's Ministry of National Defence (MND) established the Office of the Standing Agency of the National Steering Committee of the Settlement of Post-war Unexploded Ordnance and Toxic Chemical Consequences, or Office 701, to address the nation's UXO issue. Office 701 is responsible for working with individuals and organizations to decontaminate Vietnam of UXO to ensure public safety, clean the environment, and promote socio-economic development. Under a 2013 directive by the Prime Minister, the Vietnam National Mine Action Center (VNMAC) was established within the MND with responsibility for proposing policy, developing plans, and coordinating international cooperation for UXO clearance. The MND's Center for Bomb and Mine Disposal Technology (BOMICEN) is the central coordinating body for Vietnam's UXO clearance operations. In addition, Vietnam created a Mine Action Partnership Group (MAPG) to improve coordination of domestic and international UXO clearance operations. BOMICEN typically sets up project management teams (PMTs) that work with provincial or local officials to identify, survey, and decontaminate UXO. The PMTs usually interview local informants about possible UXO sites and then conduct field evaluations to determine if UXO is present and suitable for removal by Vietnam's Army Engineering Corps. The PMTs also collect information about the decontamination site and report back to BOMICON about the location and type of UXO removed. Besides the clearance operations directly conducted by Vietnam, several nations and international organizations conduct UXO removal projects in Vietnam, including the Danish Demining Group (DDG), the Mines Advisory Group (MAG), Norwegian People's Aid (NPA), and PeaceTrees Vietnam. In 2016, the Korea International Cooperation Agency (KOICA), in cooperation with VNMAC and the United Nations Development Programme (UNDP), initiated a $32 million, multi-year UXO project in the provinces of Binh Dinh and Quang Binh. The joint project began operations in March 2018 and is scheduled to end in December 2020. NGOs working in Vietnam report some issues in their collaboration with the MND, which has declared portions of contaminated provinces off limits for UXO surveying and decontamination. Many of these areas contain villages and towns inhabited by civilians. In addition, the MND has not been providing information about any UXO clearance efforts being conducted in these areas. The lack of information sharing has hindered efforts to establish a nationwide UXO database that is being used to refine UXO location and clearance techniques. <4. U.S. UXO Assistance in Southeast Asia> Since 1993, the United States has provided UXO and related assistance to Southeast Asia via several different channels, including the Center for Disease Control (CDC), the Department of Defense (DOD), the Department of State (DOS), and the U.S. Agency for International Development (USAID)(see Table 1 ). For all three countries covered by this report, most of the assistance has been provided by DOS through its Nonproliferation, Anti-terrorism, Demining and Related Programs/Conventional Weapons Destruction (NADR-CWD) account. USAID assistance to Cambodia, Laos, and Vietnam has consisted primarily of Leahy War Victims Fund programs for prostheses, physical rehabilitation, training, and employment. Laos, Cambodia, and Vietnam have been the largest recipients of U.S. conventional weapons destruction (CWD) funding in East Asia. In December 2013, the United States and Vietnam signed a Memorandum of Understanding on cooperation to overcome the effects of "wartime bomb, mine, and unexploded ordnance" in Vietnam. In their November 2017 joint statement, President Trump and President Tran Dai Quang "committed to cooperation in the removal of remnants of explosives from the war." <4.1. U.S. Department of State and USAID Activities> Department of State and USAID demining and related assistance support the work of international NGOs in Cambodia, Laos, and Vietnam. International NGOs work primarily with local NGOs in Cambodia and, to a greater extent, collaborate with government entities in Laos and Vietnam. The main areas of assistance are clearance, surveys, and medical assistance. In Cambodia, the Department of State and USAID support programs that collaborate with and train Cambodian organizations in clearance activities, conduct geographical surveys, help process explosive material retrieved from ERW, and provide mine risk education. In Laos, U.S. assistance includes clearance and survey efforts, medical and rehabilitation services, education and training assistance to victims and families, and mine risk education. In Vietnam, the United States provides mine clearance and survey support, capacity building programs, and medical assistance and vocational training for victims. <4.2. U.S. Department of Defense (DOD) and UXO Remediation Activities> DOD's role in remediating UXO in Southeast Asia falls under the category of "Support to Humanitarian Mine Action (HMA)." Chairman of the Joint Chiefs of Staff (CJCS) Instruction "Department of Defense Support to Humanitarian Mine Action, CJCSI 3207.0IC" dated September 28, 2018, covers DOD's responsibilities in this regard. DOD's stated policy is to relieve human suffering and the adverse effects of land mines and other explosive remnants of war (ERW) on noncombatants while advancing the Combatant Commanders' (CCDRs') theater campaign plan and U.S. national security objectives. The DOD HMA program assists nations plagued by land mines and ERW by executing "train-the-trainer" programs of instruction designed to develop indigenous capabilities for a wide range of HMA activities. It is important to note that U.S. Code restricts the extent to which U.S. military personnel and DOD civilian employees can actively participate in UXO activities as described in the following section: Exposure of USG Personnel to Explosive Hazards. By law, DOD personnel are restricted in the extent to which they may actively participate in ERW clearance and physical security and stockpile management (PSSM) operations during humanitarian and civic assistance. Under 10 U.S.C. 401(a)(1), Military Departments may carry out certain "humanitarian and civic assistance activities" in conjunction with authorized military operations of the armed forces in a foreign nation. 10 U.S.C. 407(e)(1) defines the term "humanitarian demining assistance" (as part of humanitarian and civic assistance activities) as "detection and clearance of land mines and other ERW, and includes the activities related to the furnishing of education, training, and technical assistance with respect to explosive safety, the detection and clearance of land mines and other ERW, and the disposal, demilitarization, physical security, and stockpile management of potentially dangerous stockpiles of explosive ordnance." However, under 10 U.S.C. 407(a)(3), members of the U.S. Armed Forces while providing humanitarian demining assistance shall not "engage in the physical detection, lifting, or destroying of land mines or other explosive remnants of war, or stockpiled conventional munitions (unless the member does so for the concurrent purpose of supporting a United States military operation)." Additionally, members of the U.S. Armed Forces shall not provide such humanitarian demining and civic assistance "as part of a military operation that does not involve the armed forces." Under DOD policy, the restrictions in 10 U.S.C. 407 also apply to DOD civilian personnel. In general terms, U.S. law restricts DOD to "train-the-trainer" type UXO remediation activities unless it is required as part of a U.S. military operation involving U.S. armed forces. <4.3. U.S. Indo Pacific Command and UXO Remediation in Vietnam, Cambodia, and Laos72> U.S. Indo Pacific Command (USINDOPACOM) is responsible for U.S. military activities in Vietnam, Cambodia, and Laos. As part of USINDOPACOM's Theater Campaign Plan, selected UXO remediation activities for Vietnam, Cambodia, and Laos are briefly described in the following sections: Vietnam: USINDOPACOM has tasked U.S. Army Pacific (USARPAC) as the primary component responsible for land-based UXO operations and the Pacific Fleet (PACFLT) as the primary component responsible for underwater UXO operations in Vietnam. FY2018 accomplishments and FY2019 and FY2020 plans are said to include: FY2018 : Trained individuals on International Mine Action Standards (IMAS) Level I and II; Trained individuals on Explosive Ordnance Disposal (EOD) instructor development; Familiarized individuals on EOD equipment; Conducted medical first responder training; Trained individuals on medical instructor development; Trained individuals on underwater remote vehicle operations; and Trained individuals on ordnance identification. FY2019 : Continue training on International Mine Action Standards Level I; Train individuals on how to develop training lanes for demining; Exercise IMAS Level I concepts; Increase Vietnamese medical first responder force structure; and Continue EOD instructor development. FY2020 : Plan to train on IMAS Level II with qualified IMAS Level I students; Plan to enhance advanced medical-related technique training; Plan to train in demolition procedures; Plan to train in maritime UXO techniques; Plan to conduct mission planning and to conduct a full training exercise; and Plan to conduct instructor development. Cambodia: USINDOPACOM has tasked Marine Forces Pacific (MARFORPAC) to be responsible for land-based UXO operations in Cambodia. Plans for FY2019 through FY2021 include: FY2019 : Train in IMAS EOD Level I; Train on EOD instructor development; Familiarize students on EOD Level I equipment; Review medical first responder training; Train on medical instructor development; Train in ordnance identification; and Train in IMAS Demining Non-Technical Survey/Technical Survey (NTS/TS) techniques. FY2020 : Plan to continue to develop capacity with IMAS EOD Level I and II training; Plan to continue to build capacity with IMAS Demining Non-Technical Survey/Technical Survey techniques; If EOD Level I and II training successful, plan to initiate EOD Level III training in late FY2020; Plan to increase student knowledge of lane training development; Plan to exercise IMAS Level II concepts; Plan to increase Cambodian medical first responder force structure; and Plan to continue EOD instructor development. FY2021 : Plan to train on IMAS EOD Level II and EOD Level III with the qualified Level I and Level II students to increase their numbers; Plan to train on IMAS Demining NTS/TS with the qualified students to increase their numbers; Plan to enhance advanced medical-related techniques; Plan to train in demolition procedures; Plan to conduct mission planning and a full training exercise; and Plan to conduct instructor development events. Laos: USINDOPACOM has tasked Marine Forces Pacific (MARFORPAC) to be responsible for land-based UXO operations in Laos. Plans for FY2019 through FY2021 include: FY2019: Conduct training on IMAS EOD Level I; Conduct training on EOD instructor development; Conduct familiarization on EOD Level I equipment; Conduct a review of medical first responder training; Conduct medical instructor development training; and Conduct training on ordnance identification. FY2020 : Plan to continue to build capacity with training in IMAS EOD Level I and II; Plan to increase knowledge on lane training development; Plan to exercise IMAS Level II concepts; Plan to increase medical first responder force structure and knowledge; and Plan to continue EOD instructor development. FY2021 : Plan to train on IMAS EOD Level II with the qualified Level I and Level II students to increase their numbers; Plan to enhance advance medical-related techniques; Plan to train in demolition procedures; Plan to conduct mission planning and conduct a full training exercise; and Continue to conduct instructor development. <5. Implications for Congress> The U.S. government has been providing UXO-related assistance to Southeast Asia for over 25 years, with contributions amounting to over $400 million. Despite this sustained level of support, as well as the efforts of the governments of Cambodia, Laos, and Vietnam, it may take decades to clear these three nations of the known UXO contamination. These estimates, however, are based on incomplete information, as systematic nationwide UXO surveys have not been completed in either Cambodia or Laos. The Legacies of War Recognition and Unexploded Ordnance Removal Act ( H.R. 2097 ) would authorize $50 million each year for fiscal years 2020 to 2024 for address the UXO issue in Cambodia, Laos, and Vietnam. The legislation also would authorize the President to provide humanitarian assistance for developing national UXO surveys, UXO clearance, and support for capacity building, risk education and UXO victims assistance in each nation. It would require the President to provide an annual briefing on related activities to the House Committee on Appropriations, the House Committee on Foreign Affairs, the Senate Committee on Appropriations, and the Senate Committee on Foreign Relations. Southeast Asia's ongoing UXO challenge may present a number of issues for Congress to consider and evaluate. Among those issues are F undin g levels It is uncertain how much money it would take to decontaminate all three nations or provide adequate assistance to their UXO victims. Given this uncertainty, is the level of U.S. assistance being provided to Cambodia, Laos, and Vietnam to conduct humanitarian demining projects adequate to significantly reduce the UXO casualty risk in a reasonable time period? In addition, is the recent distribution of funding across the three nations equitable given their relative degrees of UXO contamination and their internal ability to finance demining projects? Coordination across agencies Is there appropriate coordination across the U.S. agencies the Department of Defense, the Department of State, and USAID in providing demining assistance in Southeast Asia? Are these agencies utilizing the appropriated funds efficiently and effectively? Focus on clearance Most of the appropriated funds have been for humanitarian demining projects and technical support, with less funding for assistance to UXO victims. The focus on clearance, rather than assistance on UXO victims, may in part be due to a concern about possible post-conflict liability issues. In light of past practices, should the U.S. government increase its support for UXO victims in Cambodia, Laos, and Vietnam beyond those being currently provided via the Leahy War Victims Fund? Implications for bilateral relations Has the amount and types of U.S. UXO assistance to Cambodia, Laos, and Vietnam been a significant factor in bilateral relations with each of those nations? In Vietnam, work on war legacy issues formed an early part of building normalized relations in the post-War period ties that have broadened into closer strategic and economic linkages. In Cambodia and Laos, UXO-related assistance has been one of the broadest areas for substantive cooperation between the United States and two countries with which the United States has had relatively cool relations. Would a change in the amount or type of assistance provided be beneficial to U.S. relations with Cambodia, Laos, or Vietnam? Should the U.S. government use UXO assistance to pressure other entities, such as Vietnam's MND, to be more cooperative in the UXO decontamination effort? UXO p revention The Department of Defense has implemented a policy that is to eventually replace all cluster munitions with ones whose failure rate is below 1%. Should the U.S. government undertake additional efforts to reduce the amount of post-conflict UXO from U.S. munitions, including prohibiting the use of U.S. funding for certain types of submunitions that may leave UXO? Given DOD's current views and policies on cluster munitions and landmines, does this preclude the United States from joining the 2010 Convention on Cluster Munitions or 1999 Ottawa Convention on Landmines? Precedents and lessons for other parts of the world Are there lessons that can be drawn from U.S. assistance for UXO clearance and victim relief in Southeast Asia that may be applicable to programs elsewhere in the world, including Afghanistan and Iraq? Have the levels of assistance the United States has offered in Southeast Asia signaled a precedent for other parts of the world? During the 115 th Congress, legislation was introduced that would have addressed some of these general issues associated with UXO, though none directly addressed the current situation in Southeast Asia. The Unexploded Ordnance Removal Act ( H.R. 5883 ) would have required the Secretary of Defense, in concurrence with the Secretary of State, to develop and implement a strategy for removing UXO from Iraq and Syria. The Cluster Munitions Civilian Protection Act of 2017 ( H.R. 1975 and S. 897 ) would have prohibited the obligation or expenditure of U.S. funds for cluster munitions if, after arming, the unexploded ordnance rate for the submunitions was more than 1%.

More than 40 years after the end of the Vietnam War, unexploded ordnance (UXO) from numerous conflicts, but primarily dropped by U.S. forces over Cambodia, Laos, and Vietnam during the Vietnam War, continues to cause casualties in those countries. Over the past 25 years, the United States has provided a total of over $400 million in assistance for UXO clearance and related activities in those three countries through the Department of Defense (DOD), Department of State (DOS), and United States Agency for International Development (USAID), as well as funding for treatment of victims through USAID and the Leahy War Victims fund. Although casualty numbers have dropped in recent years, no systematic assessment of affected areas has been done, and many observers believe it may still take decades to clear the affected areas. War legacy issues such as UXO clearance and victim assistance may raise important considerations for Congress as it addresses the impact of U.S. participation in conflicts around the world and how the United States should deal with the aftermath of such conflicts. The continued presence of UXO in Southeast Asia raises numerous issues, including appropriate levels of U.S. assistance for clearance activities and victim relief; coordination in efforts among DOD, DOS, and USAID; the implications of U.S. action on relations with affected countries; whether U.S. assistance in Southeast Asia carries lessons for similar activity in other parts of the world, including Iraq and Afghanistan; and, more generally, efforts to lessen the prevalence of UXO in future conflicts. Many observers argue that U.S. efforts to address UXO issues in the region, along with joint efforts regarding other war legacy issues such as POW/MIA identification and Agent Orange/dioxin remediation, have been important steps in building relations with the affected countries in the post-war period. These efforts that have proceeded furthest in Vietnam, where the bilateral relationship has expanded across a wide range of economic and security initiatives. In Cambodia and Laos, where bilateral relations are less developed, UXO clearance is one of the few issues on which working-level officials from the United States and the affected countries have cooperated for years. Although some Cambodians and Laotians view U.S. demining assistance as a moral obligation and the U.S. government has viewed its support for UXO clearance as an important, positive aspect of its ties with the two countries, the issue of UXO has not been a major factor driving the relationships. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provides $196.5 million for "conventional weapons destruction" around the world, including $159.0 million for "humanitarian demining," with $3.85 million appropriated for Cambodia, $30.0 million for Laos, and $15.0 million for Vietnam. The Legacies of War Recognition and Unexploded Ordnance Removal Act ( H.R. 2097 ) would authorize $50 million per year for fiscal years 2020 to 2024 for humanitarian assistance in Cambodia, Laos, and Vietnam to develop national UXO surveys, conduct UXO clearance, and finance capacity building, risk education, and support for UXO victims.

crs_R45998

crs_R45998_0

<1. Introduction> Over the past couple of decades, national attention to "emerging contaminants" or "contaminants of emerging concern" (CECs) in surface water and groundwater has been increasing. Although there is no federal statutor y or regulatory definition of CECs, generally, the term refers to unregulated substances detected in the environment that may present a risk to human health, aquatic life, or the environment. CECs can include many different types of manmade chemicals and substances such as those in personal care products, pharmaceuticals, industrial chemicals, lawn care and agricultural products, and microplastics as well as naturally occurring substances such as algal toxins or manganese. CECs often enter the environment, including ground and surface waters, via municipal and industrial wastewater discharges and urban and agricultural storm runoff. Although municipal and industrial wastewater are both treated prior to discharge into waterways, treatment facilities are often not designed to remove CECs. The availability of data on CECs such as concentration and pervasiveness in the environment or exposure or toxicity data that would help determine their risk to humans and aquatic life may be limited. In some cases, detections of CECs in the environment have triggered a call for action from federal, state, and local government, as well as Congress. Increased monitoring and detections of one particular group of chemicals, per- and polyfluoroalkyl substances (PFAS), has recently heightened public and congressional interest in these CECs and has also prompted a broader discussion about how CECs are identified, detected, and regulated and whether additional actions should be taken to protect human health and the environment. Several statutes including the Safe Drinking Water Act; the Toxic Substances Control Act (TSCA); the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); and the Clean Water Act (CWA) provide authorities to the U.S. Environmental Protection Agency (EPA) and states to address particular CECs. In the 116 th Congress, Members have introduced more than 40 bills to address PFAS through various means. Multiple bills, including House- and Senate-passed National Defense Authorization Act (NDAA) bills for FY2020 ( H.R. 2500 and S. 1790 , respectively), would direct EPA to take regulatory and other actions to address PFAS under several environmental statutes. Two of these bills ( H.R. 2500 and H.R. 3616 ) would direct EPA to address PFAS using authorities provided to the agency under the CWA, which Congress established to restore and protect the quality of the nation's surface waters. Global concern about another group of CECs microplastics and their potential impacts has also been mounting. Recent studies have found that treated effluents from wastewater treatment plants can be key sources of microplastics, as can runoff from agricultural sites where sewage sludge from the wastewater treatment process has been applied as fertilizer. As with many other CECs, wastewater treatment facilities are generally not designed to screen for microplastic debris, such as microbeads, plastic fragments, or plastic fibers from clothing. Congress has shown interest in addressing the impacts of plastic pollution. In 2015, Congress passed legislation to ban plastic microbeads from rinse-off personal care products ("Microbead-Free Waters Act of 2015," P.L. 114-114 ). More recently, some Members in the 116 th Congress announced plans to introduce comprehensive legislation to address plastic waste in fall 2019. Some stakeholders have asserted that EPA could be more effective in using its existing CWA authorities to address CECs, while others have suggested a need to identify and address potential gaps in CWA authorities through amendments to the statute. This report examines authorities available to address CECs under the CWA. <2. Addressing CECs through the Clean Water Act> EPA has several CWA authorities it may use to address CECs, although it faces some challenges in doing so. The CWA's stated objective is "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." To help achieve this objective, the CWA prohibits the discharge of pollutants from any point source (i.e., a discrete conveyance, such as a pipe, ditch, etc.) to waters of the United States without a permit. Under the CWA, one of the primary mechanisms to protect or improve surface water quality is to limit or prohibit discharges of contaminants, including CECs, in National Pollutant Discharge Elimination System (NPDES) permits. The CWA authorizes EPA and delegated states to set limits or prohibit discharges of pollutants in permits through technology-based effluent (i.e., discharge) limitations and standards and through water-quality-based effluent limitations, which are established through water quality standards and criteria. Technology-based effluent limitations are specific numerical limits (i.e., maximum allowable levels of specific pollutants) that represent the minimum level of control that must be established in a permit. In cases where technology-based effluent limitations are not adequate to meet applicable water quality standards, the permits also incorporate water-quality-based effluent limitations. Water-quality-based effluent limitations are specific limits established in a permit that, if not exceeded in the discharge, allow for attainment of water quality standards in the receiving water. Water quality standards established by states, territories, tribes, and EPA define the desired condition or level of protection of a water body and what is needed to achieve or protect that condition. In addition, the CWA authorizes EPA to designate contaminants as toxic pollutants (CWA 307) or as hazardous substances (CWA 311), which may trigger other actions under the CWA and CERCLA. This section first identifies the authorities available under the CWA, their applicability to CECs, and potential challenges with EPA use of these authorities. <2.1. Technology-Based Requirements> The CWA requires EPA to establish technology-based effluent limitations for various categories of point sources/dischargers . Technology-based requirements consider the performance of specific technologies as well as economic achievability. These limits do not specify what technologies must be employed; rather , they establish the levels of specific pollutants that are allowable in the discharge based on the performance of technologies identified as representing specified levels of control (e.g., best available technology economically achievable, best conventional pollutant control technology). CWA Section 301 prescribes the levels of control required. EPA broadly classifies NPDES permittees as either (1) publicly owned treatment works (POTWs) or (2) non-POTWs, which include all other point sources and are also often called n on municipal facilities or industrial facilities . The CWA requires POTWs to meet secondary treatment standards as determined by EPA. Secondary standards are based on performance data for POTWs that use physical and biological treatment to remove or control conventional pollutants. As shown in Figure 1 , the CWA requires non-POTW dischargers to achieve specified levels of control based on (1) whether a discharger directly or indirectly discharges into a water of the United States (an indirect discharger discharges to a POTW for treatment prior to discharge into a water of the United States), (2) whether the discharger is a new or existing source, and (3) the category of pollutant (conventional, toxic, or nonconventional ). <2.1.1. Effluent Limitation Guidelines and Standards (ELGs)> The CWA requires EPA to publish national regulations for non-POTW dischargers called Effluent Limitation Guidelines and Standards (ELGs) which set minimum standards for specific pollutants in industrial wastewater discharges based on the specified levels of control. Since 1972, EPA has developed ELGs for 59 industrial categories. For direct dischargers, states or EPA incorporate the limits established in ELGs into the NPDES permits they issue. For indirect dischargers, pretreatment standards established in ELGs to prevent pass through and interference at the POTW apply. The CWA requires EPA to annually review all existing ELGs to determine whether revisions are appropriate. In addition, CWA Section 304(m) requires EPA to publish a plan every two years that includes a schedule for review and revision of promulgated ELGs, identifies categories of sources discharging toxic or nonconventional pollutants that do not have ELGs, and establishes a schedule for promulgating ELGs for any newly identified categories. In its 2002 draft Strategy for National Clean Water Industrial Regulations , EPA described a process for identifying existing ELGs that the agency should consider revising as well as industrial categories that may warrant development of new ELGs. As outlined in the strategy, EPA considers four main factors when prioritizing existing ELGs for possible revision: (1) the amount and type of pollutants in an industrial category's discharge and the relative hazard to human health or the environment, (2) the availability of an applicable and demonstrated wastewater treatment technology, process change, or pollution prevention measure that can reduce pollutants in the discharge and the associated risk to human health or the environment; (3) the cost, performance, and affordability or economic achievability of the wastewater treatment technology, process change, or pollution prevention measure; and (4) the opportunity to eliminate inefficiencies or impediments to pollution prevention or technological innovation or promote innovative approaches. EPA considers nearly identical factors in deciding whether to develop new ELGs. EPA uses a variety of screening-level analyses to address these factors. These analyses evaluate discharge monitoring reports and EPA's Toxic Release Inventory to rank industrial categories according to the total toxicity of their wastewater. In 2012, the Government Accountability Office recommended that the annual review include additional industrial hazard data sources to augment its screening-level reviews. In response, EPA has begun to use additional data sources that provide information about CECs or new pollutant discharges, industrial process changes, and new and more sensitive analytical methods, among other things. For example, EPA has reviewed data from the agency's Office of Pollution Prevention and Toxics to identify potential CECs. If EPA identifies an industrial discharge category warranting further review, it conducts a more detailed review, which may lead to a new or revised guideline. EPA published its most recent effluent guidelines program plan the Final 2016 Effluent Guidelines Program Plan in April 2018. It identified one new rulemaking to revise the Steam Electric Power Generating Point Source Category ELG but concluded that no other industries warrant new ELGs at this time. In its plan, EPA also announced that it is initiating three new studies: a holistic look at the management of oil and gas extraction wastewater from onshore facilities, an industry-wide study of nutrients, and an industry-wide study of PFAS. <2.1.2. Options to Address CECs through Technology-Based Requirements> Both EPA and states have authority under the CWA to address CECs through technology-based effluent limitations using ELGs or by setting technology-based effluent limits in NPDES permits on a case-by-case basis. In addition, the CWA authorizes EPA to add contaminants to the Toxic Pollutant List. <2.1.2.1. ELGs> When EPA develops an ELG for a new industrial category or revises an existing ELG, it is for the industrial category not a specific pollutant. However, as evidenced in the agency's most recent effluent guidelines program plan, EPA may initiate a cross-industry review of particular pollutants (such as the agency is doing with PFAS and nutrients). EPA uses such reviews to prioritize further study of the industrial categories that may be candidates for ELG development or revision to control the discharges of those particular pollutants. If EPA were to determine that new or revised ELGs are warranted to control discharges of those pollutants, and the agency had the necessary data to support the development or revision, the agency could initiate a rulemaking process to do so. <2.1.2.2. Establishing Technology-Based Effluent Limits in NPDES Permits on a Case-by-Case Basis> The CWA also authorizes EPA and states to impose technology-based effluent limits in NPDES permits on a case-by-case basis when "EPA-promulgated effluent limitations are inapplicable." This includes when EPA has not developed ELGs for the industry or type of facility being permitted or pollutants or processes are present that were not considered when the ELG was developed. This provides a means for the permitting authority to restrict pollutants in a facility's discharge even when an ELG is not available. CWA regulations require best professional judgment to set case-by-case technology-based effluent limits, applying criteria that are similar to the analysis EPA uses to develop ELGs but are performed by the permit writer for a single facility. <2.1.2.3. Toxic Pollutant List> The CWA also authorizes EPA to designate contaminants as toxic pollutants, which can trigger other actions under the CWA and CERCLA. (For a discussion of the effect of designating a contaminant as a toxic pollutant on the treatment of that contaminant under CERCLA, see " Designating CECs as Toxic Pollutants or Hazardous Substances .") CWA Section 307 authorizes EPA to designate toxic pollutants and promulgate ELGs that establish requirements for those toxic pollutants. Section 307(a)(1) directed EPA to publish a specified list of individual toxic pollutants or combination of pollutants and, from time to time, add or remove any pollutant that possesses certain properties. EPA adopted the initial list of 65 toxic pollutants in 1978, as directed by Congress. Since that time, the list of 65 toxic pollutants has generally not changed. Section 307(a)(1) directs EPA to "take into account the toxicity of the pollutant, its persistence, degradability, the usual or potential presence of the affected organisms in any waters, the importance of the affected organisms, and the nature and extent of the effect of the toxic pollutant on such organisms" when revising the Toxic Pollutant List. Section 307(a)(2) authorizes EPA to develop effluent limitations for any pollutant on the Toxic Pollutant List based on best available technology. Notably, however, EPA has the authority to develop effluent limitations for any pollutant regardless of whether it is on the Toxic Pollutant List. Adding a pollutant to the Toxic Pollutant List would trigger an additional requirement for states. Section 303(c)(2)(B) of the CWA requires states, whenever reviewing, revising, or adopting water quality standards, to adopt numeric criteria for all toxic pollutants listed pursuant to Section 307, for which EPA has published water quality criteria under Section 304(a). EPA and states use both the ELGs for industrial categories and state water quality standards in establishing pollutant limits in permits under Section 402. (See Figure 1 .) <2.1.3. Challenges to Addressing CECs through Technology-Based Requirements> EPA and states face a number of challenges in addressing CECs through technology-based effluent limitations. In particular, EPA officials stated that in developing a new ELG or updating an existing ELG, the agency needs to gather extensive supporting information. This effort includes identifying the pollutants of concern; evaluating the levels, prevalence, and sources of those pollutants of concern; determining whether the pollutants are in treatable quantities and whether effective treatment technologies are available; and developing economic data to project the cost of treatment, among other things. Also, EPA and state officials have asserted that it is difficult for the agency and its CWA programs to keep pace with the growth of new chemicals in commerce. Accordingly, the agency is generally reactive rather than proactive in addressing CECs. EPA officials stated that identifying demonstrated treatment technologies and documenting their efficiency is especially challenging. The officials further stated that the most difficult task is showing that any technology selected as the basis for an ELG is economically achievable for the industry. In addition, EPA and states often lack analytical methods to measure an emerging contaminant. Even where analytical methods are available, there is still often a lack of data on the levels of the contaminant in dischargers' effluent and/or in the receiving surface waters. The two sources of data most readily available to EPA discharge monitoring report data and toxic release inventory data are limited to specific contaminants on which industry is required to report. EPA stated that the agency's capacity to collect data including obtaining clearance to request and collect the data and undertaking the extensive effort to do so is limited in light of their staffing levels and resources. Should EPA have enough data to determine that a new or revised ELG is warranted and announce its intent to do so in an effluent guidelines program plan, the time it takes to issue the regulation varies, according to EPA officials. CWA Section 304(m) establishes a three-year time limit for new ELGs. For revised ELGs, the EPA officials stated that the time can vary depending upon the availability of data and the level of complexity some may be very technical and involve many wastestreams. Two of the more recently issued ELGs revisions of the oil and gas extraction and steam electric power generating categories took five and six years, respectively. <2.2. Water-Quality-Based Requirements> Under the CWA, water quality standards translate the goals of the act (e.g., fishable and swimmable waters, no toxic pollutants in toxic amounts) into measurable objectives to protect or improve water quality. States, territories, and authorized tribes (hereinafter referred to collectively as states) are required to adopt water quality standards for waters of the United States, subject to EPA approval. They may also adopt standards for additional surface waters if their own state laws allow them to do so. Water quality standards consist of three key required components: 1. Designated uses for each water body for example, recreation (swimming or boating), aquatic life support, fish consumption, public water supply, agriculture; 2. Criteria , which describe the conditions in a water body necessary to support the designated uses expressed as concentrations of pollutants or other quantitative measures or narrative statements; and 3. An antidegradation policy for maintaining existing water quality. States have the primary authority to adopt, review, and revise their water quality standards and implementation procedures. The CWA requires states to review their water quality standards at least once every three years. EPA is required to review the states' water quality standards. <2.2.1. Water Quality Criteria> Water quality criteria prescribe limits on specific contaminants or conditions in a water body that protect particular designated uses of the water body. Both the EPA and states have roles in establishing water quality criteria under CWA Section 304(a) and 303(c)(2), respectively. <2.2.1.1. EPA Role> CWA Section 304(a) requires EPA to develop and publish and "from time to time thereafter revise" criteria for water quality that accurately reflect the latest scientific knowledge. These criteria are recommendations to states for use in developing their own water quality standards. EPA has developed several different types of criteria, including human health criteria, aquatic life criteria, and recreational criteria. EPA has also published guidelines for deriving water quality criteria, which the agency uses to develop new criteria under Section 304(a). These guidelines also serve as guidance to states as they adjust water quality criteria developed under Section 304(a) to reflect local conditions or develop their own scientifically defensible water quality criteria. EPA most recently updated its human health criteria in 2015, revising 94 of the 122 existing human health criteria. EPA last updated its methodology for deriving human health criteria in 2000, incorporating "significant scientific advances in key areas such as cancer and non-cancer risk assessments, exposure assessments, and bioaccumulation in fish." EPA's national recommended aquatic life criteria table currently includes 58 criteria. Many of these criteria were published prior to 1990. In the past 10 years, EPA has published two new criteria. EPA has not updated its guidelines for deriving aquatic life criteria since 1985. According to EPA, however, the guidelines allow for best professional judgment, which they have used in more recent criteria development and updates. The agency recognizes that since 1985, there has been substantial scientific advancement that warrants updating these guidelines. EPA formally initiated the guidelines revision process in 2015. However, according to EPA officials, the agency has shifted its focus from updating the guidelines to determining whether available data and research support development of human health criteria for PFAS. In doing so, EPA officials indicated they plan to use information gathered for the guidelines revision and also noted that they are not tied to the 1985 guidelines due to the best professional judgment clause included therein. EPA's recreational water quality criteria are national recommendations for all inland and coastal waters that have a primary contact recreation (i.e., swimming) designated use. EPA establishes recreational water quality criteria to help protect against illness caused by organisms such as viruses, bacteria, and their associated toxins in water bodies. In 2012, EPA updated its recreational water quality criteria, which it had last issued in 1986. Additionally, in June 2019, EPA published final recreational water quality criteria for two algal toxins, which are commonly present in harmful algal blooms, to supplement the 2012 recreational water quality criteria. In addition, EPA is currently developing recreational water quality criteria for coliphage, a viral indicator of fecal contamination. <2.2.1.2. State Role> States use EPA's criteria as guidance in developing their own water quality standards. CWA Section 303(c)(2) requires states to adopt criteria to protect the designated uses of their water bodies and to also adopt criteria for all toxic pollutants listed pursuant to Section 307(a)(1), for which EPA has published criteria under Section 304(a). States' water quality criteria must be based on sound scientific rationale, contain sufficient parameters or constituents to protect the designated uses, and support the most sensitive use for water bodies with multiple designated uses. EPA regulations further require that states should establish numeric criteria based on CWA Section 304(a) guidance, CWA Section 304(a) guidance modified to reflect site-specific conditions, or other scientifically defensible methods. Where numeric criteria cannot be established, states are required to establish narrative criteria or criteria based on biomonitoring methods. States may adopt more stringent criteria than what EPA recommends, including for pollutants or parameters for which EPA has not promulgated 304(a) criteria. <2.2.2. Options to Address CECs through Water-Quality-Based Requirements> EPA and states may establish water quality criteria for CECs. If EPA were to establish criteria under CWA Section 304(a) for a CEC, that action alone would not necessarily require states to adopt criteria for that contaminant. As explained above, the CWA requires that states adopt criteria to protect their designated uses into their water quality standards. EPA's regulations provide that if a state does not adopt new or revised criteria for parameters for which EPA has published new or updated recommendations, then the state shall provide an explanation. States are explicitly required, as explained above, to adopt criteria for a contaminant if EPA designates it as a toxic pollutant under CWA Section 307 and publishes criteria for that contaminant under Section 304(a). Once a state has adopted water quality criteria for a contaminant as part of its state water quality standards and those standards have been approved, several CWA tools are available for achieving those standards. The primary tool is to limit or prohibit discharges of the contaminant in NPDES permits. In some cases, the technology-based effluent limits may already enable attainment of state water quality standards. In instances where they do not, the permit writer is required to establish water-quality-based effluent limitations. If a water body is not attaining its designated use (i.e., is "impaired" for that use), the Total Maximum Daily Load (TMDL) may also be used. A TMDL, essentially a "pollution diet" for a water body, is the maximum amount of a pollutant that a water body can receive and still meet water quality standards and an allocation of that amount to the pollutant's sources (including a margin of safety). TMDLs consider point sources, which can be addressed through permits, as well as nonpoint (diffuse) sources, which are more often addressed through best management practices and related efforts under CWA Section 319 nonpoint source management programs. <2.2.3. Challenges to Addressing CECs through Water-Quality-Based Requirements> A key challenge is often a lack of data about the occurrence, concentration, and persistence of CECs in the environment, as well as the effects on human health and aquatic life. Detection of a contaminant does not necessarily trigger regulatory measures. Information on the potential for the contaminant to adversely affect human health and aquatic life, potential exposure pathways, and other data would also be needed to inform such decisions. Developing new water quality criteria or updating existing criteria can often be time intensive, particularly in cases where data are limited. The general process for developing criteria involves a number of steps, including problem formulation and developing an analysis plan; gathering data and analyzing relevant studies; drafting the criteria document; a rigorous review process (e.g., branch level, office level, interagency, and independent external peer review); public notice and comment, and revising and publishing the criteria. According to EPA officials, the time it takes to develop or update criteria is often a function of the data that are available. EPA officials noted that developing criteria can take several years or longer. For example, the 2016 update for the aquatic life water quality criteria for selenium an effort characterized by EPA as complicated, in part because of the contaminant's bioaccumulative properties took 10 years to complete. In other cases, such as when a contaminant has an existing EPA Integrated Risk Information System value, developing or updating the human health water quality criteria for that contaminant may take less time, according to EPA officials. In May 2019, a report from the Contaminants of Emerging Concern Workgroup, convened by the Association of State Drinking Water Administrators and the Association of Clean Water Administrators, provided recommendations from state regulators regarding the ways state and federal agencies could improve the management of CECs. The report stated the following: The use of existing authorities and processes under the CWA and [Safe Drinking Water Act] to establish new criteria or standards is onerous, can take decades to implement, and does not meet public expectations for timely identification and prioritization of CECs . However slow these federal processes are, many state agencies do not have the infrastructure (i.e., sufficient funds and/or staffing levels), regulatory authority, or technical expertise to derive their own criteria or set their own standards for drinking water, surface water, groundwater, and fish tissue. Among numerous other recommendations provided in the report, the CEC workgroup recommended that EPA work with states to generate a list of priority CECs. To that end, EPA officials stated that they are developing a more formalized prioritization process for determining which contaminants warrant criteria development that will incorporate input from multiple stakeholders (including states), leverage information collected under the Safe Drinking Water Act, and incorporate monitoring and other data (e.g., ambient water concentrations). <2.3. Designating CECs as Toxic Pollutants or Hazardous Substances> Two sections of the CWA Sections 307 and 311 authorize EPA to designate contaminants as toxic pollutants and hazardous substances, respectively. Designating a contaminant under Section 307 or Section 311 of the CWA has implications for how the contaminant is treated under CERCLA. CERCLA defines the term hazardous substance to include toxic pollutants designated under CWA Section 307 and hazardous substances designated under CWA Section 311 (as well as substances designated under certain other statutes and other chemicals that EPA may designate as hazardous substances). <2.3.1. Toxic Pollutants CWA Section 307> EPA's authority to designate contaminants under CWA Section 307 as toxic pollutants and the CWA-related implications of that designation are discussed above under " Toxic Pollutant List ." <2.3.2. Hazardous Substances CWA Section 311> CWA Section 311(b)(2)(A) authorizes EPA to promulgate a rule designating as a "hazardous substance" any element or compound that, when discharged as specified under the section, would present an imminent and substantial danger to public health or welfare, including but not limited to fish, shellfish, wildlife, shorelines, and beaches. EPA is authorized to revise the list of hazardous substances subject to these criteria as may be appropriate. EPA finalized the initial list of hazardous substances in 1978 and thereafter revised the list in 1979, 1989, and 2011. Pursuant to Section 311(b)(4), EPA established "harmful" quantities for these substances that are subject to the reporting of discharges prohibited under Section 311(b)(3). Section 311(b)(5) requires a person in charge of a vessel or facility to notify the National Response Center, administered by the U.S. Coast Guard, as soon as that person has knowledge of a discharge. Discharges permitted under other provisions of the CWA or otherwise allowable under certain other federal, state, and local regulations are excluded from reporting under CWA Section 311. CWA Section 311(c) authorizes federal actions to remove a prohibited discharge of a hazardous substance (or oil). CWA Section 311(f) establishes liability for the recovery of removal costs, including restoration of damaged natural resources. Section 311(e) authorizes enforcement orders to require a responsible party to abate an imminent and substantial threat to public health or welfare from a prohibited discharge, or threat of a harmful discharge, of a hazardous substance (or oil). <2.3.3. Implications of CWA Designations on CERCLA> If EPA were to designate a CEC, or any contaminant, as a toxic pollutant or hazardous substance under the CWA, that contaminant would, by statutory definition, be defined as a hazardous substance under CERCLA. CERCLA authorizes federal actions to respond to a release, or substantial threat of a release, of a hazardous substance into the environment in coordination with the states. CERCLA similarly authorizes response actions for releases of other pollutants or contaminants that may present an imminent and substantial danger to public health or welfare. CERCLA also establishes liability for response costs and natural resource damages but only for hazardous substances and not for other pollutants or contaminants. CERCLA response authority is available for releases of pollutants or contaminants but without liability to require a potentially responsible party to perform or pay for response actions. Designating a CEC as a toxic pollutant or hazardous substance under the CWA would have the effect of establishing liability for their release as a hazardous substance under CERCLA. However, releases in compliance with a CWA permit would be exempt from liability under CERCLA as a "federally permitted release" based on the premise that the permit requirements would mitigate potential risks. CWA Section 311 also establishes liability for releases of hazardous substances, but CERCLA liability and enforcement mechanisms are broader than the CWA. In practice, CERCLA has been the principal federal authority used to respond to discharges of hazardous substances into surface waters and to enforce liability, although the enforcement authorities of CWA Section 311 remain available to EPA. For a broader discussion of CERCLA, see CRS Report R41039, Comprehensive Environmental Response, Compensation, and Liability Act: A Summary of Superfund Cleanup Authorities and Related Provisions of the Act , by David M. Bearden. <3. Legislation in the 116th Congress> Recent congressional interest in CECs has largely focused on addressing one particular group of CECs PFAS and addressing them through several statutes, such as the Safe Drinking Water Act. However, legislation in the 116 th Congress proposes to address PFAS using CWA authorities. H.R. 3616 the Clean Water Standards for PFAS Act of 2019 and Section 330A of H.R. 2500 , the House-passed version of the NDAA for FY2020, would direct EPA to add PFAS to the CWA Toxic Pollutant List and publish ELGs and pretreatment standards for PFAS within specified time frames. In addition, Section 330G of the House-passed version of the NDAA bill, Sections 6731-6736 of S. 1790 (the Senate NDAA bill), H.R. 1976 , and S. 950 would direct the U.S. Geological Survey (USGS) to carry out nationwide sampling in consultation with states and EPA to determine the concentration of perfluorinated compounds in surface water, groundwater, and soil. These bills would also require USGS to prepare a report for Congress and provide the sampling data to the EPA as well as other federal and state regulatory agencies that request it. Additionally, the bills would require the data to be used to "inform and enhance assessments of exposure, likely health and environmental impacts, and remediation priorities." Some Members have also introduced legislation to require comprehensive PFAS toxicity testing ( H.R. 2608 ). In addition to focusing on PFAS, several bills proposed in the 116 th Congress look more broadly at how to address CECs. For example, some aim to improve federal coordination and research and support states in addressing emerging contaminants. S. 1507 , S. 1251 , and Sections 6741-6742 of S. 1790 would direct the White House Office of Science and Technology Policy to establish a National Emerging Contaminant Research Initiative. The bills would also direct EPA to develop a program to provide technical assistance and support to states for testing and analysis of emerging contaminants and establish a database of resources available through the program to assist states with testing for emerging contaminants. While these efforts are more focused on CECs in drinking water, the bill directs the EPA to ensure that the database is available to groups that have interest in emerging contaminants, including wastewater utilities. <4. Conclusion> While Congress is currently debating how to best address the concerns related to widespread detections of PFAS, attention to other emerging contaminants (e.g., microplastics and algal toxins) has also increased with the availability of new detection methods and increased monitoring. Observers note that in the coming years, other CECs will likely emerge and prompt similar calls for immediate action to protect public health and the environment. Many observers argue that federal actions to address CECs currently tend to be reactive rather than proactive. Many of these observers assert that more focus and attention is needed on assessing the toxicity of chemical substances before they are introduced into commerce. Congress is currently considering legislation to improve federal coordination and responses to CECs. Specific to the CWA, some observers advocate for oversight to identify and address potential gaps or barriers in CWA authorities and processes that make it difficult for EPA and states to quickly respond when CECs are detected. Other observers assert that EPA could better use its existing authorities to address CECs. For example, EPA has not updated its ELGs for certain industrial categories in decades. Accordingly, some observers assert that various ELGs do not reflect advancements in science or technology that could lead to new effluent limitations for CECs. Similarly, some stakeholders assert that EPA could better prioritize which CECs warrant water quality criteria development. EPA's ability to address these and other recommendations depends on the availability of resources, treatment technologies, and scientific and economic data. Moving forward, Congress may be interested in evaluating EPA appropriations for the CWA programs that support EPA's efforts to address discharges of CECs. Congress may also be interested in overseeing the Administration's implementation of these programs.

Recent decades have seen increased national attention to the presence of "emerging contaminants" or "contaminants of emerging concern" (CECs) in surface water and groundwater. Although there is no federal statutory or regulatory definition of CECs, generally, the term refers to unregulated substances detected in the environment that may present a risk to human health, aquatic life, or the environment and for which the scientific understanding of potential risks is evolving. CECs can include many different types of manufactured chemicals and substances—such as those in pharmaceuticals, industrial chemicals, agricultural products, and microplastics—as well as naturally occurring substances, such as algal toxins. Data on CECs that would help determine their risk to humans and aquatic life or other aspects of the environment are often limited. Increased monitoring and detections of one particular group of chemicals, per- and polyfluoroalkyl substances (PFAS), has recently heightened public and congressional interest in these CECs and has also prompted a broader discussion about how CECs are identified, detected, and regulated and whether additional actions should be taken to protect human health and the environment. While several statutes provide authorities to the U.S. Environmental Protection Agency (EPA) and states to address CECs, this report examines authorities available under the Clean Water Act (CWA)—which Congress established to restore and protect the quality of the nation's surface waters. EPA has several CWA authorities it may use to address CECs, although it faces some challenges in doing so. Under the CWA, a primary mechanism to control contaminants in surface waters is through permits. The statute prohibits the discharge of pollutants from any point source (i.e., a discrete conveyance) to waters of the United States without a permit. The CWA authorizes EPA and states to limit or prohibit discharges of pollutants in the National Pollutant Discharge Elimination System (NPDES) permits they issue. These permits incorporate technology-based and water-quality-based requirements. The CWA authorizes EPA and states to address CECs through technology-based effluent limitations using national Effluent Limitation Guidelines and Standards (ELGs) or by setting technology-based effluent limits in NPDES permits on a case-by-case basis. The CWA requires EPA to publish ELGs, which are the required minimum standards for industrial wastewater discharges. The CWA also requires EPA to annually review all existing ELGs and to publish a biennial plan that includes a schedule for review and revision of promulgated ELGs, identifies categories of sources discharging toxic or nonconventional pollutants that do not have ELGs, and establishes a schedule for promulgating ELGs for any newly identified categories. In cases where EPA has not established an ELG for a particular industrial category or type of facility, or where pollutants or processes were not considered when an ELG was developed, the permitting authority (EPA or states) may still impose technology-based effluent limits on a case-by-case basis. Although EPA and states have these authorities available to address CECs, there are some challenges to doing so, including a lack of data available to support new ELGs or updates to existing ELGs. Agency officials stated that it is difficult for the agency to keep pace with the growth of new chemicals in commerce. The CWA also authorizes EPA and states to address CECs through water-quality-based requirements. States are required to adopt water quality standards for waters of the United States and review them at least once every three years. The CWA requires EPA to publish, and "from time to time thereafter revise" water quality criteria that reflect the latest scientific knowledge. States use EPA's criteria as guidance in developing their water quality standards. The CWA directs states to adopt criteria to protect their water bodies' designated uses and to also adopt criteria for all pollutants on the Toxic Pollutant List, for which EPA has published criteria. Once a state adopts water quality criteria for a contaminant as part of its water quality standards, several CWA tools are available to the state for achieving them. The primary tool is to establish water-quality-based effluent limitations in NPDES permits. Although EPA and states have authority to address CECs through water-quality-based requirements, they often lack data needed to support development of criteria or water-quality-based effluent limitations. The CWA also authorizes EPA to designate contaminants as toxic pollutants or as hazardous substances, which may trigger other actions under the CWA and the Comprehensive Environmental Response, Compensation, and Liability Act. Recent congressional interest in CECs has focused on addressing one particular group of CECs—PFAS—and on addressing them through other statutes. However, in the 116 th Congress, H.R. 3616 and H.Amdt. 537 , Section 330A, of the House-passed version of the National Defense Authorization Act for FY2020 ( H.R. 2500 ), would direct EPA to add PFAS to the CWA Toxic Pollutant List and publish ELGs that establish effluent limitations and standards for PFAS within specified time frames.

crs_R46195

crs_R46195_0

The Gulf of Mexico Energy Security Act of 2006 (GOMESA) altered federal offshore oil and gas leasing policy in the U.S. Gulf of Mexico. The law imposed an oil and gas leasing moratorium through June 30, 2022, throughout most of the Eastern Gulf of Mexico (off the Florida coast) and a small part of the Central Gulf. In other parts of the Gulf of Mexico, the law established a framework for sharing revenues from certain qualified oil and gas leases with the "Gulf producing states" of Alabama, Louisiana, Mississippi, and Texas, as well as with a nationwide outdoor recreation program the Land and Water Conservation Fund's (LWCF's) state assistance program. Several aspects of GOMESA have generated interest in the 116 th Congress. As the 2022 expiration date for the leasing moratorium in the Eastern Gulf approaches, the Department of the Interior's (DOI's) Bureau of Ocean Energy Management (BOEM) has begun to plan for offshore leasing in this area following the moratorium's expiration. BOEM's draft proposed five-year oil and gas leasing program for 2019-2024 would schedule new lease sales in the expired moratorium area starting in 2023. Some Members of Congress seek to forestall new lease sales by extending the moratorium beyond 2022; others support allowing it to expire on the currently scheduled date. On September 11, 2019, the House passed H.R. 205 , which would make the GOMESA moratorium permanent. Congress is weighing the potential for development of hydrocarbon resources in the Eastern Gulf against competing uses of the area for military testing and training, commercial fishing, and recreation. The debate encompasses questions of regional economic livelihoods and national energy and military security, as well as environmental concerns centered on the threat of oil spills and the potential contributions to climate change of oil and gas development. GOMESA's revenue-sharing provisions also have generated debate and interest in the 116 th Congress. The law entered a second revenue-sharing phase in FY2017 often referred to as GOMESA's "Phase II" in which qualified leasing revenues from an expanded geographic area are shared with the states and with the LWCF. Phase II has resulted in higher revenue shares than in the law's first decade (FY2007-FY2016). Revenue sharing from the added Phase II areas is capped for most years at $500 million annually for the Gulf producing states and the LWCF combined, and some Members of Congress seek to raise or eliminate this cap. In the 115 th Congress, P.L. 115-97 increased the cap to $650 million for FY2020 and FY2021. In addition to changing the cap, some Members have advocated to increase the percentage of revenues shared with the Gulf Coast states and to increase the set of qualified leases from which revenues can be shared, as well as to add an additional state (Florida) to the revenue-sharing arrangement. Other bills have proposed new uses of Gulf oil and gas revenues for various federal programs and purposes outside of revenue sharing, and some stakeholders have proposed to end GOMESA state revenue sharing altogether. Debate has centered on the extent to which these revenues should be shared with coastal states versus used for broader federal purposes, such as deficit reduction or nationwide federal conservation programs. Some Members of Congress and other stakeholders have made the case that the coastal states should receive a higher revenue share, given costs incurred by these states and localities to support extraction activities. These stakeholders have compared GOMESA revenue sharing with the onshore federal revenue-sharing program, where states receive a higher share of the federal leasing revenues than is provided under the GOMESA framework. Other Members of Congress, as well as the Obama and Trump Administrations at times, have contended that revenues generated in federal waters belong to all Americans, and revenue distribution should reflect broader national needs. This report provides brief background on Gulf of Mexico oil and gas development, discusses key provisions of GOMESA, and explores issues related to the Eastern Gulf moratorium and Gulf state revenue sharing. The report discusses various legislative options and proposals for amending GOMESA, as well as scenarios for future leasing if the law continues unchanged. <1. Background> The Gulf of Mexico has the most mature oil and gas development infrastructure on the U.S. outer continental shelf (OCS), and almost all U.S. offshore oil and gas production (approximately 98%) takes place in this region. Additionally, the Gulf contains the highest levels of undiscovered, technically recoverable oil and gas resources of any U.S. OCS region, according to BOEM. The Office of Natural Resources Revenue (ONRR) estimated federal revenues from offshore oil and gas leases in the Gulf at $5.51 billion for FY2019, out of a total of $5.57 billion for all OCS areas ( Table 1 ). From FY2009 to FY2018, annual revenues from federal leases in the Gulf ranged from a high of $8.74 billion in FY2013 (out of $9.07 billion total OCS oil and gas revenues for that year) to a low of $2.76 billion in FY2016 (out of $2.79 billion total OCS oil and gas revenues for that year). Changing prices for oil and gas are the most significant factors in these revenue swings. BOEM divides the Gulf into three planning areas: Eastern, Central, and Western. Most of the oil and gas development has taken place in the Central and Western Gulf planning areas. This is due to stronger oil and gas resources in those areas (as compared with the Eastern Gulf) and to leasing restrictions in the Eastern Gulf imposed by statutes and executive orders before GOMESA's enactment. <1.1. Eastern Gulf Leasing Prohibitions Prior to GOMESA> Congressional leasing restrictions in some parts of the Eastern Gulf date from the 1980s. Prompted by concerns of some coastal states, fishing groups, and environmentalists, Congress mandated a series of leasing moratoria in certain parts of the OCS, which grew to include the Eastern Gulf of Mexico. The FY1984 Interior Appropriations Act prohibited leasing in any Eastern Gulf areas within 30 nautical miles of the baseline of the territorial sea and in other specified Eastern Gulf blocks. From FY1989 through FY2008, the annual Interior appropriations laws consistently included moratoria in the portion of the Eastern Gulf south of 26 N latitude and east of 86 W longitude. Separately, President George H. W. Bush issued a presidential directive in 1990 ordering DOI not to conduct offshore leasing or preleasing activity in multiple parts of the OCS including portions of the Eastern Gulf until after 2000. In 1998, President Bill Clinton used his authority under Section 12(a) of the Outer Continental Shelf Lands Act (OCSLA) to extend the presidential offshore leasing prohibitions until 2012. President Clinton's order expanded the portion of the Eastern Gulf withdrawn from leasing consideration. The withdrawals designated during the Clinton Administration lasted until President George W. Bush modified them in 2008 to open multiple withdrawn areas to leasing. By that time, GOMESA had been enacted, so President Bush's action did not open the Eastern Gulf moratorium area to leasing. <1.2. Distribution of Gulf Revenues Prior to GOMESA> Before GOMESA's enactment, federal revenues from oil and gas leasing in most parts of the Gulf were not shared with coastal states. The exception was revenue from leases in certain nearshore federal waters: under Section 8(g) of the OCSLA (as amended), states receive 27% of all OCS receipts from leases lying wholly or partly within three nautical miles of state waters. Gulf Coast states argued for a greater share of the OCS revenues based on the significant effects of oil and gas development on their coastal infrastructures and environments. The states compared the offshore revenue framework to that for onshore public domain leases. Under the Mineral Leasing Act of 1920, which governs onshore oil and gas development, states generally receive 50% of all rents, bonuses, and royalties collected throughout the state, less administrative costs. <2. GOMESA's Provisions> GOMESA was signed into law on December 20, 2006. Sections 101 and 102 of the law contain a short title and definitions. Section 103 directs that two areas in the Central and Eastern Gulf be offered for oil and gas leasing shortly after enactment. These mandated lease sales took place in 2007-2009, and this provision of GOMESA has not been a focus of current congressional interest. Current interest has focused on Section 104 of the law, which imposes a moratorium on oil and gas leasing in certain parts of the Gulf, and Section 105, which contains provisions for revenue sharing from qualified leases with four states and their coastal political subdivisions, as well as with the LWCF's state assistance program. <2.1. Section 104: Eastern Gulf Moratorium> Section 104 of GOMESA states that, from the date of the law's enactment through June 30, 2022, the Secretary of the Interior is prohibited from offering certain areas, primarily in the Eastern Gulf, for "leasing, preleasing, or any related activity." The moratorium encompasses (1) areas east of a designated Milit ary Mission Line , defined in the law as the north-south line at 86 41 W longitude; (2) all parts of the Eastern Gulf planning area that lie within 125 miles of the Florida coast; and (3) certain portions of the Central Gulf planning area, including any parts within 100 miles of the Florida coast, as well as other specified areas. The resulting total moratorium formed by these overlapping areas is shown in gray in Figure 1 . Section 104 also allows for holders of existing oil and gas leases in some parts of the moratorium area to exchange the leases for a bonus or royalty credit to be used in the Gulf of Mexico. Section 104 prohibits not only lease sales in the moratorium area but also "preleasing" and other related activities. BOEM has clarified that such preleasing and related activities are not interpreted to include geological and geophysical (G&G) activities such as seismic surveys undertaken to locate resources with the potential to produce commercial quantities of oil and gas. BOEM interprets GOMESA to allow these G&G surveys in the moratorium area. The moratorium imposed by Section 104 expires on June 30, 2022. The 116 th Congress is debating whether to allow the moratorium to expire as scheduled or to amend GOMESA (or enact other legislation) to potentially further restrict federal oil and gas activity in this area. The following sections discuss scenarios for future leasing in the area under current provisions, legislative proposals to provide for other outcomes, and selected issues for Congress related to the moratorium provisions. <2.1.1. Scenario Under Current Statutory Framework> Absent further action by Congress, after June 30, 2022, the executive branch could potentially offer new oil and gas leases in the expired moratorium area. Under the OCSLA, the Secretary of the Interior could decide to include or exclude the area in future five-year offshore oil and gas leasing programs, based on specified criteria. The OCSLA also gives the President discretion to withdraw the area, temporarily or indefinitely, from leasing consideration, which would render it unavailable for inclusion in a DOI leasing program. The Trump Administration has indicated interest in pursuing oil and gas leasing in the GOMESA moratorium area after the moratorium's expiration. BOEM's initial draft of a five-year oil and gas leasing program for 2019-2024 (referred to as the "draft proposed program" or DPP) includes two lease sales in the moratorium area, one in 2023 and one in 2024. The DPP proposes to offer all available tracts in the former moratorium area after the expiration. BOEM also indicated that it would analyze two secondary options that would exclude some portions of the moratorium area from the lease sales ( Figure 2 ). First, BOEM is analyzing a potential "coastal buffer" off Florida at distances of 50, 75, 100, or 125 miles to accommodate military activities and nearshore use. Second, BOEM is separately analyzing a potential 15-mile leasing buffer offshore of Baldwin County, AL, to minimize visual and other impacts to onshore coastal areas. The next draft of the 2019-2024 program is expected to reflect the results of BOEM's analysis. Under the planning process for the program, which is governed by requirements of both the OCSLA and the National Environmental Policy Act, sales listed in the DPP could be retained, modified, or removed in subsequent drafts of the program. In deciding whether to include the sales (either in their current form or with modifications) in the final leasing program, the Secretary of the Interior must weigh economic, social, and environmental criteria. Among the factors the Secretary must consider under the OCSLA are coastal state governors' views on leasing off their coasts. Recent governors of Florida, the state most closely adjacent to the moratorium area, generally have expressed opposition to leasing in this area. Governors of other Gulf Coast states Alabama, Louisiana, Mississippi, and Texas generally have expressed support for oil and gas leasing in the Eastern Gulf. The Secretary also must consider the views of other affected federal agencies. One key agency DOD historically has opposed new leasing in the area, due to DOD's use of this part of the Gulf as a military testing and training ground (see " Military Readiness "). Both DOD and the Gulf producing states, along with some Members of Congress and many other stakeholders, submitted public comments on the 2019-2024 DPP. These comments are to be taken into account in the second draft of the program. Another round of public comment is expected to be solicited before the program could be finalized. The oil and gas industry has indicated interest in leasing in the moratorium area. Some industry representatives have stated that the Eastern Gulf represents a more attractive leasing prospect than other OCS areas currently unavailable for leasing (e.g., the Pacific and Atlantic regions) because data on the Eastern Gulf are better developed than for these other areas, and nearby infrastructure is already in place to facilitate exploration and development. Industry representatives have expressed particular interest in the deepwater Norphlet play, which spans parts of the Eastern and Central Gulf. <2.1.2. Legislative Proposals> A number of legislative proposals in the 116 th Congress have sought to extend GOMESA's moratorium or permanently prohibit leasing in the moratorium area. By contrast, other legislation would mandate lease sales in the area directly following the moratorium's current expiration date. Table 2 summarizes provisions of relevant 116 th Congress bills. Two of these bills, H.R. 4294 and S. 13 , include provisions affecting GOMESA revenue sharing, discussed further in Table 5 . One proposal related to the moratorium has passed the House of Representatives in the 116 th Congress: H.R. 205 , the Protecting and Securing Florida's Coastline Act of 2019. The bill would amend GOMESA to extend the Eastern Gulf moratorium indefinitely, thus precluding future oil and gas leasing in the area. In its report on the bill, the House Natural Resources Committee stated that a continued moratorium is necessary because leasing in the Eastern Gulf would compromise military readiness and "pose existential threats to Florida's tourism, fishing, and recreation economy, which rely on clean water and healthy beaches." In dissenting views, some committee members contended that oil and gas leasing in the area could successfully coexist with fishing, tourism, and military operations, and pointed to the role of Gulf oil and gas revenues in funding environmental restoration activities and land protection. Bills in earlier Congresses sought other types of outcomes related to the GOMESA moratorium. For example, some legislation would have enabled leasing in portions of the moratorium area before the 2022 expiration date, effectively shrinking the moratorium area. Other legislation would have prohibited some activities in the moratorium area that are not currently restricted by GOMESA, such as seismic surveys or research on potential areas for offshore drilling. These proposals have not been included to date in 116 th Congress legislation. <2.1.3. Selected Issues> <2.1.3.1. Economic and Budgetary Considerations> An extension of GOMESA's leasing prohibitions could result in a loss to the government of future federal revenues (to the extent that leasing and commercial production would otherwise take place when the moratorium expires). Also, some oil and gas industry advocates have contended that future development in the Eastern Gulf could contribute billions of dollars annually to the nation's gross domestic product, mainly through contributions to Gulf state economies, which they contend would be lost were the moratorium to continue. By contrast, some in the commercial fishing, tourism, and recreation sectors have focused on potential economic costs to these sectors if oil and gas development takes place off the coast of Florida, with particular emphasis on potential financial losses if a major oil spill were to occur. They point to estimates showing significant costs to these industries from the 2010 Deepwater Horizon oil spill. Other stakeholders express concern that any oil and gas activities in these areas would contribute to greenhouse gas emissions and human-induced climate change, with accompanying direct and indirect costs. The Congressional Budget Office (CBO) has estimated certain budgetary effects of a moratorium extension in relation to budget projections under existing law. CBO has estimated that bills to extend the moratorium would reduce offsetting receipts and thus increase direct federal spending. As a result, such bills may be subject to certain budget points of order unless offset or waived. For example, for the version of H.R. 205 reported by the House Committee on Natural Resources, CBO estimated that the bill's extension of GOMESA's moratorium would increase direct spending by $400 million over 10 years. <2.1.3.2. Military Readiness> The extent to which the GOMESA moratorium is needed for U.S. military readiness also has been at issue. The area east of the Military Mission Line in the Eastern Gulf provides about 101,000 square miles of surface area and overlying air space, which is the largest overwater DOD test and training area in the continental United States. DOD historically has expressed a need for an oil and gas leasing moratorium in this area. For instance, in 2006, DOD stated that its testing and training activities in the Eastern Gulf were "intensifying" and required "large, cleared safety footprints free of any structures on or near the water surface." In 2017, DOD wrote that the agency "cannot overstate the vital importance of maintaining this moratorium.... Emerging technologies such as hypersonics, autonomous systems, and advanced sub-surface systems will require enlarged testing and training footprints, and increased DoD reliance on the Gulf of Mexico Energy Security Act's moratorium beyond 2022." More recently, in a 2018 report to Congress on preserving military readiness in the Eastern Gulf, DOD wrote: No other area in the world provides the U.S. military with ready access to a highly instrumented, network-connected, surrogate environment for military operations in the Northern Arabian Gulf and Indo-Pacific Theater. If oil and gas development were to extend east over the [Military Mission Line], without sufficient surface limiting stipulations and/or oil and gas activity restrictions mutually agreed by the DoD and Department of Interior (DoI), military flexibility in the region would be lost and test activities severely affected. Some Members of Congress and other stakeholders have interpreted the wording of the 2018 report particularly its phrase "without sufficient surface limiting stipulations and/or oil and gas activity restrictions" as signaling a greater DOD openness to oil and gas activities in the moratorium area than had been expressed in some earlier DOD communications. The phrasing might be read to suggest that military readiness and oil and gas development could be mutually accommodated, given appropriate stipulations and restrictions. Oil and gas leases awarded in the Central and Western Gulf often contain stipulations related to military activities, such as those requiring the lessee to assume risks of damage from military activities, to control electromagnetic emissions in defense warning areas, to consult with military commanders before entering some areas, and/or to evacuate areas as needed for military purposes. BOEM also typically reserves the right to temporarily suspend a lease in the interest of national security. The 2018 report does not clarify what types of lease stipulations and restrictions might be necessary to accommodate the more intensive testing and training activities in the Eastern Gulf. The report states that some military activities in this area may be incompatible with the presence of fixed or mobile oil platforms. The report expresses concerns that increased vessel traffic and underwater noise could jeopardize some military activities. It also discusses concerns about potential foreign observation of DOD activities, if foreign entities are allowed to control offshore assets or otherwise conduct business near military ranges in the Eastern Gulf. If these military concerns were to lead to more stringent restrictions on oil and gas operations than are mandated in other parts of the Gulf, a question would be how such restrictions might affect industry interest in bidding on leases in the Eastern Gulf. In its cost estimate for H.R. 205 , CBO identified defense-related constraints (and the potential incompatibility of some development with Florida's Coastal Management Program) as factors that could reduce the value of Eastern Gulf leases to industry bidders. However, some industry representatives have expressed consistent interest in leasing in the area and have contended that economic returns on leases in this area would be substantial, despite potential restrictions related to military activities. <2.2. Section 105: Revenue Sharing> Section 105 of GOMESA provides for federal revenues from certain qualified leases in the Gulf of Mexico to be shared under specified terms with four Gulf producing states Alabama, Louisiana, Mississippi, and Texas and their "coastal political subdivisions" or CPSs (e.g., coastal counties or parishes), as well as with the LWCF state assistance program. Specifically, each year the Secretary of the Treasury is to deposit 50% of qualified revenues in a special account (the remaining 50% are deposited in the General Fund of the U.S. Treasury as miscellaneous receipts). From this special account, the Secretary disburses 75% of funds to the Gulf producing states and their CPSs, and 25% to the LWCF state assistance program. Accordingly, of the total qualified revenues in a given year, the states and CPSs receive 37.5% (i.e., 75% of the 50% in the special account), and the LWCF receives 12.5% (25% of the 50%). The law's definition of "qualified" OCS revenues differs for the first decade after GOMESA's enactment (FY2007-FY2016) versus for subsequent years. For FY2007-FY2016 (often referred to as GOMESA's Phase I), the law defines qualified OCS revenues to include all bonus bids, rents, royalties, and other sums due and payable to the United States from leases in the Eastern Gulf and the Central Gulf's 181 South Area entered into on or after the date of GOMESA's 2006 enactment. These are the relatively small areas shown as areas A and B in Figure 1 . For FY2017 and beyond (Phase II), the geographic area of qualified revenues expands. In addition to revenues from post-2006 leases in the Phase I areas, the qualified revenues in Phase II include those from post-2006 leases in the Central Gulf's portion of the 181 Area, shown as area C in Figure 1 . The Phase II qualified revenues also include the "2002-2007 planning area" the large area shown in yellow in Figure 1 , encompassing most of the Western and Central Gulf, where the bulk of production takes place. Accordingly, revenues qualified for sharing in Phase II are likely to be notably higher than in Phase I ( Table 3 ). For the added Phase II areas, Section 105 stipulates that the total amount of qualified revenues made available each year to the states and their CPSs and the LWCF (collectively) shall not exceed $500 million for each of FY2016-FY2055. A later law, P.L. 115-97 , raised the cap to $650 million for two of these years, FY2020 and FY2021. Given the percentage distributions specified in the law for each recipient, the amounts that can be shared with states and their CPSs from the added Phase II areas are capped at $375.0 million in most years (and $487.5 million in FY2020 and FY2021). The amounts that can be shared with the LWCF are capped at $125.0 million in most years (and $162.5 million in FY2020 and FY2021). Phase II began with FY2017 revenues, but GOMESA specifies that revenues shall be shared with recipients in the fiscal year immediately following the fiscal year in which they are received. Thus, in terms of payments, the first fiscal year reflecting Phase II revenue sharing was FY2018. The shared revenues rose notably in that year compared with previous years. Table 3 shows GOMESA revenue distributions since the law's enactment, with the transition from Phase I distributions to Phase II distributions occurring between FY2017 and FY2018. GOMESA directs the Secretary of the Interior to establish a formula to allocate each year's qualified state revenues among the four Gulf producing states and their CPSs. The allocations to each state primarily depend on its distance from leased tracts, with states closer to the leased tracts receiving a higher share. The law additionally provides that each state must receive an annual minimum of at least 10% of the total amount available to all the Gulf producing states for that year. Further, GOMESA directs that the Secretary shall pay 20% of the allocable share of each Gulf producing state to the state's CPSs. See the box below for additional details on the state allocations. GOMESA authorizes the states and CPSs to use revenues for the following purposes: Projects and activities for the purposes of coastal protection, including conservation, coastal restoration, hurricane protection, and infrastructure directly affected by coastal wetland losses. Mitigation of damage to fish, wildlife, or natural resources. Implementation of a federally approved marine, coastal, or comprehensive conservation management plan. Mitigation of the impact of OCS activities through the funding of onshore infrastructure projects. Planning assistance and the administrative costs of complying with GOMESA. (No more than 3% of a state or CPS's revenues may be used for this purpose.) The following sections discuss the scenario for GOMESA revenue sharing under the law's current provisions, summarize legislative proposals for changes, and explore selected issues. <2.2.1. Scenario Under Current Statutory Framework> Under GOMESA, revenue sharing with the states and LWCF continues indefinitely, and the annual cap on shared revenues from the Phase II areas continues through FY2055. After that year, all qualified Gulf revenues would be shared under the current formula 37.5% to states and their CPSs and 12.5% to the LWCF regardless of whether the shared amount from the Phase II areas exceeds $500 million. DOI, in its annual budget justifications, develops five-year projections of qualified GOMESA revenues. Table 4 shows DOI projections for FY2020-FY2024 shared revenues (which are half of all qualified revenues), by revenue collection year. The revenues collected in a given year would be shared with the states and LWCF in the following fiscal year. In general, the DOI projections for a given year have not always been consistent over time. Changing oil prices have been a major factor in revised projections. Under the current scenario, the majority of the moratorium area the portion shown in gray in Figure 1 does not qualify for revenue sharing, even after the moratorium ends in June 2022. Instead, any revenues from oil and gas leasing and development in this area after the moratorium expires would go entirely to the Treasury. Also, GOMESA does not provide for revenue sharing with Florida, although some of the qualified revenue-sharing areas such as portions of the 181 Area are closer to Florida than to the other Gulf producing states. <2.2.2. Legislative Proposals> In the 116 th Congress, several bills would amend GOMESA to increase the portion of qualified revenues shared with the Gulf producing states by raising the states' percentage share, eliminating the revenue-sharing cap, or both. Some legislation also would expand the purposes for which states may use the GOMESA revenues, modify the uses of the LWCF share, or add Florida to the revenue-sharing arrangement. Table 5 describes selected relevant bills and their provisions. None of the bills has been reported from committee in the 116 th Congress. In contrast with bills that would increase the state revenue share, some legislative proposals in earlier Congresses would have ended state revenue sharing under GOMESA. For example, in the 114 th Congress, would have amended GOMESA to provide that 87.5% of qualified revenues under the law would be deposited in the Treasury's General Fund, while 12.5% would continue to be provided for LWCF financial assistance to states. This proposal is similar to some legislative proposals in DOI budget requests under the Obama and Trump Administrations (see " Determining the Appropriate State Share "). <2.2.3. Selected Issues> <2.2.3.1. Determining the Appropriate State Share> Members of Congress differ in their views on the extent to which Gulf Coast states should share in revenues derived from oil and gas leasing in federal areas of the Gulf. State officials from the Gulf producing states and some Members of Congress have expressed that the Gulf producing states should receive a higher share than is currently provided under GOMESA, given the costs they incur to support offshore extraction activities. These stakeholders have argued that the revenues are needed to mitigate environmental impacts and to maintain the necessary support structure for the offshore oil and gas industry. For example, at a 2018 hearing of the House Committee on Natural Resources, former Senator Mary Landrieu stated: "It is important to note that revenue sharing was established to recognize the contributions that states and localities make to facilitate the extraction and production of these resources, including the provision of infrastructure to enable the federal activity: transportation, hospitals, schools and other necessary governmental services." Advocates have emphasized that Gulf Coast areas, especially coastal wetlands, face significant environmental challenges, owing in part to hydrocarbon development (among other activities). These advocates have contended that additional federal revenues are critical to address environmental challenges and economic impacts of wetland loss. Advocates point to a disparity between the 37.5% state share provided under GOMESA and the 50% share of revenues that most states receive from onshore public domain leases under the Mineral Leasing Act. They contend that a comparable state revenue share under GOMESA would significantly contribute to coastal wetland restoration, given GOMESA's requirement that the Gulf producing states use the funding to address coastal protection, damage mitigation, and restoration (and given comparable requirements under some state laws). By contrast, some other Members of Congress, as well as the Obama and Trump Administrations at times, have contended that GOMESA revenue sharing with the states should be reduced or eliminated to facilitate use of these revenues for broader national purposes. They have argued that, since the OCS is a federal resource, the benefits from offshore revenues should accrue to the nation as a whole, rather than to specific coastal states. Under the Obama Administration, DOI budget requests for FY2016 and FY2017 recommended that Congress repeal GOMESA state revenue-sharing payments and direct a portion of the savings to programs that provide "broad benefits to the Nation," such as a proposed new Coastal Climate Resilience Program "to provide resources for at-risk coastal States, local governments, and their communities to prepare for and adapt to climate change." Legislation in the 114 th Congress ( S. 2089 ; see " Legislative Proposals ") would have amended GOMESA to eliminate the state revenue sharing and provide for the state share to go to the Treasury's General Fund. For FY2018, the Trump Administration proposed that Congress repeal GOMESA's state revenue-sharing provisions, in order to "ensure [that] the sale of public resources from Federal waters owned by all Americans, benefit all Americans." The Trump Administration has not included similar proposals in subsequent budget requests, and no legislation to reduce or eliminate GOMESA state revenue sharing has been introduced to date in the 116 th Congress. <2.2.3.2. Set of Leases Qualified for Revenue Sharing> Although Phase II of GOMESA considerably expanded the set of leases contributing to revenue sharing, some Gulf leases still do not qualify, because the law applies only to leases that were entered into on or after the date of GOMESA's enactment (December 20, 2006). It appears from 2019 leasing data maintained by BOEM that approximately 61% of the more than 2,500 active leases in the Gulf of Mexico were entered into on or after the enactment date, and thus would qualify for revenue sharing under GOMESA's current terms. However, the majority of these newer leases are not producing oil and gas; and leases awarded before GOMESA's enactment which do not qualify continue to contribute a substantial portion of production royalties. For this reason, the percentage of Gulf revenues subject to GOMESA sharing is much smaller than the percentage of Gulf leases subject to GOMESA sharing. For example, of federal offshore revenues disbursed in FY2019 (the high majority of which come from the Gulf), GOMESA-qualified revenues including those distributed to states and their CPSs, the LWCF state grant program, and the Treasury combined constituted 18% of the total. The percentage of total revenues that qualify for sharing under GOMESA might be expected to increase over time, to the extent that older leases gradually terminate and current and future leases begin producing. Some Members of Congress have proposed that GOMESA's terms be altered to include an expanded set of leases in the qualified sharing group. For instance, in the 116 th Congress, S. 2418 would amend GOMESA to define the qualified leases as those entered into on or after October 1, 2000, rather than after GOMESA's 2006 enactment. According to BOEM data as of November 2019, this would more than double the number of producing leases eligible for GOMESA revenue sharing (although the addition in total leases would be relatively small). The result could be a higher revenue share with the states and their CPSs and the LWCF state grant program. Some other Members do not favor this type of change because it could reduce the portion of offshore revenues going to the Treasury for other federal purposes. <2.2.3.3. Revenue Amounts and Adequacy for Legislative Purposes> Offshore oil and gas revenues support a variety of federal and state activities, through amounts deposited annually in the LWCF and the Historic Preservation Fund (HPF) and through revenues shared with states under revenue-sharing laws. Revenue totals have fluctuated from year to year ( Table 1 ), raising questions about whether future revenues will be adequate to support these various activities and whether new legislation for offshore revenue distribution would strain available amounts. For example, some Members of Congress have considered whether raising GOMESA's state revenue share would result in insufficient funds to meet statutory requirements for deposits to the LWCF and HPF. Alternatively, some Members have questioned whether proposals to use offshore revenues for new conservation programs would reduce state sharing under GOMESA and jeopardize programs supported by the state-shared funds. Thus far, in each year since GOMESA's enactment, OCS revenues have been sufficient to provide for all distributions under current law. If bills in Table 5 were enacted to raise the GOMESA state revenue share to 50% and eliminate the revenue-sharing cap for states, it appears that, based on DOI projections for FY2020-FY2024, OCS revenues remaining after state sharing would still be more than sufficient to meet statutory requirements for deposits to the LWCF and HPF in these years. Various economic factors or policy decisions could affect these DOI projections, and under some theoretical scenarios, enactment of bills to increase the state share could affect the sufficiency of revenues to cover other legislative requirements. Similarly, under some scenarios, legislative proposals to fund new conservation programs with offshore revenues could affect amounts shared with the states under GOMESA. Whether this would occur would depend partly on the terms of the legislative proposals. For example, S. 500 and H.R. 1225 in the 116 th Congress would establish a new deferred maintenance fund for specified federal lands supported partly by offshore energy revenues. These proposals address the issue of revenue availability by specifying that the new deferred maintenance fund would draw only from miscellaneous receipts deposited to the Treasury after other dispositions are made under federal law. That is, if revenues were insufficient to provide for the funding amounts specified under these bills along with the other distributions required in law, it appears that the requirements of current laws (including GOMESA) would be prioritized. Also relevant are proposals by some Members of Congress and other stakeholders to significantly curtail or end OCS oil and gas leasing, in response to climate change concerns. Depending on the extent to which offshore production decreased, such policy changes could result in an insufficiency of revenues to meet all statutory requirements, especially over the long term as production from existing leases diminished. Some supporters of reducing or eliminating federal offshore oil and gas leasing have suggested that other revenue sources, such as from an expansion of renewable energy leasing on federal lands, should be found for desired federal programs. Some opponents of curtailing offshore oil and gas leasing have pointed to the revenue implications as an argument against such actions. <2.2.3.4. Budgetary Considerations> Bills that would increase the state share of GOMESA revenues by giving the states a higher revenue percentage, eliminating revenue-sharing caps, or both have been identified by CBO as increasing direct spending. For example, in cost estimates for 115 th Congress legislation which would have made similar state-sharing changes to those proposed in H.R. 3814 , H.R. 4294 , and S. 2418 ( Table 5 ) CBO estimated that these changes would increase direct spending of OCS receipts by $2.1 billion over a 10-year period. As a result, such legislation may be subject to certain budget points of order unless offset or waived. As of January 2020, CBO has not released cost estimates for the 116 th Congress bills discussed in Table 5 (none of which has been reported from committee), and it is unclear how CBO would estimate costs associated with those bills or whether some provisions in those bills might be estimated to offset costs of other provisions. For example, H.R. 4294 contains provisions to repeal presidential withdrawals of offshore areas from leasing consideration and to facilitate offshore wind leasing in U.S. territories, among others. CBO scored similar provisions in 115 th Congress bills as increasing offsetting receipts (and thus partly offsetting bill costs). <2.2.3.5. Florida and Revenue Sharing> Under GOMESA's current provisions, Florida is not among the Gulf producing states eligible for revenue sharing. Some proposals, including S. 13 in the 116 th Congress, would add Florida to the group of states receiving a revenue share. Because the high majority of Gulf leasing takes place in the Western and Central Gulf planning areas, which do not abut Florida, Florida's share of GOMESA revenues if S. 13 were enacted would likely be lower than those of the other Gulf Coast states, especially Louisiana and Texas. Nonetheless, since GOMESA provides that every Gulf producing state must receive at least 10% of the annual state revenue share, adding Florida to the Gulf producing states would provide at least that portion of GOMESA revenues for Florida and would correspondingly reduce the total available to the other Gulf producing states. Some Florida stakeholders have opposed legislation to add Florida to GOMESA revenue sharing on the basis that doing so could incentivize eventual oil and gas development off Florida. Others support a continued moratorium off Florida and support giving Florida a revenue share from leasing elsewhere in the Gulf. These stakeholders contend that Florida bears risks from oil and gas leasing elsewhere in the Gulf (particularly related to potential oil spills) and so should also see benefits. This position is captured in S. 13 , which would extend the GOMESA moratorium through 2027 and add Florida as a revenue-sharing state. Still others support adding Florida as a revenue-sharing state as part of a broader change to allow leasing and revenue sharing in areas offshore of Florida. Supporters of this approach, including some from the current Gulf producing states, may contend that an increase in the number of states that share GOMESA revenues should be accompanied by a growth in the area qualified for revenue sharing to reduce the likelihood of a smaller share for the original four states. <3. Conclusion> The current period is one of transition for the oil and gas leasing framework established by GOMESA for the Gulf of Mexico. First, the Eastern Gulf leasing moratorium is set to expire in 2022, and BOEM is proposing offshore lease sales for the moratorium area starting in 2023. Second, the Gulf leases subject to revenue sharing expanded substantially starting in FY2017, and DOI projects revenues from these areas will approach or reach GOMESA's revenue-sharing cap in FY2024. Congress is considering whether GOMESA's current provisions will best meet federal priorities going forward, or whether changes are needed to achieve various (and sometimes conflicting) national goals. Regarding the moratorium provisions, a key question is whether decisions about leasing in the Eastern Gulf should be legislatively mandated or left to the executive branch to control. Absent any legislative intervention, after June 2022, the President and the Secretary of the Interior are to decide whether, where, and under what terms to lease tracts in the former moratorium area, following the statutory provisions of the OCSLA. Some Members of Congress seek to amend GOMESA either to extend the moratorium or to mandate lease sales in the area rather than deferring to the OCSLA's authorities for executive branch decisionmaking. At stake are questions of regional and national economic priorities, environmental priorities, energy security, and military security. With respect to Gulf oil and gas revenues, GOMESA's current revenue-sharing provisions take into account multiple priorities: mitigating the impacts of human activities and natural processes on the Gulf Coast (through state revenue shares directed to this purpose); supporting conservation and outdoor recreation nationwide (through the LWCF state assistance program); and contributing to the Treasury. For the most part, legislative proposals to change the terms of GOMESA revenue distribution have supported some or all of these priorities but have sought to change the balance of revenues devoted to each purpose. Also at issue are proposals to use the revenues for new (typically conservation-related) purposes outside the GOMESA framework, as well as proposals to substantially reduce or eliminate Gulf oil and gas production with corresponding revenue implications in the context of addressing climate change. The 116 th Congress is debating such questions as it considers multiple measures to amend GOMESA.

Almost all U.S. offshore oil and gas production occurs in the Gulf of Mexico. Federal oil and gas leasing in the Gulf is governed primarily by two laws—the Outer Continental Shelf Lands Act (OCSLA; 43 U.S.C. §§1331-1356b), which broadly controls oil and gas leasing throughout the U.S. outer continental shelf (OCS); and the Gulf of Mexico Energy Security Act of 2006 (GOMESA; 43 U.S.C. §1331 note), whose provisions relate specifically to leasing in the Gulf region. GOMESA imposes an oil and gas leasing moratorium through June 30, 2022, in most of the Eastern Gulf (off the Florida coast) and a small part of the Central Gulf. The law also establishes a framework for sharing revenues from certain qualified oil and gas leases in other parts of the Gulf with the "Gulf producing states" of Alabama, Louisiana, Mississippi, and Texas, as well as with a nationwide outdoor recreation program—the state assistance program establis hed by the Land and Water Conservation Fund Act (LWCF; 54 U.S.C. §§200301 et seq.). The 116 th Congress is considering changes to GOMESA, as statutory provisions related to both the moratorium and revenue sharing enter a period of transition. GOMESA Moratorium GOMESA's leasing moratorium is scheduled to expire in June 2022, and the Department of the Interior's (DOI's) Bureau of Ocean Energy Management (BOEM) has begun to plan for offshore leasing in the moratorium area after the expiration. Some Members of Congress seek to forestall new lease sales in the area by extending the moratorium; others support allowing it to expire on the scheduled date. On September 11, 2019, the House passed H.R. 205 , which would make the GOMESA moratorium permanent. Some other 116 th Congress bills (e.g., H.R. 286 , H.R. 291 , H.R. 341 , H.R. 2352 , H.R. 3585 , and S. 13 ) also would extend the moratorium or make it permanent. By contrast, H.R. 4294 would mandate lease sales in the area directly following the expiration. Absent congressional action, the executive branch is to decide whether to offer new oil and gas leases in the GOMESA moratorium area after June 2022. The Trump Administration has indicated interest in pursuing oil and gas leasing in that area after the expiration and has included two lease sales in a preliminary draft of its offshore leasing program for 2019-2024. In addition to economic, budgetary, and environmental considerations in extending or ending the moratorium, a particular issue is potential conflict related to the Department of Defense's (DOD's) intensive use of the area for military testing and training. DOD generally has supported the moratorium and has indicated that, from a defense standpoint, stipulations and restrictions on oil and gas activities would be necessary if the area were to be opened to leasing in 2022. GOMESA Revenue Sharing A second revenue-sharing phase (referred to as "Phase II") has begun under GOMESA. Compared with GOMESA's first decade (FY2007-FY2016), Phase II requires revenues to be shared from an expanded set of leases. Revenues continue to be shared at a rate of 37.5% with the Gulf producing states and their coastal political subdivisions, and at a rate of 12.5% with the LWCF state assistance program. The remaining 50% of qualified revenues are deposited in the General Fund of the U.S. Treasury as miscellaneous receipts. Revenue sharing from the added Phase II areas is capped annually at $500 million for most years through FY2055 for the four states and LWCF combined. Stakeholders have debated whether the Phase II revenue-sharing provisions should remain in place or whether different proportions should be shared with coastal states, used for broader federal programs, or deposited as miscellaneous receipts to the U.S. Treasury. Some Members of Congress seek to increase revenues shared with the Gulf Coast states, for example, by raising or eliminating GOMESA's revenue-sharing cap, increasing the state-shared percentage, or both. In the 115 th Congress, P.L. 115-97 increased the revenue-sharing cap to $650 million for FY2020 and FY2021. Several bills in the 116 th Congress (e.g., H.R. 3814 , H.R. 4294 , and S. 2418 ) would eliminate the cap and raise the state share of qualified revenues to 50%. S. 13 would add Florida as a revenue-sharing state. Other bills have proposed new uses of Gulf oil and gas revenues for other federal programs and purposes outside of revenue sharing; and some stakeholders have proposed to end GOMESA state revenue sharing altogether. Also at issue are questions about the overall adequacy of revenue amounts to fulfill existing and proposed purposes, including considerations about the optimal extent of federal offshore oil and gas leasing in the Gulf and how various policy choices would affect revenue amounts.

crs_R46338

crs_R46338_0

The constitutional system of checks and balances and the separation of powers among the legislative, executive, and judicial branches is a cornerstone of the American system of government. By separating and checking powers in this way, the Framers hoped to prevent any person or group from seizing control over the nation's government. For example, the Framers checked congressional legislative power by providing the President the power to veto legislation and, in turn, checked the President's veto power by providing Congress a means to override that veto. Over time, it has become clear that the presidential veto power, even when not formally exercised, provides the President with an important tool to engage in the legislative process. Most Presidents have exercised their veto power in an effort to block legislation. Of 45 Presidents, 37 have exercised their veto power. As of the end of 2019, Presidents have issued 2,580 vetoes, and Congress has overridden 111. President George W. Bush vetoed 12 bills during his presidency. Congress attempted to override six of them and succeeded four times. President Barack Obama also vetoed 12 bills during his presidency. Congress attempted to override six of them and succeeded once. Presidents have also attempted to influence the shape of legislation through the use of veto threats. Since the 1980s, formal, written Statements of Administration Policy (SAPs, pronounced "saps") have frequently been used to express the President's support for or opposition to particular pieces of legislation. SAPs sometimes threaten to use the veto power if the legislation reviewed reaches the President's desk in its current form. Among the George W. Bush Administration (2001-2009) and the Obama Administration (2009-2017) SAPs examined later in this report, for example, 24% and 48%, respectively, contained a veto threat. This report begins with a brief discussion of the veto power and Congress's role in the veto process. It then examines the ways Presidents communicate their intention to veto, oppose, or support a bill. The report then provides and discusses summary data on veto threats and vetoes during the Bush and Obama Administrations. <1. The President's Veto Power> As specified by the U.S. Constitution (Article I, Section 7), the President has 10 days, Sundays excepted, to act once he has been presented with legislation that has passed both houses of Congress and either reject or accept the bill into law. Within those 10 days, Administration officials consider various points of view from affected agencies (as is the case throughout the legislative process) and recommend a course of action to the President regarding whether or not to veto the presented bill. The President has three general courses of action during the 10-day presentment period: The President may sign the legislation into law, take no action and allow the bill to become law without signature after the 10 days, or reject the legislation by exercising the office's veto authority. The President may reject legislation in two ways. The President may veto the bill and "return it, with his Objections to that House in which it shall have originated." This action is called a "regular" or "return" veto (hereinafter return veto). Congress typically receives the objections to the bill in a written veto message. If Congress has adjourned during the 10-day period, the President might also reject the legislation through a "pocket veto." This occurs when the President retains, but does not sign, presented legislation during the 10-day period, with the understanding that the President cannot return the bill to a Congress that has adjourned. Under these circumstances, the bill will not become law. A pocket veto is typically marked by a type of written veto message known as a "Memorandum of Disapproval." As discussed in greater detail below, this practice has sometimes been controversial, because arguably it prevents Congress from attempting to override the President's veto. <2. Congress's Response> A President's return veto may be overridden, or invalidated, by a process provided for in Article 1, Section 7, of the U.S. Constitution. To override a return veto, Congress may choose to "proceed to reconsider" the bill. Passage by two-thirds of Members in each chamber is required to override a veto before the end of the Congress in which the veto is received. Neither chamber is under any constitutional, legal, or procedural obligation to conduct an override vote. It is not unusual for either chamber of Congress to make no effort to override the veto if congressional leaders do not believe they have sufficient votes to do so. If a two-thirds vote is successful in both chambers, the President's return veto is overridden, and the bill becomes law. If a two-thirds vote is unsuccessful in one or both chambers, the veto is sustained, and the bill does not become law. In contrast, Congress cannot override the President's pocket veto. By definition, a pocket veto may occur only when a congressional adjournment prevents the return of the vetoed bill. If a bill is pocket vetoed while Congress is adjourned, the only way for Congress to pass a version of the policy contained in the vetoed bill is to reintroduce the legislation as a new bill, pass it through both chambers, and present it to the President again for signature. Recent Presidents and Congresses have disagreed about what constitutes an adjournment that prevents the return of a bill such that a pocket veto may be used. For purposes of the sections below concerning the use of veto threats, the unit of analysis is a veto. The analysis does not distinguish between regular and pocket vetoes. <3. Veto Threats in the Legislative Process> Because Congress faces a two-thirds majority threshold to override a President's veto, veto threats may deter Congress from passing legislation that the President opposes. The veto override threshold may also prompt Congress to change a bill in response to a veto threat. The Framers of the U.S. Constitution viewed the veto power as a way of reminding Congress that the President also plays an important legislative role and that threatening to use the veto power can influence legislators into creating more amenable bills. Political scientist Richard A. Watson writes that "the veto is available to a President as a general weapon in his conflicts with Congress: Franklin Roosevelt sometimes asked his aides for 'something I can veto' as a lesson and reminder to congressmen that they had to deal with a President." Veto threats are, therefore, an important component in understanding the use of the President's veto power. In recent presidencies, these threats have generally been expressed either through SAPs or verbally. President Trump has also used social media to communicate his intention to veto, oppose, or support a bill. <3.1. Signaling Policy Intentions Before a Veto> Presidents may signal their intention to support, oppose, or veto a bill early in the legislative process using both verbal and written means. For example, Presidents can mention in a speech that they intend to veto legislation, or they can authorize others (such as a press secretary) to verbally indicate the Administration's position on specific legislation. Presidents can also issue, through the Office of Management and Budget (OMB), formal, written SAPs to communicate their intention to veto, oppose, or support a bill. <3.1.1. Verbal Veto Threats> Verbal veto threats may include commentary related to the President's strategy for working with Congress along with a threat to veto legislation if the President's policy agenda is not heeded. For example, at a press conference President George W. Bush explained, "I want the Members of Congress to hear that once we set a budget we're going to stick by it. And if not, I'm going to use the veto pen of the President of the United States to keep fiscal sanity in Washington, D.C." In another instance, President Obama said that the House "is trying to pass the most extreme and unworkable versions of a bill that they already know is going nowhere, that can't pass the Senate and that if it were to pass the Senate I would veto. They know it." In these remarks, both President Bush and President Obama used their words to attempt to deter Congress from passing bills that did not match the President's policy agenda and unambiguously remind the public of their veto power. <3.1.2. Written Veto Threats> Formal, written SAPs are frequently used to express the President's support for or opposition to particular pieces of legislation. The decision to issue a SAP is a means for the President to insert the Administration's views into the legislative debate. While SAPs provide Presidents an opportunity to assert varying levels of support for or against a bill, perhaps the most notable statement in a SAP is whether the Administration intends to veto the bill. Members of Congress may pay particular attention to a SAP when a veto threat is being made. At least one congressional leader has characterized SAPs as forerunner indicators of a veto. SAPs are often the first public document outlining the Administration's views on pending legislation and allow for the Administration to assert varying levels of support for or opposition to a bill. Because written threats are typically required to be scrutinized by the Administration through the central legislative clearance process in advance of their release, written SAP veto threats are often considered more formal than verbal veto threats. When a SAP indicates that the Administration may veto a bill, it appears in one of two ways: 1. A statement indicating that the President intends to veto the bill (hereinafter a presidential veto threat) or 2. A statement that agencies or senior advisors would recommend that the President veto the bill (hereinafter a senior advisors veto threat). These two types of SAPs indicate degrees of veto threat certainty. Generally speaking, a presidential veto threat signals the President's strong opposition to the bill. A senior advisors veto threat, on the other hand, may signal that the President may be more likely to enter into negotiations in order to reach a compromise with Congress on the bill. By publicly issuing a veto threat, the President may leverage public pressure upon Congress to support the President's agenda. Furthermore, many SAPs propose a compromise to Congress wherein the President would not exercise a veto. In addition, a President or an Administration's senior advisors may not always issue a veto threat prior to a decision to veto passed legislation. As discussed below, both Presidents Bush and Obama vetoed legislation for which they never issued a written veto threat. <4. Veto Threats Within Different SAP Types> During both the Obama and Bush Administrations, roughly three-quarters of SAPs issued were on non-appropriations bills, and roughly one-quarter concerned appropriations bills. Each SAP signaled the Administration's intent to veto, oppose, or support a bill. There are fundamental differences between non-appropriations bill SAPs and appropriations bill SAPs. Non-appropriations bill SAPs typically involve specific policy objections, such as how a program operates or what constituency the program is designed to serve. Appropriations bill SAPs, in contrast, often involve more general budgetary policy objections, such as the perceived need to balance the budget or to reallocate resources for other purposes. Therefore, the President may generally support a particular provision in an appropriations bill on programmatic policy grounds but oppose it for budgetary reasons. Or the President may oppose a particular provision in an appropriations bill for both programmatic and budgetary reasons. This report focuses on the impact of the President's veto threat in non-appropriations bill SAPs given their more targeted nature. <5. Veto Threats During the George W. Bush and Obama Administrations> Data in this report were compiled from SAPs located on the archived White House websites of the Bush and Obama Administrations. Using the classification of SAPs on each website, analysis was conducted with only non-appropriations SAPs for reasons described above. The analysis examined each SAP and individually assessed whether the SAP contained a veto threat, the type of threat (presidential or senior advisor), and whether the veto threat concerned a part of the bill or the whole bill. The analysis considers each SAP to be an individual veto threat. In instances where one bill received veto threats in multiple SAPs, veto threats were counted individually and not combined. To assess the final outcome of bills, the analysis used information on bill statuses located at Congress.gov and does not track whether bills that received a SAP were later combined into other legislative vehicles. The inherent limitations in this methodology make it difficult to determine direct effects of any veto threat on the final outcome of a bill. However, in the aggregate, general trends may be observed. The proportion of non-appropriation bill SAPs with veto threats steadily increased over the course of each of the two presidencies reviewed. SAPs containing veto threats as a proportion of all SAPs was at its highest at the conclusion of both President Bush's and President Obama's second terms. Figure 1 illustrates this trend by showing SAP veto threats as a percentage of issued SAPs. <5.1. George W. Bush Administration Veto Threats> While the Bush Administration remained relatively consistent in the number of veto threats issued in SAPs during its first six years, the number of threats increased during the final two years of the Administration. The Bush Administration issued a total of 491 SAPs on non-appropriations bills. Just under one-quarter (24%) of the non-appropriations bill SAPs contained a veto threat: 24 presidential veto threats and 94 senior advisors veto threats. Of bills that received a presidential veto threat, one was signed by the President, seven were vetoed, and the remaining 16 did not make it to the President's desk. Of bills that received a senior advisors veto threat, 16 were signed, one was vetoed, and the remaining 77 were not passed by both chambers. Seven of the 12 Bush Administration vetoes were preceded by a SAP containing a veto threat. While the number of veto threats in SAPs slowly increased during the first three Congresses of the Bush Administration (two in the 107 th Congress, three in the 108 th Congress, and seven in the 109 th Congress), the number of veto threats grew sharply in the 110 th Congress to 107 veto threats coinciding with Democrats gaining control of both chambers of Congress during the Republican President's final two years in office. This might suggest (and is supported by Obama Administration data) that the partisan constitution of Congress, as well as whether the Administration is in its first or second term, may impact the number of veto threats issued. Below, Figure 2 illustrates this change in the number of veto threats over time across the four Congresses associated with President Bush's two terms in office. Nevertheless, presidential veto threats in the Bush Administration remained a fraction of overall veto threats and often resulted in an actual veto. The rarity with which the Bush Administration issued presidential veto threats suggests that the Administration viewed them as a message to be used sparingly. Although the relationship between Congress and a President may change every two years with each new Congress, the relationship between an Administration and its President may also change by presidential term. Compared to a President's first term, in a second term Administration, executive branch officials may become more adept in coordinating the veto power. Additionally, a second-term President cannot be re-elected, which may allow the Administration to take a stronger position on unfavorable legislation. Alternatively, it could be that the President lacks the political influence necessary to advance his legislative agenda and instead relies on veto power to block legislative vehicles more often as his presidency concludes. Figure 3 presents veto threat percentages by presidential term for the Bush Administration, showing an increase in the President's second term. During President Bush's first term (2001-2005), 98% of SAPs did not contain a veto threat, 1% contained a senior advisors veto threat, and 1% contained a presidential veto threat. During President Bush's second term (2005-2009), 60% did not contain a veto threat, 32% contained a senior advisors veto threat, and 8% contained a presidential veto threat. <5.2. Obama Administration Veto Threats> In comparison to the Bush Administration, the Obama Administration steadily increased its use of veto threats issued in SAPs in every subsequent Congress. The Obama Administration issued 472 SAPs on non-appropriations bills. Just under half (48%) of these contained a veto threat: 43 presidential veto threats and 186 senior advisors veto threats. Of bills that received a presidential veto threat, four were ultimately signed by the President, five were vetoed, and 34 did not make it to the President's desk. Of bills that received a senior advisors veto threat, 17 were signed, two were vetoed, and 167 were not passed by the two chambers. Six of the 12 Obama Administration vetoes were preceded by a SAP containing a veto threat. President Obama (a Democrat) issued more veto threats in his SAPs with each passing Congress. (Democrats controlled both chambers during the 111 th Congress and the Senate during the 112 th Congress, and Republicans controlled the House during the 113 th Congress and both chambers during the 114 th Congress. ) Below, Figure 4 illustrates this change in the number of veto threats over time by Congress. Although the number of veto threats increased over the course of the Obama presidency (eight in the 111 th Congress, 54 in the 112 th Congress, 63 in the 113 th Congress, and 104 in the 114 th Congress), the number of presidential veto threats remained small when compared to the total number of veto threats, varying from a low of 14.3% in the 111 th Congress to a high of 28.3% in the 114 th Congress. The increase over time in total number of veto threats may indicate that President Obama was presented with more legislation he was likely to oppose. However, the increase is mostly composed of senior advisors veto threats. This suggests that the Administration nonetheless treated presidential veto threats, compared to senior advisors veto threats, as a tool to be used more rarely. As with the Bush Administration, President Obama's use of veto threats in the first and second terms differ. Figure 5 presents veto threat percentages by presidential term as opposed to by Congress. During President Obama's first term (2009-2013), 69% of SAPs did not contain a veto threat, 27% contained a senior advisors veto threat, and 4% contained a presidential veto threat. During President Obama's second term (2013-2017), 39% of SAPs did not contain a veto threat, 49% contained a senior advisors veto threat, and 13% contained a presidential veto threat. <6. Congressional Responses to Veto Threats> CRS analyzed all veto threats contained in SAPs on non-appropriations legislation across these two Administrations and determined whether the veto threat was isolated to a provision of the bill (a partial bill veto threat) or if the veto threat was not particularized (a whole bill veto threat). President Bush issued partial bill veto threats and whole bill veto threats an equal amount of the time. However, the type of threat he used in each category varied. Of partial bill veto threats, 7% were presidential veto threats and the remaining 93% were senior advisors veto threats. Of whole bill veto threats, 34% were presidential veto threats and the remaining 66% were senior advisors veto threats. In contrast, President Obama issued partial bill veto threats more sparingly (8% versus 92% for whole bill veto threats). Similar to President Bush, however, of partial bill veto threats, 6% were presidential veto threats and the remaining 94% were senior advisors veto threats. Of whole bill veto threats, 20% were presidential veto threats and the remaining 80% were senior advisors veto threats. The difference in frequency of partial and whole bill veto threats across the Administrations may suggest that the two Presidents viewed the use of veto threats differently: One President may have used partial threats to negotiate more with Congress, whereas another President preferred to threaten a veto only when he viewed an entire bill as unfavorable. Likewise, the increased frequency of partial bill senior advisors veto threats suggests that both Presidents preferred to use presidential veto threats in rejecting an entire bill and leaving senior advisors veto threats for negotiations where only part of a bill is unfavorable. <6.1. Legislative Action Following a Veto Threat> A presidential veto threat in a SAP may be more likely than a senior advisors veto threat to deter passage of a bill because of the President's direct association with the threat. However, an analysis of these two Administrations does not necessarily support this argument. Figure 6 shows that bills appeared less likely to pass when the bill received a senior advisors veto threat versus a presidential veto threat. This may be due to a number of factors, including that senior advisors threats are more frequently issued than presidential veto threats (279 senior advisors threats and 67 presidential veto threats were issued across these two presidencies) or that Congress may perceive it to be beneficial to pass presidentially threatened legislation anyway based on certain political calculations and circumstances. <7. Veto Threats and Veto Patterns> During the Bush and Obama Administrations, enrolled bills that passed both chambers and were met with a presidential veto threat SAP were vetoed more often than were those that were met with a senior advisors threat. Figure 7 shows the outcomes of bills receiving veto threats that were passed by Congress and sent to the President. Across both the Bush and Obama Administrations, a bill that received a presidential veto threat and was passed was followed by a veto 70.6% of the time, whereas a bill that received a senior advisors veto threat was later vetoed 8.3% of the time. When a President vetoes a bill, it marks the end of the President's ability to procedurally affect whether or not a bill becomes law. Whether or not that specific bill becomes law is no longer in the President's hands. Congress may or may not elect to attempt an override. <7.1. George W. Bush Administration Vetoes and Ensuing Congressional Action> President Bush exercised the veto power 12 times. Four of these vetoes were overridden. Six vetoed bills were forewarned with a written veto threat. (Four received a presidential threat, and two received senior advisors threats.) Three additional bills received statements noting the Administration's opposition to the bill but did not include a veto threat. None of the bills that Congress later overrode were preceded by a presidential veto threat. Three-quarters of President Bush's vetoes (9 of 12) were preceded by a written statement of opposition to the bill. President Bush also issued multiple written veto threats on four bills that would later receive a veto: Three bills received two threats each, and one bill received two statements of opposition. <7.2. Obama Administration Vetoes and Ensuing Congressional Action> President Obama vetoed 12 bills, and Congress overrode his veto once. As was true for President Bush, six of President Obama's vetoes were preceded by a written veto threat (four presidential and two senior advisors threats). Unlike the patterns observed for the Bush presidency, however, all of President Obama's veto threats were whole bill veto threats. Whereas President Bush also communicated in SAPs his opposition to three bills short of threatening a veto, President Obama either did not issue a SAP at all or issued one that contained a veto threat. One of President Obama's vetoed bills received two veto threats. President Obama's approach of issuing either no statement at all on a bill or a statement containing a veto threat marks a different approach from the one used by President Bush.

The Framers checked congressional legislative power by providing the President the power to veto legislation and, in turn, checked the President's veto power by providing Congress a means to override that veto. Over time, it has become clear that the presidential veto power, even if not formally exercised, provides the President some degree of influence over the legislative process. Most Presidents have exercised their veto power as a means to influence legislative outcomes. Of 45 Presidents, 37 have exercised their veto power. This report begins with a brief discussion of the ways Presidents communicate their intention to veto, oppose, or support a bill. It then examines the veto power and Congress's role in the veto process. The report then provides analysis of the use of veto threats and vetoes and the passage of legislation during the George W. Bush Administration (2001-2009) and the Obama Administration (2009-2017) with some observations of the potential influence of such actions on legislation. As specified by the U.S. Constitution (Article I, Section 7), the President has 10 days, Sundays excepted, to act once he has been presented with legislation that has passed both houses of Congress and either reject or accept the bill into law. The President has three general courses of action during the 10-day presentment period: The President may sign the legislation into law, take no action, or reject the legislation by exercising the office's veto authority. A President's return veto may be overridden, or invalidated, by a process also provided for in Article 1, Section 7, of the U.S. Constitution. Because Congress faces a two-thirds majority threshold to override a President's veto, veto threats may deter Congress from passing legislation that the President opposes. By going public with a veto threat, the President may leverage public pressure upon Congress to support his agenda. For purposes of this report, which focuses on the use of veto threats, the unit of analysis throughout is a veto (or a threatened veto), and the report does not distinguish between regular and pocket vetoes. Formal, written Statements of Administration Policy (SAPs, pronounced "saps") are frequently used to express the President's support for or opposition to particular pieces of legislation and may include statements threatening to use the veto power. Among the Bush and Obama Administrations' SAPs examined later in this report, for example, 24% and 48%, respectively, contained a veto threat. Although the relationship between Congress and a President may change every two years with each new Congress, the relationship between an Administration and its President may also change by presidential term. For example, while the number of veto threats in SAPs slowly increased during the first three Congresses of the Bush Administration, the number of veto threats grew sharply in the 110 th Congress. In comparison to the Bush Administration, the Obama Administration steadily increased its use of veto threats issued in SAPs in every subsequent Congress. President George W. Bush exercised the veto power 12 times during his presidency. Congress attempted to override six of President Bush's 12 vetoes and succeeded four times. President Barack Obama similarly exercised the veto power 12 times during his presidency. Congress also attempted to override six of President Obama's 12 vetoes and succeeded once. During the Bush and Obama Administrations, enrolled bills that passed both chambers and were met with a statement indicating that the President intended to veto the bill (a presidential veto threat SAP) were vetoed more often than were those that were met with a statement that agencies or senior advisors would recommend that the President veto the bill (a senior advisors threat SAP).

crs_R46258

crs_R46258_0

<1. Regional Political and Economic Environment> With 33 countries ranging from the Caribbean nation of St. Kitts and Nevis, one of the world's smallest states, to the South American giant of Brazil, the world's fifth-largest country the Latin American and Caribbean region has made significant advances over the past four decades in terms of both political and economic development. (See Figure 1 and Table 2 for a map and basic facts on the region's countries.) Significant challenges remain, however, and some countries have experienced setbacks, most prominently Venezuela (which has descended into dictatorship). In the early 1980s, authoritarian regimes governed 16 Latin American and Caribbean countries, both on the left and the right. Today, three countries in the region Cuba, Nicaragua, and Venezuela are ruled by authoritarian governments. Most governments in the region today are elected democracies. Although free and fair elections have become the norm, recent elections in several countries have been controversial and contested. In 2019, Argentina, Dominica, El Salvador, Panama, and Uruguay held successful free and fair elections. Guatemala held two presidential election rounds in June and August 2019 that international observers judged to be successful, but the elections suffered because several popular candidates were disqualified from the race on dubious grounds. In Bolivia, severe irregularities in the conduct of the country's October 2019 presidential elections ignited protests and violence that led to the resignation of incumbent President Evo Morales, who was seeking a fourth term; new elections under an interim president are now scheduled for May 2020. Most recently, Guyana held elections on March 2, 2020, which were marred by allegations of fraud; final results are on hold pending court action regarding the final verification of some votes. Six other Caribbean countries are scheduled to hold elections in 2020 (see text box " 2020 Elections "). Despite significant improvements in political rights and civil liberties since the 1980s, many countries in the region still face considerable challenges. In a number of countries, weaknesses remain in the state's ability to deliver public services, ensure accountability and transparency, advance the rule of law, and ensure citizen safety and security. There are numerous examples of elected presidents who have left office early amid severe social turmoil and economic crises, the presidents' own autocratic actions contributing to their ouster, or high-profile corruption. In addition to Morales's resignation in 2019, corruption scandals either caused or contributed to several presidents' resignations or removals of several president Guatemala in 2015, Brazil in 2016, and Peru in 2018. Although the threat of direct military rule has dissipated, civilian governments in several countries have turned to their militaries or retired officers for support or during crises, raising concerns among some observers. Most recently, in El Salvador on February 9, 2020, President Nayib Bukele used the military in an effort to intimidate the country's legislature into approving an anti-crime bill; the action elicited strong criticism in El Salvador and abroad, with concerns centered on the politicization of the military and the separation of powers. The quality of democracy has eroded in several countries over the past several years. The Economist Intelligence Unit's (EIU's) 2019 democracy index shows a steady regional decline in democratic practices in Latin America since 2017. Several years ago only Cuba was viewed as an authoritarian regime, but Venezuela joined its ranks in 2017 as President Nicol s Maduro's government violently repressed the political opposition. Nicaragua turned to authoritarian practices in 2018 under long-time President Daniel Ortega, as the government violently repressed protests. The continued regional downward trend in 2019 stemmed from Bolivia's post-election crisis and to a lesser extent by setbacks in the following other countries: Guatemala, where the government ousted the anti-corruption body known as the International Commission against Impunity in Guatemala; Haiti, which experienced widespread anti-government protests against corruption and deteriorating economic conditions; and Guyana, with the delay of elections following a no-confidence vote by the legislature. Public satisfaction with how democracy is operating has declined along with the quality of democracy in the region. According to the 2018/2019 AmericasBarometer public opinion survey, the percentage of individuals satisfied with how democracy was working in their countries averaged 39.6% among 18 countries in the region, the lowest level of satisfaction since the poll began in 2004. Given these trends, the eruption of social protests in many countries around the region in 2019 is unsurprising, but in each country a unique set of circumstances has sparked the protests. In addition to the protests in Bolivia and Haiti cited above, protests broke out in Ecuador over fuel price increases, in Chile over pent-up frustration over social inequities, and in Colombia over opposition to a range of government policies and proposals, from tax reform to education to peace accord implementation. Although each country is unique, several broad political and economic factors appear to be driving the decline in satisfaction with democracy in the region. Political factors include an increase in authoritarian practices, weak democratic institutions and politicized judicial systems, corruption, high levels of crime and violence, and organized crime that can infiltrate or influence state institutions. Economic factors include declining or stagnant regional economic growth rates over the past several years, high levels of income inequality in many Latin American countries, increased poverty, and the inadequacy of social safety net programs or advancement opportunities, along with increased pressure on the region's previously expanding middle class. Beginning around 2015, the global decline in commodity prices significantly affected the region, as did China's economic slowdown and its reduced appetite for imports from the region in 2015 and 2016 (see Table 1 ). According to the International Monetary Fund (IMF), the region experienced an economic contraction of 0.6% in 2016, dragged down by recessions in Argentina and Brazil, as well as by Venezuela's severe economic deterioration as oil prices fell. Since then, the region has registered only marginal growth rates, including an estimated growth rate of 0.2% in 2019. Regional growth in 2019 was suppressed by the collapse of much of the Venezuelan economy, which contracted 35%, and by continued recession in Argentina, which suffered an economic contraction of 3.1%. The current IMF 2020 outlook is for regional growth to reach 1.6%, led by recovery in Brazil and spurred by growth forecasts of 3% or higher for Chile, Colombia, and Peru. The economic fallout from the current coronavirus disease (COVID-19) outbreak, which already is having repercussions around the world, could jeopardize this forecast. Even before the onset of the coronavirus, recession was forecasted to continue in several countries, including Argentina and Venezuela, with contractions of 1.3% and 10% respectively. The risk of social unrest similar to that experienced in 2019 could also constrain growth in some countries. Despite some easing of income inequality in the region from 2002 to 2014, reductions in income inequality have slowed since 2015; Latin America remains the most unequal region in the world in terms of income inequality, according to the United Nations (U.N.) Economic Commission for Latin America and the Caribbean. The level of poverty in the region also has increased over the past five years. In 2014, 27.8% of the region's population lived in poverty; that figure increased to 30.8% by 2019. <2. U.S. Policy Toward Latin America and the Caribbean> U.S. interests in Latin America and the Caribbean are diverse and include economic, political, security, and humanitarian concerns. Geographic proximity has ensured strong economic linkages between the United States and the region, with the United States being a major trading partner and source of foreign investment for many Latin American and Caribbean countries. Free-trade agreements (FTAs) have augmented U.S. economic relations with 11 countries in the region. The Western Hemisphere is a large source of U.S. immigration, both legal and illegal; geographic proximity and economic and security conditions are major factors driving migration trends. Curbing the flow of illicit drugs from Latin America and the Caribbean has been a key component of U.S. relations with the region and a major interest of Congress for more than four decades. The flow of illicit drugs, including heroin, methamphetamine, and fentanyl from Mexico and cocaine from Colombia, poses risks to U.S. public health and safety; and the trafficking of such drugs has contributed to violent crime and gang activities in the United States. Since 2000, Colombia has received U.S. counternarcotics support through Plan Colombia and its successor programs. In addition, for over a decade, the United States sought to forge close partnerships with other countries to combat drug trafficking and related violence and advance citizen security. These efforts include the M rida Initiative begun in 2007 to support Mexico, the Central America Regional Security Initiative (CARSI) begun in 2008, and the Caribbean Basin Security Initiative (CBSI) begun in 2009. Another long-standing component of U.S. policy has been support for strengthened democratic governance and the rule of law. As described in the previous section, although many countries in the region have made enormous strides in terms of democratic political development, several face considerable challenges. U.S. policy efforts have long supported democracy promotion efforts, including support for strengthening civil society and promoting the rule of law and human rights. <2.1. Trump Administration Policy> In its policy toward Latin America and the Caribbean, the Trump Administration has retained many of the same priorities and programs of past Administrations, but it has also diverged considerably. The Administration has generally adopted a more confrontational approach, especially regarding efforts to curb irregular immigration from the region. In 2018, the State Department set forth a framework for U.S. policy toward the region focused on three pillars for engagement: (1) economic growth and prosperity, (2) security, and (3) democratic governance. The framework reflects continuity with long-standing U.S. policy priorities for the region but at times appears to be at odds with the Administration's actions, which sometimes have been accompanied by antagonistic statements on immigration, trade, and foreign aid. Meanwhile, according to Gallup and Pew Research Center polls, negative views of U.S. leadership in the region have increased markedly during the Trump Administration (see text box " Latin America and the Caribbean: Views of U.S. Leadership "). Foreign Aid. The Administration's proposed foreign aid budgets for FY2018 and FY2019 would have cut assistance to the region by more than a third, and the FY2020 budget request would have cut funding to the region by about 30% compared to that appropriated in FY2019. Congress did not implement those budget requests and instead provided significantly more for assistance to the region in appropriations measures. In 2019, however, the Trump Administration withheld some assistance to Central America to compel its governments to curb the flow of migrants to the United States. (See " U.S. Foreign Aid " section.) Trade. In 2017, President Trump ordered U.S. withdrawal from the proposed Trans-Pacific Partnership (TPP) FTA that had been negotiated by 12 Asia-Pacific countries in 2015. The TPP would have increased U.S. economic linkages with Latin American countries that were parties to the agreement Chile, Mexico, and Peru. President Trump strongly criticized the North American Free Trade Agreement (NAFTA) with Mexico and Canada, repeatedly warned that the United States might withdraw from the agreement, and initiated renegotiations in 2017. The three countries agreed in September 2018 to a new United States-Mexico-Canada Agreement (USMCA), which retained many NAFTA provisions but also included some modernizing updates and changes, such as provisions on digital trade and the dairy and auto industries. (See " Trade Policy " section.) Mexico , Central America, and Migration Issues . Relations with Mexico have been tested by inflammatory anti-immigrant rhetoric, immigration actions, and changes in U.S. border and asylum polices that have shifted the burden of interdicting migrants and offering asylum to Mexico. In September 2017, the Administration announced that it would end the Deferred Action for Childhood Arrivals (DACA) program; begun in 2012 by the Obama Administration, the program provides relief from deportation for several hundred thousand immigrants who arrived in the United States as children. The future of the initiative remains uncertain given challenges in federal court. In December 2018, Mexico's president agreed to allow the United States to return certain non-Mexican migrants to Mexico (pursuant to Migrant Protection Protocols or MPP) while awaiting U.S. immigration court decisions. In May 2019, President Trump threatened to impose new tariffs on motor vehicles from Mexico if the government did not increase actions to deter U.S.-bound migrants from Central America; Mexico ultimately agreed in June 2019 to increase its enforcement actions and to allow more U.S.-bound asylum seekers to await their U.S. immigration proceedings in Mexico. Despite tensions, U.S.-Mexico bilateral relations remain friendly, with continued strong energy and economic ties, including the USMCA, and close security cooperation related to drug interdiction. (See " Mexico " section.) Other Administration actions on immigration have caused concern in the region. In 2017 and 2018, the Administration announced plans to terminate Temporary Protected Status (TPS) designations for Nicaragua, Haiti, El Salvador, and Honduras, but federal court challenges have put the terminations on hold. (See " Migration Issues " section.) Unauthorized migration from Central America's Northern Triangle countries El Salvador, Guatemala, and Honduras has increased in recent years, fueled by difficult socioeconomic and security conditions and poor governance. To deter such migration, the Trump Administration implemented a "zero tolerance" policy toward illegal border crossings in 2018 and applied restrictions on access to asylum at the U.S. border. The Administration also has used aid cuts of previously appropriated assistance for FY2017 and FY2018 and threats of increased U.S. tariffs and taxes on remittances to compel Central American countries and Mexico to curb unauthorized migration to the United States. In 2019, the Administration negotiated "safe third country" agreements with each of the Northern Triangle countries to permit the United States to transfer asylum applicants from third countries to the Northern Triangle countries. (See " Central America's Northern Triangle " section.) Venezuela , Cuba , and Nicaragua . In November 2018, then-National Security Adviser John Bolton made a speech in Miami, FL, on the Administration's policies in Latin America that warned about "the destructive forces of oppression, socialism, and totalitarianism" in the region. Reminiscent of Cold War political rhetoric, Bolton referred to Cuba, Nicaragua, and Venezuela as the "troika of tyranny" in the hemisphere that has "finally met its match." He referred to the three countries as "the cause of immense human suffering, the impetus of enormous regional instability, and the genesis of a sordid cradle of communism in the Western Hemisphere." As the situation in Venezuela has deteriorated under the Maduro government, the Trump Administration has imposed targeted and broader financial sanctions, including sanctions against the state oil company, the country's main source of income. In January 2019, the Administration recognized the head of Venezuela's National Assembly, Juan Guaid , as interim president. In September 2019, the United States joined 11 other Western Hemisphere countries to invoke the Rio Treaty to facilitate a regional response to the Venezuelan crisis. The Administration also is providing humanitarian and development assistance for Venezuelans who have fled to other countries, especially Colombia, as well as for Venezuelans inside Venezuela. (See " Venezuela " section.) With regard to Cuba, the Trump Administration has not continued the policy of engagement advanced during the Obama Administration and has imposed a series of economic sanctions on Cuba for its poor human rights record and support for the Maduro government. Economic sanctions have included restrictions on travel and remittances, efforts to disrupt oil flows from Venezuela, and authorization (pursuant to Title III of the LIBERTAD Act, P.L. 104-114 ) of the right to file lawsuits against those trafficking in confiscated property in Cuba. In 2017, the State Department cut the staff of the U.S. Embassy in Havana by about two-thirds in response to unexplained injuries of U.S. diplomatic staff. (See " Cuba " section.) Since political unrest began to grow in Nicaragua in 2018, the Trump Administration has employed targeted sanctions against several individuals close to President Ortega due to their alleged ties to human rights abuses or significant corruption. (See " Nicaragua " section.) <2.2. Congress and Policy Toward the Region> Congress traditionally has played an active role in policy toward Latin America and the Caribbean in terms of both legislation and oversight. Given the region's geographic proximity to the United States, U.S. foreign policy toward the region and domestic policy often overlap, particularly in areas of immigration and trade. The 116 th Congress completed action on FY2019 foreign aid appropriations in February 2019 when it enacted the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). Amounts appropriated for key U.S. initiatives and countries in Latin America and the Caribbean exceeded the Administration's request by almost $600 million. Congress completed action on FY2020 foreign aid appropriations in December 2019 when it enacted the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), with amounts for key countries and regional programs once again significantly exceeding the Administration's request. Congress recently has begun consideration of the Administration's FY2021 foreign aid request. In January 2020, Congress completed action on implementing legislation for the USMCA ( P.L. 116-113 ). The agreement retains many of NAFTA's provisions and includes new provisions on the auto and dairy industries and some modernizing features. Before U.S. implementing legislation received final congressional approval in January 2020, the trade agreement was amended to address concerns of Congress regarding provisions related to labor (including enforcement), the environment, dispute settlement procedures, and intellectual property rights (IPR). On Venezuela, Congress has supported the Administration's efforts to sanction the Maduro government for its antidemocratic actions and to provide humanitarian assistance to Venezuelan migrants throughout the region. In December 2019, Congress enacted the Venezuela Emergency Relief, Democracy Assistance, and Development Act of 2019, or the VERDAD Act of 2019, in Division J of P.L. 116-94 . The measure incorporates provisions from S. 1025 , as reported by the Senate Foreign Relations Committee in June 2019, and some language or provisions from three bills on Venezuela passed by the House in March 2019: H.R. 854 , to authorize humanitarian assistance to the Venezuelan people; H.R. 920 , to restrict the export of defense articles and crime control materials; and H.R. 1477 , to require a threat assessment and strategy to counter Russian influence in Venezuela. In other legislative action, the House approved H.R. 549 in July 2019, which would provide TPS to Venezuelans in the United States. Congress included several provisions related to Latin America in the National Defense Authorization Act for Fiscal Year 2020 (FY2020 NDAA; P.L. 116-92 ), signed into law in December 2019. Among the provisions are the following: Venezuela. Section 890 prohibits the Department of Defense (DOD) from entering into a contract for the procurement of goods or services with any person that has business operations with the Maduro regime in Venezuela. Western Hemisphere Resources. Section 1265 provides that the Secretary of Defense shall seek to enter into a contract with an independent nongovernmental institute that has recognized credentials and expertise in national security and military affairs to conduct an accounting and an assessment of the sufficiency of resources available to the U.S. Southern Command, the U.S. Northern Command, the Department of State, and the U.S. Agency for International Development (USAID) to carry out their respective missions in the Western Hemisphere. Among other matters, the assessment is required to include "a list of investments, programs, or partnerships in the Western Hemisphere by China, Iran, Russia, or other adversarial groups or countries that threaten the national security of the United States." A report on the assessment is due to Congress within one year, in unclassified form, but may include a classified annex. Brazil. Section 1266 requires the Secretary of Defense, in coordination with the Secretary of State, to submit a report to Congress regarding the human rights climate in Brazil and U.S.-Brazilian security cooperation. Guatemala. Section 1267 requires the Secretary of Defense to certify, prior to the transfer of any vehicles to the Guatemalan government, that the government has made a credible commitment to use such equipment only as intended. Honduras. Section 1268 requires the Secretary of Defense to enter into an agreement with an independent institution to conduct an analysis of the human rights situation in Honduras. Central America and Mexico. Section 5522 requires the Director of National Intelligence, in collaboration with other agencies, to submit within 90 days a comprehensive assessment of drug trafficking, human trafficking, and human smuggling activities in Central America and Mexico; the report may be in classified form, but if so, it shall contain an unclassified summary. Other bills and resolutions have passed either or both houses: Mexico. In January 2019, the House approved H.R. 133 , which would promote U.S.-Mexican economic partnership and cooperation, including a strategy to prioritize and expand educational and professional exchange programs with Mexico. The Senate approved the bill, amended, in January 2020, which included a new provision that would promote positive cross-border relations as a priority for advancing U.S. foreign policy and programs. Central America. The House approved H.R. 2615 , the United States-Northern Triangle Engagement Act, in July 2019, which would authorize foreign assistance to El Salvador, Guatemala, and Honduras to address the root causes of migration. The bill would also require the State Department to devise strategies to foster economic development, combat corruption, strengthen democracy and the rule of law, and improve security conditions in the region. Bolivia. The Senate approved S.Res. 35 in April 2019, expressing support for democratic principles in Bolivia and throughout Latin America. In January 2020, the Senate approved S.Res. 447 , expressing concerns about election irregularities and violence in Bolivia and supporting the convening of new elections. Argentina. Both houses approved resolutions, H.Res. 441 in July 2019 and S.Res. 277 in October 2019, commemorating the 25 th anniversary of the 1994 bombing of the Argentine-Israeli Mutual Association in Buenos Aires. Congressional committees have held almost 20 oversight hearings on the region, including on Venezuela, Central America (including the impact of U.S. aid cuts), relations with Colombia, human rights in Cuba, China's engagement in Latin America, environmental concerns in the Brazilian Amazon, repression in Nicaragua, and security cooperation with Mexico (see Appendix ). <3. Regional U.S. Policy Issues> <3.1. U.S. Foreign Aid> The United States provides foreign assistance to Latin American and Caribbean nations to support development and other U.S. objectives. U.S. policymakers have emphasized different strategic interests in the region at different times, from combating Soviet influence during the Cold War to promoting democracy and open markets, as well as countering illicit narcotics, since the 1990s. Over the past three years, the Trump Administration has sought to refocus U.S. assistance efforts in the region to address U.S. domestic concerns, such as irregular migration and transnational crime. The Trump Administration has also sought to cut U.S. assistance to Latin America and the Caribbean. In 2019, for example, the Administration withheld an estimated $405 million that Congress had appropriated for Central America in FY2018 and reprogrammed the funds to address other foreign policy priorities inside and outside the Western Hemisphere. (See " Central America's Northern Triangle ," below.) The Administration has proposed additional foreign assistance cuts in each of its annual budget proposals. For FY2020, the Administration requested approximately $1.2 billion to be provided to the region through foreign assistance accounts managed by the State Department and USAID, which is about $503 million (30%) less than the region received in FY2019 (see Table 3 ). The request would have cut funding for nearly every type of assistance provided to the region and would have reduced aid for most Latin American and Caribbean countries. The Administration's FY2020 budget proposal also would have eliminated the Inter-American Foundation, an independent U.S. foreign assistance agency that promotes grassroots development in the region. For FY2021, the Administration requested $1.4 billion for the region, which is about 18% less than Congress appropriated for FY2019, and again proposed eliminating the Inter-American Foundation. Congressional Action: After a partial government shutdown and a short-term continuing resolution ( P.L. 116-5 ), the 116 th Congress completed action on FY2019 foreign aid appropriations in February 2019. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) included an estimated $1.69 billion of foreign assistance for Latin America and the Caribbean. That amount was slightly more than the $1.67 billion appropriated for the region in FY2018 and nearly $600 million more than the Trump Administration requested for the region. Although the House passed an FY2020 foreign aid appropriations bill in June 2019 ( H.R. 2740 , H.Rept. 116-78 ), and the Senate Appropriations Committee reported its bill in September 2019 ( S. 2583 , S.Rept. 116-126 ), neither measure was enacted before the start of FY2020. Instead, Congress passed two continuing resolutions ( P.L. 116-59 and P.L. 116-69 ), which funded foreign aid programs in Latin America and the Caribbean at the FY2019 level between October 1, 2019, and December 20, 2019, when President Trump signed into law the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). The act and the accompanying explanatory statement do not specify appropriations levels for every Latin American and Caribbean nation. Nevertheless, the amounts designated for key U.S. initiatives in Central America, Colombia, and Mexico significantly exceed the Administration's request. The act provides "not less than" $519.9 million to continue implementation of the U.S. Strategy for Engagement in Central America, which is about $75 million more than the Administration requested but $8 million less than Congress appropriated for the initiative in FY2019. "not less than" $448.3 million to support the peace process and security and development efforts in Colombia, which is about $104 million more than the Administration requested and $27 million more than Congress appropriated for Colombia in FY2019. $157.9 million to support security and rule-of-law efforts in Mexico, which is $79 million more than the Administration requested but about $5 million less than Congress appropriated for Mexico in FY2019. The act also provides $37.5 million for the Inter-American Foundation to continue its grassroots development programs throughout the region. Resolutions have been introduced in both houses (H.Res. 649 and S.Res. 297 ) to commend the Inter-American Foundation on its 50 th anniversary, recognize its contributions to development and to advancing U.S. national interests, and pledge continued support for the agency's work. For additional information, see CRS Report R45547, U.S. Foreign Assistance to Latin America and the Caribbean: FY2019 Appropriations , by Peter J. Meyer and Edward Y. Gracia. <3.2. Drug Trafficking and Criminal Gangs> Latin America and the Caribbean feature prominently in U.S. counternarcotics policy due to the region's role as a source and transit zone for several illicit drugs destined for U.S. markets cocaine, marijuana, methamphetamine, and opiates (plant-based and synthetic). Heroin abuse and synthetic opioid-related deaths in the United States have reached epidemic levels, raising questions about how to address foreign sources of opioids particularly Mexico, which has experienced an uptick in opium poppy cultivation and the production of heroin and fentanyl (a synthetic opioid). According to the State Department, over 90% of heroin seized and sampled in the United States comes from Mexico and increasingly has included fentanyl. Policymakers also are concerned that methamphetamine and cocaine overdoses in the United States are on an upward trajectory. Rising cocaine usage occurred as coca cultivation and cocaine production in Colombia, which supplies roughly 89% of cocaine in the United States, reached record levels in 2017 before leveling off in 2018. Whereas Mexico, Colombia, Peru, and most other source and transit countries in the region work closely with the United States to combat drug production and interdict illicit flows, the Venezuelan government does not. Public corruption in Venezuela also has made it easier for drug trafficking organizations to smuggle illicit drugs. Contemporary drug trafficking and transnational crime syndicates have contributed to degradations in citizen security and economic development in some countries, often resulting in high levels of violence and homicide. Despite efforts to combat the drug trade, many Latin American governments, particularly in Mexico and Central America a region through which roughly 93% of cocaine from South America transited in 2018 continue to suffer from weak criminal justice systems and overwhelmed law enforcement agencies. Government corruption, including high-level cooperation with criminal organizations, further frustrates efforts to interdict drugs, investigate and prosecute traffickers, and recover illicit proceeds. At the same time, a widespread perception particularly among Latin American observers is that U.S. demand for illicit drugs is largely to blame for the region's ongoing crime and violence problems. Criminal gangs with origins in southern California, principally the Mara Salvatrucha (MS-13) and the "18 th Street" gang, continue to undermine citizen security and subvert government authority in Central America. Gang-related violence has been particularly acute in El Salvador, Honduras, and urban areas in Guatemala, contributing to some of the highest homicide rates in the world. Although some gangs engage in local drug distribution, gangs generally do not have a role in transnational drug trafficking. Gangs have been involved in a range of other criminal activities, including extortion, money laundering, and weapons smuggling, and gang-related violence has fueled unauthorized migration to the United States. U.S. Policy. For more than 40 years, U.S. policy toward the region has focused on countering drug trafficking and reducing drug production in Latin America and the Caribbean. The largest support program, Plan Colombia, provided more than $10 billion to help Colombia combat both drug trafficking and rebel groups financed by the drug trade from FY2000 to FY2016. After Colombia signed a historic peace accord with the country's largest leftist guerrilla group, the Revolutionary Armed Forces of Colombia (FARC), the United States provided assistance to help implement the agreement. U.S. officials concerned about rising cocaine production have praised Colombian President Ivan Duque's willingness to restart aerial fumigation of coca crops and significantly scale up manual eradication. U.S. support to combat drug trafficking and reduce crime also has included a series of partnerships with other countries in the region: the M rida Initiative, which has led to improved bilateral security cooperation with Mexico; the Central America Regional Security Initiative (CARSI); and the Caribbean Basin Security Initiative (CBSI). During the Obama Administration, those initiatives combined U.S. antidrug and rule-of-law assistance with economic development and violence prevention programs intended to improve citizen security in the region. The Trump Administration's approach to Latin America and the Caribbean has focused heavily on U.S. security objectives. All of the aforementioned assistance programs have continued, but they place greater emphasis on combating drug trafficking, gangs, and other criminal groups than during the Obama Administration. The Trump Administration also has sought to reduce funding for each of the U.S. security assistance programs and has reprogrammed, withheld, or not yet obligated significant portions of assistance to Central America due to concerns that those governments have not adequately curbed unauthorized migration. President Trump has welcomed Mexico's assistance on migration enforcement, but the Administration noted in an FY2020 presidential determination issued in August 2019 that "without further progress over [this year], he could determine that Mexico has 'failed demonstrably' to meet its international drug control commitments." Such a determination could trigger U.S. foreign assistance cuts to Mexico. President Trump also has prioritized combating gangs, namely the MS-13, which the Department of Justice (DOJ) has named a top priority for U.S. law enforcement agencies. U.S. agencies, in cooperation with vetted units in Central America funded through CARSI, have brought criminal charges against thousands of MS-13 members in the United States. U.S. assistance that supports vetted units working with the U.S. Department of Homeland Security (DHS) and DOJ have been exempt from recent aid reductions for Central America. Congressional Action: The 116 th Congress has held hearings on opioids, which included consideration of heroin and fentanyl production in Mexico; corruption in the Americas; the importance of U.S. assistance to Central America (including CARSI); and relations with Colombia, Mexico, and Central America, including antidrug cooperation. Compared to FY2018, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided increased FY2019 resources for Colombia and Mexico, slightly less funding for CARSI, and stable funding for the CBSI. P.L. 116-6 provided $1.5 million to support the creation of a Western Hemisphere Drug Policy Commission to assess U.S. policy and make recommendations on how it might be improved. The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) provides more security and rule of law funding for Colombia and Mexico than the estimated FY2019 appropriations level, less funding for CARSI, and slightly more funding for the CBSI. The FY2020 NDAA ( P.L. 116-92 ) requires the Director of National Intelligence, in collaboration with other agencies, to submit within 90 days of enactment an assessment of drug trafficking, human trafficking, and human smuggling activities and how those activities influence migration in Mexico and the Northern Triangle. The FY2020 NDAA also establishes a Commission on Combating Synthetic Opioid Trafficking to report on, among other things, the scale of opioids coming from Mexico. For additional information, see CRS In Focus IF10578, Mexico: Evolution of the M rida Initiative, 2007-2020 , by Clare Ribando Seelke; CRS In Focus IF10578, Mexico: Evolution of the M rida Initiative, 2007-2020 , by Clare Ribando Seelke; CRS In Focus IF10400, Transnational Crime Issues: Heroin Production, Fentanyl Trafficking, and U.S.-Mexico Security Cooperation , by Clare Ribando Seelke and Liana W. Rosen; CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress , by Peter J. Meyer; CRS Report R43813, Colombia: Background and U.S. Relations , by June S. Beittel; and CRS In Focus IF10789, Caribbean Basin Security Initiative , by Mark P. Sullivan. <3.3. Trade Policy> The Latin American and Caribbean region is one of the fastest-growing regional trading partners for the United States. Economic relations between the United States and most of its trading partners in the region remain strong, despite challenges, such as President Trump's past threats to withdraw from NAFTA, tariff policy, diplomatic tensions, and high levels of violence in some countries in the region. The United States accounts for roughly 33% of the Latin American and Caribbean region's merchandise imports and 44% of its merchandise exports. Most of this trade is with Mexico, which accounted for 77% of U.S. imports from the region and 61% of U.S. exports to the region in 2019. In 2019, total U.S. merchandise exports to Latin America and the Caribbean were valued at $418.9 billion, down from $429.7 billion in 2018. U.S. merchandise imports were valued at $467.0 billion in 2019 (see Table 4 ). The United States strengthened economic ties with Latin America and the Caribbean over the past 24 years through the negotiation and implementation of FTAs. Starting with NAFTA in 1994, which will be replaced by the USMCA when it enters into force, the United States currently has six FTAs in force involving 11 Latin American countries: Mexico, Chile, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Panama, and Peru. NAFTA was significant because it was the first U.S. FTA with a country in the Latin American and Caribbean region, and it established new rules and disciplines that influenced future trade agreements on issues important to the United States, such as IPR protection, services trade, agriculture, dispute settlement, investment, labor, and the environment. In addition to FTAs, the United States has extended unilateral trade preferences to some countries in the region through several trade preference programs. The Caribbean Basin Economic Recovery Act (no expiration), for example, provides limited duty-free entry of select Caribbean products as a core element of the U.S. foreign economic policy response to uncertain economic and political conditions in the region. Several preference programs for Haiti, which expire in 2025, provide generous and flexible unilateral preferences to the country's apparel sector. Two other preference programs include the Caribbean Basin Trade Partnership Act (CBTPA), which expires in September 2020, and the Generalized System of Preferences (GSP), which expires in December 2020. The CBTPA extends preferences on apparel products to eligible Caribbean countries similar to those given to Mexico under NAFTA. The GSP provides duty-free tariff treatment to certain products imported from 120 designated developing countries throughout the world, including Argentina, Brazil, Ecuador, and other Latin American and Caribbean countries. In the 15 to 20 years after NAFTA, some of the largest economies in South America, such as Argentina, Brazil, and Venezuela, resisted the idea of forming comprehensive FTAs with the United States. That opposition may be changing. In September 2019, President Trump noted preliminary talks with Brazil for a trade agreement, and Brazilian officials recently stated that the country was ready for a trade deal similar to USMCA. Numerous other bilateral and plurilateral trade agreements throughout the Western Hemisphere do not include the United States. For example, the Pacific Alliance, a trade arrangement composed of Mexico, Peru, Colombia, and Chile, is reportedly moving forward on a possible trade arrangement with Mercosur, composed of Brazil, Argentina, Uruguay, and Paraguay. On June 28, 2019, the European Union (EU) and Mercosur reached a political agreement to negotiate an ambitious and comprehensive trade agreement. President Trump has made NAFTA renegotiation and modernization a priority of his Administration's trade policy. Early in his Administration, he viewed FTAs as detrimental to U.S. workers and industries, stating that NAFTA was "the worst trade deal" and repeatedly warning that the United States may withdraw from the agreement. The United States, Canada, and Mexico subsequently renegotiated NAFTA and concluded negotiations for USMCA on September 30, 2018. Mexico was the first country to ratify the agreement in June 2019 and the first country to approve the amended USMCA on December 12, 2019. The original text of USMCA was amended to address congressional concerns on labor, environment, IPR, and dispute settlement provisions. On January 16, 2020, Congress approved the agreement, and many expect Canada's parliament to ratify it in early 2020. The USMCA retains NAFTA's market opening provisions and most other provisions. The agreement makes notable changes to labor and environment provisions, market access provisions for autos and agriculture products, and rules, such as investment, government procurement, IPR, and dispute settlement; it adds new provisions on digital trade, state-owned enterprises, and currency misalignment. All parties must ratify the agreement and have laws and regulations in place to meet their USMCA commitments before the agreement can enter into force. In 2018, President Trump issued two proclamations imposing tariffs on U.S. imports of certain steel and aluminum products using presidential powers granted under Section 232 of the Trade Expansion Act of 1962. In doing so, the Administration added new challenges to U.S. trade relations with the region. The proclamations outlined the President's decisions to impose tariffs of 25% on steel and 10% on aluminum imports, with some flexibility on the application of tariffs by country. In May 2018, President Trump proclaimed Argentina and Brazil permanently exempt from the steel tariffs in exchange for quota agreements, but he threatened to impose tariffs again in December 2019. The United States imposed tariffs on steel and aluminum imports from Mexico on May 31, 2018, and Mexico subsequently imposed retaliatory tariffs on 71 U.S. products, covering an estimated $3.7 billion worth of trade. By May 2019, President Trump had exempted Mexico from steel and aluminum tariffs, and Mexico agreed to terminate its retaliatory tariffs. President Trump's January 2017 withdrawal from the proposed TPP, an FTA that included Mexico, Peru, and Chile as signatories, signified another change to U.S. trade policy. In March 2018, all TPP parties signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11), which essentially brought a modified TPP into effect. The TPP-11 has entered into force among seven countries Canada, Australia, Japan, Mexico, New Zealand, Singapore, and Vietnam. Chile and Peru expect to ratify the agreement eventually. Colombia has expressed plans to request entry into the agreement after it enters into force among all partners. Some observers contend that U.S. withdrawal from the proposed TPP could damage U.S. competitiveness and economic leadership in the region, whereas others see the withdrawal as a way to prevent lower-cost imports and potential job losses. Congressional Action: The 116 th Congress, in both its legislative and oversight capacities, has faced numerous trade policy issues related to NAFTA's renegotiation and the USMCA. The U.S. House of Representatives approved USMCA implementing legislation, H.R. 5430 , on December 19, 2019, by a vote of 385-41, and the Senate approved it on January 16, 2020, by a vote of 89-10; it was signed into law ( P.L. 116-113 ) on January 29, 2020. Lawmakers took an interest as to whether the Administration followed U.S. trade negotiating objectives and procedures as required by Trade Promotion Authority (Bipartisan Congressional Trade Priorities and Accountability Act of 2015, or TPA; P.L. 114-26 ). Some Members also considered issues surrounding the labor and environment provisions' enforceability, access to medicine, and economic effects. Other Members showed interest in how the USMCA may affect U.S. industries, especially the auto industry, as well as the overall effects on the U.S. and Mexican economies, North American supply chains, and trade relations with the Latin American and Caribbean region. Among other trade issues, legislation was introduced ( H.R. 991 and S. 2473 ) that would extend CBTPA benefits through September 2030. Regarding the Section 232 investigations on aluminum and steel imports, the impact of tariffs and retaliatory tariffs from Mexico on U.S. producers, domestic U.S. industries, and consumers raised numerous issues for Congress. Energy reform in Mexico, and the implications for U.S. trade and investment in energy, may continue to be of interest to Congress. Policymakers also may consider how U.S. trade policy is perceived by the region and whether it may affect multilateral trade issues and cooperation on matters regarding security and migration. Another issue relates to U.S. market share. If Mexico, Chile, Colombia, Peru, and Mercosur countries continue trade and investment liberalization efforts with other countries without the United States, doing so may open the door to more intra-trade and investment among certain Latin American and Caribbean countries, or possibly China and other Asian countries, which may affect U.S. exports. For additional information, see CRS In Focus IF10997, U.S.-Mexico-Canada (USMCA) Trade Agreement , by M. Angeles Villarreal and Ian F. Fergusson; CRS Report R44981, NAFTA and the United States-Mexico-Canada Agreement (USMCA) , by M. Angeles Villarreal and Ian F. Fergusson; CRS In Focus IF10038, Trade Promotion Authority (TPA) , by Ian F. Fergusson; CRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and Implications , by M. Angeles Villarreal; and CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress , coordinated by Rachel F. Fefer and Vivian C. Jones. <3.4. Migration Issues> Latin America's status as a leading source of both legal and unauthorized migration to the United States means that U.S. immigration policies significantly affect countries in the region and U.S. relations with their governments. Latin Americans comprise the vast majority of unauthorized migrants who have received relief from removal (deportation) through the TPS program and the DACA initiative; they also comprise a large percentage of recent asylum seekers. As a result, several U.S. immigration policy changes have concerned countries in the region. These include the following Trump Administration actions: ending TPS designations for Haiti, El Salvador, Nicaragua, and Honduras; rescinding DACA; and restricting access to asylum in the United States. In January 2019, the Administration launched the Migrant Protection Protocols (MPP), a program to require many migrants and asylum seekers processed at the Mexico-U.S. border to be returned to Mexico to await their immigration proceedings; the program is currently facing legal challenges but remains in place. Under a practice known as "metering," migrants may now be required to wait in Mexico until there is capacity to process them at a port of entry. The Administration also signed what it termed "asylum cooperative agreements" also referred to as "safe third country" agreements with Guatemala, El Salvador, and Honduras to allow the United States to transfer certain migrants who arrive to a U.S. border seeking asylum protection to apply for asylum in one of those countries. The factors that have driven legal and unauthorized U.S.-bound migration from Latin America are multifaceted, and some have changed over time. They include poverty and unemployment, political and economic instability, crime and violence, natural disasters, as well as relatively close proximity to the United States, familial ties in the United States, and relatively attractive U.S. economic conditions. As an example, Venezuela, a historically stable country with limited emigration to the United States, recently has become the top country of origin among those who seek U.S. asylum due to Venezuela's ongoing crisis. Migrant apprehensions at the southwest border had been steadily declining, reaching a 50-year low in 2017, but they began to rise in mid-2017. By FY2019, DHS apprehended 977,509 migrants, roughly 456,400 more than in FY2018. Unaccompanied children and families from the Northern Triangle, many of whom were seeking asylum, made up a majority of those apprehensions. (See " Central America's Northern Triangle " below.) During the first three months of FY2020, total apprehensions declined compared to FY2019, but apprehensions of Mexican adults surged. The Trump Administration's rhetoric and policies have tested U.S. relations with Mexico and the Northern Triangle countries. Mexico's President Andr s Manuel L pez Obrador agreed to shelter migrants affected by the MPP program and then, to avoid U.S. tariffs, allow the MPP to be expanded in Mexico and increase Mexico's immigration enforcement efforts, particularly on its southern border with Guatemala. DHS is now reportedly considering sending Mexican asylum seekers to Guatemala, despite Mexico's opposition to the policy. Amidst U.S. foreign aid cuts and tariff threats (in the case of Guatemala), the Northern Triangle countries signed "safe third country" agreements despite serious concerns about conditions in the three countries; DHS began implementing the agreement with Guatemala in November 2019, but the agreements with Honduras and El Salvador have not yet been implemented. Mexico and the Northern Triangle countries, which received some 91% of the 267,258 individuals removed from the United States in FY2019, have expressed concerns that removals could overwhelm their capacity to receive and reintegrate migrants. Central American countries also are concerned about the potential for increased removals of those with criminal records to exacerbate their security problems. Congressional Action: The 116 th Congress has provided foreign assistance to help address some of the factors fueling migration from Central America and support Mexico's migration management efforts in FY2019 ( P.L. 116-6 ) and FY2020 ( P.L. 116-94 ). In July 2019, the House passed H.R. 2615 , the United States-Northern Triangle Enhanced Engagement Act, which would require a report on the main drivers of migration from Central America. The 116 th Congress has also acted on bills that could affect significant numbers of individuals from Latin America and the Caribbean living in the United States. For example in June 2019, the House passed H.R. 6 , the American Dream and Promise Act of 2019, which would establish a process for certain unauthorized immigrants who entered the United States as children, such as DACA recipients, and for certain TPS recipients to obtain lawful permanent resident (LPR) status. In July 2019, the House passed H.R. 549 , the Venezuela TPS Act of 2019, which would provide TPS designation for Venezuela. In December 2019, the House passed H.R. 5038 , the Farm Workforce Modernization Act of 2019, which would create a new temporary immigration status (certified agricultural worker (CAW) status) for certain unauthorized and other agricultural workers and would establish a process for CAWs to become LPRs. For more information, see CRS Legal Sidebar LSB10402, Safe Third Country Agreements with Northern Triangle Countries: Background and Legal Issues , by Ben Harrington; CRS In Focus IF11151, Central American Migration: Root Causes and U.S. Policy , by Peter J. Meyer and Maureen Taft-Morales; CRS In Focus IF10215, Mexico's Immigration Control Efforts , by Clare Ribando Seelke; CRS Report R45266, The Trump Administration's "Zero Tolerance" Immigration Enforcement Policy , by William A. Kandel; CRS Report R45995, Unauthorized Childhood Arrivals, DACA, and Related Legislation , by Andorra Bruno; CRS Report RS20844, Temporary Protected Status: Overview and Current Issues , by Jill H. Wilson; CRS In Focus IF11363, Processing Aliens at the U.S.-Mexico Border: Recent Policy Changes , by Hillel R. Smith, Ben Harrington, and Audrey Singer; and CRS Report R46012, Immigration: Recent Apprehension Trends at the U.S. Southwest Border , by Audrey Singer and William A. Kandel. <4. Selected Country and Subregional Issues> <4.1. The Caribbean> <4.1.1. Caribbean Regional Issues> The Caribbean is a diverse region of 16 independent countries and 18 overseas territories, including some of the hemisphere's richest and poorest nations. Among the region's independent countries are 13 island nations stretching from the Bahamas in the north to Trinidad and Tobago in the south; Belize, which is geographically located in Central America; and Guyana and Suriname, located on the north-central coast of South America (see Figure 2 ). Pursuant to the United States-Caribbean Strategic Enhancement Act of 2016 ( P.L. 114-291 ), the State Department submitted a multiyear strategy for the Caribbean in 2017. The strategy established a framework to strengthen U.S.-Caribbean relations in six priority areas or pillars: (1) security, with the objectives of countering transnational crime and terrorist organizations and advancing citizen security; (2) diplomacy, with the goal of increasing institutionalized engagement to forge greater cooperation at the Organization of American States (OAS) and the U.N.; (3) prosperity, including the promotion of sustainable economic growth and private sector-led investment and development; (4) energy, with the goals of increasing U.S. exports of natural gas and the use of U.S. renewable energy technologies; (5) education, focusing on increased exchanges for students, teachers, and other professionals; and (6) health, including a focus on long-standing efforts to fight infectious diseases such as HIV/AIDS. In July 2019, the State Department issued a report to Congress on the implementation of its multiyear strategy. The report maintained that limited budgets and human resources have constrained opportunities for deepening relations, but funding for the strategy's security pillar has supported meaningful engagement and produced tangible results for regional and U.S. security interests. Because of their geographic location, many Caribbean nations are vulnerable to use as transit countries for illicit drugs from South America destined for the U.S. and European markets. Many Caribbean countries also have suffered high rates of violent crime, including murder, often associated with drug trafficking activities. In response, the United States launched the Caribbean Basin Security Initiative (CBSI) in 2009, a regional U.S. foreign assistance program seeking to reduce drug trafficking in the region and advance public safety and security. The program dovetails with the first pillar of the State Department's Caribbean multiyear strategy for U.S. engagement. From FY2010 through FY2020, Congress appropriated almost $677 million for the CBSI. These funds benefitted 13 Caribbean countries. The program has targeted assistance in five areas: (1) maritime and aerial security cooperation, (2) law enforcement capacity building, (3) border/port security and firearms interdiction, (4) justice sector reform, and (5) crime prevention and at-risk youth. Many Caribbean nations depend on energy imports and, over the past decade, have participated in Venezuela's PetroCaribe program, which supplies Venezuelan oil under preferential financing terms. The United States launched the Caribbean Energy Security Initiative (CESI) in 2014, with the goals of promoting a cleaner and more sustainable energy future in the Caribbean. The CESI includes a variety of initiatives to boost energy security and sustainable economic growth by attracting investment in a range of energy technologies through a focus on improved governance, increased access to finance, and enhanced coordination among energy donors, governments, and stakeholders. Many Caribbean countries are susceptible to extreme weather events such as tropical storms and hurricanes, which can significantly affect their economies and infrastructure. Recent scientific studies suggest that climate change may be increasing the intensity of such events. In September 2019, Hurricane Dorian caused widespread damage to the northwestern Bahamian islands of Grand Bahama and Abaco, with 70 confirmed deaths and many missing. The United States responded with nearly $34 million in humanitarian assistance, including almost $25 million provided through USAID. Prior to the hurricane, the State Department had launched a U.S.-Caribbean Resilience Partnership in April 2019, with the goal of increasing regional disaster response capacity and promoting resilience to natural disasters. In December 2019, USAID announced it was providing $10 million to improve local resilience to disasters in the Caribbean. Congressional Action: The 116 th Congress has continued to appropriate funds for Caribbean regional programs. Over the past two fiscal years, Congress has funded the CBSI at levels significantly higher than requested by the Trump Administration. For FY2019, Congress appropriated $58 million for the CBSI ($36.2 million was requested), in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). For FY2020, the Trump Administration requested $40.2 million for the CBSI, about a 30% drop from FY2019 appropriations. Ultimately, Congress appropriated not less than $60 million for the CBSI for FY2020 in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). For FY2021, the Administration is requesting $32 million for the CBSI, a cut of almost 47% from that appropriated for FY2020. Congress has also continued to provide funding for the CESI, appropriating $2 million in FY2019 ( P.L. 116-6 ) and $3 million in FY2020 ( P.L. 116-94 ). Regarding U.S. support for natural disasters, the report to the Department of State, Foreign Operations, and Related Programs appropriations bill, 2020 H.Rept. 116-78 to H.R. 2839 directed that bilateral economic assistance be made available to strengthen resilience to emergencies and disasters in the Caribbean. For additional information, see CRS In Focus IF10789, Caribbean Basin Security Initiative , by Mark P. Sullivan; CRS In Focus IF10666, The Bahamas: An Overview , by Mark P. Sullivan; CRS Insight IN11171, Bahamas: Response to Hurricane Dorian , by Rhoda Margesson and Mark P. Sullivan; CRS In Focus IF10407, Dominican Republic , by Clare Ribando Seelke; CRS In Focus IF11381, Guyana: An Overview , by Mark P. Sullivan; CRS In Focus IF10912, Jamaica , by Mark P. Sullivan; and CRS In Focus IF10914, Trinidad and Tobago , by Mark P. Sullivan. <4.1.2. Cuba> Political and economic developments in Cuba, a one-party authoritarian state with a poor human rights record, have been the subject of intense congressional concern since the Cuban revolution in 1959. Current Cuban President Miguel D az-Canel succeeded Ra l Castro in April 2018, but Castro is expected to head Cuba's Communist Party until 2021. In February 2019, almost 87% of Cubans approved a new constitution in a national referendum. The changes include the addition of an appointed prime minister to oversee government operations, limits on the president's tenure (two five-year terms) and age (60, beginning first term), and market-oriented economic reforms, including the right to private property and the promotion of foreign investment. The new constitution, however, ensures the state sector's dominance over the economy and the Communist Party's predominant role. The Cuban economy has registered minimal growth in recent years; the EIU estimates that the economy grew 0.5% in 2019 but will contract 0.7% in 2020. For more than a decade, Cuba has implemented gradual market-oriented economic policy changes but has not taken enough action to foster sustainable economic growth. The economy also has been hard-hit by the reimposition of, and increase in, U.S. economic sanctions in 2019 that impede international financial transactions with Cuba, as well as by Venezuela's economic crisis that has limited Venezuela's support to Cuba. Cuban officials reported that 4.3 million tourists visited Cuba in 2019, down from 4.7 million in 2018; the decline in tourism has hurt Cuba's nascent private sector. Since the early 1960s, the centerpiece of U.S. policy toward Cuba has consisted of economic sanctions aimed at isolating the Cuban government. Congress has played an active role in shaping policy toward Cuba, including the enactment of legislation strengthening, and at times easing, U.S. sanctions. In 2014, the Obama Administration initiated a policy shift moving away from sanctions toward a policy of engagement. This shift included restoring diplomatic relations (July 2015), rescinding Cuba's designation as a state sponsor of international terrorism (May 2015), and increasing travel, commerce, and the flow of information to Cuba implemented through regulatory changes (2015-2016). President Trump unveiled a new policy toward Cuba in 2017, introducing new sanctions and rolling back some of the Obama Administration's efforts to normalize relations. By 2019, the Trump Administration had largely abandoned the previous Administration's policy of engagement by significantly increasing economic sanctions to pressure the Cuban government on its human rights record and its military and intelligence support of the Nicol s Maduro regime in Venezuela. The Administration has taken actions to allow lawsuits against those trafficking in property confiscated by the Cuban government, provided for in the 1996 LIBERTAD Act ( P.L. 104-114 ), and tighten restrictions on travel to Cuba, including terminating cruise ship travel from the United States and U.S. flights to and from Cuban cities other than Havana. Congressional Action: The 116 th Congress has continued to fund democracy assistance for Cuban human rights and democracy activists and U.S.-government sponsored broadcasting to Cuba. For FY2019, Congress appropriated $20 million for democracy programs and $29.1 million for Cuba broadcasting ( P.L. 116-6 , H.Rept. 116-9 ). For FY2020, Congress appropriated $20 million for democracy programs and $20.973 million for Cuba broadcasting ( P.L. 116-94 , H.R. 1865 , Division G). The measure also includes several reporting requirements on Cuba set forth in H.Rept. 116-78 and S.Rept. 116-126 . Congress is now considering the Administration's FY2021 request of $10 million for Cuba democracy programs (a 50% decline from that appropriated in FY2020) and $12.973 for Cuba broadcasting (a 38% decline from that appropriated in FY2020). Much of the debate over Cuba in Congress throughout the past 20 years has focused on U.S. sanctions. Several bills introduced in the 116 th Congress would ease or lift U.S. sanctions: H.R. 213 (baseball); S. 428 (trade); H.R. 1898 / S. 1447 (financing for U.S. agricultural exports); H.R. 2404 (overall embargo); and H.R. 3960 / S. 2303 (travel). H.R. 4884 would direct the Administration to reinstate the Cuban Family Reunification Parole Program, which has been in limbo since 2017. Several resolutions would express concerns regarding Cuba's foreign medical missions ( S.Res. 14 / H.Res. 136 ); U.S. fugitives from justice in Cuba (H.Res. 92/ S.Res. 232 ); religious and political freedom in Cuba ( S.Res. 215 ); and the release of human rights activist Jos Daniel Ferrer and other members of the pro-democracy Patriotic Union of Cuba ( S.Res. 454 and H.Res. 774 ). In September 2019, the House Subcommittee on the Western Hemisphere, Civilian Security, and Trade (House Western Hemisphere Subcommittee) held a hearing on the human rights situation in Cuba (see Appendix ). For additional information, see CRS In Focus IF10045, Cuba: U.S. Policy Overview , by Mark P. Sullivan; and CRS Report R45657, Cuba: U.S. Policy in the 116th Congress , by Mark P. Sullivan. <4.1.3. Haiti> During the administration of President Jovenel Mo se, who began a five-year term in February 2017, Haiti has been experiencing growing political and social unrest, high inflation, and resurgent gang violence. The Haitian judiciary is conducting investigations into Mo se's possible involvement in money laundering, irregular loan arrangements, and embezzlement; the president denies these allegations. In mid-2018, Mo se decided to end oil subsidies, which, coupled with deteriorating economic conditions, sparked massive protests. Government instability has heightened since May 2019, when the Superior Court of Auditors delivered a report to the Haitian Senate alleging Mo se had embezzled millions of dollars. Mass demonstrations have continued, calling for an end to corruption, the provision of government services, and Mo se's resignation. Mo se has said it would be irresponsible of him to resign, and that he will not do so. He has called repeatedly for dialogue with the opposition. Haiti's elected officials have exacerbated the ongoing instability by not forming a government. The president, who is elected directly by popular elections, is head of state and appoints the prime minister, chosen from the majority party in the National Assembly. The prime minister serves as head of government. The first two prime ministers under Mo se resigned. The Haitian legislature did not confirm the president's subsequent two nominees for prime minister. Some legislators actively prevented a vote by absenting themselves to prevent a quorum being met or by other, sometimes violent, tactics. Nevertheless, a legislative motion to impeach the president did not pass. Because the legislature also did not pass an elections law, parliamentary elections scheduled for October 2019 have been postponed indefinitely. Mo se is now ruling by decree. As of January 13, 2020, the terms of the entire lower Chamber of Deputies and two-thirds of the Senate expired, as did the terms of all local government posts, without newly elected officials to take their place. Currently, there is no functioning legislature. When the legislature's terms expired in January 2015 because the government had not held elections, then-President Michel Martelly ruled by decree for over a year, outside of constitutional norms. On March 2, 2020, President Mo se appointed a new prime minister, Joseph Jouthe, by decree. Since January 2020, the U.N., the OAS, and the Vatican have been facilitating a dialogue among the government, opposition, civil society, and private sector to establish a functioning government, develop a plan for reform, create a constitutional revision process, and set an electoral calendar. The Trump Administration supports the efforts to break the political impasse, but states that "while constitutional reforms are necessary and welcome, they must not become a pretext to delay elections." Haiti has received high levels of U.S. assistance for many years given its proximity to the United States and its status as the poorest country in the hemisphere. In recent years, it was the second-largest recipient of U.S. aid in the region, after Colombia. Since a peak in 2010, the year a massive earthquake hit the country, aid to Haiti has been declining steadily. Since 2014, a prolonged drought and a hurricane have severely affected Haiti's food supply. Haiti continues to struggle against a cholera epidemic inadvertently introduced by U.N. peacekeepers in 2010. The U.N. has had a continuous presence in Haiti since 2004, recently shifting from peacekeeping missions to a political office, and authorized its Integrated Office in Haiti for an initial one-year period beginning in October 2019. The office's mandate is to protect and promote human rights and to advise the government of Haiti on strengthening political stability and good governance through support for an inclusive inter-Haitian national dialogue. With the support of U.N. forces and U.S. and other international assistance, the Haitian National Police (HNP) force has become increasingly professional and has taken on responsibility for domestic security. New police commissariats have given more Haitians access to security services, but with 14,000-15,000 officers, the HNP remains below international standards for the size of the country's population. It is also underfunded. According to the U.N., the HNP has committed human rights abuses, including extrajudicial killings. Congressional Action : The Trump Administration's FY2020 request for aid for Haiti totaled $145.5 million, a 25% reduction from the estimated $193.8 million provided to Haiti in FY2019. The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) contains several provisions related to Haiti, including that aid may be provided to Haiti only through the regular notification procedures. Under the act, Economic Support Fund assistance for Haiti may not be made available for assistance to the Haitian central government unless the Secretary of State certifies and reports to the Committees on Appropriations that the government is taking effective steps to strengthen the rule of law, combat corruption, increase government revenues, and resolve commercial disputes. The act provides budget authority for $51 million in Development Assistance, including $8.5 million for reforestation; it also provides $10 million in International Narcotics Control and Law Enforcement funds for prison assistance, prioritizing improvements to meet basic sanitation, medical, nutritional, and safety needs at Haiti's National Penitentiary. The measure also prohibits the provision of appropriated funds for assistance to Haiti's armed forces. The House Western Hemisphere Subcommittee held a hearing on U.S. policy toward Haiti in December 2019 (see Appendix ). Congress has begun consideration of the Administration's FY2021 foreign aid request for Haiti. The Administration requested $128.2 million, almost a 34% cut from the amount appropriated by Congress in FY2019. For background, see CRS Report R45034, Haiti's Political and Economic Conditions , by Maureen Taft-Morales. <4.2. Mexico and Central America> <4.2.1. Mexico> Mexico and the United States share a nearly 2,000-mile border and strong cultural, familial, and historical ties. Economically, the United States and Mexico have grown interdependent since NAFTA entered into force in 1994. The countries have also forged close security ties, as security conditions in Mexico affect U.S. national security and U.S. citizens living in or traveling to Mexico, particularly along the U.S.-Mexican border. On December 1, 2018, Andr s Manuel L pez Obrador, the populist leader of the National Regeneration Movement (MORENA) party, which he created in 2014, took office for a six-year term. L pez Obrador won 53% of the July 2018 vote, marking a shift away from Mexico's traditional parties, the Institutional Revolutionary Party (PRI) and the National Action Party (PAN). Elected on an anti-corruption platform, L pez Obrador is the first Mexican president in over two decades to enjoy majorities in both chambers of Congress. In addition to combating corruption, he pledged to build infrastructure in southern Mexico, revive the poor-performing state oil company, address citizen security through social programs, and adopt a foreign policy based on the principle of nonintervention. Given fiscal constraints, observers question whether his goals are attainable. Thirteen months into his term, President L pez Obrador enjoys high approval ratings (60% in January 2020), even though Mexico experienced record homicides and 0% economic growth in 2019. Mexicans have praised L pez Obrador's backing of new social programs, minimum wage increases, and willingness to tackle problems, such as oil theft by criminal groups. His decision to cut his own salary and public sector salaries generally has prompted resignations among experienced bureaucrats but has been popular with his constituency. Critics also have expressed concerns that L pez Obrador has centralized power and weakened institutions, relied too much on his own counsel, and dismissed journalists, regulatory agencies, and others critical of his policies. Despite some predictions to the contrary, U.S.-Mexico relations under the L pez Obrador government have thus far remained friendly. Tensions have emerged over several key issues, including trade disputes and tariffs, immigration and border security issues, U.S. citizens killed in Mexico (including the November 2019 massacre of an extended family of U.S.-Mexican citizens), and Mexico's decision to remain neutral regarding the crisis in Venezuela. The Mexican government has condemned anti-immigrant rhetoric and actions in the United States, including the August 2019 mass shooting in El Paso, TX, that resulted in the deaths of at least seven Mexican citizens. Security cooperation under the M rida Initiative has continued, including efforts to address the production and trafficking of opioids and methamphetamine, but the Trump Administration has pushed Mexico to improve its antidrug efforts and security policies. During L pez Obrador's administration, the Mexican government has accommodated most of the Trump Administration's border and asylum policy changes that have shifted the burden of interdicting migrants and offering asylum to Mexico. After enacting labor reforms and raising wages, the L pez Obrador administration achieved a significant foreign policy goal: U.S. congressional approval of implementing legislation for the proposed USMCA to replace NAFTA. (See " Trade Policy ," above.) Congressional Action: The 116 th Congress closely followed the Trump Administration's efforts to renegotiate NAFTA and recommended modifications to the proposed USMCA (on labor, the environment, and dispute settlement, among other topics) that led to the three countries signing an amendment to the agreement on December 10, 2019. The House approved the implementing legislation for the proposed USMCA in December 2019, and the Senate followed suit in January 16, 2020 ( P.L. 116-113 ). Both houses have taken action on H.R. 133 , the United States-Mexico Economic Partnership Act ( H.R. 133 ), which directs the Secretary of State to enhance economic cooperation and educational and professional exchanges with Mexico; the House approved the measure in January 2019, and the Senate approved an amended version in January 2020. The FY2020 NDAA ( P.L. 116-92 ) requires a classified assessment of drug trafficking, human trafficking, and alien smuggling in Mexico. Regarding foreign aid, in FY2019, Congress provided some $162 million for Mexico in P.L. 116-6 , with much of that designated for the M rida Initiative. Those increased resources aimed to help address the flow of U.S.-bound opioids. For FY2020 total aid amounts are not yet available Congress provided $150 million for accounts that fund the M rida Initiative in P.L. 116-94 (roughly $73 million above the Administration's budget request). For FY2021, the Administration has requested $63.8 million for Mexico, a decline of almost 61% compared to that provided in FY2019. In the wake of recent high profile massacres in Mexico, congressional concerns about the efficacy of U.S.-Mexican security cooperation and calls for oversight have increased as Congress begins consideration of the FY2021 foreign aid request. For additional information, see CRS Report R42917, Mexico: Background and U.S. Relations , by Clare Ribando Seelke; CRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and Implications , by M. Angeles Villarreal; CRS In Focus IF10997, U.S.-Mexico-Canada (USMCA) Trade Agreement , by M. Angeles Villarreal and Ian F. Fergusson; CRS In Focus IF10578, Mexico: Evolution of the M rida Initiative, 2007-2020 , by Clare Ribando Seelke; CRS Report R41576, Mexico: Organized Crime and Drug Trafficking Organizations , by June S. Beittel; CRS In Focus IF10215, Mexico's Immigration Control Efforts , by Clare Ribando Seelke; and CRS In Focus IF10400, Transnational Crime Issues: Heroin Production, Fentanyl Trafficking, and U.S.-Mexico Security Cooperation , by Clare Ribando Seelke and Liana W. Rosen. <4.2.2. Central America's Northern Triangle> The Northern Triangle region of Central America (see Figure 3 ) has received renewed attention from U.S. policymakers in recent years, as it has become a major transit corridor for illicit drugs and has surpassed Mexico as the largest source of irregular migration to the United States. In FY2019, U.S. authorities apprehended nearly 608,000 unauthorized migrants from El Salvador, Guatemala, and Honduras at the southwest border; 81% of those apprehended were families or unaccompanied minors, many of whom were seeking asylum. These narcotics and migrant flows are the latest symptoms of deep-rooted challenges in the region, including widespread insecurity, fragile political and judicial systems, and high levels of poverty and unemployment. The Obama Administration determined it was in the national security interests of the United States to work with Central American nations to improve security, strengthen governance, and promote prosperity in the region. Accordingly, the Obama Administration launched a new, whole-of-government U.S. Strategy for Engagement in Central America and requested a significant increase in foreign assistance for the region to support the strategy's implementation. Congress appropriated more than $2 billion of aid for Central America between FY2016 and FY2018, allocating most of the funds to El Salvador, Guatemala, and Honduras. Congress required a portion of the aid to be withheld, however, until the Northern Triangle governments took steps to improve border security, combat corruption, protect human rights, and address other congressional concerns. The Trump Administration initially maintained the U.S. Strategy for Engagement in Central America, but suspended most aid for the Northern Triangle in March 2019 due to the continued northward flow of migrants and asylum seekers from the region. The aid suspension forced U.S. agencies to begin closing down projects and canceling planned activities. Although Administration officials acknowledged that U.S. foreign aid programs had been "producing the results [they] were intended to produce" with regard to security, governance, and economic development, they argued that, "the only metric that matters is the question of what the migration situation looks like on the southern border." Over the course of 2019, the Trump Administration reprogrammed approximately $405 million of aid appropriated for the Northern Triangle to other foreign policy priorities while negotiating a series of "safe third country" agreements (also known as asylum cooperative agreements) with El Salvador, Guatemala, and Honduras. Under the agreement with Guatemala, the United States has begun sending some individuals to Guatemala to apply for protection there rather than in the United States; similar agreements with El Salvador and Honduras are awaiting implementation. The Trump Administration has released some previously suspended assistance, primarily for programs to counter transnational crime and improve border security, as the new agreements have gone into effect. For FY2021, the Administration maintains that it is requesting almost $377 million for Central America if countries in the region continue to take action to stem unauthorized migration. The Administration's Congressional Budget Justification, however, does not specify request amounts for the three Northern Triangle countries or the foreign affairs accounts from which the assistance would come. Congressional Action: The 116 th Congress has demonstrated continued support for the U.S. Strategy for Engagement in Central America but has reduced annual funding for the initiative. The Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) provided an estimated $527.6 million for the Central America strategy, which is about $92 million more than the Trump Administration requested. The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) provides $519.9 million for the initiative, which is about $75 million more than the Trump Administration requested. Both appropriations measures maintained conditions on U.S. assistance to the central governments of the Northern Triangle. Congress has also sought to improve the effectiveness of the Central America strategy. The Senate Foreign Relations Committee, House Foreign Affairs Committee, and House Western Hemisphere Subcommittee each held oversight hearings to assess U.S. policy and foreign assistance in Central America (see Appendix ). The United States-Northern Triangle Enhanced Engagement Act ( H.R. 2615 ), passed by the House in July 2019, would require the State Department, in coordination with other agencies, to develop five-year strategies to support inclusive economic growth, combat corruption, strengthen democratic institutions, and improve security conditions in the Northern Triangle. The measure would also authorize $577 million for the Central America strategy in FY2020, including "not less than" $490 million for the Northern Triangle. Other measures introduced in the 116 th Congress that would authorize certain types of assistance and guide U.S. policy in the region include the Central America Reform and Enforcement Act ( S. 1445 ), the Northern Triangle and Border Stabilization Act ( H.R. 3524 ), and the Central American Women and Children Protection Act of 2019 ( H.R. 2836 / S. 1781 ). Congress has continued to express concerns about corruption and human rights abuses in the region. P.L. 116-94 provides $45 million for offices of attorneys general and other entities and activities to combat corruption and impunity in Central America. Congress allocated $3.5 million of those funds to the OAS-backed Mission to Support the Fight against Corruption and Impunity in Honduras (MACCIH); Honduran President Juan Orlando Hern ndez allowed the MACCIH's mandate to expire in January 2020, ignoring repeated calls for the mission's renewal from Members of Congress and the Trump Administration. P.L. 116-94 also includes $20 million for combating sexual and gender-based violence in the region, as well as a total of $3 million for the offices of the U.N. High Commissioner for Human Rights in Guatemala and Honduras and El Salvador's National Commission for the Search of Persons Disappeared in the Context of the Armed Conflict. Several other legislative measures also include provisions intended to address corruption and human rights abuses in the Northern Triangle. The FY2020 NDAA ( P.L. 116-92 ) requires DOD to certify, prior to the transfer of any vehicles to the Guatemalan government, that the government has made a credible commitment to use such equipment only as intended. The act also requires DOD to enter into an agreement with an independent institution to conduct an analysis of the human rights situation in Honduras. Other measures introduced in the 116 th Congress addressing corruption and human rights include the Guatemala Rule of Law Accountability Act ( H.R. 1630 / S. 716 ) and the Berta Caceres Human Rights in Honduras Act ( H.R. 1945 ). For additional information, see CRS Report R44812, U.S. Strategy for Engagement in Central America: Policy Issues for Congress , by Peter J. Meyer; CRS In Focus IF10371, U.S. Strategy for Engagement in Central America: An Overview , by Peter J. Meyer; CRS In Focus IF11151, Central American Migration: Root Causes and U.S. Policy , by Peter J. Meyer and Maureen Taft-Morales; CRS Report R43616, El Salvador: Background and U.S. Relations , by Clare Ribando Seelke; CRS Report R42580, Guatemala: Political and Socioeconomic Conditions and U.S. Relations , by Maureen Taft-Morales; CRS Report RL34027, Honduras: Background and U.S. Relations , by Peter J. Meyer; and CRS Insight IN11211, Corruption in Honduras: End of the Mission to Support the Fight Against Corruption and Impunity in Honduras (MACCIH) , by Peter J. Meyer. <4.2.3. Nicaragua> President Daniel Ortega, aged 74 in early 2020, has been suppressing popular unrest in Nicaragua in a manner reminiscent of Anastasio Somoza, the dictator he helped overthrow in 1979 as a leader of the leftist Sandinista National Liberation Front (FSLN). Ortega served as president from 1985 to 1990, during which time the United States backed right-wing insurgents known as contras in an attempt to overthrow the Sandinista government. In the early 1990s, Nicaragua began to establish democratic governance. Democratic space has narrowed as the FSLN and Ortega have consolidated control over the country's institutions, including while Ortega served as an opposition leader in the legislature from 1990 until 2006. Ortega reclaimed the presidency in 2007 and has served as president for the past 13 years. Until recently, for many Nicaraguans, Ortega's populist social welfare programs that improved their standard of living outweighed his authoritarian tendencies and self-enrichment. Similarly, for many in the international community, the relative stability in Nicaragua outweighed Ortega's antidemocratic actions. Ortega's long-term strategy to retain control of the government began to unravel in 2018 when his proposal to reduce social security benefits triggered protests led by a wide range of Nicaraguans. The government's repressive response led to an estimated 325-600 extrajudicial killings, torture, political imprisonment, suppression of the press, and thousands of citizens going into exile. The government says it was defending itself from coup attempts. The crisis also undermined economic growth in the hemisphere's second poorest country. The Nicaraguan economy contracted by 5.1% in 2019, and some economists estimate the economy will contract a further 1.5% in 2020. The international community has sought to hold the Ortega government accountable for human rights abuses and facilitate the reestablishment of democracy in Nicaragua. In July 2018, an Inter-American Commission on Human Rights team concluded that the Nicaraguan security forces' actions could be considered crimes against humanity. The OAS High Level Commission on Nicaragua concluded in November 2019 that the government's actions "make the democratic functioning of the country impossible," in violation of Nicaragua's obligations under Article 1 of the Inter-American Democratic Charter. The Nicaragua Human Rights and Anticorruption Act of 2018 ( P.L. 115-335 ), effectively blocks access to new multilateral lending to Nicaragua. The Trump Administration has imposed sanctions against 16 high-level officials, including Vice President Rosario Murillo. On March 5, 2020, the Trump Administration imposed sanctions against the Nicaraguan National Police for its role in serious human rights abuses. Dialogue between the government and the opposition collapsed in 2019 and has not resumed. Congressional Action: The 116 th Congress remains concerned about the erosion of democracy and human rights abuses in Nicaragua. The Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) appropriates $10 million for foreign assistance programs to promote democracy and the rule of law in Nicaragua. For FY2021, the Administration has requested $10 million for democracy and civil society programs in Nicaragua. In December 2019, the House Foreign Affairs Committee ordered H.Res. 754 to be reported favorably by unanimous consent to the full House, and the full House approved the measure on March 9, 2020. The resolution expresses the sense of the House of Representatives that the United States should continue to support the people of Nicaragua in their peaceful efforts to promote democracy and human rights and to use the tools under U.S. law to increase political and financial pressure on the Ortega government. In June 2019, the House Western Hemisphere Subcommittee held a hearing on the Nicaraguan government's repression of dissent (see Appendix ). <4.3. South America> <4.3.1. Argentina> Current President Alberto Fern ndez of the center-left Peronist Frente de Todos (FdT, Front for All) ticket won the October 2019 presidential election and was inaugurated to a four-year term in December 2019. He defeated incumbent President Mauricio Macri of the center-right Juntos por el Cambio (JC, Together for Change) coalition by a solid margin of 48.1% to 40.4% but by significantly less than the 15 to 20 percentage points predicted by polls. The election also returned to government former leftist Peronist President Cristina Fern ndez de Kirchner (2007-2015), who ran on the FdT ticket as vice president. Argentina's economic decline in 2018 and 2019, with high inflation and increasing poverty, was the major factor in Macri's electoral defeat. Macri had ushered in economic policy changes in 2016-2017 that lifted currency controls, reduced or eliminated agricultural export taxes, and reduced electricity, water, and heating subsidies. In 2018, as the economy faced pressure from a severe drought and large budget deficits, the IMF supported the government with a $57 billion program. Macri's economic reforms and IMF support were not enough to stem Argentina's economic decline, and the government reimposed currency controls and took other measures to stabilize the economy. President Fern ndez faces an economy in crisis, with a recession that is expected to extend into 2020, high poverty, and a high level of unsustainable public debt requiring restructuring. He has pledged to restructure Argentina's debt by the end of March 2020, and he has opened talks with bondholders and other creditors, including the IMF. Fern ndez also has rolled out several measures, including a food program and price controls on basic goods, aimed at helping low-income Argentines cope with inflation and increased poverty. U.S. relations with Argentina were strong under the Macri government, marked by increasing engagement on a range of bilateral, regional, and global issues. After Argentina's 2019 presidential race, Secretary of State Mike Pompeo said that the United States looked forward to working with the Fern ndez administration to promote regional security, prosperity, and the rule of law. One point of contention in relations could be Argentina's stance on Venezuela. Under Macri, Argentina was strongly critical of the antidemocratic actions of the Maduro regime. The country joined with other regional countries in 2017 to form the Lima Group seeking a democratic resolution, and in 2019, recognized the head of Venezuela's National Assembly, Juan Guaid , as the country's interim president. In contrast, the Fern ndez government does not recognize Guaid as Venezuela's interim president, although it criticized Maduro's January 2020 actions preventing Guaid from being elected to a second term as head of the legislature. Congressional Action: Argentina has not traditionally received much U.S. foreign aid because of its relatively high per capita income level, but for each of FY2018-FY2020, Congress has appropriated $2.5 million in International Narcotics Control and Law Enforcement assistance to support Argentina's counterterrorism, counternarcotics, and law enforcement capabilities. Congress has expressed concern over the years about progress in bringing to justice those responsible for the July 1994 bombing of the Argentine-Israeli Mutual Association (AMIA) in Buenos Aires that killed 85 people. Both Iran and Hezbollah (the radical Lebanon-based Islamic group) allegedly are linked to the attack, as well as to the 1992 bombing of the Israeli Embassy in Buenos Aires that killed 29 people. As the 25 th anniversary of the AMIA bombing approached in July 2019, the House approved H.Res. 441, reiterating condemnation of the attack and expressing strong support for accountability; the Senate followed suit in October 2019 when it approved S.Res. 277 . For additional information, see CRS In Focus IF10932, Argentina: An Overview , by Mark P. Sullivan; CRS In Focus IF10991, Argentina's Economic Crisis , by Rebecca M. Nelson; and CRS Insight IN11184, Argentina's 2019 Elections , by Mark P. Sullivan and Angel Carrasquillo Benoit. <4.3.2. Bolivia> Bolivia experienced relative stability and prosperity from 2006 to 2019, but as governance standards weakened, relations with the United States deteriorated under populist President Evo Morales. Morales was the country's first indigenous president and leader of the Movement Toward Socialism (MAS) party. On November 10, 2019, President Morales resigned and sought protection abroad (first in Mexico and then in Argentina) after weeks of protests alleging fraud in the October 20, 2019, election in which he had sought a fourth term. After three individuals in line to succeed Morales also resigned, opposition Senator Jeanine A ez, formerly second vice president of the senate, declared herself senate president and then interim president on November 12. Bolivia's constitutional court recognized her succession. In late November, the MAS-led Congress unanimously approved an electoral law to annul the October elections and select a new electoral tribunal. On January 3, 2020, the reconstituted tribunal scheduled new presidential and legislative elections for May 3, 2020. A second-round presidential contest would likely occur, if needed, on June 14. The situation in Bolivia remains volatile. On January 24, 2020, Interim President A ez announced her intention to run in the May presidential election, abandoning her earlier pledge to preside over a caretaker government focused on convening credible elections. Even before she announced her candidacy, observers had criticized A ez for exceeding her mandate by reversing several MAS foreign policy positions and bringing charges of sedition against Morales and other former MAS officials. The Trump Administration has sought to bolster ties with the A ez government while expressing support for "free, fair, transparent, and inclusive elections." U.S. officials have praised the A ez government for expelling Cuban officials and recognizing Venezuela's Guaid government. In January 2020, President Trump waived restrictions on U.S. assistance to Bolivia, and a multiagency team traveled to the country to assess what type of election support U.S. agencies might offer the interim government. Congressional Action: Members of the 116 th Congress have expressed concerns about the situation in Bolivia. S.Res. 35 , approved in April 2019, expressed concern over Morales's efforts to circumvent term limits in Bolivia and called on his government to allow electoral bodies to administer the October 2019 elections in accordance with international norms. Although some Members condemned the ouster of Morales as a "coup," most have focused on ensuring a democratic transition. In January 2020, the Senate agreed by unanimous consent to S.Res. 447 , expressing concerns about election irregularities and violence in Bolivia, urging the Bolivian government to protect human rights and promptly convene new elections, and encouraging the U.S. State Department and the OAS to help ensure the integrity of the electoral process. For more information, see CRS Insight IN11198, Bolivia Postpones May Elections Amidst COVID-19 Outbreak , by Clare Ribando Seelke; and CRS In Focus IF11325, Bolivia: An Overview , by Clare Ribando Seelke. <4.3.3. Brazil> Occupying almost half of South America, Brazil is the fifth-largest and the fifth-most populous country in the world. Given its size and tremendous natural resources, Brazil has long had the potential to become a world power. Its rise to prominence has been hindered, however, by uneven economic performance and political instability. After experiencing a period of strong economic growth and increased international influence during the first decade of the 21 st century, Brazil has struggled with a series of domestic crises in recent years. The economy fell into its worst recession on record in 2014; the recovery since 2017 has been slow, with annual economic growth averaging 1% and the unemployment rate stuck above 11%. The political environment has also deteriorated as a sprawling corruption investigation underway since 2014 has implicated politicians from across the political spectrum. Those combined crises contributed to the controversial impeachment and removal from office of President Dilma Rousseff (2011-2016) and discredited much of the country's political class, paving the way for right-wing populist Jair Bolsonaro to win the presidency in October 2018. Since taking office in January 2019, President Bolsonaro has maintained his political base's support by taking socially conservative stands on cultural issues and proposing hardline security policies to reduce crime and violence. He has also begun enacting economic and regulatory reforms favored by international investors and Brazilian businesses. His confrontational approach to governance has alienated many potential allies, however, hindering the enactment of his policy agenda. Many Brazilians and international observers are concerned that Bolsonaro's environmental policies are contributing to increased deforestation in the Brazilian Amazon, and that his frequent verbal attacks against the press, nongovernmental organizations (NGOs), and other government branches are weakening democracy. The Bolsonaro administration's foreign policy has focused on forging closer ties to the United States. Brazil has partially abandoned its traditional commitment to autonomy in foreign affairs as Bolsonaro has supported the Trump Administration on a variety of issues, including the crisis in Venezuela, the U.S. trade embargo against Cuba, and the U.S. killing of Iranian military commander Qasem Soleimani. On other issues, such as commercial ties with China, Bolsonaro has adopted a more pragmatic approach intended to ensure continued access to major export markets. In 2019, President Trump designated Brazil as a major non-NATO ally for the purposes of the Arms Export Control Act (22 U.S.C. 2751 et seq.), offering Brazil privileged access to the U.S. defense industry and increased joint military exchanges, exercises, and training. President Trump also signed several agreements with President Bolsonaro intended to strengthen bilateral commercial ties. Some Brazilian analysts have questioned the benefits of partnership with the United States due to the Trump Administration's decision to maintain import restrictions on Brazilian beef until February 2020, and the Administration's threats to impose tariffs on other key Brazilian products, such as steel. Congressional Action: The 116 th Congress has continued long-standing U.S. support for environmental conservation efforts in Brazil. In September 2019, the House Western Hemisphere Subcommittee held an oversight hearing on preserving the Amazon rainforest that focused on the surge of fires and deforestation in the region (see Appendix ). Some Members of Congress also have introduced legislative proposals to address the situation. A Senate resolution ( S.Res. 337 ) would express concern about fires and illegal deforestation in the Amazon, call on the Brazilian government to strengthen environmental enforcement, and support continued U.S. assistance to the Brazilian government and NGOs. The Act for the Amazon Act ( H.R. 4263 ) would take a more punitive approach. The act would ban the importation of certain fossil fuels and agricultural products from Brazil, prohibit certain types of military-to-military engagement and security assistance to Brazil, and forbid U.S. agencies from entering into free trade negotiations with Brazil. Congress ultimately appropriated $15 million for foreign assistance programs in the Brazilian Amazon, including $5 million to address fires in the region, in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ). That amount is $4 million more than Congress appropriated for environmental programs in the Brazilian Amazon in the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ). Congress has also expressed concerns about the state of democracy and human rights in Brazil. A provision of the FY2020 NDAA ( P.L. 116-92 ) directs the Secretary of Defense, in coordination with the Secretary of State, to submit a report to Congress regarding the human rights climate in Brazil and U.S.-Brazilian security cooperation. Some Members have also called for changes to U.S. policy. A resolution introduced in September 2019 expressing profound concerns about threats to human rights, the rule of law, democracy, and the environment in Brazil (H.Res. 594) would call for the United States to rescind Brazil's designation as a major non-NATO ally and suspend assistance to Brazilian security forces, among other actions. For additional information, see CRS Report R46236, Brazil: Background and U.S. Relations , by Peter J. Meyer; and CRS In Focus IF11306, Fire and Deforestation in the Brazilian Amazon , by Pervaze A. Sheikh et al. <4.3.4. Colombia> Colombia is a key U.S. ally in Latin America. Because of the country's prominence in illegal drug production, the United States and Colombia have forged a close relationship over the past two decades to respond to mutual challenges. Focused initially on counternarcotics, and later on counterterrorism, a program called Plan Colombia laid the foundation for a security partnership between the two countries. Plan Colombia and its successor strategies ultimately became the basis for a 17-year U.S.-Colombian bilateral effort. President Juan Manuel Santos (2010-2018) made concluding a peace accord with the FARC the country's largest leftist guerrilla organization his government's primary focus. Following four years of formal peace negotiations, Colombia's Congress ratified the FARC-government peace accord in November 2016. During a U.N.-monitored demobilization effort in 2017, approximately 13,200 FARC (armed combatants and militia members) disarmed, demobilized, and began the process of reintegration. Iv n Duque, a former senator from the conservative Democratic Center party, who won the 2018 presidential election, was inaugurated to a four-year presidential term in August 2018. Duque campaigned as a critic of the peace accord. His approval ratings slipped early in his presidency, and his government faced weeks of protests and strikes in late 2019 focused on several administration policies, including what many Colombians view as a halting approach to peace accord implementation. Colombia continues to face major challenges, including a sharp increase of coca cultivation and cocaine production, vulnerability to a mass migration of Venezuelans fleeing the authoritarian government of Maduro, a spike in attacks on human rights defenders and social activists, and financial and other challenges enacting the ambitious peace accord commitments while controlling crime and violence by armed groups seeking to replace the FARC. President Duque has not succeeded in building a legislative coalition with other parties to implement major legislative reforms. In August 2019, a FARC splinter faction, which included the former lead FARC negotiator of the peace accord, announced its return to arms. In response, neighboring Venezuela appears to be sheltering and perhaps collaborating with FARC dissidents and guerrilla fighters of the National Liberation Army (ELN) formerly Colombia's second largest insurgency, now its largest. The ELN is also a U.S.-designated foreign terrorist organization. Some 3,000 former FARC fighters are estimated to have returned to armed struggle, and some have indicated they will cooperate with the ELN. The majority of demobilized FARC members remain committed to the peace process, despite numerous risks; the U.N. Verification Mission in Colombia reported in December 2019 that 77 demobilized FARC members were killed in 2019, with 173 in total killed since 2016. In 2017, Colombia cultivated a record 209,000 hectares of coca, amounting to a potential 921 metric tons of pure cocaine. In 2018, drug yields declined marginally, according to U.S. estimates, although the U.N. estimates for cocaine production were considerably higher. In meetings between President Duque and Secretary of State Pompeo in 2019, the governments reaffirmed a March 2018 commitment to work together to lower coca crop expansion and cocaine production by 50% by 2023. The U.S. government depends on the Colombian government to interdict much of the cocaine leaving the country, as it is mainly destined for the United States. President Duque campaigned on returning to forced aerial eradication (or spraying of coca crops) with the herbicide glyphosate. This strategy has been a central albeit controversial feature of U.S.-Colombian counterdrug cooperation for more than two decades. In late December 2019, President Duque announced that spraying was likely to restart in early 2020. Several analysts maintain that forced manual and aerial eradication of coca have not been successful strategies in Colombia, and they consider voluntary eradication and alternative development programs made viable by a gradually more present central government in rural communities as critical to consolidating peace. The United States remains Colombia's top trading partner. Colombia's economy, which grew 2.6% in 2018, is estimated to have grown by 3.1% in 2019, with foreign direct investment on the rise. Projections are that Colombia's growth rate will remain at 3% and above over the next few years, which makes it one of the strongest major economies in the region. Congressional Action: At the close of 2019, 1.6 million Venezuelans were residing in Colombia. This number could grow in 2020 to more than 3 million migrants depending how the political crisis in neighboring Venezuela unfolds. Since FY2017, the State Department has allocated more than $400 million to support countries receiving Venezuelan migrants, with over half almost $215 million in U.S. humanitarian and development assistance for Colombia, as the most severely affected country. (See " Venezuela ," below.) Congress appropriated more than $10 billion for Plan Colombia and its follow-on programs between FY2000 and FY2016, about 20% of which was funded through DOD. Subsequently, Congress provided $1.2 billion annually in additional assistance for Colombia from FY2017 through FY2019, including assistance funded through DOD. For FY2020, Congress provided $448 million in the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ) for State Department and USAID-funded programs in Colombia. For FY2021, the Administration has requested $412.9 million for Colombia, about a 2% decline from that appropriated in FY2019. For additional information, see CRS Report R43813, Colombia: Background and U.S. Relations , by June S. Beittel; CRS Report R44779, Colombia's Changing Approach to Drug Policy , by June S. Beittel and Liana W. Rosen; CRS Report RL34470, The U.S.-Colombia Free Trade Agreement: Background and Issues , by M. Angeles Villarreal and Edward Y. Gracia; and CRS Report R42982, Colombia's Peace Process Through 2016 , by June S. Beittel. <4.3.5. Venezuela> Venezuela remains in a deep crisis under the authoritarian rule of Nicol s Maduro of the United Socialist Party of Venezuela. Maduro, narrowly elected in 2013 after the death of Hugo Ch vez (president, 1999-2013), began a second term on January 10, 2019, that most Venezuelans and much of the international community consider illegitimate. Since January 2019, Juan Guaid , president of Venezuela's democratically elected, opposition-controlled National Assembly, has sought to form a transition government to serve until internationally observed elections can be held. The United States and 57 other countries recognize Guaid as interim president, but he has been unable to wrest Maduro from power, and he has faced increased danger since returning home from a January-February 2020 international tour, which included a meeting with President Trump. Some observers believe that National Assembly elections due this year might start an electoral path out of the current stalemate. Maduro has used repression to quash dissent; rewarded allies with income earned from illegal gold mining, drug trafficking, and other illicit activities; relied on support from Russia to avoid U.S. sanctions; and had his supporters use violence to prevent the National Assembly from convening. Venezuela's economy has collapsed. The country is plagued by hyperinflation, severe shortages of food and medicine, and electricity blackouts that have worsened an already dire humanitarian crisis. In April 2019, U.N. officials estimated that some 90% of Venezuelans are living in poverty. Many observers cite economic mismanagement and corruption as the key factors responsible for the economic crisis, but also acknowledge that economic sanctions have contributed to Venezuela's economic decline. U.N. agencies estimate that 4.8 million Venezuelans had fled the country as of December 2019, primarily to Latin American and Caribbean countries. U.S. Policy. As the situation in Venezuela has deteriorated under Maduro, the Trump Administration has imposed targeted sanctions on Venezuelan officials responsible for antidemocratic actions, human rights violations, and corruption, as well as increasingly strong financial sanctions against the Maduro government and the state oil company, its main source of income. Since recognizing Guaid as interim president in January 2019, the Administration has increased sanctions on the Maduro government and encouraged other countries to do so. The EU, Canada, and 11 Western Hemisphere countries who are states parties to the Inter-American Treaty of Reciprocal Assistance (Rio Treaty) have imposed targeted sanctions and travel bans on Maduro officials, but not broad economic sanctions as the United States has done. Those countries similarly oppose military intervention in Venezuela, a policy option that the Trump Administration reportedly considered early in 2019 but has not raised since. In January 2020, the Administration issued a statement backing a political solution that leads to the convening of free and fair presidential and parliamentary elections this year. International efforts to broker a political solution have not produced results. Although the U.S. statement encourages a focus on convening elections (as did the 2019 Norway-led talks between the Guaid and Maduro teams), it also says that those elections should be overseen by a "negotiated transitional government," a requirement that Maduro may not accept. Some observers maintain that any negotiations between Maduro and Guaid would need the backing of the United States and Russia in order to succeed. Since FY2017, the Administration has provided $472 million in humanitarian and development assistance, including $56 million for humanitarian relief activities in Venezuela, and the remainder to support regional countries sheltering most of the 4.8 million Venezuelans who have fled the crisis. The U.S. military has twice deployed a naval ship hospital to the region. In October 2019, the Administration signed an agreement with the Guaid government to provide $100 million in development assistance, including direct support for the interim government. Congressional Action: Congress has supported the Administration's efforts to restore democracy in Venezuela and provide humanitarian assistance to Venezuelans, although some Members have expressed concerns about the humanitarian effects of sanctions and about potential unauthorized use of the U.S. military in Venezuela. In February 2019, Congress enacted the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ), which provided $17.5 million for democracy programs in Venezuela. In December 2019, Congress enacted the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), which provided $30 million for democracy and human rights programs in Venezuela. The measure also incorporates provisions from S. 1025 , the VERDAD Act, authorizing $400 million in FY2020 humanitarian aid to Venezuela, codifying several types of sanctions on the Maduro government, and authorizing $17.5 million to support elections and a democratic transition in Venezuela. P.L. 116-94 also incorporates languages from several House-approved bills including H.R. 920 , restricting the export of defense articles to Venezuela; and H.R. 1477 , requiring a strategy to counter Russian influence in Venezuela. Congress has begun consideration of the Administration's $205 million FY2021 foreign aid request for Venezuela, an 811% increase over that appropriated in FY2019. According to the Administration, the assistance would provide support to democratic institutions following a potential political transition and would address the urgent health needs of the Venezuelan people. In July 2019, the House passed H.R. 549 , which would designate Venezuela for TPS. In December 2019, Congress enacted the FY2020 NDAA ( P.L. 116-92 ), which prohibits federal contracting with persons who do business with the Maduro government. House and Senate committees have held hearings on the situation in Venezuela and U.S. policy (see Appendix ). For additional information, see CRS In Focus IF10230, Venezuela: Political Crisis and U.S. Policy , by Clare Ribando Seelke; CRS In Focus IF10715, Venezuela: Overview of U.S. Sanctions , by Mark P. Sullivan; CRS Report R44841, Venezuela: Background and U.S. Relations , coordinated by Clare Ribando Seelke; CRS In Focus IF11216, Venezuela: International Efforts to Resolve the Political Crisis , by Clare Ribando Seelke; and CRS In Focus IF11029, The Venezuela Regional Migration Crisis , by Rhoda Margesson and Clare Ribando Seelke. <5. Outlook> Congress has begun to consider the Trump Administration's FY2021 $1.4 billion foreign aid budget request for the region. The 18% cut in overall funding compared to FY2019 foreign aid levels masks large cuts, ranging from 30-60%, for some countries and programs. In particular, the Trump Administration's linkage of aid to Central America to reductions in unauthorized migration from the region could be an area of contention with Congress as could the Administration's large increase in assistance to support a democratic transition in Venezuela that has yet to happen. On trade issues, the 116 th Congress may consider whether to extend a tariff preference program for certain Caribbean countries, the CBTPA which expires in September 2020 and the broader GSP for developing countries worldwide, which expires in December 2020. Looking ahead through 2020, the Latin America and Caribbean region faces significant challenges most prominently, Venezuela's ongoing political impasse and economic and humanitarian crisis, which has resulted in some 4 million Venezuelan refugees and migrants in the region. Upcoming elections in Bolivia in May 2020 are expected to be an important test of the country's political system in the aftermath of President Morales's resignation following protests ignited by widespread electoral fraud in October 2019. Social protests racked many Latin American countries in late 2019, and such unrest could continue in 2020 given that many of the underlying conditions still exist. These challenges and the appropriate U.S. policy responses may remain oversight issues for Congress. Other areas of congressional oversight and interest may include the ongoing difficult political situations in Haiti and Nicaragua, efforts to stem drug trafficking from South America, appropriate strategies to curb the flow of migrants from Central America, and U.S. policy toward Cuba. <5.1. Appendix. Hearings in the 116th Congress>

The United States maintains strong linkages with neighboring Latin America and the Caribbean based on geographic proximity and diverse U.S. interests, including economic, political, and security concerns. The United States is a major trading partner and source of foreign investment for many countries in the region, with free-trade agreements enhancing economic linkages with 11 countries. The region is a large source of U.S. immigration, both legal and illegal; proximity and economic and security conditions are major factors driving migration. Curbing the flow of illicit drugs has been a key component of U.S. relations with the region for more than four decades and currently involves close security cooperation with Mexico, Central America, and the Caribbean. U.S. support for democracy and human rights in the region has been long-standing, with particular current focus on Cuba, Nicaragua, and Venezuela. Under the Trump Administration, U.S. relations with Latin America and the Caribbean have moved toward a more confrontational approach from one of engagement and partnership during past Administrations. Since FY2018, the Administration's proposed foreign aid budgets for the region would have cut assistance levels significantly—the FY2021 request would cut aid to the region by 18%. (A large increase for Venezuela masks significantly larger cuts for many countries and programs.) To deter increased unauthorized migration from Central America, the Administration has used a variety of immigration policy tools (including Migrant Protection Protocols and "safe third country" agreements), as well as aid cuts and threats of increased U.S. tariffs and taxes on remittances. Other Administration actions on immigration include efforts to end the deportation relief program known as Deferred Action for Childhood Arrivals (DACA) and Temporary Protected Status (TPS) designations for Nicaragua, Haiti, El Salvador, and Honduras. Among trade issues, President Trump strongly criticized and repeatedly threatened to withdraw from the North American Free Trade Agreement (NAFTA), which led to the new United States-Mexico-Canada Agreement (USMCA) negotiated in 2018. The Trump Administration also did not follow the policy of engagement with Cuba advanced by the Obama Administration and imposed new sanctions. Congressional Action in the 116 th Congress . Congress traditionally has played an active role in policy toward Latin America and the Caribbean in terms of both legislation and oversight. The 116 th Congress did not implement the Trump Administration's downsized foreign aid budget requests for the region for FY2019 ( P.L. 116-6 ) and FY2020 ( P.L. 116-94 ), instead providing aid amounts roughly similar to those provided in recent years. Congress approved the Venezuela Emergency Relief, Democracy Assistance, and Development Act of 2019 in December 2019 (included in Division J of P.L. 116-94 ), which, among its provisions, codifies several types of sanctions imposed on Venezuela and authorizes humanitarian assistance to Venezuelans and support for international election observation and democratic civil society. In January 2020, Congress completed action on implementing legislation ( P.L. 116-113 ) for the USMCA, but before final agreement, the trade agreement was amended to address congressional concerns regarding provisions on labor, the environment, dispute settlement procedures, and intellectual property rights. The FY2020 National Defense Authorization Act ( P.L. 116-92 ), approved in December 2019, includes provisions on Venezuela and Guatemala and reporting requirements on Brazil, Honduras, Central America, and Mexico. Either or both houses approved several bills and resolutions on a range of issues and countries: H.R. 133 , which would promote economic cooperation and exchanges with Mexico; H.R. 2615 , which would authorize assistance to Central America's Northern Triangle countries to address the root causes of migration; S.Res. 35 and S.Res. 447 on the political situation in Bolivia; H.Res. 441 and S.Res. 277 , commemorating the 25 th anniversary of the 1994 bombing of the Argentine-Israeli Mutual Association in Buenos Aires; and H.Res. 754 , expressing continued U.S. support for the people of Nicaragua and pressure on the government of Daniel Ortega. To date, congressional committees have held 20 oversight hearings on the region in the 116 th Congress (see Appendix ).

crs_R45884

crs_R45884_0

The Supreme Court term that began on October 1, 2018, was a term of transition, with the Court issuing a number of rulings that, at times, signaled but did not fully adopt broader transformations in its jurisprudence. The term followed the retirement of Justice Kennedy, who was a critical vote on the Court for much of his 30-year tenure and who had been widely viewed as the Court's median or "swing" Justice. In nine out of the last 12 terms of the Roberts Court, he voted for the winning side in a case more often than any of his colleagues. Justice Brett Kavanaugh replaced Justice Kennedy one week into the October 2018 Term. The Court's newest member had served on the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) for over a decade before his elevation to the Supreme Court. Empirical evidence suggests the Court can change with the retirement and replacement of one its members. As a result, the question looming over the October 2018 Term was how Justice Kennedy's departure and Justice Kavanaugh's arrival would alter the Court's jurisprudence going forward. Indeed, one member of the Court, Justice Ruth Bader Ginsburg, predicted Justice Kennedy's retirement to be "the event of greatest consequence for the current Term, and perhaps for many Terms ahead." Notwithstanding the alteration in the Court's makeup, observers have generally agreed that the October 2018 Term largely did not produce broad changes to the Court's jurisprudence. Although a number of cases presented the Court with the opportunity to rethink various areas of law, the Court largely declined those invitations. For instance, the Court in Gamble v. United States opted not to overrule a 170-year old doctrine concerning the reach of the Double Jeopardy Clause of the Fifth Amendment. In other cases, a majority of the Justices did not resolve potentially far-reaching questions, resulting in the Court either issuing more narrow rulings or simply not issuing an opinion in a given case. Nonetheless, much of the low-key nature of the October 2018 Term was a product of the Court's decisions to not hear certain matters. For instance, save for a three-page, per curiam opinion upholding an Indiana law regulating the disposal of fetal remains, the Court refrained from hearing cases touching on the subject of abortion during the October 2018 Term. The Court also declined to review cases addressing a number of other high-profile matters, including a challenge to the federal ban on bumpstocks, a dispute over whether business owners can decline on religious grounds to provide services for same-sex weddings, a case concerning President Trump's authority to impose tariffs on imported steel, and a challenge to the continued detainment of enemy combatants at Guantanamo Bay. And for a number of closely watched cases it did agree to hear, the Court opted to schedule arguments for the October 2019 Term, including several cases concerning whether federal law prohibits employers from discriminating on the basis of sexual orientation or gender identity and the lawfulness of the Department of Homeland Security's decision to wind down the Deferred Action for Childhood Arrivals (DACA) policy. While the Supreme Court's latest term generally did not result in wholesale changes to the law, its rulings were nonetheless important, in large part, because they may provide insight into how the Court will function following Justice Kennedy's retirement. For the fourth straight year at the Court, the number of opinions decided by a bare majority increased, with 29% of the Court's decisions being issued by a five-Justice majority. Some of these decisions saw the Court divided along what are perceived to be the typical ideological lines, with Justices appointed by Republican presidents on one side and those appointed by Democrats on the other. These 5-4 splits occurred in several appeals concerning the death penalty and in three cases where the Court expressly or implicitly overturned several of the Court's previous precedents regarding sovereign immunity, property rights, and redistricting. Nonetheless, such divisions proved to be the exception rather than the rule in closely divided cases during the last term. Of the 21 cases decided by a single vote, seven cases saw 5-4 splits between what have been viewed to be the conservative and liberal voting blocs on the Court. Instead, the October 2018 Term witnessed a number of heterodox lineups at the Court. For instance, Justice Kavanaugh joined the perceived liberal wing of the Court in a major antitrust dispute, and Justice Gorsuch voted with that same voting bloc in several cases involving Indian and criminal law. Justice Breyer joined the more conservative wing of the Court in the term's biggest Fourth Amendment case. And, as discussed in more detail below, in cases concerning the inclusion of a citizenship question on the 2020 Census questionnaire and judicial deference afforded to interpretations of agency regulations, the Chief Justice voted with the perceived liberal voting bloc. Underscoring the new dynamics of the Roberts Court, three Justices with fairly distinct judicial approaches voted most frequently with the majority of the Court last term: Justice Kavanaugh (voting with the majority 88% of the time), Chief Justice Roberts (85%), and Justice Kagan (83%). Collectively, the voting patterns of the October 2018 Term have led some legal commentators to suggest that the Court has transformed from an institution that was largely defined by the vote of Justice Kennedy to one in which multiple Justices are now the Court's swing votes. Beyond the general dynamics of October 2018 Term, the Court issued a number of opinions of particular importance for Congress. While a full discussion of every ruling from the last Supreme Court term is beyond the scope of this report, Table 1 and Table 2 provide brief summaries of the Court's written opinions issued during the October 2018 Term. The bulk of this report highlights five notable opinions from the October Term 2018 that could affect the work of Congress: (1) Kisor v. Wilkie , which considered the continued viability of the Auer-Seminole Rock doctrine governing judicial deference to an agency's interpretation of its own ambiguous regulation; (2) Department of Commerce v. New York , a challenge to the addition of a citizenship question to the 2020 census questionnaire; (3) Rucho v. Common Cause , which considered whether federal courts have jurisdiction to adjudicate claims of excessive partisanship in drawing electoral districts; (4) American Legion v. American Humanist Association , a challenge to the constitutionality of a state's display of a Latin cross as a World War I memorial; and (5) Gundy v. United States , which considered the scope of the long-dormant nondelegation doctrine. <1. Administrative Law> <1.1. Deference and Agency Regulations: Kisor v. Wilkie37> In Kisor v. Wilkie , the Supreme Court considered whether to overrule the Auer doctrine (also known as the Seminole Rock doctrine), which generally instructs courts to defer to agencies' reasonable constructions of ambiguous regulatory language. In a 5-4 decision, the Supreme Court upheld the deference doctrine on stare decisis grounds. However, while the Court in Kisor declined to overrule Auer , it emphasized that the doctrine applies only in limited circumstances. These limitations on the doctrine's scope could bear consequences for future courts' review of agency action and affect the manner in which agencies approach their decisionmaking. Background: The Supreme Court has established several doctrines that guide judicial review of agency action. Perhaps the most well known is the Chevron doctrine, which generally instructs courts to defer to an agency's reasonable interpretation of an ambiguous statute that it administers. Auer deference, which takes its name from the Supreme Court's 1997 decision in Auer v. Robbins , has roots in the Court's 1945 decision in Bowles v. Seminole Rock & Sand Co. Auer generally instructs courts to defer to an agency's interpretation of ambiguous regulatory language " unless ," as the Court framed the test in Seminole Rock , that interpretation "is plainly erroneous or inconsistent with the regulation." While Chevron deference applies to agency interpretations of statutes that are contained in agency statements that have the force of law (e.g., regulations promulgated following notice-and-comment rulemaking procedures), Auer deference has been applied to a range of nonbinding agency memoranda and other materials that construe ambiguous regulatory language. While the doctrine has long-standing roots, in the wake of Auer , several Members of the Court began to criticize the doctrine on policy, statutory, and constitutional grounds. The Kisor case arose after the Department of Veterans Affairs (VA) denied James L. Kisor's request for retroactive disability compensation benefits. The agency determined that records he supplied were not " relevant " within the meaning of the governing regulation . On appeal, the Federal Circuit held that the term "relevant" as used in that regulation was ambiguous and, applying Auer deference to the VA's interpretation, affirmed the agency's decision. The Supreme Court granted the petitioner's request for review to consider whether to overturn Auer . Supreme Court's Decision: While the Supreme Court unanimously agreed to vacate the Federal Circuit's decision, the Justices fractured on whether to overrule Auer , with a bare majority voting to uphold it. Writing on behalf of five Members of the Court, Justice Kagan joined by Chief Justice Roberts and Justices Breyer, Ginsburg, and Sotomayor grounded the decision to uphold Auer on stare decisis principles. The doctrine of stare decisis typically leads the Court to follow rules set forth in prior decisions unless there is a " special justification " or " strong grounds " for overruling that precedent. Justice Kagan concluded that the petitioner's arguments did not justify abandoning Auer deference in light of the extensive body of precedent, going back at least to Seminole Rock , which supported the continued use of a doctrine that "pervades the whole corpus of administrative law." The Kisor majority also expressed concern that abandonment of Auer deference could result in litigants revisiting any of the myriad cases that applied the doctrine. And, the Court continued, " particularly ' special justification [ s], ' " which had not been offered by the petitioner, were necessary to overturn Auer , given that Congress has left the doctrine undisturbed for so long, despite the Court's repeated assertions that the doctrine rests on a presumption "that Congress intended for courts to defer to agencies when they interpret their own ambiguous rules." Although the Court did not overrule Auer , it took "the opportunity to restate, and somewhat expand on , " the doctrine's limitations. In so doing, the Court formulated a multistep process for determining whether Auer deference should be afforded to an agency's interpretation of a regulation. First, a reviewing court may defer under Auer only after determining that the regulation is "genuinely ambiguous," a conclusion the court may reach only after " exhaust [ing] all the ' traditional tools ' of construction ." Second, even if ambiguity exists, Auer will not apply unless the court determines that the agency's interpretation is " reasonable " that is, the interpretation "must come within the zone of ambiguity" that the court uncovered in its interpretation of the regulation. And third, even if a court determines that the agency has reasonably interpreted a genuinely ambiguous regulation, it must still independently assess " whether the character and context of the agency interpretation entitles it to controlling weight ." Though the Court cautioned that this examination is unable to be reduced "to any exhaustive test," the Court indicated that Auer deference shall not extend to interpretations that (1) are not the official or authoritative position of the agency; (2) do not somehow "implicate [ the agency ' s ] substantive expertise "; or (3) do not represent the agency ' s " fair and considered judgment ." The Court remanded the case to the Federal Circuit after concluding that the court of appeals did not adequately assess whether the regulation at issue was ambiguous, nor "whether the [VA's] interpretation is of the sort that Congress would want to receive deference." Two portions of Justice Kagan's opinion defended Auer on grounds other than stare decisis principles but did not gain the support of a majority of the Court. Joined by Justices Breyer, Ginsburg, and Sotomayor, Justice Kagan argued that Auer deference follows from "a presumption that Congress would generally want [agencies] to play the primary role in resolving regulatory ambiguities." Justice Kagan wrote that this presumption was justified on several grounds, including agencies' significant substantive expertise, the relative political accountability of agencies subordinate to the President, and the view that the agency responsible for issuing a regulation is often best situated to determine the meaning of that regulation. The four Justices also disagreed with the petitioner's s tatutory, policy, and constitutional arguments for overrulin g Auer . Concurring Opinions: Justice Gorsuch authored an opinion in which he disagreed with the majority's refusal to overrule Auer . Justice Gorsuch agreed with the petitioner that Auer violates the Constitution, arguing that the doctrine runs afoul of the separation of powers by demanding that courts accede to the legal judgments of the executive branch and placing "the powers of making, enforcing, and interpreting laws . . . in the same hands." He also agreed with the petitioner that Auer violates the judicial review and rulemaking provisions of the Administrative Procedure Act (APA). Instead of affording deference under Auer , Justice Gorsuch argued that judges should employ the so-called " Skidmore doctrine " when attempting to discern the meaning of an agency regulation. Under that doctrine named after the Court's 1944 decision in Skidmore v. Swift & Co. courts independently interpret the text of a regulation, but may accord nonbinding weight to an administrative interpretation, consistent with "the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade." The Chief Justice, who provided the crucial fifth vote to uphold Auer , authored a partial concurrence contending that the "distance" between the controlling portion of Justice Kagan's opinion and the position put forth by Justice Gorsuch "is not as great as it may initially appear." He noted that the limitations on Auer deference announced by the Kisor majority that an interpretation must, among other things, be based on the agency's "authoritative, expertise-based, and fair and considered judgment" were not so different from those factors that Justice Gorsuch believed may persuade a court to follow an interpretation under Skidmore . And, perhaps anticipating a future legal challenge to the continuing viability of the Chevron doctrine, the Chief Justice also wrote that the Auer and Chevron doctrines are analytically distinct, maintaining that the Court's refusal to overrule Auer had no bearing on the distinct issues associated with Chevron . Implications for Congress: While the Court did not overrule the Auer doctrine in Kisor , the framework it elucidated for assessing whether deference is appropriate may provide further guidance and, perhaps, constrain lower courts deciding whether to defer to an agency's regulatory interpretation. Legal commentators have drawn various conclusions about Kisor 's potential impact, but it ultimately remains to be seen whether courts will be more hesitant to conclude that deference is warranted after Kisor , and whether the Kisor Court's elaborations on the limits on Auer deference will inform agency decisionmaking. In any event, the Court in Kisor made clear that Auer deference is not constitutionally required , and Congress may opt to memorialize, abrogate, or modify application of the doctrine by statute. For example, Congress could amend the judicial review provision of the APA to explicitly provide that judicial review of agency interpretations of regulations shall be accorded no deference (i.e., shall be reviewed "de novo") or instead be subject to some other standard . More narrowly, Congress could also provide in particular statutes governing specific agency actions whether Auer deference or some other standard of judicial review should be applied to regulatory interpretations. <2. Election Law> <2.1. Census: Department of Commerce v. New York89> On the last day that the Supreme Court sat for the October 2018 Term, the Court issued its decision in Department of Commerce v. New York a case involving the legal challenges to the decision by the Secretary of the Department of Commerce, Wilbur Ross, to add a citizenship question to the 2020 census questionnaire. The Court's opinion resolved important questions of constitutional, statutory, and administrative law. The Court concluded that adding a citizenship question to the 2020 census questionnaire did not violate the Enumeration Clause of the U.S. Constitution or the Census Act. But the Court also at least temporarily prohibited the Department of Commerce from adding the citizenship question to the 2020 census questionnaire because it determined that Secretary Ross had violated the APA by failing to disclose his actual reason for doing so. Background : Article I, 2 of the U.S. Constitution, as amended by the Fourteenth Amendment, requires Congress to take an "actual Enumeration" of "the whole Number of . . . persons" in each State "every . . . Term of ten Years, in such Manner as [Congress] shall by Law direct." Through the Census Act, Congress delegated this responsibility to the Secretary of Commerce. That law requires the Secretary of Commerce to "take a decennial census of population" and grants the Secretary discretion to do so "in such form and content as he may determine" and to "obtain such other census information as necessary." The Census Act places limits on how the Secretary of Commerce may conduct the census. Though the Secretary is authorized to "determine the inquires" and to "prepare questionnaires" for obtaining demographic or other information, Section 6(c) of the Census Act instructs the Secretary to first attempt to obtain such information from federal, state, or local government administrative sources "[t]o the maximum extent possible" and "consistent with the kind, timeliness, quality and scope" of the information needed. Moreover, to facilitate congressional oversight, Section 141(f) of the act directs the Secretary to "submit [reports] to the [appropriate] committees of Congress" (1) identifying the "subjects proposed to be included" and "types of information to be compiled"; (2) describing "the questions proposed to be included in [the] census"; and (3) if "new circumstances exist," modifying the prior two reports. On March 26, 2018, Secretary Ross issued a memorandum stating that the Census Bureau would add a citizenship question to the 2020 decennial census questionnaire. Secretary Ross stated that he made this decision because the Department of Justice (DOJ) had asked that the citizenship question be added to the 2020 census to obtain citizenship data that would be used for enforcement of Section 2 of the Voting Rights Act (VRA). In the memorandum, Secretary Ross explained that he had considered four options in deciding how to respond to DOJ's request: (A) not adding the citizenship question; (B) adding the citizenship question; (C) relying solely on administrative records to obtain citizenship data; and (D) relying on both administrative records and a citizenship question to obtain citizenship data. While the Census Bureau concluded that Option C would produce the most accurate citizenship information because noncitizens and Hispanics would be less likely to respond to a census questionnaire including a citizenship question, Secretary Ross chose option D. He stated that reliance on administrative records alone was "a potentially appealing solution," but noted that it would provide "an incomplete picture" because the Census Bureau did not have a complete set of administrative records for the entire population. In response to concerns that "reinstatement of the citizenship question . . . would depress response rate[s]" among Hispanics and noncitizens, Secretary Ross stated the Department of Commerce had "not [been] able to determine definitively how inclusion of a citizenship question . . . will impact responsiveness" and determined that, in any event, "the value of more complete and accurate data derived from surveying the entire population outweighs such concerns." Secretary Ross's decision was challenged in federal district courts in California, Maryland, and New York. Two of these courts concluded that the addition of a citizenship question violated the Enumeration Clause of the U.S. Constitution because "its inclusion would materially harm the accuracy of the census without advancing any legitimate governmental interest." Two courts also determined that Secretary Ross violated Sections 6(c) and 141(f) of the Census Act. As to Section 6, those courts found that administrative records alone would produce more accurate citizenship data than when used in combination with a citizenship question, and therefore the addition of a citizenship question would violate Section 6(c)'s directive to rely on administrative records "[t]o the maximum extent possible." The same two courts also determined that Secretary Ross violated Section 141(f) because he had not included citizenship as a "subject" in the first report that he submitted to Congress. Finally, all three district courts held that Secretary Ross had violated the APA the law requiring that agency action be based on "'reasoned decisionmaking.'" In particular, these courts concluded that Secretary Ross's decision was among other things contrary to the evidence before him. They also determined that the Secretary's decision was unlawful because his sole stated reason for adding the citizenship question providing DOJ with citizenship data for VRA enforcement was pretextual. Supreme Court ' s Decision : Chief Justice Roberts wrote the opinion for the Court in Department of Commerce v. New York . Though this opinion garnered a majority for each issue addressed, the Justices comprising the majority for each issue varied. On the merits, Chief Justice Roberts joined by Justices Thomas, Alito, Gorsuch, and Kavanaugh concluded that adding a citizenship question to the census did not violate the Enumeration Clause. Noting that the Court's "interpretation of the Constitution is guided by Government practice that 'has been open, widespread, and unchallenged since the early days of the Republic,'" the Court observed that "demographic questions have been asked in every census since 1790" and that "questions about citizenship in particular have been asked for nearly as long." Relying on this "early understanding" and "long practice," the Court determined that the Enumeration Clause does not prohibit inquiring about citizenship on the census questionnaire. These same Justices also determined that Secretary Ross's decision was supported by the evidence before him and therefore did not violate the APA on that ground. The Court ruled that the Secretary's decision to rely on both administrative records and a citizenship question to obtain citizenship data for DOJ was a reasonable exercise of his discretion in light of the available evidence. While the Census Bureau had found that administrative records alone would produce the most accurate citizenship data, it acknowledged that each option "entailed tradeoffs between accuracy and completeness," and that it "was not able to 'quantify the relative magnitude of the errors" in each of Options C and D. The Court concluded that where the "choice [is] between reasonable policy alternatives in the face of uncertainty," the Secretary has discretion to choose. The Court also determined that the Secretary reasonably weighed the costs and benefits of reinstating the citizenship question, particularly "the risk that inquiring about citizenship would depress census response rates . . . among noncitizen households." The Court observed that the Secretary had explained why the "risk[s] w[ere] difficult to assess," concluding that he had reasonably "[w]eigh[ed] that uncertainty against the value of obtaining more complete and accurate citizenship data" through a citizenship question. In the end, and "in light of the long history of the citizenship question on the census," the Court was unwilling to second-guess the Secretary's conclusion as "the evidence before [him] hardly led ineluctably to just one reasonable course of action." The same Justices also ruled that the Secretary's decision did not violate the Census Act. The Court first determined, "for essentially the same reasons" underlying its ruling that Secretary Ross's decision was supported by the evidence, that Secretary Ross reasonably concluded that relying solely on administrative records to obtain citizenship data "would not . . . provide the more complete and accurate data that DOJ sought." Thus, because administrative records alone would not supply the "kind," "quality," and "scope" of "'statistics required,'" the Court held that Secretary Ross had complied with Section 6(c)'s requirement to rely "[t]o the maximum extent possible" on administrative records. The Court also determined that the Secretary complied with Section 141(f) of the Census Act. Though Secretary Ross had not included "citizenship" as a "subject" in his initial report to Congress, the Court determined that by listing "citizenship" as a "question" in the second report, the Secretary had adequately "informed Congress that he proposed to modify the original list of subjects" from his initial report. Finally, the Chief Justice joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan held that the Secretary's decision violated the APA because his sole stated reason for adding the citizenship question to the census questionnaire was not the real reason for his decision. The Court began by reaffirming the "settled proposition[]" that "in order to permit meaningful judicial review, an agency must 'disclose the basis' of its action." Moreover, while acknowledging that courts normally accept an agency's stated reason for its action, the Court recognized that courts may review evidence outside the agency record to probe the justifications of an agency's decision when there is a strong showing of bad faith or improper behavior. After concluding that it could review the extra-record evidence on which the district court had relied, the Court conducted its own review of the evidence regarding Secretary Ross's reason for adding the citizenship question to the census. It began by noting that while the Secretary had "tak[en] steps to reinstate a citizenship question about a week into his tenure," there was "no hint that he was considering VRA enforcement" at that time. In addition, the Court observed that the Department of Commerce had itself gone "to great lengths to elicit the request from DOJ (or any other willing agency)" to add the citizenship question. In the end, "viewing the evidence as a whole," the Court concluded that "the decision to reinstate a citizenship question [could not] be adequately explained in terms of DOJ's request for improved citizenship data to better enforce the VRA." Given this "disconnect between the decision made and the explanation given," the Court held that the Secretary's decision violated the APA. However, the Court was clear that it was "not hold[ing] that the [Secretary's] decision . . . was substantively invalid," but was only requiring the Secretary to disclose the reason for that decision. And to give Secretary Ross that opportunity, the Court directed the district court to remand the case back to the Department of Commerce. Concurring and Dissenting Opinions : Every Justice (other than Chief Justice Roberts) dissented from some portion of the Court's opinion. Among the most notable dissents were those of Justice Thomas and Justice Breyer. Justice Thomas joined by Justices Gorsuch and Kavanaugh dissented from the Court's holding that Secretary Ross's decision was based on a pretextual rationale. Justice Thomas began by criticizing the majority for relying on evidence outside the administrative record. Under the APA, Justice Thomas explained, judicial review of an agency decision is generally based on "'the agency's contemporaneous explanation'" for its decision, and courts normally may not invalidate the agency's action even if it "ha[d] other, unstated reasons for the decision." Justice Thomas acknowledged that review of extra-record materials may be permissible upon a showing of bad faith, but he disagreed with the Court's assessment that this case met that standard. Even if review of extra-record materials were appropriate, Justice Thomas concluded that none of the evidence established that Secretary Ross's stated basis for his decision "did not factor at all into [his] decision." In his view, the evidence showed "at most, that leadership at both the Department of Commerce and DOJ believed it important for a variety of reasons to include a citizenship question on the census." Finally, Justice Thomas criticized the Court's decision as being the "the first time the Court has ever invalidated an agency action as 'pretextual,'" contending that the Court had "depart[ed] from traditional principles of administrative law." Justice Breyer joined by Justices Ginsburg, Sotomayor, and Kagan dissented from the Court's conclusion that Secretary Ross's decision was supported by the evidence before the agency. Justice Breyer contended that Secretary Ross inaccurately stated that he was "'not able to determine definitively how inclusion of a citizenship question on the decennial census will impact responsiveness.'" Specifically, the dissent observed that the experts within the Census Bureau itself had found that "adding the question would produce a less accurate count because noncitizens and Hispanics would be less likely to respond to the questionnaire," finding there was "nothing significant" in the record "to the contrary." Moreover, Justice Breyer criticized Secretary Ross's conclusion that the addition of the citizenship question would produce more complete and accurate data. According to Justice Breyer, the administrative record showed that inclusion of the citizenship question would, for a large segment of the population, "be no improvement over using administrative records alone," and for 35 million people, it "would be no better, and in some respects would be worse, than using [only] statistical modeling." On these grounds, four Justices concluded that Secretary Ross's decision was arbitrary and capricious. Implications for Congress : The Supreme Court's decision in Department of Commerce is significant, both for its immediate impact on the 2020 census and for how it may affect administrative law more broadly. The Court's decision barred the Trump Administration from adding the citizenship question to the 2020 census without disclosing the Secretary's actual reason for doing so. Though the Trump Administration initially sought to cure the legal error identified by Court's opinion, it ultimately abandoned these efforts and confirmed that a citizenship question will not be on the 2020 census questionnaire. Nonetheless, because the Court did not deem the addition of a citizenship question "substantively" unlawful, it is possible that the Department of Commerce could add a citizenship question to a future census questionnaire, as long as the Secretary of Commerce discloses the actual reasons for doing so. Notably, the Trump Administration recently issued an executive order related to the collection of citizenship data, which, among other things, instructs the Secretary of Commerce to "consider initiating any administrative process necessary to include a citizenship question on the 2030 decennial census." Separately, the Supreme Court's decision could lay the groundwork for pretext-based challenges to agency decisions. The Court's opinion recognized that while "a court is ordinarily limited to evaluating the agency's contemporaneous explanation in light of the existing administrative record," it may inquire further into the motive underlying an agency's action where there is "a 'strong showing of bad faith or improper behavior.'" Though this rule preexisted the Court's decision in Department of Commerce , some plaintiffs could view that decision as signaling a greater receptiveness by the Court to such challenges. This was the view taken by Justice Thomas, who asserted in his dissenting opinion that the Court's decision "opened a Pandora's box of pretext-based challenges" to agency action because "[v]irtually every significant agency action is vulnerable to the kinds of allegations the Court credit[ed]" in its opinion. Some commentators have echoed Justice Thomas's prediction. Perhaps responding to Justice Thomas's concerns, the Court's opinion emphasized that judicial inquiry into an agency's stated reason for its decision should be "rare," explaining that this case involved "unusual circumstances" and was not "a typical case." This limiting language could discourage potential litigants from raising pretext-based challenges to agency action. <2.2. Redistricting: Rucho v. Common Cause and Lamone v. Benisek172> Partisan gerrymandering, "the drawing of legislative district lines to subordinate adherents of one political party and entrench a rival party in power," is an issue that has vexed the federal courts for more than three decades. On June 27, 2019, by a 5-to-4 vote, the Supreme Court ruled that claims of unconstitutional partisan gerrymandering are not subject to federal court review because they present nonjusticiable political questions, thereby removing the issue from federal courts' purview. In Rucho v. Common Cause and Lamone v. Benisek (hereinafter Rucho ), the Court viewed the Elections Clause of the Constitution as solely assigning disputes about partisan gerrymandering to the state legislatures, subject to a check by the U.S. Congress. Moreover, in contrast to one-person, one-vote and racial gerrymandering claims, the Court determined that no test exists for adjudicating partisan gerrymandering claims that is both judicially discernible and manageable. However, the Court suggested that Congress, as well as state legislatures, could play a role in regulating partisan gerrymandering going forward. Background: Prior to the 1960s, the Supreme Court had determined that challenges to redistricting plans presented nonjusticiable political questions that were most appropriately addressed by the political branches of government, not the judiciary. In 1962, however, in the landmark ruling of Baker v. Carr , the Court held that a constitutional challenge to a redistricting plan is justiciable, identifying factors for determining when a case presents a nonjusticiable political question, including "a lack of [a] judicially discoverable and manageable standard[] for resolving it." Since then, while invalidating redistricting maps on equal protection grounds for other reasons based on inequality of population among districts or one-person, one-vote and as racial gerrymanders the Court has not nullified a map because of partisan gerrymandering. In part, the Court has been reluctant to invalidate redistricting maps as impermissibly partisan because redistricting has traditionally been viewed as an inherently political process. Moreover, critics of federal court adjudication of partisan gerrymandering claims have argued that such lawsuits would open the floodgates of litigation and that it would be judicially difficult to police because it is unclear how much partisanship in redistricting is too much. On the other hand, critics of this view have argued that extreme partisan gerrymandering is "incompatible with democratic principles" by entrenching an unaccountable political class in power with the aid of modern redistricting software using "pinpoint precision" to maximize partisanship thereby necessitating some role by the unelected judiciary. In earlier cases presenting a claim of unconstitutional partisan gerrymandering, the Court left open the possibility that such claims could be judicially reviewable, but did not ascertain a discernible and manageable standard for adjudicating such claims. In those rulings, Justice Kennedy cast the deciding vote, leaving open the possibility that claims could be held justiciable in some future case, under a yet-to-be-determined standard. Last year, the Supreme Court considered claims of partisan gerrymandering raising nearly identical questions to those in Rucho , but ultimately issued narrow rulings on procedural grounds specific to those cases. Rucho marked the first opinion on partisan gerrymandering since Justice Kennedy left the Court. Prior to the Supreme Court's consideration, three-judge federal district courts in North Carolina and Maryland invalidated congressional districts as unconstitutional partisan gerrymanders under standards they viewed to be judicially discernible and manageable. In the North Carolina case, the court determined that a redistricting map violates the Equal Protection Clause as an unconstitutional partisan gerrymander when (1) the map drawer's predominant intent was to entrench a specific political party's power; (2) the resulting dilution of voting power by the disfavored party was likely to persist in later elections; and (3) the discriminatory effects were not attributable to other legitimate interests. Further, the court determined that a partisan gerrymandered map may violate provisions in Article I requiring "the People" to select their representatives and limiting the states to determining only "neutral provisions" regarding the "Times, Places, and Manner of holding Elections." Both courts concluded that a redistricting map violates the First Amendment if the challengers demonstrate that (1) the map drawers specifically intended to disadvantage voters based on their party affiliation and voting history; (2) the map burdened voters' representational and associational rights; and (3) the map drawers' intent to burden certain voters caused the "adverse impact." Under a provision of federal law providing for direct appeals to the Supreme Court in cases challenging the constitutionality of redistricting maps, North Carolina legislators and Maryland officials appealed to the Supreme Court. Supreme Court's Decision: In Rucho , the Supreme Court held that, based on the political question doctrine, federal courts lack jurisdiction to resolve claims of unconstitutional partisan gerrymandering, vacating and remanding the North Carolina and Maryland lower court rulings with instructions to dismiss for lack of jurisdiction. In an opinion written by Chief Justice Roberts, the Court began by addressing the Framers' views on gerrymandering. According to the majority opinion, at the time of the Constitution's drafting and ratification, the Framers were well familiar with the controversies surrounding the practice of partisan gerrymandering. "At no point" during the Framers' debates, the Court observed, "was there a suggestion that the federal courts had a role to play." Instead, the Chief Justice viewed the Elections Clause as a purposeful assignment of disputes over partisan gerrymandering to the state legislatures, subject to a check by the U.S. Congress. In this vein, the Court noted that Congress has in fact exercised its power under the Elections Clause to address partisan gerrymandering on several occasions, such as by enacting laws to require single-member and compact districts. Nonetheless, the Court acknowledged that there are two areas relating to redistricting where the Court has a unique role in policing the states claims relating to (1) inequality of population among districts or "one-person, one-vote" and (2) racial gerrymandering. However, the Court distinguished those claims from claims of unconstitutional partisan gerrymandering, reasoning that while judicially discernible and manageable standards exist for adjudicating claims relating to one-person, one-vote and racial gerrymandering, partisan gerrymandering cases "have proved far more difficult to adjudicate." This difficulty stems from the fact, the Court explained, that while it is illegal for a redistricting map to violate the one-person, one-vote principle or to engage in racial discrimination, at least some degree of partisan influence in the redistricting process is inevitable and, as the Court has recognized, permissible. Hence, according to the Court, the challenge has been to identify a standard for determining how much partisan gerrymandering is "too much." The Chief Justice's opinion focused on three concerns regarding what he viewed as the central argument for federal adjudication of partisan gerrymandering claims: "an instinct" that if a political party garners a certain share of a statewide vote, as a matter of fairness, courts need to ensure that the party also holds a proportional number of seats in the legislature. First, the Court stated that this expectation "is based on a norm that does not exist in our electoral system." For example, noting her extensive experience in state and local politics, the Court quoted Justice O'Connor's 1986 concurrence that maintained that "[t]he opportunity to control the drawing of electoral boundaries through the legislative process of apportionment is a critical and traditional part of politics in the United States." Furthermore, the Rucho Court observed that the nation's long history of states electing their congressional representatives through "general ticket" or at-large elections typically resulted in single-party congressional delegations. As a result, the Chief Justice explained, for an extended period of American history, a party could achieve nearly half of the statewide vote, but not hold a single seat in the House of Representatives, suggesting that proportional representation was not a value protected by the Constitution. Second, even if proportional representation were a constitutional right, determining how much representation political parties "deserve," based on each party's share of the vote, would require courts to allocate political power, a power to which courts are, in the view of the majority, not "equipped" to exercise. For the Court, resolving questions of fairness presents "basic questions that are political, not legal." Third, even if a court could establish a standard of fairness, the Court determined that there is no discernible and manageable standard for identifying when the amount of political gerrymandering in a redistricting map meets the threshold of unconstitutionality. In so concluding, the Supreme Court rejected the tests that the district courts adopted in ascertaining unconstitutional partisan gerrymandering in North Carolina and Maryland. As to the North Carolina case, the Court criticized the "predominant intent" prong of the test adopted by the district court in holding the map in violation of the Equal Protection Clause. As the Chief Justice explained, although this inquiry is proper in the context of racial gerrymandering claims because drawing district lines based predominantly on race is inherently suspect, it does not apply in the context of partisan gerrymandering where some degree of political influence is permissible. Moreover, responding to the aspect of the test requiring challengers to demonstrate that partisan vote dilution "is likely to persist," the Court concluded that it would require courts to "forecast with unspecified certainty whether a prospective winner will have a margin of victory sufficient to permit him to ignore the supporters of his defeated opponent." That is, according to the Court, judges under this test would "not only have to pick the winner they have to beat the point spread." The Court also disapproved of the test the district courts adopted in both the North Carolina and Maryland cases in holding that the maps violated the First Amendment's guarantee of freedom to associate. As a threshold matter, the Court determined that the subject redistricting plans do not facially restrict speech, association, or any other First Amendment guarantees, as voters in diluted districts remain free to associate and speak on political matters. More directly, the Court concluded that under the premise that partisan gerrymandering constitutes retaliation because of an individual's political views, "any level of partisanship in districting would constitute an infringement of their First Amendment rights." As a consequence, the Court viewed the First Amendment standard as failing to provide a manageable approach for determining when partisan activity has gone too far. In addition, the Court rejected North Carolina's reliance on Article I of the Constitution as the basis to invalidate a redistricting map, concluding that the text of the Constitution provided no enforceable limit for considering partisan gerrymandering claims. Nonetheless, Chief Justice Roberts acknowledged that excessive partisan gerrymandering "reasonably seem[s] unjust," stressing that the ruling "does not condone" the practice. However, he maintained that the Court cannot address the problem simply "because it must," viewing any solutions to extreme partisan gerrymandering to lie with Congress and the states, not the courts. Characterizing the dissent and the challengers' request that the Court ascertain a standard for adjudication as seeking "an unprecedented expansion of judicial power," the Chief Justice cautioned that such an "intervention would be unlimited in scope and duration . . . recur[ring] over and over again around the country with each new round of redistricting." Instead, he observed that many states have constitutional provisions and laws providing standards for state courts to address excessive partisan gerrymandering, which have been invoked with successful results. Furthermore, citing examples of past and pending federal legislation, the Court reiterated that "the Framers gave Congress the power to do something about partisan gerrymandering in the Elections Clause." Dissenting Opinion: Justice Kagan wrote a dissent on behalf of four Justices arguing that the Court has the power to establish a standard for adjudicating unconstitutionally excessive partisan gerrymandering and that its "abdication" in Rucho "may irreparably damage our system of government." According to the dissent, the standards proposed by the challengers and the lower courts are not "unsupported and out-of-date musings about the unpredictability of the American voter," but instead are "evidence-based, data-based, statistics-based." Moreover, responding to the Court's suggestion that Congress and the states have the power to ameliorate excessive partisan gerrymandering, the dissent maintained that the prospects for legislative reform are poor because the legislators who currently hold power as a result of partisan gerrymandering are unlikely to promote change. Instead, for the dissent, the solution to what they viewed as a crisis of the political process is a means to challenge extreme partisan gerrymandering outside of that process, through the unelected federal judiciary. Implications for Congress: As a result of Rucho , federal courts lack subject-matter jurisdiction to resolve claims of unconstitutional partisan gerrymandering. However, Rucho suggests that Congress and the states may have the power to address extreme partisan gerrymandering should they so choose. For example, as observed by the Court, several bills that take various approaches to address partisan gerrymandering have been introduced in the 116th Congress. For example, H.R. 1 , the For the People Act of 2019, which passed the House of Representatives on March 8, 2019, would eliminate legislatures from the redistricting process and require each state to establish a nonpartisan, independent congressional redistricting commission, in accordance with certain criteria. H.R. 44 , the Coretta Scott King Mid-Decade Redistricting Prohibition Act of 2019, would prohibit states from carrying out more than one congressional redistricting following a decennial census and apportionment, unless a state is ordered by a court to do so in order to comply with the Constitution or to enforce the Voting Rights Act of 1965. (At least one scholar has argued that limiting redistricting to once per decade renders it "less likely that redistricting will occur under conditions favoring partisan gerrymandering.") H.R. 131 , the Redistricting Transparency Act of 2019, would, based on the view that public oversight of redistricting may lessen partisan influence in the process, require state congressional redistricting entities to establish and maintain a public internet site and conduct redistricting under procedures that provide opportunities for public participation. Notably, the Court in Rucho specifically stated that it expressed "no view" on any pending proposals, but observed "that the avenue for reform established by the Framers, and used by Congress in the past, remains open." With regard to the states, Rucho does not preclude state courts from considering such claims under applicable state constitutional provisions. For example, in 2015, the Florida Supreme Court invalidated a Florida congressional redistricting map as violating a state constitutional provision addressing partisan gerrymandering. Similarly, in 2018, the Pennsylvania Supreme Court struck down the state's congressional redistricting map under a Pennsylvania constitutional provision. Looking ahead, as a result of Rucho , such state remedies, coupled with any congressional action, will likely be the primary means for regulating excessive partisan influence in the redistricting process. <3. First Amendment> <3.1. Religious Displays: American Legion v. American Humanist Association242> In American Legion v. American Humanist Association , the Supreme Court held that the Bladensburg Peace Cross, a public World War I memorial in the form of a Latin cross, did not violate the First Amendment's Establishment Clause. A divided Court also limited the applicability of Lemon v. Kurtzman , a long-standing but often-questioned precedent that had previously supplied the primary standard for evaluating Establishment Clause claims. However, the separate opinions from the Court gave rise to a number of significant questions. In particular, there was no single majority opinion agreeing on what test should apply in future Establishment Clause claims. Further, the Court left open the possibility that the Lemon test, and the specific considerations it suggests courts should take into account, may continue to govern certain types of Establishment Clause challenges. Background: The First Amendment's Establishment Clause provides that the government "shall make no law respecting an establishment of religion." The Court has long interpreted this requirement to require the government to be "neutral" toward religion but over the years, the Supreme Court has employed a variety of different inquiries to determine whether challenged government practices are sufficiently neutral. In Lemon , decided in 1971, the Court synthesized its prior Establishment Clause decisions into a three-part test, saying that to be considered constitutional, government action (1) "must have a secular legislative purpose"; (2) must have a "principal or primary effect . . . that neither advances nor inhibits religion"; and (3) "must not foster an excessive government entanglement with religion." However, the Court has not always applied the Lemon test to analyze Establishment Clause challenges. For instance, in cases evaluating the constitutionality of government-sponsored prayer before legislative sessions, the Court has asked whether the disputed prayer practice "is supported by this country's history and tradition." The Court has also adopted variations on Lemon , most notably using an "endorsement" test that asks "whether the challenged governmental practice either has the purpose or effect of 'endorsing' religion." Thus, in 2018, Justice Thomas said that the Court's "Establishment Clause jurisprudence is in disarray." Justice Thomas and other Justices have argued that the Court should abandon Lemon and instead adopt a single approach to interpreting the Clause one that can be applied consistently. The Court's divergent approaches to evaluating Establishment Clause claims were apparent in two cases, issued on the same day in 2005, that involved government-sponsored displays containing religious symbols. In the first case, McCreary County v. ACLU , the Court applied the Lemon test and held that Ten Commandments displays in two Kentucky courthouses likely violated the Establishment Clause. In the second, Van Orden v. Perry , a plurality of the Court argued that like legislative prayers, religious displays should be evaluated primarily by reference to "our Nation's history." Justice Breyer concurred in the Court's judgment in Van Orden , providing the fifth vote to uphold a Ten Commandments display on the grounds of the Texas State Capitol. Justice Breyer stated that that while he believed the particular monument did " satisfy [the] Court ' s more formal Establishment Clause tests, " including Lemon , his view of the case was also driven by a number of other factors, including the monument ' s history and physical setting. In particular, he emphasized that the monument had gone legally unchallenged for 40 years . Under the circumstances, Justice Breyer argued that removing or altering the monument would likely be "divisive" in a way that the monument itself was not, exhibiting "a hostility toward religion that has no place in our Establishment Clause traditions." The plaintiffs in American Legion argued that Maryland violated the Establishment Clause by maintaining a war memorial known as the Bladensburg Peace Cross. The monument is a 32-foot Latin cross that sits on a large base containing a plaque with the names of 49 Prince George's County soldiers who died in World War I. The Fourth Circuit had agreed with the challengers and held that after looking to the Lemon test and giving "due consideration" to the "factors" set forth in Justice Breyer's Van Orden concurrence, the memorial violated the First Amendment. Supreme Court's Decision: The Supreme Court reversed the Fourth Circuit's decision. But while seven Justices ultimately approved of the Peace Cross, they did so in six different opinions, reflecting disagreement about how, exactly, to resolve the case. Justice Alito wrote the opinion for the American Legion Court, although certain portions of that opinion represented only a plurality. Writing for five members of the Court, Justice Alito's majority opinion relied on some of the factors highlighted by Justice Breyer's concurring opinion in Van Orden namely, the fact that this particular monument had "stood undisturbed for nearly a century" and had "acquired historical importance" to the community. The Court acknowledged that the cross is a Christian symbol, but viewed the symbol as taking on "an added secular meaning when used in World War I memorials." Under these circumstances, the Court concluded that requiring the state to "destroy[] or defac[e]" the Peace Cross "would not be neutral" with respect to religion "and would not further the ideals of respect and tolerance embodied in the First Amendment." Concurring and Dissenting Opinions: A different majority of Justices voted to limit the applicability of the Lemon test although no five Justices agreed just how far to limit Lemon . Justice Alito, writing for a four-Justice plurality, suggested that "longstanding monuments, symbols, and practices" should not be evaluated under Lemon , but should instead be considered constitutional so long as they "follow in" a historical "tradition" of religious accommodation. Justices Thomas and Gorsuch wrote separate concurrences disapproving of Lemon more generally. Justice Thomas argued that the Court should "overrule the Lemon test in all contexts" and instead analyze Establishment Clause claims by reference to historical forms of "coercion." Justice Gorsuch viewed Lemon as a "misadventure," expressing concerns about that test and suggesting instead that the Court should look to historical practice and traditions in Establishment Clause challenges. Therefore, it appears that Lemon will no longer be used to assess the constitutionality of "longstanding monuments, symbols, and practices." Justice Ginsburg dissented, joined by Justice Sotomayor. She stressed the cross's religious nature, observing that it has become a marker for Christian soldiers' graves "precisely because" the cross symbolizes "sectarian beliefs." Her analysis did not expressly invoke the three-part Lemon test, but applied the "endorsement" test developed from Lemon , asking whether the display conveyed "a message that religion or a particular religious belief is favored or preferred." Looking to the memorial's nature and history, Justice Ginsburg believed that the Peace Cross did convey a message of endorsement. Ultimately, she concluded that by maintaining the monument, the state impermissibly "elevate[d] Christianity over other faiths, and religion over nonreligion." Implications for Congress: While American Legion was ostensibly concerned with the constitutionality of a single monument, the Court's decision raises a number of questions regarding future interpretations of the Establishment Clause. First, while the plurality opinion said that "monuments, symbols, and practices with a longstanding history" should now be evaluated by reference to historical practices rather than the Lemon test, it is not clear what qualifies as a long-standing symbol or practice. Further, it is unclear whether the historical practice test will apply outside of the context of challenges to monuments or legislative prayer . Indeed, two of the Justices who joined the plurality opinion Justices Breyer and Kavanaugh wrote separate opinions suggesting that other factors in addition to historical practice may be relevant to evaluating Establishment Clause challenges. More broadly, however, regardless of the particular test employed, the opinions in American Legion suggest that the Roberts Court may be adopting a view of the Establishment Clause that is more accommodating of government sponsorship of religious displays and practices even where those practices are aligned with a particular religion. Given that a majority of Justices agreed in American Legion that at least with respect to government use of religious symbols, "[t]he passage of time gives rise to a strong presumption of constitutionality," it seems likely that courts will view Establishment Clause challenges to long-standing monuments with significant skepticism moving forward. <4. Separation of Powers> <4.1. Nondelegation Doctrine: Gundy v. United States289> In affirming the petitioner's conviction for violating the Sex Offender Registration and Notification Act (SORNA), a divided Supreme Court in Gundy v. United States upheld the constitutionality of Congress's delegated authority to the U.S. Attorney General to apply registration requirements to offenders convicted prior to SORNA's enactment. In a plurality opinion written on behalf of four Justices, Justice Kagan concluded that SORNA's delegation "easily passes constitutional muster" and was "distinctively small-bore" when compared to the other broad delegations the Court has upheld since 1935. Justice Gorsuch's dissent, joined by Chief Justice Roberts and Justice Thomas, highlighted an emerging split on the Court's approach in reviewing authority Congress delegates to another branch of government. Providing the fifth vote to affirm Gundy's conviction, Justice Alito concurred in the judgment only, declining to join Justice Kagan's opinion and indicating his willingness to rethink the Court's approach to the nondelegation doctrine, which seeks to bar Congress from delegating its legislative powers to other branches of government. After Gundy , whether the Court revives the long-dormant nondelegation doctrine likely depends on Justice Kavanaugh's views on the doctrine. (Justice Kavanaugh, who was not confirmed to the Court at the time of oral arguments, took no part in the Gundy decision. ) Background: Article I, Section 1 of the Constitution provides that "[a]ll legislative Powers herein granted" will be vested in the United States Congress. The Supreme Court has held that the "text in [Article I's Vesting Clause] permits no delegation of those powers." The nondelegation doctrine, as crafted by the courts, exists mainly to prevent Congress from ceding its legislative power to other entities and, in so doing, maintain the separation of powers among the three branches of government. At the same time, the Court has recognized that the nondelegation doctrine does not require complete separation of the three branches of government, permitting Congress to delegate certain powers to implement and enforce the law. To determine whether a delegation of authority is constitutional, the Court has required that Congress lay out an "intelligible principle" to guide the delegee's discretion and constrain its authority. Under the lenient "intelligible principle" standard that has its origins in the 1928 decision J.W. Hampton, Jr., & Co. v. United States , the Court has relied on the nondelegation doctrine twice, in 1935, to invalidate two provisions in the National Industrial Recovery Act delegating authority to the President, rejecting every nondelegation challenge thereafter. Gundy , the latest nondelegation challenge at the Supreme Court, centered on the application of registration requirements under SORNA to pre-act offenders. Enacted as Title I of the Adam Walsh Child Protection and Safety Act of 2006, SORNA's stated purpose is "to protect the public from sex offenders and offenders against children" by establishing a comprehensive national registration system of offenders. To this end, SORNA requires convicted sex offenders to register in each state where the offender resides, is employed, or is a student. Section 20913(d) of SORNA authorizes the Attorney General to "specify the applicability" of the registration requirements "to sex offenders convicted before the enactment" of the act and to "prescribe rules for the registration of any such sex offenders" and for other offenders unable to comply with the initial registration requirements. As decided by the Court in Reynolds v. United States , the law's registration requirements did not apply to pre-SORNA offenders until the Attorney General so specified. Accordingly, in a series of interim and final rules and guidance documents issued between 2007 and 2011, the Attorney General specified that SORNA's requirements apply to all sex offenders, including sex offenders convicted before the statute's enactment. Before the enactment of SORNA, petitioner Herman Gundy was convicted of a sex offense in Maryland. After serving his sentence, Gundy traveled from Maryland to New York. Subsequently, he was arrested and convicted for failing to register as a sex offender in New York under SORNA. In his petition to the Supreme Court, Gundy argued, among other things, that SORNA's grant of "undirected discretion" to the Attorney General to decide whether to apply the statute to pre-SORNA offenders is an unconstitutional delegation of legislative power to the executive branch. Supreme Court's Decision: In Gundy, Justice Kagan announced the judgment of the Court, affirming the lower court, and authored a plurality opinion joined by Justices Ginsburg, Breyer, and Sotomayor that followed the modern approach toward the nondelegation doctrine, rejecting Gundy's argument that Congress unconstitutionally delegated "quintessentially legislative powers" to the Attorney General to decide whether to apply the statute to pre-SORNA offenders. Relying on Reynolds , Justice Kagan read SORNA as requiring the Attorney General to "apply SORNA's registration requirements as soon as feasible to offenders convicted before the statute's enactment." Based on this interpretation, the plurality decided that Congress did not violate the nondelegation doctrine based on the Court's "long established law" in upholding broad delegations. The plurality explained that under the intelligible principle standard, so long as Congress has made clear the "general policy" and boundaries of the delegation, such broad delegations are permissible. Compared to very broad delegations upheld in the past (e.g., delegations to agencies to regulate in the "public's interest"), the plurality concluded that the Attorney General's "temporary authority" to delay the application of SORNA's registration requirements to pre-act offenders due to feasibility concerns "falls well within constitutional bounds." Dissenting and Concurring Opinions: In contrast, in his dissent, Justice Gorsuch, joined by Chief Justice Roberts and Justice Thomas, viewed the plain text of the delegation as providing the Attorney General limitless and "vast" discretion and "free rein" to impose (or not) selected registration requirements on pre-act offenders. In concluding the delegation to be unconstitutional, Justice Gorsuch distinguished his analysis from the plurality and the Court's precedents by focusing on the separation-of-powers principles that underpin the nondelegation doctrine. In the dissent's view, the nondelegation doctrine used to serve a vital role in maintaining the separation of powers among the branches of government by assuring that elected Members of Congress fulfill their constitutional lawmaking duties. Justice Gorsuch warned that delegating Congress's constitutional legislative duties to the executive branch bypasses the bicameral legislative process, resulting in laws that fail to protect minority interests or provide political accountability or fair notice. Consequently, the dissent faulted the "evolving intelligible principle" standard and increasingly broad delegations as pushing the nondelegation doctrine further from its separation-of-powers roots. Arguing for a more robust review of congressional delegations, Justice Gorsuch outlined several "guiding principles." According to the dissent, Congress could permissibly delegate (1) authority to another branch of government to "fill up the details" of Congress's policies regulating private conduct; (2) fact-finding to the executive branch as a condition to applying legislative policy; or (3) nonlegislative responsibilities that are within the scope of another branch of government's vested powers (e.g., assign foreign affairs powers that are constitutionally vested in the President). Applying these "traditional" separation-of-powers tests in lieu of the plurality's "intelligible principle" approach, Justice Gorsuch concluded that SORNA's delegation was an unconstitutional breach of the separation between the legislative and executive branches. He argued that SORNA lacked a "single policy decision concerning pre-Act offenders" and delegated more than the power to fill the details to the Attorney General. The dissent disputed the plurality's comparison of SORNA's delegation to other broad delegations that the Court has upheld, reasoning that "there isn't . . . a single other case where we have upheld executive authority over matters like these on the ground they constitute mere 'details.'" Further, he asserted that the delegation is neither conditional legislation subject to executive fact-finding nor a delegation of powers vested in the executive branch because determining the rights and duties of citizens is "quintessentially legislative power." In "a future case with a full panel," Justice Gorsuch hoped that the Court would recognize that "while Congress can enlist considerable assistance from the executive branch in filling up details and finding facts, it may never hand off to the nation's chief prosecutor the power to write his own criminal code. That 'is delegation running riot.'" Although Justice Alito voiced "support [for the] effort" of the dissent in rethinking the Court's approach to the nondelegation doctrine, he opted to not join that effort without the support of the majority of the Court. As a result, Justice Alito concurred in the judgment of the Court in affirming the petitioner's conviction. In his brief, five-sentence concurring opinion, Justice Alito viewed a "discernable standard [in SORNA's delegation] that is adequate under the approach this Court has taken for many years." Implications for Congress: The divided opinions in Gundy signal a potential shift in the Court's approach in nondelegation challenges and potential resurrection of the nondelegation doctrine. With three Justices and the Chief Justice in Gundy willing to reconsider or redefine the Court's "intelligible principle" standard, Justice Kavanaugh, who did not participate in Gundy , appears likely to be the critical vote to break the tie in a future case considering a revitalization of the nondelegation principle. If the Court were to replace the modern intelligible principle approach, new challenges may arise in determining when Congress crosses the nondelegation line. A more restrictive nondelegation standard could invite constitutional challenges to many other statutory provisions that delegate broad authority and discretion to the executive branch to issue and enforce regulations. The significance of these challenges was the subject of a debate between the Gundy plurality and dissent. Justice Kagan cautioned that striking down SORNA's delegation as unconstitutional would make most of Congress's delegations to the executive branch unconstitutional because Congress relies on broad delegations to executive agencies to implement its policies. However, Justice Gorsuch countered that "respecting the separation of powers" does not prohibit Congress from authorizing the executive branch to fill in details, find facts that trigger applicable statutory requirements, or exercise nonlegislative powers. A future case may provide the Court with the opportunity to provide guidance to the courts and Congress on how precise Congress must be in its delegation and how best to draw the line between permissible and impermissible delegations. For now, however, the current intelligible principle standard in use since 1935 survives while the nondelegation doctrine continues to remain "moribund."

The Supreme Court term that began on October 1, 2018, was a term of transition, with the Court issuing a number of rulings that, at times, suggested but did not fully adopt broader transformations in its jurisprudence. The term followed the retirement of Justice Kennedy, who was a critical vote on the Court for much of his 30-year tenure and who had been widely viewed as the Court's median or "swing" Justice. As a result, the question looming over the October 2018 Term was how the replacement of Justice Kennedy with Justice Kavanaugh would alter the Court's jurisprudence going forward. Notwithstanding the alteration in the Court's makeup, observers have generally agreed that the October 2018 Term largely did not produce broad changes to the Court's jurisprudence. Although a number of cases presented the Court with the opportunity to rethink various areas of law, the Court largely declined those invitations. In other cases, a majority of the Justices did not resolve potentially far-reaching questions, resulting in the Court either issuing more narrow rulings or simply not issuing an opinion in a given case. Nonetheless, much of the low-key nature of the October 2018 Term was a product of the Court's decisions to not hear certain matters. And for a number of closely watched cases that it did agree to hear, the Court opted to schedule arguments for the next term. While the Supreme Court's latest term generally did not result in wholesale changes to the law, its rulings were nonetheless important, in large part, because they provide insight into how the Court may function following Justice Kennedy's retirement. For the fourth straight year at the Court, the number of opinions decided by a bare majority increased, with 29% of the Court's decisions being issued by a five-Justice majority. While a number of decisions saw the Court divided along what are perceived to be the typical ideological lines, the bulk of the Court's closely divided cases involved heterodox lineups in which Justices with divergent judicial philosophies joined to form a majority in a given case. Collectively, the voting patterns of the October 2018 Term have led some commentators to suggest that the Court has transformed from an institution that was largely defined by the vote of Justice Kennedy to one in which multiple Justices are now perceived to be the Court's swing votes. Beyond the general dynamics of the October 2018 Term, the Court issued a number of opinions of importance for Congress. Of particular note are five opinions from the October Term 2018: (1)Â Kisor v. Wilkie , which considered the continued viability of the Auer-Seminole Rock doctrine governing judicial deference to an agency's interpretation of its own ambiguous regulation; (2) Department of Commerce v. New York , a challenge to the addition of a citizenship question to the 2020 census questionnaire; (3) Rucho v. Common Cause , which considered whether federal courts have jurisdiction to adjudicate claims of excessive partisanship in drawing electoral districts;Â (4)Â American Legion v. American Humanist Association , a challenge to the constitutionality of a state's display of a Latin cross as a World War I memorial; and (5) Gundy v. United States , which considered the scope of the long-dormant nondelegation doctrine.

crs_R46361

crs_R46361_0

<1. Introduction> This report provides an overview of the FY2020 Defense Appropriations Act ( P.L. 116-93 ) and serves as an access portal to other CRS products providing additional context, detail, and analysis relevant to particular aspects of that legislation. The following Overview tracks the legislative history of the FY2020 defense appropriations act and summarizes the budgetary and strategic context within which it was being debated. Subsequent sections of the report summarize the act's treatment of major components of the Trump Administration's budget request, including selected weapons acquisition programs and other provisions. <2. Overview> For FY2020, the Trump Administration requested a total of $750.0 billion in discretionary budget authority for national defense-related activities. This included $718.3 billion (95.8% of the total) for the military activities of the Department of Defense (DOD). The balance of the national defense budget request is for defense-related activities of the Energy Department and other agencies. Of the amount requested for DOD, $689.5 billion fell within the scope of the annual defense appropriations bill, as did $1.1 billion for certain expenses of the intelligence community. This bill does not include funding for military construction and family housing, which is provided by the appropriations bill that funds those activities, the Department of Veterans Affairs, and certain other agencies. Also not included in the FY2020 defense bill is $7.8 billion in accrual payments to fund the TRICARE for Life program of medical insurance for military retirees, funding for which is appropriated automatically each year, as a matter of permanent law (10 U.S.C. 1111-1117). (See Figure 1 .) The FY2020 Defense Appropriations Act, enacted as Division A of H.R. 1158 , the Consolidated Appropriations Act for FY2020, provides a total of $687.8 billion for DOD, which is $2.86 billion less than President Trump requested for FY 2020. (See Table 1 .) <2.1. Base Budget, OCO, and Emergency Spending> Since the terrorist attacks of September 11, 2001, DOD has organized its budget requests in various ways to designate funding for activities that either are related to the aftermath of those attacks or otherwise are distinct from regularly recurring costs to man, train, and equip U.S. armed forces for the long haul. The latter are funds that have come to be referred to as DOD's "base budget." Since 2009, the non-base budget funds have been designated as funding for Overseas Contingency Operations (OCO). Since enactment of the Budget Control Act (BCA) of 2011 ( P.L. 112-25 ), which set binding annual caps on defense and non-defense discretionary spending, the OCO designation has taken on additional significance. Spending designated by the President and Congress as OCO or for emergency requirements (such as the storm damage remediation funds in the enacted FY2020 defense bill) is effectively exempt from the spending caps. Under the law in effect when the FY2020 budget was submitted to Congress, the defense spending cap for FY2020 was $576.2 billion. The Administration's FY2020 budget request for defense-related programs included that amount for the base budget plus an additional $97.9 billion that also was intended to fund base budget activities but which was designated as OCO funding, in order to avoid exceeding the statutory defense spending cap. The Armed Services and Appropriations Committees of both the Senate and the House treated the "OCO for base" funds as part of the base budget request. The issue became moot with the enactment on August 2, 2019 of the Bipartisan Budget Act of 2019 ( P.L. 116-37 ) which raised the defense spending cap for FY2020 to $666.5 billion. <2.2. Legislative History> Separate versions of the FY2020 defense appropriations bill were reported by the Appropriations Committees of the House and Senate. After the House committee reported its version ( H.R. 2968 ), the text of that bill was incorporated into H.R. 2740 , which the House passed on June 19, 2019, by a vote of 226-203. The Senate committee reported its version of the bill ( S. 2474 ) on September 12, 2019, but the Senate took no action on that measure. A compromise version of the defense bill was agreed by House and Senate negotiators and then was incorporated by amendment into another bill ( H.R. 1158 ), which was passed by both chambers. (See Table 2 .) In the absence of a formal conference report on the bill, House Appropriations Committee Chairman Nita Lowey inserted in the Congressional Record an Explanatory Statement to accompany the enacted version of H.R. 1158 . <3. Strategic Context> The President's FY2020 budget request for DOD reflects a shift in strategic emphasis based on the 2018 National Defense Strategy (NDS), which called for "increased and sustained investment" to counter evolving threats from China and Russia. This marks a change from the focus of U.S. national security policy for nearly the past three decades and a renewed emphasis on competition between nuclear-armed powers, which had been the cornerstone of U.S. strategy for more than four decades after the end of World War II. During the Cold War, U.S. national security policy and the design of the U.S. military establishment were focused on the strategic competition with the Union of Soviet Socialist Republics and on containing the spread of communism globally. In the years following the collapse of the Soviet Union, U.S. policies were designed and U.S. forces were trained and equipped largely with an eye on dealing with potential regional aggressors such as Iraq, Iran, and North Korea and recalibrating relations with China and Russia. After the terrorist attacks of September 11, 2001, U.S. national security policy and DOD planning focused largely on countering terrorism and insurgencies in the Middle East while containing, if not reversing, North Korean and Iranian nuclear weapons programs. However, as a legacy of the Cold War, U.S. and allied military forces had overwhelming military superiority over these adversaries and, accordingly, counter-terrorism and counterinsurgency operations were conducted in relatively permissive environments. The 2014 Russian invasion of the Crimean peninsula and subsequent proxy war in eastern Ukraine fostered a renewed concern in the United States and in Europe about an aggressive and revanchist regime in Moscow. Meanwhile, China began building and militarizing islands in the South China Sea in order to lay claim to key shipping lanes and to reinforce its claims to sovereignty over the South China Sea, itself. Together, these events highlighted anew the salience in the U.S. national security agenda of competing with other great powers , that is, states able and willing to use military force unilaterally to accomplish their objectives. At the same time, the challenges that had surfaced at the end of the Cold War (e.g., fragile states, genocide, terrorism, and nuclear proliferation) remained serious threats to U.S. interests. In some cases, adversaries appear to be collaborating to achieve shared or compatible objectives and to take advantage of social and economic tools to advance their agendas. Some states are also collaborating with non-state proxies (including, but not limited to, militias, criminal networks, corporations, and hackers) and deliberately blurring the lines between conventional and irregular conflict and between civilian and military activities. In this complex security environment, conceptualizing, prioritizing, and managing these numerous problems, arguably, is more difficult than it was in eras past. The Trump Administration's December 2017 National Security Strategy (NSS) and the 11-page unclassified summary of the January 2018 National Defense Strategy (NDS) explicitly reorient U.S. national security strategy (including defense strategy) toward a primary focus on great power competition with China and Russia and on countering their military capabilities. In addition to explicitly making great power competition the primary U.S. national security concern, the NDS also argues for a focus on bolstering the competitive advantage of U.S. forces, which, the document contends, has eroded in recent decades vis- -vis the Chinese and Russian threats. The NDS also maintains that, contrary to what was the case for most of the years since the end of the Cold War, U.S. forces now must assume that their ability to approach military objectives will be vigorously contested. The Trump Administration's strategic orientation, as laid out in the NSS and NDS is consistent with the strategy outlined in comparable documents issued by prior Administrations, in identifying five significant external threats to U.S. interests: China, Russia, North Korea, Iran, and terrorist groups with global reach. In a break from previous Administrations, however, the NDS views retaining the U.S. strategic competitive edge relative to China and Russia as a higher priority than countering violent extremist organizations. Accordingly, the new orientation for U.S. strategy is sometimes referred to a "2+3" strategy, meaning a strategy for countering two primary challenges (China and Russia) and three additional challenges (North Korea, Iran, and terrorist groups). <4. Budgetary Context> In the more than four decades since the end of U.S. military involvement in Vietnam, annual outlays by the federal government have increased by a factor of nine. The fastest growing segment of federal spending during that period has been mandatory spending for entitlement programs such as Social Security, Medicare, and Medicaid. (See Figure 2 .) Over the past decade, a central consideration in congressional budgeting was the Budget Control Act of 2011 (BCA; P.L. 112-25 ) as amended, which was intended to control federal spending by enforcement through sequestration of government operating budgets in case discretionary spending budgets failed to meet separate caps on defense and nondefense discretionary budget authority. The act established binding annual limits (or caps) to reduce discretionary federal spending through FY2021 by $1.0 trillion. Sequestration provides for the automatic cancellation of previous appropriations, to reduce discretionary spending to the BCA cap for the year in question. The caps on defense-related spending apply to discretionary funding for DOD and for defense-related activities by other agencies, comprising the national defense budget function which is designated budget function 050 . The caps do not apply to funding designated by Congress and the president as emergency spending or spending on OCO. Congress repeatedly has enacted legislation to raise the annual spending caps. However, at the time the Administration submitted its budget request for FY2020, the national defense spending cap for that year remained $576 billion a level enacted in 2013 that was $71 billion lower than the revised cap for FY2019. To avert a nearly 11% reduction in defense spending, the Administration's FY2020 base budget request conformed to the then-binding defense cap. But the Administration's FY2020 request also included $165 billion designated as OCO funding (and thus exempt from the cap) of which $98 billion was intended for base budget purposes. The Armed Services and Appropriations Committees of the House and Senate disregarded this tactic, and considered all funding for base budget purposes as part of the base budget request. <5. Selected Elements of the Act> <5.1. Military Personnel Issues> <5.1.1. Military End-strength> P.L. 116-93 funds the Administration's proposal for a relatively modest net increase in the number of active-duty military personnel in all four armed forces, but includes a reduction of 7,500 in the end-strength of the Army. According to Army budget documents, the reduction was based on the fact that the service had not met higher end-strength goals in FY2018. The act also funds the proposed reduction in the end-strength of the Selected Reserve those members of the military reserve components and the National Guard who are organized into operational units that routinely drill, usually on a monthly basis. (See Table 3 ) <5.1.2. Military Pay Raise> As was authorized by the FY2020 National Defense Authorization Act ( P.L. 116-92 ), P.L. 116-93 funds a 3.1% increase in military basic pay that took effect on January 1, 2020. <5.1.3. Sexual Assault Prevention and Treatment> The act appropriates $61.7 million for DOD's Sexual Assault Prevention and Response Office (SAPRO), adding to the amount requested $35.0 million for the Special Victims' Counsel (SVC) program . The SVC organization provides independent legal counsel in the military justice system to alleged victims of sexual assault. The act also provides $3.0 million (not requested) to fund a pilot program for treatment of military personnel for Post-Traumatic Stress Disorder related to sexual trauma. The program was authorized by Section 702 of the FY2019 National Defense Authorization Act ( P.L. 115-232 ). <5.1.4. Child Care> P.L. 116-93 added a total of $110 million to the $1.1 billion requested for DOD's childcare program. This is the largest employer-sponsored childcare program in the United States, with roughly 23,000 employees attending to nearly 200,000 children of uniformed service members and DOD civilians. The act and its accompanying explanatory statement let stand a requirement in the Senate Appropriations Committee report on S. 2474 for the Secretary of Defense to give Congress a detailed report on DOD's childcare system including plans to increase its capacity and a prioritized list of the top 50 childcare center construction requirements. <5.2. Strategic, Nuclear-armed Systems> P.L. 116-93 generally supports the Administration's FY2020 budget request to continue the across-the-board modernization of nuclear and other long-range strike weapons started by the Obama Administration. The Trump Administration's FY2020 budget documentation described as DOD's "number one priority" this modernization of the so-called nuclear triad: ballistic missile-launching submarines, long-range bombers, and land-based intercontinental ballistic missiles (ICBMs). <5.3. Hypersonic Weapons> P.L. 116-93 generally supported the Administration's effort to develop an array of long-range missiles that could travel at hypersonic speed that is, upwards of five times the speed of sound (3,800 mph) and that would be sufficiently accurate to strike distant targets with conventional (non-nuclear) warheads. Although ballistic missiles travel as fast, the types of weapons being developed under the "hypersonic" label differ in that they can maneuver throughout most of their flight trajectory. DOD has funded development of hypersonic weapons since the early 2000s. However, partly because of reports that China and Russia are developing such weapons, DOD identified hypersonic weapons as an R&D priority in its FY2019 budget request and is seeking and securing from Congress funding to accelerate the U.S. hypersonic program. The FY2020 DOD budget request continued this trend, and Congress supported it in the enacted FY2020 defense appropriations bill. P.L. 116-93 also provided more than three times the amount requested to develop defenses against hypersonic missiles. Such weapons are difficult to detect and track because of the low altitude at which they fly and are difficult to intercept because of their combination of speed and maneuverability. The act also added $100 million, not requested, to create a Joint Hypersonics Transition Office to coordinate hypersonic R&D programs across DOD. In the Explanatory Statement accompanying the enacted FY2020 defense bill, House and Senate negotiators expressed a concern that the rapid growth in funding for hypersonic weapons development might result in duplication of effort among the services and increased costs. <5.4. Ballistic Missile Defense Systems> In general, P.L. 116-93 supported the Administration's proposals to strengthen defenses against ballistic missile attacks, whether by ICBMs aimed at U.S. territory, or missiles of shorter range aimed at U.S. forces stationed abroad, or at the territory of allied countries. The missile defense budget request reflected recommendations of the Administration's Missile Defense Review , published in January 2019. (See Table 6 ) <5.4.1. U.S. Homeland Missile Defense Programs> Compared with the Administration's budget request, P.L. 116-93 shifted several hundred million dollars among various components of the system intended to defend U.S. territory against ICBMs. In the explanatory statement accompanying the bill, House and Senate negotiators indicated that the impetus for these changes was DOD's August 2019 cancellation of an effort to develop an improved warhead -- designated the Replacement Kill Vehicle (RKV) -- to be carried by the system's Ground-Based Interceptors (GBIs). Partly by reallocating funds that had been requested for the RKV programs, the act provides a total of $515.0 million to develop an improved interceptor missile that would replace the GBI and its currently deployed kill vehicle. It also provides: $285 million for additional GBI missiles and support equipment; and $180 million for R&D intended to improve the reliability GBIs. <5.5. Defense Space Programs> P.L. 116-93 was generally supportive of the Administration's funding requests for acquisition of military space satellites and satellite launches. (See Table 7 .) <5.5.1. Space Force O&M Funding> Congress approved $40.0 million of the $72.4 million requested for operation of the newly created Space Force, authorized by P.L. 116-92 , the FY2020 National Defense Authorization Act. The Explanatory Statement accompanying the bill asserted that DOD had provided insufficient justification for the Space Force budget request. Therefore, DOD received nearly 44% less in Space Force operating funds than it requested. The Explanatory Statement also directed the Secretary of the Air Force to give the congressional defense committees a month-by-month spending plan for FY2020 Space Force O&M funding. <5.6. Ground Combat Systems> The act supported major elements of the Army's plan to upgrade its currently deployed fleet of ground-combat vehicles. One departure from that plan was the act's provision of 30% more than was requested to increase the firepower of the Stryker wheeled troop-carrier. The program would replace that vehicle's .50 caliber machine gun effective against personnel with a 30 mm cannon that could be effective against lightly armored vehicles. (See Table 8 .) <5.6.1. Army Modernization Plan> The act sends a mixed message regarding congressional support for the Army's strategy for developing a new suite of combat capabilities. The service plans to pay for the new programs in part -- with funds it anticipated in future budgets that were slated to pay for continuation of upgrade programs for existing systems. Under the Army's new plan, those older programs would be truncated to free up the anticipated funds. In effect, this means that planned upgrades to legacy systems would not occur so investments in development of new systems could be made sooner. The Army has proposed that programs to upgrade Bradley fighting vehicles and CH-47 Chinook helicopters be among those utilized as these "bill-payers". The enacted bill provides one-third less than was requested for Bradley upgrades, with the $223.0 million that was cut being labelled by the Explanatory Statement as "excess to need." However, the enacted version of the appropriations bill like the versions of that bill passed by the House and Senate provides nearly triple the amount requested for the Chinook upgrade, appropriating $46.2 million rather than the $18.2 million requested. The amount appropriated is the amount that had been planned for the Chinook upgrade in FY2020, prior to the publication of the Army's new modernization plan. In the reports accompanying their respective versions of the bill, the House and Senate Appropriations Committees each had challenged the Army's plan to forego upgrades to the existing CH-47 fleet. <5.6.2. Optionally Manned Fighting Vehicle (OMFV)> P.L. 116-93 reined in the Army's third effort in 20 years to develop a replacement for the 1980s-vintage Bradley infantry fighting vehicle, providing $205.6 million of the $378.4 million requested for the Optionally-Manned Fighting Vehicle (OMFV) program. The program had come under fire on grounds that it was too technologically ambitious to be managed under a streamlined acquisition process (Section 804 authority), as the Army proposed. The issue became moot after P.L. 116-93 was enacted, when the Army announced on January 16, 2020, that it was cancelling the OMFV contracting plan and restarting it with new design parameters. <5.7. Military Aviation Systems> P.L. 116-93 generally supports the budget request for the major aviation programs of all four armed forces. (See Table 9 ) <5.7.1. Chinook Helicopter Upgrades> An indicator of potential future disagreements between Congress and the Army was the act's insistence that a planned upgrade of the service's CH-47 Chinook helicopter continue as had been planned prior to submission of the FY2020 budget request. As discussed above, this is one of several programs to improve currently deployed equipment that the Army wants to curtail in order to free up funds in future budgets for the wide-ranging modernization strategy it announced in late 2019. Prior to tagging the program as a "bill-payer" for new programs, the Army had projected a FY2020 request of $46.4 million associated with procurement of improved "Block II" CH-47s. The amended FY2020 request for the program was $18.2 million, reflecting the Army's decision to truncate the planned procurement. The enacted version of the FY2020 defense bill like the versions passed by the House and approved by the Senate Appropriations Committee provided $46.2 million for the program. <5.7.2. F-15 Fighter> The act provides $985.5 million of the $1.05 billion requested for eight F-15s to partly fill the gap in Air Force fighter strength resulting from later-than-planned fielding of the F-35A Joint Strike Fighter. The act shifted funds for two of the eight aircraft and some design efforts (a total of $364.4 million) to the Air Force's Research and Development account on grounds that those F-15s would be used for testing. The Explanatory Statement accompanying the act directs the Secretary of the Air Force to provide the House and Senate Armed Services and Appropriations Committees with a review of options for reducing the Air Force's shortfall in its planned complement of fighters. <5.8. Shipbuilding Programs> P.L. 116-93 supports major elements of the Navy's shipbuilding budget request. The request in turn reflects a 2016 plan to increase the size of the fleet to 355 ships, a target some 15% higher than the force goal set by the previous Navy plan. The request included and the act generally supports funds to begin construction of a number of relatively large, unmanned surface and subsurface ships that carry weapons and sensors and would further enlarge the force. The act departed from the budget request on two issues that involved more than $1 billion apiece: It denied a total of $3.2 billion budgeted for one of the three Virginia -class submarines included in the Administration's request, adding $1.4 billion of those funds instead to the funds requested (and approved by the act) for the other two subs. The increase is intended to pay for incorporating into the two funded ships the so-called Virginia Payload Module -- an 84-foot-long, mid-body section equipped with four large-diameter, vertical launch tubes for storing and launching additional Tomahawk missiles or other payloads. It provided a total of $1.2 billion, not requested, for specialized ships and a landing craft to support amphibious landings by Marine Corps units. (See Table 10 .) Notes: The Appendix lists the full citation of each CRS product cited in this table by its ID number. <5.8.1. Appendix. CRS Reports, In Focus, and Insights> Following, in numerical order, are the full citations of CRS products cited in this report. CRS Reports CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL30563, F-35 Joint Strike Fighter (JSF) Program , by Jeremiah Gertler. CRS Report RL30624, Navy F/A-18E/F and EA-18G Aircraft Program , by Jeremiah Gertler. CRS Report RL31384, V-22 Osprey Tilt-Rotor Aircraft Program , by Jeremiah Gertler. CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL33640, U.S. Strategic Nuclear Forces: Background, Developments, and Issues , by Amy F. Woolf. CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked Questions , by Megan S. Lynch. CRS Report R43049, U.S. Air Force Bomber Sustainment and Modernization: Background and Issues for Congress , by Jeremiah Gertler. CRS Report R43240, The Army's Armored Multi-Purpose Vehicle (AMPV): Background and Issues for Congress , by Andrew Feickert. CRS Report R43838, Renewed Great Power Competition: Implications for Defense Issues for Congress , by Ronald O'Rourke. CRS Report R43543, Navy LPD-17 Flight II and LHA Amphibious Ship Programs: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R44039, The Defense Budget and the Budget Control Act: Frequently Asked Questions , by Brendan W. McGarry. CRS Report R44229, The Army's M-1 Abrams, M-2/M-3 Bradley, and M-1126 Stryker: Background and Issues for Congress , by Andrew Feickert. CRS Report R44463, Air Force B-21 Raider Long-Range Strike Bomber , by Jeremiah Gertler. CRS Report R44519, Overseas Contingency Operations Funding: Background and Status , by Brendan W. McGarry and Emily M. Morgenstern. CRS Report R44874, The Budget Control Act: Frequently Asked Questions , by Grant A. Driessen and Megan S. Lynch. CRS Report R44891, U.S. Role in the World: Background and Issues for Congress , by Ronald O'Rourke and Michael Moodie. CRS Report R44968, Infantry Brigade Combat Team (IBCT) Mobility, Reconnaissance, and Firepower Programs , by Andrew Feickert. CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R45288, Military Child Development Program: Background and Issues , by Kristy N. Kamarck. CRS Report R45349, The 2018 National Defense Strategy: Fact Sheet , by Kathleen J. McInnis. CRS Report R45519, The Army's Optionally Manned Fighting Vehicle (OMFV) Program: Background and Issues for Congress , by Andrew Feickert. CRS Report R45811, Hypersonic Weapons: Background and Issues for Congress , by Kelley M. Sayler. CRS Report R46002, Military Funding for Border Barriers: Catalogue of Interagency Decisionmaking , by Christopher T. Mann and Sofia Plagakis. CRS Report R46107, FY2020 National Defense Authorization Act: Selected Military Personnel Issues , coordinated by Bryce H. P. Mendez. CRS Report R46211, National Security Space Launch , by Stephen M. McCall. CRS Report R46216, The Army's Modernization Strategy: Congressional Oversight Considerations , by Andrew Feickert and Brendan W. McGarry. Congressional In Focus CRS In Focus IF10541, Defense Primer: Ballistic Missile Defense , by Stephen M. McCall. CRS In Focus IF10657, Budgetary Effects of the BCA as Amended: The "Parity Principle" , by Grant A. Driessen. CRS In Focus IF11244, FY2020 National Security Space Budget Request: An Overview , by Stephen M. McCall and Brendan W. McGarry. CRS In Focus IF11326, Military Space Reform: FY2020 NDAA Legislative Proposals , by Stephen M. McCall. Congressional Insights CRS Insight IN11052, The Defense Department and 10 U.S.C. 284: Legislative Origins and Funding Questions , by Liana W. Rosen. CRS Insight IN11083, FY2020 Defense Budget Request: An Overview , by Brendan W. McGarry and Christopher T. Mann. CRS Insight IN11148, The Bipartisan Budget Act of 2019: Changes to the BCA and Debt Limit , by Grant A. Driessen and Megan S. Lynch. CRS Insight IN11210, Possible Use of FY2020 Defense Funds for Border Barrier Construction: Context and Questions , by Christopher T. Mann.

The FY2020 Defense Appropriations Act, enacted as Division A of H.R. 1158 , the Consolidated Appropriations Act for FY2020, provides a total of $687.8 billion in discretionary budget authority, all to fund activities of the Department of Defense (DOD), except for $1.1 billion for certain activities of the intelligence community. As enacted, the bill provides 99.6% of the funding requested by President Trump requested for programs falling within the scope of this bill. To comply with the FY2020 cap on DOD base budget funding that was in effect at the time the FY2020 budget request was submitted, the Administration included in its request $97.9 billion intended for DOD base budget activities, but which was designated as part of the Overseas Contingency Operations (OCO) request and thus was exempt from the cap for all practical purposes. The Appropriations Committees of the House and Senate treated these funds as part of the base budget request. Activities funded by the annual defense appropriations act accounted for more than 90% of the budget authority included in the Trump Administration's $761.8 billion budget request for national defense-related activities in FY2020. The balance of the request consisted of activities funded by other appropriations bills (e.g., DOD's military construction program and defense-related nuclear energy work of the Energy Department) and certain amounts appropriated automatically as a result of permanent law.

crs_R46016

crs_R46016_0

<1. Introduction> The current trajectory of democracy around the world is an issue of interest for Congress, which has contributed to U.S. democracy promotion objectives overseas. For decades, U.S. policy has broadly reflected the view that the spread of democracy around the world is favorable to U.S. interests. This report provides a regional snapshot of the political climate in Latin America and the Caribbean, based on the U.S. Department of State's description of each country's political system and selected nongovernmental (NGO) indices that measure democracy trends worldwide. For additional information on democracy in the global context, see CRS Report R45344, Global Trends in Democracy: Background, U.S. Policy, and Issues for Congress , by Michael A. Weber. For related information about democracy in Latin American and the Caribbean, see the following products: CRS In Focus IF10460, Latin America and the Caribbean: U.S. Policy Overview , by Mark P. Sullivan; CRS Report R45547, U.S. Foreign Assistance to Latin America and the Caribbean: FY2019 Appropriations , by Peter J. Meyer and Edward Y. Gracia; CRS Report 98-684, Latin America and the Caribbean: Fact Sheet on Leaders and Elections , by Carla Y. Davis-Castro; and CRS Report R45733, Combating Corruption in Latin America: Congressional Considerations , coordinated by June S. Beittel. CRS also publishes reports on specific Latin American and Caribbean countries. <2. Source Notes> This report compiles information from the U.S. State Department and data from four nongovernmental (NGO) indices. For a discussion about definitions of democracy and critiques of democracy indices, see CRS Report R45344, Global Trends in Democracy: Background, U.S. Policy, and Issues for Congress , by Michael A. Weber. CRS does not endorse the methodology or accuracy of any particular democracy index. In parentheses following the country name in the tables below is the nature of the country's political system, as described in the U.S. State Department's 2018 Country Reports on Human Rights Practices . While the publication focuses broadly on human rights conditions in each country, the first sentence of each country report provides a characterization of the country's political system. This U.S. government information is included here for comparison with findings from the democracy indicators published by NGOs. Bertelsmann Stiftung, a private foundation based in Germany, has published the Bertelsmann Transformation Index (BTI) biannually since 2006. Key regional findings and country reports are available in English (BTI publishes the full regional report in German). BTI 2018 evaluates the quality of democracy, a market economy, and political management in 129 developing and transition countries. For political transformation specifically, BTI ranks countries using 18 indicators grouped into five criteria: (1) stateness, (2) political participation, (3) rule of law, (4) stability of democratic institutions, and (5) political and social integration. Based on the criteria, BTI assigns a category: democracy in consolidation, defective democracy, highly defective democracy, moderate autocracy , and hardline autocracy . In its regional report, BTI notes that since 2008, it "has recorded a decline in the quality of democracy in Latin America not dramatic, but continual." BTI evaluates all Central and South American nations. With the exception of Cuba, the Dominican Republic, Haiti, and Jamaica, BTI does not evaluate Caribbean nations. The Economist Intelligence Unit (EIU), based in London and New York, has offices and analysts in various countries. Since 2006, EIU has produced a democracy index that provides an annual snapshot of the state of democracy for 165 independent states and two territories. The EIU classifies countries as full democracies , flawed democracies , hybrid regimes , or authoritarian regimes based on an aggregate score of 60 indicators in five categories: (1) electoral process and pluralism, (2) civil liberties, (3) the functioning of government, (4) political participation, and (5) political culture. According to the EIU's Democracy Index 2018 , the Latin America and Caribbean region's overall score went down from 6.26 in 2017 to 6.24 in 2018 (on a 0 to 10 scale). The two countries in the region classified in 2018 as full democracies are Uruguay and, new to the group, Costa Rica. EIU's Democracy Index 2018 identified three countries in the region as authoritarian regimes: Nicaragua moved to join Venezuela and Cuba. EIU evaluates all Central and South American nations. With the exceptions of Cuba, the Dominican Republic, Guyana, Haiti, Jamaica, Suriname, and Trinidad and Tobago, EIU does not evaluate Caribbean nations. Freedom House is a U.S.-based NGO that conducts research on democracy, political freedom, and human rights worldwide. It has published Freedom in the World since 1978, and the current report covers 195 countries and 14 territories. Freedom House assigns each country 0 to 4 points on 25 indicators (10 political rights indicators and 15 civil liberties indicators) for a total of up to 100 points. The scores determine numerical ratings for political rights and civil liberties freedoms on a scale of 1 (most free) to 7 (least free). The political rights and civil liberties ratings are averaged to produce an overall status of free, partly free , or not free. Freedom House's report covering 2018 found that Nicaragua was the country with the greatest decline in the world regarding conditions for political rights and civil liberties as compared to 2017. Venezuela had the third-greatest decline; Brazil, El Salvador, and Guatemala also made the top 20 for steepest declines. The report's analysis is based on data that are detailed in full on the Freedom House web page on "Countries," which ranks the state of democracy for 197 countries and 15 territories. This web page lists the top three aggregate scores in Latin America and the Caribbean: Uruguay, Barbados, and Chile; the region's lowest aggregate scores are those for Nicaragua, Venezuela, and Cuba. Freedom House evaluates democracy in all Central and South American and Caribbean nations. The Varieties of Democracy Institute (V-DEM), headquartered at the University of Gothenburg in Sweden, collects democracy data through its research team in collaboration with country experts. In 2017, V-Dem published its first global report measuring the status of democracy with an index. Democracy Report 2019 includes the Liberal Democracy Index, which examines 71 indicators included in the Liberal Component Index and the Electoral Democracy Index. V-Dem groups 179 countries into four categories: liberal democracy , electoral democracy , electoral autocracy , and closed autocracy . The current report notes "the regional average for Latin America is down to 0.51 in 2018, bringing the region back to about 1996-levels." V-DEM evaluates all Central and South American nations. With the exceptions of Barbados, Cuba, the Dominican Republic, Guyana, Haiti, Jamaica, Suriname, and Trinidad and Tobago, V-DEM does not evaluate Caribbean nations. Table 1 looks at Caribbean countries' global democracy rankings according to EIU's Democracy Index 2018 , Freedom House's Freedom in the World 2019 , V-Dem's Democracy Report 2019 , and Bertelsmann Stiftung's 2018 Transformation Index. Table 2 compares the same reports for Mexico and Central America, as does Table 3 for South America. Each report evaluates a different number of countries, so there are missing rankings for some countries. Countries are listed alphabetically in each table. Figure 1 shows the global rank and classification of all Central and South American and Caribbean countries according to the Political Transformation Rank, a component of the 2018 Bertelsmann Stiftung Transformation Index (BTI). Figure 2 shows the global rank and classification of Central and South American and Caribbean countries according to the EIU's Democracy Index 2018 . Figure 3 shows the aggregate scores of all Central and South American and Caribbean countries according to the Freedom House country web page for Freedom in the World 2019 . Countries receive 0 to 4 points on 25 indicators (10 political rights indicators and 15 civil liberties indicators) for a total of up to 100 points. Figure 4 shows the political rights and civil liberties scores of all Central and South American and Caribbean countries according to Freedom House's Freedom in the World 2019 . The scale used is 1-7, with 1 indicating the most free conditions and 7 the least free. Figure 5 shows the liberal democracy index rank and classification of all Central and South American and Caribbean countries according to the Varieties of Democracy Institute's Democracy Report 2019 . Table 4 provides resources for further information about democracy indicators in Central and South America and the Caribbean, although many cover other geographic areas as well. The sources are organized alphabetically by title. This is not an exhaustive list.

This report provides a regional snapshot of the political climate in Latin America and the Caribbean, based on the U.S. Department of State's description of each country's political system and selected nongovernmental indices that measure democracy trends worldwide. Using tables and graphs to illustrate regional trends, this report provides a snapshot of democracy indicators from the following sources: (1) the U.S. Department of State's 2018 Country Reports on Human Rights Practices ; (2) Bertelsmann Stiftung's 2018 Bertelsmann Transformation Index (BTI); (3) the Economist Intelligence Unit's (EIU's) Democracy Index 2018 ; (4) Freedom House's Freedom in the World 2019 ; and (5) the Varieties of Democracy Institute's (V-DEM's) Liberal Democracy Index in its Democracy Report 2019 . A bibliography at the end provides sources for further information.

crs_R45906

crs_R45906_0

<1. Introduction> Congress annually considers 12 regular appropriations bills for the fiscal year that begins on October 1. These bills together with other legislative measures providing appropriations known as supplemental and continuing appropriations (also referred to as continuing resolutions or CRs) provide annual appropriations for the agencies, projects, and activities funded therein. The annual appropriations cycle is often initiated after the President's budget submission. The House and Senate Appropriations Committees then hold hearings at which agencies provide further information and details about the President's budget. These hearings may be followed by congressional consideration of a budget resolution establishing a ceiling on overall spending within appropriations bills for the upcoming fiscal year. Committee and floor consideration of the annual appropriations bills occurs during the spring and summer months and may continue through the fall and winter until annual appropriations actions are completed. This report discusses FY2019 congressional appropriations actions and the impacts of the statutory budget enforcement framework established in the Budget Con trol Act of 2011 (BCA; P.L. 112-25 ) and the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ). It includes a chronological discussion and timeline ( Figure 1 ) of these actions. <2. FY2019 Appropriations and the Bipartisan Budget Act of 2018> FY2019 appropriations actions were impacted by the BCA, which placed statutory limits on spending for FY2012-FY2021, divided between defense and nondefense. In addition, the law created procedures that would automatically lower those caps if specified deficit-reducing legislation were not enacted. Congress has adjusted these statutory caps, including through the Bipartisan Budget Acts (BBAs) of 2013 (for FY2014 and FY2015), 2015 (for FY2016 and FY2017), 2018 (for FY2018 and FY2019), and 2019 (for FY2020 and FY2021), which provided for spending cap increases in both defense and nondefense categories. BBA 2018 capped FY2019 discretionary spending for defense at $647 billion and for nondefense at $597 billion. It also provided that in the absence of agreement on a budget resolution for FY2019, the Budget Committees in the House and Senate could make committee allocations that could function as enforceable limits under Section 302 of the Congressional Budget Act. In May 2018, the House and Senate submitted these filings. With a "top-line" for FY2019 funding established, the Appropriations Committees could proceed with consideration of the 12 appropriations bills and provide enforceable 302(b) suballocations for each regular appropriations bill. The House and Senate Appropriations Committees completed their drafting and consideration of all 12 regular appropriations bills by the end of July 2018. <3. Consideration and Enactment of Regular Appropriations Measures> In the 115 th Congress and prior to the start of FY2019 on October 1, 2018, the House passed half of the regular bills (6 out of 12), and the Senate passed 9 bills (see Table 2 and Table 3 ). In both chambers, separate regular appropriations bills were combined for floor consideration into consolidated appropriations bills, commonly referred to as "minibuses" (in contrast to an omnibus bill comprising most or all regular appropriations bills). These appropriations bill groupings were also used for resolving differences between the House and Senate through conference committees. Three appropriations bills were combined for initial consideration in the House: Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs ( H.R. 5895 ). The House passed this combined measure on June 8, 2018. The Senate subsequently agreed to the combined measure with amendment on June 25. A final measure was negotiated in a conference committee. The Senate passed the final measure on September 12. The House passed it on September 13. It was enacted into law on September 21, 2018 ( P.L. 115-244 ). The House passed the Defense appropriations bill ( H.R. 6157 ) on June 28, 2018. The Senate added the text of the Labor, HHS, and Education appropriations bill and passed the combined measure on August 23, 2018. The combined measure was then sent to conference. The Senate passed the final measure on September 18. The House passed it on September 26. It was enacted into law on September 28, 2018 ( P.L. 115-245 ). In addition, the House passed a measure combining the Interior and Environment appropriations bill with the Financial Services appropriations bill ( H.R. 6147 ) on July 19, 2018. The Senate added the text of the Agriculture appropriations bill and the Transportation and HUD appropriations bill and passed the combined measure on August 1, 2018. Although a conference committee was appointed to negotiate on this measure, it did not report an agreement back to the House and Senate. FY2019 thus began on October 1, 2018, with five of the regular appropriations bills enacted. Funding for agencies, projects, and activities covered by the remaining seven regular appropriations bills was provided through December 7, 2018, in a CR (Division C of P.L. 115-245 , the same measure that provided funding for Defense and Labor, HHS, and Education). A second CR was enacted on December 7, extending funding for the remaining seven appropriations bills through December 21, 2018 ( P.L. 115-298 ). <4. Expiration of Second CR and the Shutdown> In the Senate, a third CR for FY2019 ( H.R. 695 ) was passed by voice vote on December 19, 2018. This CR would have extended funding through February 8, 2019. The House subsequently considered and amended it the following day, adding $5.7 billion to the U.S. Customs and Border Protection's "Procurement, Construction, and Improvements" account to remain available until FY2024, as well as $7.8 billion for disaster relief. The amended CR passed the House by a vote of 217-185 and was sent back to the Senate for further consideration. On December 21, the Senate agreed to a motion to proceed to the House amendment by a vote of 48-47, with Vice President Pence casting the tie-breaking vote. Following the vote, Senate Majority Leader Mitch McConnell stated the following: However, obviously, since any eventual solution requires 60 votes here in the Senate, it has been clear from the beginning that two things are necessary: support from enough Senate Democrats to pass the proposal at 60 and a Presidential signature. As a result, the Senate has voted to proceed to legislation before us in order to preserve maximum flexibility for a productive conversation to continue between the White House and our Democratic colleagues. I hope Senate Democrats will work with the White House on an agreement that can pass both Houses of Congress and receive the President's signature. Colleagues, when an agreement is reached, it will receive a vote here on the Senate floor. Without such an agreement, the Senate did not complete action on the House's proposal. The House and Senate adjourned later that day. When the second CR which provided funding for the agencies, programs, and activities covered by the remaining seven FY2019 appropriations bills expired at midnight on December 21, funding lapsed and a partial government shutdown ensued. While the Senate continued consideration of the House amendment on December 22, December 27, and January 2, no further votes on appropriations occurred during the 115 th Congress. The 115 th Congress adjourned sine die on January 3, 2019, and the 116 th Congress took office the same day. <5. Actions in the 116th Congress> Majority control of the House in the 116 th Congress changed from the Republican Party to the Democratic Party. In addition, any appropriations measures introduced and only reported or considered in the 115 th Congress were no longer pending. New measures needed to be introduced for the 116 th Congress to complete action on FY2019 appropriations. During January 2019, the House introduced and considered a number of measures concerning FY2019 appropriations. These measures are listed below, along with information on their content and corresponding floor votes. January 3, 2019, H.J.Res. 1 , a CR to provide FY2019 appropriations for Homeland Security, lasting through February 8, 2019. The resolution passed the House by a vote of 239-192. No further action was taken in the Senate. January 3, 2019, H.R. 21 , a measure to provide full-year FY2019 funding for six regular appropriations bills (Agriculture; CJS; Financial Services; Interior and Environment; State and Foreign Operations; and Transportation and HUD). The bill passed the House by a vote of 241-190. No further action was taken in the Senate. January 9, 2019, H.R. 264 , a measure to provide full-year FY2019 regular appropriations for Financial Services. The bill passed the House by a vote of 240-188. No further action was taken in the Senate. January 10, 2019, H.R. 267 , a measure to provide full-year FY2019 regular appropriations for Transportation and HUD. The bill passed the House by a vote of 244-180. No further action was taken in the Senate. January 10, 2019, H.R. 265 , a measure to provide full-year regular appropriations for Agriculture. The bill passed the House by a vote of 243-183. No further action was taken in the Senate. January 11, 2019, H.R. 266 , a measure to provide full-year regular appropriations for Interior and Environment. The bill passed the House by a vote of 240-179. No further action was taken in the Senate. January 15, 2019, H.J.Res. 27 , a CR to provide funding through February 1 for the seven remaining regular FY2019 appropriations bills. The resolution was brought up under suspension of the rules requiring a two-thirds majority for passage. The motion failed to achieve the necessary two-thirds on a vote of 237-187 . January 16, 2019, H.R. 268 , supplemental appropriations for disaster relief. The legislation included a CR providing FY2019 continuing appropriations through February 8. The bill passed the House by a vote of 237-187. On January 24, 2019, the Senate considered two separate amendments to the House-passed bill: a Republican amendment ( S.Amdt. 5 ) and a Democratic amendment ( S.Amdt. 6 ). The Senate failed to invoke cloture (requiring a vote of three-fifths of all Senators, or 60 votes) to end consideration of either amendment. No further action occurred. January 17, 2019, H.J.Res. 28 , a CR to provide FY2019 appropriations for the seven remaining regular appropriations measures through February 28. The resolution passed the House on a voice vote, but the House later, by unanimous consent, vacated the proceedings by which the CR had passed and allowed further proceedings to be postponed through the legislative day of January 23, 2019. The resolution subsequently passed the House by a vote of 229-184 on January 23. The measure was passed by the Senate on January 25 by voice vote, with an amendment providing for continuing appropriations through February 15. The House then passed the measure as amended, clearing it for the President. It was signed into law on the same day ( P.L. 116-5 ), ending the partial shutdown. January 23, 2019, H.R. 648 , a bill to provide full-year FY2019 funding for six of the remaining regular appropriations measures (Agriculture; CJS; Financial Services; Interior and Environment; State and Foreign Operations; and Transportation and HUD). The bill passed the House by a vote of 234-180. No further action was taken in the Senate. January 24, 2019, H.J.Res. 31 , a CR to provide FY2019 appropriations for Homeland Security through February 28. The resolution passed the House by a vote of 231-180. The measure was amended in the Senate to provide full-year funding for the seven remaining regular appropriations bills and agreed to by voice vote on January 25. The two chambers then agreed to convene a conference committee to negotiate a final version of these bills. A conference report to accompany H.J.Res . 31 was filed on February 13 and agreed to in the Senate, 83-16, on February 14 and in the House, 300-128, the same day. It was signed into law on February 15 ( P.L. 116-6 ). This ended action on regular appropriations bills for FY2019. For information about particular funding provisions in each of the 12 bills, congressional clients may access CRS's appropriations issue page at https://www.crs.gov/iap/appropriations .

Congress annually considers 12 regular appropriations measures to provide discretionary funding for federal government activities and operations. For FY2019, appropriations actions spanned two Congresses, between which there was a change in the majority party in the House. The process of drafting, considering, and enacting FY2019 appropriations began in early 2018 and included the House and Senate Appropriations Committees each marking up and reporting all 12 annual appropriations bills by the end of July. Five appropriations bills in the 115 th Congress were enacted into law by the start of the fiscal year. An additional seven appropriations bills remained in various stages of consideration. Continuing resolutions (CRs) were enacted in order to extend funding of government operations covered in these seven bills. The first CR for FY2019 provided funding through December 7, 2018. A second CR provided funding through December 21, 2018. When the second CR expired, funding lapsed for the agencies and activities covered in the remaining seven appropriations bills, and a partial government shutdown ensued. The shutdown ended on January 25, 2019, when the 116 th Congress enacted a third CR to provide funding through February 15, 2019. Appropriations actions were subsequently completed when H.J.Res . 31 , an omnibus measure covering the seven remaining appropriations measures, was signed into law on February 15, 2019 ( P.L. 116-6 ). These and other actions are detailed in this report to provide overview information and a chronology of FY2019 appropriations measures. For information on tracking appropriations and related products, congressional clients may access the CRS FY2019 Appropriations Status Table at https://www.crs.gov/AppropriationsStatusTable .

crs_R45862

crs_R45862_0

<1. Introduction> The Every Student Succeeds Act (ESSA; P.L. 114-95 ) amended the Elementary and Secondary Education Act (ESEA) to add a new Part E to Title I entitled "Flexibility for Equitable Per-Pupil Spending." Under Title I-E, the Secretary of Education (the Secretary) has the authority to provide local educational agencies (LEAs) with flexibility to consolidate eligible federal funds with state and local funding to create a "single school funding system based on weighted per-pupil allocations for low-income and otherwise disadvantaged students." The ESEA Title I-E authority is applicable to LEAs that are using or agree to implement "weighted student funding" systems to establish budgets for, and allocate funds to, individual public schools. These funding systems base school funding on the number of pupils in each school in specified categories. Under these funding systems, weights are assigned to a variety of pupil characteristics that are deemed to be related to the costs of educating such pupils such as being from a low-income family, being an English Learner (EL), or having a disability. Weights are also assigned on the basis of students' educational program (grade level, career-technical education, gifted and talented, or others). School budgets are based on these weighted pupil counts, in contrast to treating all pupils in the same manner. Under weighted student funding policies, school allocations are based on weighted counts of students enrolled in them; therefore, if students transfer from one public school to another within the same LEA, their weighted budget level transfers with them, although possibly with a time lag. The Secretary is permitted to waive a wide range of requirements under various ESEA programs, including provisions related to the allocation of Title I-A funds to schools, for LEAs entering into an agreement under Title I-E if an existing ESEA requirement would prevent the LEA from implementing its weighted student funding system under the agreement. LEAs must, however, meet Title I-E requirements for allocations to schools with students from low-income families and ELs. LEAs must also continue to meet a number of Title I-A and other requirements, though in somewhat modified fashion in some instances. The Title I-E authority is limited to 50 LEAs in school years preceding 2019-2020, but it could be offered to any LEA from that year onward, as long as a "substantial majority" of the LEAs participating in previous years have met program requirements. In February 2018, the Secretary announced that she would begin accepting applications from LEAs to enter into local flexibility demonstration agreements under the Student-Centered Funding Pilot, which is how the U.S. Department of Education (ED) refers to the Title I-E authority. To date, six LEAs have applied for the Title I-E authority, and only Puerto Rico has been approved to enter into an agreement. Puerto Rico will begin implementing a weighted student funding system using the Title I-E flexibility authority during the 2019-2020 school year. Thus, no LEAs will have implemented weighted student funding systems under Title I-E prior to the 2019-2020 school year. To provide context for the Title I-E authority, this report begins with a brief discussion of how public elementary and secondary education is financed at the state and local levels. It focuses on the primary types of state school finance programs and school finance "equalization," including an overview of weighted student funding systems. For a more detailed discussion of state and local financing of public schools, see CRS Report R45827, State and Local Financing of Public Schools . Building on this background, the remainder of the report focuses on the Title I-E authority. First, there is an examination of the Title I-E statutory authority and related non-regulatory guidance provided by ED. This is followed by a discussion of current Title I-E implementation issues. The next section considers possible interactions between the Title I-E authority and other ESEA programs, particularly Title I-A. The report concludes with discussion of some issues that may arise related to the Title I-E authority. <2. Overview of Financing for Public Elementary and Secondary Schools in the United States> This section provides a brief overview of funding sources for public elementary and secondary education. It also discusses school finance "equalization," including an examination of the use of weighted student funding at the state and LEA levels. <2.1. Sources of Funding for Public Elementary and Secondary Education> The funding of public elementary and secondary schools in the United States involves a combination of local, state, and federal government revenues, in proportions that vary substantially both across and within states. Overall, a total of $678.4 billion in revenues was devoted to public elementary and secondary education in the 2015-16 school year (the latest year for which detailed data on revenues by source are available). State governments provided $318.6 billion (47.0%) of these revenues, local governments provided $303.8 billion (44.8%), and the federal government provided $56.0 billion (8.3%). Over the last several decades, the share of public elementary and secondary education revenues provided by state governments has increased, the share provided by local governments has decreased, and the federal share has varied within a range of 6.0% to 12.7%. The primary source of local revenues for public elementary and secondary education is the property tax, while state revenues are raised from a variety of sources, primarily personal and corporate income and retail sales taxes, a variety of "excise" taxes such as those on tobacco products and alcoholic beverages, plus lotteries in several states. All states (but not the District of Columbia) provide a share of the total revenues available for public elementary and secondary education. This state share varies widely, from approximately 25% in Illinois to almost 90% in Hawaii and Vermont. The programs through which state funds are provided to LEAs for public elementary and secondary education have traditionally been categorized into five types of programs: (1) Foundation Programs, (2) Full State Funding Programs, (3) Flat Grants, (4) District Power Equalizing, and (5) Categorical Grants. , Of these, Foundation Programs are the most common, although many states use a combination of program types. <2.2. School Finance "Equalization"> A goal of all of the various types of state school finance programs is to provide at least some limited degree of "equalization" of spending and resources, and/or local ability to raise funds, for public elementary and secondary education across all of the LEAs in the state. Such programs often establish target levels of funding "per pupil." The "pupil" counts involved in these programs may simply be based on total student enrollment as of some point in time, or they may be a "weighted" count of students, taking into account variations in a number of categories special pupil needs (e.g., disabilities, low family income, limited proficiency in English), grade levels, specific educational programs (e.g., career and technical education), or geographic considerations (e.g., student population sparsity or local variation in costs of providing education). <2.2.1. State Use of Weighted Student Funding> A review of the individual state entries in a recent survey is an instructive indication of the extent to which weighted student counts are used to determine funding levels under current state programs. It shows that at least 32 states used some degree of weighting of the pupil counts used to calculate state aid to LEAs. Most of these states have policies that assign numeric weights to different categories of pupils, while in other states the school finance program specifies different target dollar amounts for specific categories of pupils, which is mathematically equivalent to assigning weights. Many states also adjust pupil weights for those in selected grade levels, geographic areas, or programs. Weights are often higher for pupils in the earliest grades or in grades 9-12, though policies vary widely, and a few states prioritize other grade levels such as 7-9. The population sparsity weights recognize the diseconomies of scale in areas with especially small LEAs or schools. The career and technical education weights recognize the extra costs of these types of programs. <2.2.2. Application of Weighted Student Funding in LEA Programs to Finance Individual Schools> As seen above, the concept of pupil weighting is often applied in determining funding levels for LEAs under state school finance programs. After state funds reach LEAs, they are combined with locally raised funds to provide educational resources to students in individual schools. It is this stage in the distribution of educational resources that is relevant to the weighted student funding authority in ESEA Title I, Part E (see subsequent discussion of Title I-E). Below is an overview of both conventional intra-LEA budgeting policies and the use of weighted student funding at the LEA level. <2.2.2.1. Conventional Intra-LEA Budgeting Policies> Under the traditional, and still most common, method of allocating resources within LEAs, there are no specific budgets for individual schools. Available state and local funds are managed centrally, by LEA staff, and various resources facilities, teachers, support staff, school administrators, instructional equipment, etc. are assigned to individual schools. In this process, LEA staff typically apply LEA-wide standards such as pupil-teacher ratios or numbers of various categories of administrative and support staff to schools of specific enrollment sizes and grade levels. While levels of expenditures per pupil may be determined for individual schools under these budgetary systems, they are calculated "after the fact," based on whatever staff and other resources have been assigned to the school. And while standard ratios of pupils per teacher or other resource measures may be applied LEA-wide in these situations, substantial variations in the amounts actually spent on teachers and other resources in each school can result from systematic variations in teacher seniority and other factors. These variations might be masked by local policies to apply average salaries, rather than specific actual salaries, in school accounting systems. Further, under traditional school budgeting policies there is little or no immediate or direct adjustment of resources or spending when students transfer from one school to another. <2.2.2.2. Weighted Student Funding Concept Applied to Intra-LEA Budgeting for Schools> In contrast to traditional, fully centralized budgeting and accounting policies for public schools within LEAs, a number of LEAs have in recent years applied the weighted student funding concept to developing and implementing individual school budgets. These policies are not currently applied to any federal program funds and are applied only to a portion of the state and local revenues received by these LEAs, as they continue to centrally administer and budget for various activities such as school facility construction, operations and maintenance, employee benefits, transportation, food services, and many administrative functions . The LEAs develop school budgets for teachers, support staff, and at least some other resources on the basis of weighted counts of the students currently enrolled in each school, and adjust these budgets when students transfer from one school to another. CRS is not aware of any comprehensive listing of all of the LEAs that are currently implementing weighted student funding policies for intra-LEA allocations to schools. The use of weighted student funding within LEAs is a relatively new practice in most cases, and comprehensive research on its effects is not yet available. However, Dr. Marguerite Roza and her team at the Edunomics Lab at Georgetown University were awarded a three-year grant by the Institute of Education Sciences at ED to study whether spending patterns change with weighted student funding systems and what the effects of these systems are on equity and achievement, particularly for poor and at-risk students. An interview with Dr. Roza based on their preliminary findings revealed that nearly all 19 LEAs in the study that use weighted student funding systems cite equity (89%) and flexibility for school principals (79%) as a main reason for implementing such systems. Dr. Roza also noted that there is not a "standard" weighted student funding model used by LEAs and that LEAs differ with respect to the share of their total budgets allocated through weighted student funding systems, how base amounts are defined, and the weights assigned to various categories of students. She also noted that almost all of the LEAs in their study continue to use average salaries in their budgeting rather than actual personnel expenditures. <3. ESEA Title I-E> The remainder of this report focuses on the new authority for flexible per-pupil spending made available under ESEA Title I-E. The discussion begins with an examination of the Title I-E statutory requirements and implementation of that authority. This is followed by an analysis of how these requirements may interact with ESEA programmatic requirements for several programs, with a focus on interactions with the Title I-A program. The report concludes with discussion of possible issues related to the Title I-E authority. <3.1. Title I-E Authority> This section discusses the requirements related to the Title I-E authority. All of the statutory provisions are included in ESEA, Section 1501. <3.1.1. Overview> The purpose of the Title I-E authority is to provide LEAs with flexibility to consolidate eligible federal funds with state and local funding to create a "single school funding system based on weighted per-pupil allocations for low-income and otherwise disadvantaged students." Once consolidated in a participating LEA's weighted student funding system, the eligible federal funds are treated the same way as the state and local funds. There are no required uses associated with the eligible federal funds provided that the expenditures are "reasonable and necessary" and the purposes of the eligible federal programs for which funds have been consolidated are met. <3.1.2. Federal Funds Eligible for Consolidation> Eligible federal funds that may be consolidated under the Title I-E authority include ESEA funds received by LEAs under the programs listed below. Programs that provide formula grant funding to LEAs directly or via the state educational agency (SEA) are denoted by an asterisk. Title I-A* Migrant Education (Title I-C) Neglected and Delinquent (Title I-D-2)* Supporting Effective Instruction (Title II-A)* Teacher and School Leader Incentive Program (Title II-B-1) Comprehensive Literacy State Development Grants (Title II-B-2) Innovative Approaches to Literacy (Title II-B-2) School Leader Recruitment and Support (Title II, Section 2243) English Language Acquisition (Title III)* Student Support and Academic Enrichment (Title IV-A)* Small, Rural School Achievement Program (Title V-B-1)* Rural and Low-Income School Program (Title V-B-2)* In general, a participating LEA may use the consolidated federal funds without having to meet the specific requirements of each of the programs whose funds were consolidated provided the LEA is able to demonstrate the funds allocated through its weighted student funding systems address the purposes of each of the federal programs. For example, under the Student Support and Academic Enrichment (SSAE) grant program, LEAs must use funds for well-rounded education, safe and healthy students, and technology purposes. If SSAE funds were consolidated with state and local funds under a weighted student funding system, then the participating LEA would have to demonstrate that the activities being implemented in its schools meet these purposes. However, the LEA would not have to meet SSAE grant requirements about how much funding was used for each purpose. If a participating LEA consolidates funds from an eligible federal program that provides competitive grants to LEAs into its weighted student funding system, it is still required to carry out the scope and objectives, at a minimum, as described in the LEA's approved application. The majority of federal funds available for LEAs to use under the Title I-E authority are provided through formula grants. LEAs applying for funding flexibility under Title I-E are not required to include funds from every eligible federal program in their weighted student funding systems. If a participating LEA opts not to include some of the eligible federal funds in its system, all current statutory and regulatory requirements will continue to apply to those funds. It should be noted that no non-ESEA funds, such as those available under the Individuals with Disabilities Education Act (IDEA) or Perkins Career and Technical Education (CTE) Act, are considered eligible federal funds for the purposes of the Title I-E authority. <3.1.3. Secretarial Authority> Under the authority granted under Title I-E, the Secretary may enter into a local flexibility demonstration agreement for up to three years with an LEA that is selected to participate and meets the required terms of the agreement (hereinafter referred to as a participating LEA). A participating LEA may consolidate and use funds as stated in the agreement to develop and implement a school funding system based on weighted student funding allocations for low-income and otherwise disadvantaged students. Except as discussed below, the Secretary is authorized in entering into these agreements to waive any ESEA provision that would prevent a participating LEA from using eligible federal funds in its weighted student funding system, including Title I-A requirements regarding the allocation of Title I-A funds to public schools (Section 1113(c)). Thus, the waiver authority granted to the Secretary for the purposes of Title I-E is broader than the general waiver authority available under Section 8401. Under the latter, the Secretary is prohibited from waiving provisions such as the allocation or distribution of funds to grantees. However, there are several statutory requirements that participating LEAs must agree to continue to meet. For example, each participating LEA must agree to meet the three Title I-A fiscal accountability requirements in Section 1118, which include maintenance of effort (Section 1118(a)), supplement, not supplant (Section 1118(b)), and comparability (Section 1118(c)). The maintenance of effort provision requires LEA expenditures of state and local funds to be at least 90% of what they were for the second preceding fiscal year for public elementary and secondary education. The use of either a weighted student funding system or a traditional funding system should not directly affect the amount of state and local funds spent on public education, so the use of a weighted student funding system does not present any problems with meeting this requirement. The supplement, not supplant provision requires that Title I-A funds be used so as to supplement and not supplant state and local funds that would otherwise be provided to Title I-A schools. According to ED, an LEA may presume that this requirement has been met if the LEA "implements its system so that the State and local funds that are included in the system include the funds that Title I, Part A schools would have received if they were not Title I, Part A schools." Comparability requires that a comparable level of services be provided with state and local funds in Title I-A schools compared with non-Title I-A schools prior to the receipt of Title I-A funds. Many LEAs currently meet this provision using a pupil-teacher ratio to compare Title I-A and non-Title I-A schools. It is possible that they may not be able to continue to use this method under a weighted student funding system. According to ED, if an LEA demonstrates comparability based on the state and local funds received by each Title I-A school compared to non-Title I-A schools through an equitable funding system, the LEA's weighted student funding system would "constitute per se comparability." Therefore, according to ED, an LEA might find it "advantageous to demonstrate comparability based on funds rather than a staff-student ratio." The identification of public schools for purposes of the supplement, not supplant and comparability fiscal accountability provisions requires the identification of public schools as Title I-A schools and their Title I-A funding levels under the current structure of the program. Thus, Title I-A provisions that require LEAs to determine which public schools would receive Title I-A funds and the amount that each school would receive cannot be waived by the Secretary, even though funds would not be distributed based on these determinations if an LEA chose to include Title I-A funds in its weighted student funding system. However, as previously mentioned, an LEA does not have to distribute Title I-A funds based on the current distribution requirements if the LEA includes Title I-A funds in its weighted student funding system. In addition to meeting Title I-A fiscal accountability requirements and provisions related to the identification of Title I-A schools and their Title I-A funding levels, participating LEAs must continue to meet Title I-A program requirements related to the participation of eligible children enrolled in private schools as well as the Section 8501 requirements related to the participation of children enrolled in private schools in other ESEA programs. Prior to allocating funds through its weighted student funding system, each participating LEA must determine the amount of funds from each eligible federal program whose funds have been consolidated that must be reserved to provide equitable services under that program. For example, under Title I-A a participating LEA must still determine the amount of funding that would have been provided to a public school attendance area if the LEA was allocating Title I-A funds in accordance with Section 1113(c). Based on this funding level, the LEA must determine how much Title I-A funding needs to be reserved for serving eligible private school students. The participating LEA must then follow current procedures with respect to consulting with private school officials and providing needed services under each program to eligible private school students. Remaining Title I-A funds not reserved at the LEA level would be distributed through the LEA's weighted student funding formula. Participating LEAs are also required to meet all applicable federal civil rights laws (e.g., Title VI of the Civil Rights Act) and all IDEA requirements. These requirements may not be waived by the Secretary. In addition to the requirements in statutory language, there are several other requirements that the Secretary has determined cannot be waived. For example, participating LEAs must continue to meet state-level requirements, such as implementing state academic standards, administering annual state assessments, meeting educational accountability requirements, and issuing an annual local report card, including reporting per-pupil expenditures by school. In addition, state-level requirements delegated by a state to an LEA as part of a subgrant agreement cannot be waived. For example, if a participating LEA is delegated state responsibilities for identifying migratory children and transferring student records, these responsibilities must be met. The Secretary has also determined that a participating LEA that has schools identified for comprehensive or targeted support and improvement under Section 1111 must ensure that such schools develop and implement improvement plans. If a participating LEA chooses to offer public school choice as an intervention in schools identified for comprehensive support and improvement, however, the LEA would no longer be subject to the limitation on funding for transportation. A participating LEA is also required to continue addressing the disparities that result in low-income and minority students in Title I-A schools being taught at higher rates than other students by inexperienced, ineffective, or out-of-field teachers. The Secretary has also noted that a participating LEA may have to meet additional ESEA requirements to ensure that it is meeting the purpose of each eligible federal program included in its weighted student funding system. <3.1.4. Selection of LEAs> The Secretary is permitted to enter into local flexibility demonstration agreements with up to 50 LEAs having approved applications through the 2018-2019 school year. Each interested LEA must do three things to be selected: 1. submit a proposed local flexibility demonstration agreement in accordance with the requirements of Section 1501, 2. demonstrate that the submitted agreement meets all statutory requirements, and 3. agree to meet the continued demonstration requirements included in Section 1501. Beginning with the 2019-2020 school year, the Secretary is permitted to extend the funding flexibility to any LEA that submits and has approved an application that meets the required terms that apply to local flexibility demonstration agreements provided that a "substantial majority" of LEAs that entered into agreements meet two sets of requirements as of the end of the 2018-2019 school year. First, they must meet the requirements for the weighted student funding system included in Section 1501 (discussed below). Second, they must demonstrate annually to the Secretary that compared to the previous fiscal year, no high-poverty school served by the LEA received less per-pupil funding for low-income students or less per-pupil funding for English learners. A high-poverty school is defined as a school in the highest two quartiles of schools served by the LEA based on the enrollment of students from low-income families. As will be discussed in subsequent sections, six LEAs applied for Title I-E authority, and one LEA, Puerto Rico, was approved to implement a local flexibility demonstration agreement for the 2018-2019 school year, but it will not implement the funding flexibility until the 2019-2020 school year. Thus, no LEAs will have implemented weighted student funding systems under Title I-E prior to the 2019-2020 school year. <3.1.5. Local Flexibility Demonstration Agreement Application> LEAs interested in entering into a local flexibility demonstration agreement to consolidate eligible federal funds with state and local funds in a weighted student funding system must submit an application to the Secretary. To assist in the review of applications, the Secretary may establish a peer review process. The application must include a description of the LEA's weighted student funding system, including the weights that will be used to allocate funds. It must also include information about the LEA's legal authority to use state and local funds in the system. The application must address the specific system requirements included in Section 1501 (discussed below) and discuss how the system will support the academic achievement of students, including low-income students, the lowest-achieving students, ELs, and students with disabilities. The application must detail the funding sources, including eligible federal funds and state and local funds, that will be included in the weighted student funding system. The LEA must provide a description of the amount and percentage of total LEA funding (eligible federal funds, state funds, and local funds) that will be allocated through the system. The application must also state the per-pupil expenditures of state and local education funds for each school served by the LEA for the previous fiscal year. In making this determination, the LEA is required to base the per-pupil expenditures calculation on actual personnel expenditures, including staff salary differentials for years of employment, and actual nonpersonnel expenditures. The LEA must also provide the per-pupil amount of eligible federal funds that each school served by the agency received in the preceding fiscal year, disaggregated by the programs supported by the eligible federal funds. The application must include a description of how the system will ensure that for any eligible federal funds allocated through it, the purposes of the federal programs will be met, including serving students from low-income families, ELs, migratory children, and children who are neglected, delinquent, or at risk, as applicable. An LEA is required to provide several assurances in its application. First, it must provide an assurance that it has developed and will implement the local flexibility demonstration agreement in consultation with various stakeholders including teachers, principals, other school leaders, administrators of federal programs affected by the agreement, and community leaders. Second, it must provide an assurance that it will use fiscal controls and sound accounting procedures to ensure that the eligible federal funds included in the weighted student funding system are properly disbursed and accounted for. Third, as previously discussed, it must agree to continue to meet the requirements of ESEA Sections 1117, 1118, and 8501. Finally, it must provide an assurance that it will meet the requirements of all applicable federal civil rights laws (e.g., Title VI of the Civil Rights Act) when implementing its agreement and consolidating and using funds under that agreement. <3.1.6. Requirements for the Weighted Student Funding System> In order to enter into a local flexibility demonstration agreement, each LEA must have a weighted student funding system that meets specific requirements. The system must allocate a "significant portion of funds," including eligible federal funds and state and local funds, to the school level based on the number of students in a school and an LEA-developed formula that determines per-pupil weighted amounts. The system must also allocate to schools a "significant percentage" of all of the LEA's eligible federal funds and state and local funds. The percentage must be agreed upon during the application process, and must be sufficient to carry out the purpose of the agreement and meet its terms. In addition, the LEA must demonstrate that the percentage of eligible federal funds and state and local funds that are not allocated through the LEA's system does not undermine or conflict with the requirements of the agreement. The LEA's weighted student funding system must use weights or allocation amounts that provide "substantially more funding" than is allocated to other students to ELs, students from low-income families, and students with any other characteristic related to educational disadvantage that is selected by the LEA. The system must also ensure that each high-poverty school receives in the first year of the agreement more per-pupil funding from federal, state, and local sources for low-income students than was received for low-income students from in the year prior to entering into an agreement and at least as much per-pupil funding from federal, state, and local sources for ELs as was received for ELs in the year prior to entering into an agreement. The system must include all school-level actual personnel expenditures for instructional staff, including staff salary differentials for years of employment, and actual nonpersonnel expenditures in the LEA's calculation of eligible federal funds and state and local funds to be allocated to the school level. After funds are allocated to schools through the weighted student funding formula, the LEA is required to determine or "charge" each school for the per-pupil expenditures of eligible federal funds and state and local funds. This determination must include actual personnel expenditures, including staff salary differentials for years of employment, for instructional staff and actual nonpersonnel expenditures. By charging schools based on actual costs, an LEA can ensure that schools do not receive less funding than the weighted student funding system would indicate the school should receive, even if it has lower actual expenditures in some categories compared to the LEA average. , Finally, as discussed by ED, LEAs entering into a local flexibility demonstration agreement must agree to cooperate with ED in monitoring and technical assistance activities. They must also collect and report information that the "Secretary may reasonably require" in order to conduct the program evaluation discussed below. <3.1.7. Continued Demonstration Requirements> Each participating LEA must demonstrate to the Secretary on an annual basis that, as compared to the previous year, no high-poverty school served by the LEA received (1) less per-pupil funding for low-income students or (2) less per-pupil funding for ELs from eligible federal funds and state and local funds. On an annual basis, each participating LEA is also required to make public and report to the Secretary for the preceding fiscal year the per-pupil expenditures of eligible federal funds and state and local funds for each school served by the LEA, disaggregated by each quartile of students attending the school based on student level of poverty and by each major racial/ethnic group. Per-pupil expenditure data must include actual personnel expenditures, including staff salary differentials for years of employment, and actual nonpersonnel expenditures. Each year, the participating LEA must also make public the total number of students enrolled in each school served by the agency and the number of students enrolled in each school disaggregated by economically disadvantaged students, students from major racial/ethnic groups, children with disabilities, and ELs. Any information reported or made public by the participating LEA to comply with these requirements shall only be reported or made public if it does not reveal personally identifiable information. <3.1.8. Renewal of Local Flexibility Demonstration Agreement> The Secretary is authorized to renew local flexibility demonstration agreements for additional three-year terms if the participating LEA (1) has met the requirements for weighted student funding systems and the continued demonstration requirements and (2) has a "high likelihood" of continuing to meet these requirements. The Secretary must also determine that renewing the agreement is in the interest of students served by programs authorized under Title I and Title III of the ESEA. <3.1.9. Noncompliance> After providing notice and opportunity for a hearing, the Secretary may terminate a local flexibility demonstration agreement if there is evidence that the LEA has failed to comply with the terms of the agreement, the requirements of the system, and continued demonstration requirements. If the LEA believes the Secretary has erred in making this determination for statistical or other substantive reasons, it may provide additional evidence that the Secretary shall consider before making a final determination. <3.1.10. Program Evaluation> From the amount reserved for evaluation under Section 8601, the Secretary, acting through the Director of the Institute of Education Sciences, shall consult with the relevant program office at ED to evaluate the implementation of local flexibility demonstration agreements and their effect on improving the equitable distribution of state and local funding and increasing student achievement. The statutory language does not require an evaluation of the distribution of eligible federal funds. <3.1.11. Administrative Expenditures> Each participating LEA may use for administrative purposes an amount of eligible federal funds that is not more than the percentage of funds allowed for such purposes under each eligible federal program. <3.2. Program Implementation> On February 2, 2018, the Secretary announced that she was using the authority made available under Title I-E to launch a Student-Centered Funding Pilot. LEAs interested in using the flexibility for the 2018-2019 school year were required to submit an application by March 12, 2018. LEAs interested in using the flexibility for the 2019-2020 school year had to apply by July 15, 2018. <3.2.1. First Application Round> Five LEAs submitted applications for the local flexibility demonstration agreement by March 12, 2018: Wilsona School District (CA), Indianapolis Public Schools (IN), Salem-Keizer School District 24J (OR), Upper Adams School District (PA), and the Puerto Rico Department of Education. Puerto Rico's application was approved on June 28, 2018. While Puerto Rico initially intended to implement a weighted student funding system that consolidated eligible federal funds with state and local funds during the 2018-2019 school year, its implementation has been delayed until the 2019-2020 school year. As of July 2019, none of the other applicants have had their applications approved. <3.2.2. Second Application Round> Only the Roosevelt School District in Arizona applied by the July deadline to use the flexibility for the 2019-2020 school year. As of July 2019, its application had not yet been approved. <3.3. Recent Budget Requests> This section provides an overview of ED's budget requests for FY2018 through FY2020 as they relate to the Title I-E authority. <3.3.1. FY2018 Budget Request> In its FY2018 budget request, ED requested that it be permitted to use up to $1 billion of Title I-A funding to support weighted student funding systems and public school choice. The funds would have been used to make Furthering Options for Children to Unlock Success (FOCUS) grants. One use of the FOCUS grant funds would have been to support LEAs in establishing or expanding weighted student funding systems if they agreed to combine their funding flexibility with an open enrollment policy for public school choice. ED proposed that it would establish the requirements for such open enrollment systems with a focus on "maximizing opportunities for all students, particularly those from low-income families, to select, attend, and succeed in a high-quality public school." The proposal suggested that the requirements could include, for example, making school information available to parents in a timely way, supporting school integration efforts, arranging or paying for transportation to schools of choice, and giving priority to low-income students or students in schools identified for improvement under Title I-A. ED also proposed allowing participating LEAs to use the funds to provide temporary payments to individual schools affected by the transition to a weighted funding system. In addition, the proposal included an option for ED to establish "tiers based on LEA student enrollments" and give special consideration to LEAs proposing to serve at least one rural school or to consortia of LEAs that agreed to provide interdistrict choice for all students. Implementing this proposal would have required congressional authorization, and Congress did not act on ED's request. <3.3.2. FY2019 Budget Request> In its FY2019 budget request, ED requested funding to make Open Enrollment Grants (OEGs) to LEAs approved to operate Flexibility for Equitable Per-Pupil Funding pilots authorized under Title I-E that agreed to combine their funding flexibility with an open enrollment policy for public school choice. Similar to its FY2018 budget request, ED proposed that it would establish the requirements for such open enrollment systems with a focus on "maximizing opportunities for all students, particularly those from low-income families, to select, attend, and succeed in a high-quality public school." The proposal again suggested that the requirements could include, for example, making school information available to parents in a timely way, supporting school integration efforts, arranging or paying for transportation to schools of choice, and giving priority to low-income students or students in schools identified for improvement under Title I-A. ED also proposed allowing participating LEAs to use the funds to provide temporary payments to individual schools affected by the transition to a weighted funding system, providing information on public school options to parents, and supporting needed administrative systems. ED did not request a specific amount of funding for only the OEGs. Rather, it requested $500 million for Scholarships for Private Schools and OEGs to be divided between the programs based on the demand for grants. Implementing either program would have required congressional authorization, and Congress did not act on ED's proposal. <3.3.3. FY2020 Budget Request> In its FY2020 budget request, ED requested $50 million to create Student-Centered Funding Incentive Grants to help increase LEA participation in the agreements authorized under ESEA Section 1501. These grants are not authorized in the ESEA and congressional action would be required to implement the proposal. In its proposal, ED argues that the new grants "would help demonstrate the viability" of moving to weighted student funding systems and the potential for these new systems to improve student outcomes while reducing "LEA red tape." ED believes that the proposed grants could help increase participation by providing resources to LEAs to develop procedures to charge schools based on actual (as opposed to average) personnel expenditures and could reduce the potential negative effects on some individual schools of transitioning to a weighted student funding system under Title I-E. The grants would only be available to LEAs that have already been approved for an agreement. ED estimates that up to 10 LEAs could be supported through the grants and suggests that it could give "special consideration" to LEAs with the highest concentration of poverty. The funds could be used by participating LEAs for activities related to implementing weighted student funding systems. According to ED, this could include using funds to make temporary payments to individual schools to offset reductions in funding resulting from the transition to the system, allowing a "smooth transition to these new systems." Grant funds could also be used by ED to provide technical assistance to LEAs in developing and preparing for the implementation of weighted student funding systems that meet the requirements of Section 1501. In its proposal, ED also mentions that it may consider using existing authority to extend the initial local flexibility demonstration agreement period from three years to six years to help increase LEA participation. Regardless of whether Congress acts on ED's proposal to provide Student-Centered Funding Incentive Grants, LEAs that enter into an agreement are currently permitted to use administrative funds consolidated under Section 8203 to support the implementation of their weighted student funding system. <3.4. Possible Interactions Between Title I-E Authority and Other ESEA Programs> This section discusses some of the ways in which the Title I-E authority might interact with other ESEA programs. As Title I-A is the only ESEA program that includes specific requirements for the allocation of funds to schools within LEAs, it is the primary focus of the discussion. <3.4.1. ESEA Programs to Which Title I-E Provisions Apply> Under Title I-E, participating LEAs may consolidate and allocate eligible federal funds to public schools through their weighted student funding formulas. Table 1 details the amount of funding appropriated under each eligible federal program for FY2019. The majority of the funding available for consolidation and allocation under the Title I-E authority is provided through formula grants. These grants are either provided directly to LEAs or, in most cases, to LEAs via the state. Most of the attention regarding the possible impact of the weighted student funding authority has been focused on the ESEA Title I-A program. In addition to constituting about 76% of the total FY2019 appropriations for all programs potentially affected by the Title I-E authority ( Table 1 ), it is the only one of the potentially affected federal programs under which most funds are allocated to individual schools under statutory school allocation policies, and therefore the only program where current policies for the allocation of funds to schools can be compared to how funds might be allocated to schools under the weighted student funding authority. The other potentially affected federal programs are either much less focused on individual schools (as opposed to being centrally managed by LEAs), are much less widespread in their distribution of funds among LEAs, and/or are focused largely on SEAs rather than LEAs or schools. Thus, in most cases, ESEA Title I-A funds are likely to be the primary federal program funds directly affected by the ESEA Title I-E authority in most participating LEAs. It is possible, however, depending on which eligible federal funds and the percentage of such funds an LEA decides to include in its weighting student funding system, that the distribution of funds under other ESEA programs that have funds eligible for consolidation could change substantially. <3.4.2. Current Policies for Allocating Title I-A Funds to Schools Within LEAs> As is explained below, the allocation of Title I-A funds within LEAs is focused on providing grants to schools with comparatively high concentrations of students from low-income families, not individual students. Thus, the authority under ESEA Title I-E to combine Title I-A funds with state and local funds under weighted student funding formulas and to have the Title I-A funds follow students to any public school in the LEA, not just those with concentrations of students from low-income families, is a significant shift from the way the program is generally implemented. Under almost all federal education assistance programs, grants are made to states or to LEAs (or subgranted to LEAs by SEAs) with services or resources provided in a manner that is managed by the SEA or LEA. In sharp contrast to this general pattern, most ESEA Title I-A funds are allocated to individual schools, under statutory allocation provisions, although LEAs retain substantial discretion to control the use of a share of Title I-A grants at a central district level. While there are several rules related to school selection, LEAs must generally rank public schools by their percentage of pupils from low-income families, and serve them in rank order. LEAs may choose to consider only schools serving selected grade levels (e.g., only elementary schools or only middle schools) in determining eligibility for grants, so long as all public schools where more than 75% of the pupils from low-income families receive grants (if sufficient funds are available to serve all such schools). LEAs also have the option of serving all high schools where more than 50% of the pupils are from low-income families before choosing to serve schools at selected grade levels. All participating schools must generally have a percentage of children from low-income families that is higher than the LEA's average, or 35%, whichever of these two figures is lower. The percentage of students from low-income families for each public school is usually measured directly, although LEAs may choose to measure it indirectly for middle or high schools based on the measured percentages for the elementary or middle schools that students attended previously (sometimes called "feeder schools"). LEAs have the option of setting school eligibility thresholds higher than the minimum in order to concentrate available funds on a smaller number of schools, and this is especially the practice in some large urban LEAs. For example, according to data available from ED, in the 2015-16 school year all public schools reported as participating in Title I-A in Chicago had a free and reduced-price lunch child percentage of 55% or higher, whereas the minimum eligibility threshold would generally be 35%. In almost all cases, the data used to determine which pupils are from low-income families for the distribution of Title I-A funds to schools are not the same as those used to estimate the number of school-age children in low-income families for purposes of calculating Title I-A allocations to states and LEAs. This is because Census or other data are generally not available on the number of school-age children enrolled in a school, or living in a residential school attendance zone, with income below the standard federal poverty threshold. Thus, LEAs must use available proxies for low-income status. The Title I-A statute allows LEAs to use the following low-income measures for school selection and allocations: (1) eligibility for free and reduced-price school lunches under the federal child nutrition programs, (2) eligibility for Temporary Assistance for Needy Families (TANF), (3) eligibility for Medicaid, or (4) Census poverty estimates (in the rare instances where such estimates may be available for individual schools or school attendance areas). According to the most recent relevant data, approximately 90% of LEAs receiving Title I-A funds use free/reduced-price school lunch (FRPL) data sometimes alone, sometimes in combination with other authorized criteria to select Title I-A schools and allocate funds among them. The income eligibility thresholds for free and reduced-price lunches 130% of the poverty income threshold for free lunches, and 185% of poverty for reduced-price lunches are higher than the poverty levels used in the Title I-A allocation formulas to states and LEAs. For example, for a family of four people during the 2018-2019 school year, the income threshold for eligibility was $32,630 for free lunches and $46,435 for reduced price lunches. By contrast, the poverty threshold for a family of four people in 2018 was $25,100. While Title I-A funds are to be focused on the schools within a recipient LEA with percentages of students from low-income families that are relatively high in the context of their locality, many Title I-A schools do not have high percentages of low-income students when considered from a national perspective. Largely because of the relatively low poverty rate thresholds for LEA eligibility to receive Title I-A grants, many low-poverty LEAs receive Title I-A funds, and often the highest-poverty schools in those LEAs do not have high percentages of students from low-income families compared to the nation as a whole. For example, according to ED, 23% of the nation's public schools that are in the lowest quartile nationwide in terms of their percentage of students from low-income families (35% or below) receive Title I-A grants. Title I-A funds are allocated among participating schools in proportion to their number of pupils from low-income families, although grants to eligible schools per pupil from a low-income family need not be equal for all schools. LEAs may choose to provide higher grants per child from a low-income family to schools with higher percentages of such pupils. A Title I-A school at which 40% or more of the students are from low-income families may provide Title I-A services via a schoolwide program, under which all of the students at the school may be served. This is in contrast to the other mode of providing Title I-A services via targeted assistance schools wherein Title I-A may be used only for services directed to the lowest-achieving students at the schools. The share of funds to be used by each Title I-A LEA to serve educationally disadvantaged pupils attending private schools is determined on the basis of the number of private school students from low-income families living in the residential areas served by public schools selected to receive Title I-A grants. In making this determination, LEAs may use either the same source of data used to select and allocate funds among public schools (i.e., usually FRPL data) or one of a specified range of alternatives. As noted earlier, the allocation of Title I-A funds within LEAs is focused on providing grants to schools with comparatively high concentrations of students from low-income families, not individual students. One rationale for the strategy of concentrating Title I-A funds on relatively high poverty schools is that the level of funding for each participating student is relatively low and can finance a substantial level of services only if combined with Title I-A funding for numerous eligible students in a school. Title I-A funding per student is usually discussed in terms of grant amounts per student served under the program. Especially with the growth of schoolwide programs in recent years, the amount of funding per student deemed to be participating in the program (which includes all students in schoolwide program sites) would be estimated at $645. Even this amount, which is based on dividing the total FY2019 Title I-A appropriation ($15,859,802,000) by the latest published estimate of the number of students participating in Title I-A programs (24.6 million), would be an overestimate, as it does not take into account the share of Title I-A funds that do not reach individual schools because they are used at the state or LEA level for activities such as administration, school improvement, and districtwide programs (e.g., professional development for Title I-A teachers). However, under weighted student funding the more relevant figure would be the level of funding per student from a low-income family. If the standard of low-income most often applied in the current Title I-A school allocation process were used, the number of public school students from low-income families would be slightly higher (25.8 million) and the national average Title I-A grant per pupil from a low-income family would be $614. For the reasons just discussed (i.e., not accounting for funds retained at the state or LEA level), this would also be an overestimate of the amount of funding per student. <3.4.3. Other ESEA Programs Potentially Affected by the Title I-E Authority> Beyond the primary focus on the ESEA Title I-A program, it is possible that LEAs participating in the weighted student funding authority would include funds from at least some of the other potentially affected programs. For example, the one currently approved applicant for the ESEA Title I-E authority, Puerto Rico, plans to allocate 53% of its Title I-A funds plus 55% of its Title II-A and 92% of its Title III-A funds to schools through its weighted student funding formula. Thus, in participating LEAs, at least some federal programs that are currently centrally managed by LEAs may be decentralized and managed, at least in part, by individual schools. The extent to which this occurs may depend on the percentage of funds of an eligible federal program that are allocated through the LEA's weighted student funding formula as opposed to being retained at the state or LEA level. <3.5. Possible Issues Regarding the Weighted Student Funding Authority Available Under Title I-E> The last section of the report examines issues related to the Title I-E flexibility authority. The first set of issues examines possible reasons why participation by LEAs in the Title I-E authority has been low and some potential issues related to it. It then considers why LEAs might want to participate in the Title I-E authority based on reasons stated by ED. This is followed by an examination of possible issues that may arise if participation in the Title I-E authority increases. This includes consideration of how the allocation of eligible federal funds, particularly Title I-A funds, could be different if the Title I-E flexibility was adopted more broadly, as well as LEA access to other fund consolidation authority, whether the use of the Title I-E authority could increase the extent to which federal programs are focused on individual schools, whether the Title I-E authority could represent a model for a major change in the distribution of ESEA funds, and whether adequate safeguards exist to ensure that the purposes of federal education programs whose funds are consolidated are met. <3.5.1. Why have relatively few LEAs applied for the Title I-E flexibility authority thus far?> As of July 2019, six LEAs have applied for the weighted student funding authority under Title I-E, and one has been approved. The single approved LEA, Puerto Rico, intends to implement the authority beginning in the 2019-2020 school year. One reason for the low rate of participation could be the relatively slow implementation by ED. The authority was provided under the ESSA's amendments to the ESEA, enacted on December 10, 2015. However, ED's initial announcement that the flexibility authority was available was made more than two years later, on February 2, 2018. LEA interest, to the extent that it existed, may have waned over this time period. Another possible constraint on LEA interest in applying for the Title I-E authority is that the authority is applicable for only a three-year period. While potentially renewable, and while such a time limitation may be typical and appropriate for a pilot authority, LEAs may be hesitant to make major changes to, or new investments in, their school finance system or administration of Title I-A and other federal programs for such a limited time period. While it is not a requirement that an LEA already be implementing a weighted student funding system in order to participate in Title I-E, the number of LEAs that have already adopted weighted student funding for their state and local funds, and would therefore be interested in expanding those systems to include a number of federal programs, may be limited. There is no definitive, comprehensive listing of LEAs currently using weighted student funding formulas. While a number of relatively large urban LEAs are doing so, the total number of such LEAs may still be rather small, limiting the number of likely and eligible applicants for the federal weighted student funding authority. Potential applicants may be deterred by the limitations to the federal weighted student funding authority. While state- and LEA-level weighted student funding formulas often include state and local funding for students with disabilities and career and technical education programs, the Title I-E authority does not apply to funds under IDEA or the Perkins CTE Act. While it might seem most appropriate for an ESEA flexibility provision to apply only to ESEA programs, and while the IDEA and the Perkins CTE Act involve somewhat different constituencies and interest groups than the ESEA, the Title I-E flexibility authority might be more consistent with many state and local weighted student funding policies, and offer enhanced flexibility to participating LEAs, if it included at least some of the IDEA and Perkins CTE Act funding streams. In addition, as discussed below, schools operating schoolwide programs under Title I-A are already permitted to consolidate federal funds provided through non-ESEA programs (e.g., IDEA and Perkins CTE Act funds) with their state and local funds. It is also possible that LEAs have been deterred by the Title I-E requirement that weighted student funding systems must use actual personnel expenditures, including staff salary differentials for years of employment, in their systems. Based on the preliminary results of an ongoing study on the use of weighted student funding systems in LEAs, most of the LEAs in the study have continued to use average staff salaries, rather than actual personnel expenditures, in their weighted student funding systems. In addition, while many requirements under ESEA Title I-A and other ESEA programs are waived in LEAs receiving the weighted student funding flexibility authority, a number of others (e.g., those involving fiscal and academic outcome accountability) remain in effect. This may cause potential-applicant LEAs to determine that the possible reduction in administrative burdens (e.g., from having to track the use of some federal funds, or to allocate them among schools as they have in the past) is not sufficient for them to be motivated to apply. <3.5.2. Could there be changes in individual public school funding levels within LEAs as a result of an LEA entering into a local flexibility demonstration agreement?> If an LEA enters into a local flexibility demonstration agreement, the resulting distribution of state, local, and eligible federal funds under a weighted student funding system that meets the Title I-E requirements could lead to funds shifting among public schools in the LEA. While this may result in public schools serving low-income students, ELs, and other disadvantaged students receiving an increase in funding, it is possible that other public schools may lose funds, possibly a substantial amount or percentage of their current funding. Decreases in funding levels in the course of one school year could potentially be difficult for an individual school to absorb. Without state, local, or federal funds to help ease the transition to a weighted funding system, it is possible that some LEAs may be hesitant to apply to enter into an agreement. Under current law, the Title I-E authority for the Secretary does not include any federal funds to implement local flexibility demonstration agreements or offset the loss of funds in public schools as LEAs implement weighted student funding systems under an agreement. In its budget requests, ED has proposed providing grants to LEAs implementing a local flexibility demonstration agreement for these purposes (see previous discussion of FY2018, FY2019, and FY2020 budget requests), but no such funds have yet been appropriated. <3.5.3. What might happen with respect to expansion of the local flexibility demonstration agreements beyond the original limit of 50 LEAs?> The delay in implementation of the Title I-E authority by the Secretary complicates the schedule envisioned in the Title I-E legislation regarding expansion of eligibility for weighted student funding flexibility to potentially all LEAs. Eligibility for the weighted student funding authority was limited to no more than 50 LEAs for school years preceding 2019-2020. But the statute provides that eligibility may be expanded to any LEA beginning with the 2019-2020 school year, as long as a "substantial majority" of the LEAs participating in previous years have met program requirements. However, no LEA will actually begin implementing the Title I-E flexibility authority until the 2019-2020 school year. Thus, a key requirement for program expansion cannot be met. It is unclear how this would be resolved moving forward should additional LEAs express interest in applying for the Title I-E authority. <3.5.4. What goals or purposes might be served by the use of the weighted student funding authority in participating LEAs?> Given the relatively low level of LEA interest in the flexibility offered by Title I-E, there are questions about why an LEA would want to enter into a local flexibility demonstration agreement. In a document titled "Why should your school district apply for the Student-centered Funding pilot?," ED outlined several opportunities that, in its opinion, would be advanced for LEAs that implement the ESEA Title I-E authority. ED states that participating LEAs would have greater flexibility in the use of the affected federal education program funds, because those federal funds could be used in the same manner as state and local funds, with no specifically required or prohibited uses. LEAs would be able to set their own priorities for these funds. ED further states that participating LEAs would experience reduced administrative burdens, because federal funds under the affected programs would not have to be tracked separately. By combining state, local, and federal funds, participating LEAs could prioritize funding for groups of students with particular needs by developing or expanding a weighted student funding system. ED also notes that participating in the Title I-E authority would enhance transparency in the allocation of resources within LEAs and facilitate the involvement of school-level leaders in resource allocation. In addition, advocates of weighted student funding policies in general often argue that they enhance options for student mobility and choice among public schools in an LEA, support school-based management practices, and may increase the targeting of total (local, state and federal) funds on schools attended by disadvantaged students. The ED document specifically compares the weighted student funding authority to the schoolwide program authority provided under ESEA Title I-A. The document states that the weighted student funding authority is more expansive than the schoolwide program authority, as it would be available to all public schools within the LEA. (For more information about differences between the Title I-E authority and schoolwide program authority to consolidate federal funds, see the next "issue" discussion.) These views of ED and of advocates of weighted student funding may be countered by other views of, or concerns about, the weighted student funding authority, as discussed elsewhere in the "Issues" section of this report. <3.5.5. How does the authority granted under Title I-E differ from authority for Title I-A schools operating schoolwide programs to consolidate federal funds with state and local funds?> Title I-A schools that are operating schoolwide programs already have the authority to consolidate their federal, state, and local funds without having to create a weighted student funding system. However, there are several differences between the funding consolidation authority available to Title I-A schools operating schoolwide programs under Section 1114 and the funding consolidation authority available under Title I-E. The authority to consolidate funds under schoolwide programs is only available to Title I-A schools operating those programs (as opposed to operating targeted assistance programs). Schools operating schoolwide programs have the choice of whether to consolidate their federal, state, and local funds or not. Under the Title I-E authority, all public schools in an LEA that has entered into a local flexibility demonstration agreement would be required to consolidate state, local, and eligible federal funds. An individual public school would not have a choice about participating in the weighted student funding system. Schools operating schoolwide programs must conduct a comprehensive needs assessment, develop a comprehensive schoolwide plan, annually review the schoolwide plan, and revise the plan as necessary based on student needs. Schools located in an LEA participating in Title I-E are not required to conduct a comprehensive needs assessment or develop and maintain a comprehensive plan. For any funds consolidated by a school or an LEA, respectively, under either a schoolwide program or a local flexibility demonstration agreement, the school or LEA must ensure that it meets the intent and purposes of each federal program whose funds were consolidated. While federal programs eligible for consolidation under the Title I-E authority are limited to selected ESEA programs, schools operating schoolwide programs have the flexibility to consolidate funds from ESEA programs as well as non-ESEA programs, such as the IDEA and Perkins Act, provided certain requirements are met. Federal funds consolidated under either a schoolwide program or the Title I-E authority are subject to supplement, not supplant requirements. <3.5.6. Could implementation of the weighted student funding authority result in less targeting of Title I-A funds on high-poverty schools?> Title I-A is the only one of the potentially affected federal programs that currently has school-level allocation requirements. It currently is primarily a "school-based" program, with funds targeted on the specific schools in each LEA with relatively high concentrations of students from low-income families. In sharp contrast, under the Title I-E flexibility authority Title I-A funds in a participating LEA would be provided to any public school in the LEA that enrolls even one student from a low-income family. While it is not possible precisely to compare the current allocation of Title I-A funds to schools to how they might be allocated under the weighted student funding authority, there would be a distinct contrast in general strategy between the two sets of allocation policies. The Title I-A program structure is based implicitly on the assumption, and the findings of past studies, that the relationship between poverty and low achievement is not especially strong for individual pupils, but the correlation between concentrations of poverty and concentrations of low-achieving pupils is quite high. According to proponents of the current structure of Title I-A, this implies that limited Title I-A funds should be concentrated on the highest-poverty schools if they are to address the greatest pupil needs. In addition, the level of Title I-A funding per pupil (a maximum of an estimated $645 per pupil served or $614 per pupil from a low-income family, as discussed above) might be sufficient to pay the costs of substantial supplementary educational services only if combined for relatively large numbers of students in a school. Under the Title I-E flexibility authority, while funds would be allocated among these schools in proportion to their number of students from low-income families, the overall distribution of Title I-A funds would almost undoubtedly be more dispersed among more public schools than under current policies. Concerns regarding economies of scale would argue against the dispersal of Title I-A grants among potentially all schools in a locality. As noted, it is possible that the current level of aid per student can provide a significant amount of resources or services only if combined for a substantial number of pupils in a school. While this would not be a concern at public schools that numerous pupils from low-income families choose to attend, it would be an issue at schools that only a few such children choose to attend. However, this concern might be countered by the fact that under a weighted student funding process, not only Title I-A funds but also state and local funds and potentially other eligible federal program funds would be combined and allocated under a formula giving additional weight to students from low-income families. It is also specifically required that the high-poverty schools in a participating LEA receive in the first year of implementation more total funding per pupil from a low-income family (and at least as much per EL) as in the year preceding initial implementation of the flexibility authority, and at least as much in succeeding years. Thus, while Title I-A funds alone would likely be substantially more widely dispersed among schools than they currently are, it is possible that total federal, state, and local funding to relatively high-poverty schools would increase, especially in LEAs that had not previously adopted weighted student funding policies with respect to their state and local funds. <3.5.7. Would the Title I-E flexibility authority increase the extent to which federal programs other than Title I-A are focused on individual schools?> It is possible that as a result of the Title I-E flexibility, some eligible federal programs may become more focused on the use of funds at the school level as opposed to the state or LEA level. There is currently limited data on how funds under eligible federal programs are distributed to the school level, if at all. It may be helpful from a data analysis perspective to have comprehensive data on the specific federal education funds provided to each public school to examine whether switching to a weighted student funding system that meets the requirements of Title I-E alters this distribution of funds. Under the ESEA as amended by the ESSA, Title I-A requires participating states to include in school report cards data on expenditures at each public school. The state report card must provide data on LEA- and school-level per-pupil expenditures of federal, state, and local funds, including actual personnel expenditures and actual nonpersonnel expenditures, disaggregated by the source of funds. The data must be reported for every LEA and public school in the state. These data have not been reported for LEAs and public schools in the past. Based on draft guidance issued by ED, SEAs and LEAs may delay reporting per-pupil expenditures until they issue report cards for the 2018-2019 school year. However, if an LEA decides to delay the reporting of per-pupil expenditures, the SEA and its LEAs are required to provide information on their report cards for the 2017-2018 school year about the steps they are taking to provide such information on the 2018-2019 school year report card. While this new reporting requirement does not require schools to disaggregate the receipt of funds under Title I-E eligible federal programs, it will, for the first time, detail the per-pupil expenditure of aggregate federal funds that are allocated or used at the school level. If LEAs participating in the Title I-E authority include Title I-A funds in their agreement, it may be possible to get a sense of whether the allocation of federal funds at individual schools is changing under weighted student funding systems that meet the requirements of Title I-E. <3.5.8. Might the weighted student funding authority represent a model for a major change in strategy for Title I-A and other potentially affected ESEA programs?> In participating LEAs that include Title I-A funds in their weighted student funding systems, Title I-A would be transformed from a "school-based" program to an "individualized grant." The Title I-E flexibility authority arguably represents a substantial change in the basic strategy of Title I-A, and to a lesser extent other potentially affected federal education programs. As discussed earlier, from its beginning in 1965 Title I-A has been primarily a school-based program. Funds are to be allocated only to the relatively high-poverty schools in each participating LEA. Within those recipient schools, Title I-A funds are to be used only to serve the lowest-achieving students unless the school meets the 40% low-income threshold, in which case they can be used to serve all students. The level of Title I-A funding per student served is relatively modest, and it is implicitly assumed that such amounts are sufficient to provide substantial services only if combined for relatively large numbers of students from low-income families in a school. Further, there are a number of requirements regarding the authorized uses of Title I-A funds to meet the special educational needs of educationally disadvantaged students in participating schools. The weighted student funding pilot represents a very different approach. First, while academic outcome accountability and civil rights requirements will continue to apply to all public schools in states receiving Title I-A funds, and fiscal accountability requirements will continue to apply to certain "high-poverty" schools within LEAs, other requirements for targeting schools or uses of funds will be waived. Administrative burdens would be reduced, but so would a number of potentially important requirements for targeting services on students with the greatest educational needs. Title I-A and other federal program funds would be combined with state and local funds into weighted grant amounts that would be dispersed among all public schools in the LEA, and that would follow students if they transfer among schools in the LEA (though possibly with a time lag). This is a very different approach from traditional Title I-A programs. The "individualized grant" approach embodied in the Title I-E authority might serve as a model that could, in the future, be expanded if desired through congressional action to include students attending public schools in other LEAs of the same state, or possibly even eligible students enrolled in private schools. <3.5.9. Do the provisions of Title I-E provide adequate assurance that the purposes of the eligible ESEA programs will be met by participating LEAs?> The Title I-E flexibility authority provides for the waiver of a wide range of requirements regarding the allocation of Title I-A funds to schools, and regarding the authorized uses of funds under all of the eligible federal programs. However, participating LEAs must ensure that the purposes of the eligible federal programs included in their weighted student funding systems are met. This may be challenging for participating LEAs, at least initially, as more federal funding from non-Title I-A programs is provided to the school level as opposed to being retained and controlled at the LEA level and as Title I-A funds are potentially used for the first time in schools that had not previously received the funds. <3.5.9.1. Appendix. Glossary of Acronyms> CTE: Career and Technical Education ED: U.S. Department of Education EFIG: Education Finance Incentive Grant EL: English Learner ESEA: Elementary and Secondary Education Act ESSA: Every Student Succeeds Act ( P.L. 114-95 ) IDEA: Individuals with Disabilities Education Act LEA: Local educational agency OEG: Open Enrollment Grant SEA: State educational agency SSAE: Student Support and Academic Enrichment grants TANF: Temporary Assistance for Needy Families

The Every Student Succeeds Act (ESSA; P.L. 114-95 ) amended the Elementary and Secondary Education Act (ESEA) to add the "Flexibility for Equitable Per-Pupil Spending" authority as Title I, Part E. Under Title I-E, the Secretary of Education (the Secretary) has authority to provide local educational agencies (LEAs) with flexibility to consolidate eligible federal funds with state and local funding to create a "single school funding system based on weighted per-pupil allocations for low-income and otherwise disadvantaged students." The Title I-E authority is applicable to LEAs that are implementing "weighted student funding" systems to establish budgets for, and allocate funds to, individual public schools. In general, weighted student funding systems base school funding on the number of pupils in each school in specified categories. Under these funding systems, weights are assigned to pupil characteristics that are deemed to be related to the costs of educating such pupils—such as being from a low-income family, being an English Learner (EL), or having a disability—and their educational program (such as grade level or career-technical education). Eligible federal funds that may be consolidated in an LEA's weighted student funding system include those available under ESEA Title I-A (Education for the Disadvantaged), Supporting Effective Instruction (Title II-A), English Language Acquisition (Title III-A), and Student Support and Academic Enrichment (Title IV-A). No non-ESEA funds (e.g., funds available under the Individuals with Disabilities Education Act (IDEA) or the Perkins Career and Technical Education (Perkins) Act) may be consolidated. Once eligible federal funds are consolidated in a participating LEA's weighted student funding system, these funds are treated the same way as the state and local funds. LEAs participating in Title I-E must have a funding system that uses weights or allocation amounts that provide "substantially more funding" than is allocated to other students to ELs, students from low-income families, and students with any other characteristic related to educational disadvantage that is selected by the LEA. The system must also ensure that each high-poverty school receives in the first year of the local flexibility demonstration agreement more per-pupil funding for low-income students than was received for low-income students from federal, state, and local sources in the year prior to entering into the agreement and at least as much per-pupil funding for ELs as was received for ELs from federal, state, and local sources in the prior year. The weighted student funding system must include all school-level actual personnel expenditures for instructional staff, including staff salary differentials for years of employment, and actual nonpersonnel expenditures in the LEA's calculation of eligible federal funds and state and local funds to be allocated to the school level. The Title I-E authority is limited to 50 LEAs in school years preceding 2019-2020, but could be offered to any LEA from that year onward, if a "substantial majority" of the LEAs participating in previous years have met program requirements. In February 2018, the Secretary announced that the U.S. Department of Education (ED) would begin accepting applications from LEAs to enter into agreements under the Student-Centered Funding Pilot, which is how ED refers to the Title I-E authority. To date, only six LEAs have applied for the Title I-E authority, and only Puerto Rico has been approved to enter into an agreement. Puerto Rico will begin implementing the Title I-E flexibility authority during the 2019-2020 school year. Thus, no LEAs will have implemented weighted student funding systems under Title I-E prior to the 2019-2020 school year. While it is unclear why relatively few LEAs have expressed interest in participating in the Title I-E authority, there are several possible explanations, some of which are summarized below: ED did not act to implement the Title I-E authority until February 2018, more than two years after the enactment of the ESSA. Local flexibility demonstration agreements are for a three-year period with a possible renewal. LEAs may not feel that the changes needed to implement the required weighted student funding system are worthwhile for a three-year period without knowing for certain if the authority would be extended. States and LEAs that currently have weighted student funding systems often include funds for students with disabilities and career and technical education in their systems. However, LEAs would be prohibited from consolidating IDEA or Perkins funds under the Title I-E authority. Public schools that operate schoolwide programs under Title I-A already have the authority to consolidate state, local, and certain federal funds, including those available under IDEA or Perkins. There may be concerns that some public schools may lose funds by switching to a weighted student funding system. As the Title I-E authority does not include any funding to ease the transition to the new funding system for schools that may be negatively affected, LEAs may be hesitant to participate. Under the ESEA Title I-A program, which accounts for over 76% of the eligible federal funds under Title I-E, funds have historically been provided to public schools with the highest concentrations of low-income students. Under the Title I-E authority, if an LEA chooses to consolidate its Title I-A funds it is likely that the distribution of Title I-A funds would be more diffuse. It is possible that some LEAs may view the consolidation of federal funds and the resulting redistribution of funds among public schools in the LEA as a step toward the portability of federal funds, whereby funds would be associated with individual students rather than schools and could ultimately follow them to any school of their choosing, including a private school.

crs_R45951

crs_R45951_0

<1. Introduction> Every 10 years, the U.S. population is counted through the national census, and districts for the U.S. House of Representatives are readjusted to reflect the new population level and its distribution across states through the federal apportionment and state redistricting processes. The requirement to have proportional representation in the House is found in the U.S. Constitution, and constitutional provisions also underlie other elements of the census, apportionment, and redistricting practices. Figure 1 provides a generalized timeline for how these three interrelated processes occur, and the sections of the report that follow provide additional information on apportionment and redistricting. For additional information on the census process, see CRS Report R44788, The Decennial Census: Issues for 2020 , and CRS In Focus IF11015, The 2020 Decennial Census: Overview and Issues . <2. Apportionment Process> Apportionment (or reapportionment) refers to the process of dividing seats in the U.S. House of Representatives among the states. Article 1, Section 2, of the U.S. Constitution, as amended by Section 2 of the Fourteenth Amendment, requires that seats for Representatives are divided among states, based on the population size of each state. House seats today are reallocated due to changes in state populations, since the number of U.S. states (50) has remained constant since 1959; in earlier eras, the addition of new states would also affect the reapportionment process, as each state is constitutionally required to receive at least one House seat. The 2010 census reported a 9.9% overall increase in the U.S. apportionment population since the 2000 census, to 309,183,463 individuals. The ideal (or average) district population size increased across all states following the 2010 census, even though some states experienced larger growth levels than others. The average congressional district population for the United States following the 2010 census was 710,767 individuals. The map in Figure 2 illustrates changes in states' ideal district size and changes in the number of House seats allocated to each state between the 1990 and 2010 apportionments. Twelve U.S. House seats shifted across states following the 2010 census; 10 states lost seats and 8 states gained seats, distributed as shown in Table 1 . Table 2 provides additional historical data on the number of states and number of seats affected by each apportionment since 1910. Regional patterns of population change observed following previous censuses continued in 2010, as the percentage of House seats distributed across the Northeast and Midwest regions decreased, and the percentage of House seats distributed across the South and West regions increased. California had the largest House delegation following the 2010 census, with 53 seats; Alaska, Delaware, Montana, North Dakota, South Dakota, Vermont, and Wyoming each had a single House seat. <2.1. Federal Requirements/Guidelines for Reapportionment: History and Current Policy> The constitutional requirements for representation in the House based on state population size are provided in Article I, Section 2, as amended by Section 2 of the Fourteenth Amendment. Article I, Section 2, specified the first apportionment of seats for the House of Representatives, and it also includes some standards for subsequent reapportionments. Article I, Section 2, requires that the national population be counted at least once every 10 years in order to distribute House seats across states. Broad parameters for the number of House Members are also contained in Article I, Section 2: there can be no more than one Representative for every 30,000 persons, provided that each state receives at least one Representative. Federal statute establishes a number of other elements of the apportionment process, including how to count the population every 10 years via the decennial census; how many seats are in the House; how those House seats are divided across states; and certain related administrative details. In the 19 th century, Congress often passed measures each decade to address those factors, specifically for the next upcoming census and reapportionment. By the early 20 th century, however, Congress began to create legislation to standardize the process and apply it to all subsequent censuses and reapportionments, unless modified by later acts. One example of such legislation was the permanent authorization of the U.S. Census Bureau in 1902, which helped establish a recurring decennial census process and timeline. Other legislation established the current number of 435 House seats; this number was first used following the 1910 census and subsequently became fixed under the Permanent Apportionment Act of 1929. Congress also created a more general reapportionment formula and process to redistribute seats across states. The timeline for congressional reapportionment and current method for allocating seats among states were contained in the Apportionment Act of 1941, which would then apply to every reapportionment cycle, beginning with the one following the 1950 census. The size of the House, method for reapportionment, and timeline for reapportionment are codified in 2 U.S.C. 2a and are further detailed in the section below, alongside the relevant census procedures codified in Title 13 of the U.S. Code . <2.2. Reapportionment Method and Timeline> The apportionment steps detailed below are also summarized by the timeline in Figure 1 . Under federal law, April 1 in any year ending in "0" marks the official decennial census date and the beginning of the population counting process. The U.S. Census Bureau calculates the apportionment population for the United States from the information it collects in the decennial census and certain administrative records. The apportionment population reflects the total resident population in each of the 50 states, including minors and noncitizens, plus Armed Forces personnel/dependents living overseas and federal civilian employees/dependents living overseas. The Secretary of Commerce must report the apportionment population to the President within nine months of the census date (by December 31 of the year ending in "0"). In past years, the Census Bureau has released apportionment counts to the public at about the same time they are presented to the President. Under requirements in the Constitution, each state must receive at least one House Representative, and under statute, the current House size is set at 435 seats. To determine how the 51 st through 435 th seats are distributed across the 50 states, a mathematical approach known as the method of equal proportions is used, which is specified in statute. Essentially, under this method, the "next" House seat available is apportioned to the state ranked highest on a priority list . The priority list rankings are calculated by taking each state's apportionment population from the most recent census, and multiplying it by a series of values. The multipliers used are the reciprocals of the geometric means between every pair of consecutive whole numbers, with those whole numbers representing House seats to be apportioned. The resulting priority values are ordered from largest to smallest, and with the House size set at 435, the states with the top 385 priority values receive the available seats. See the Appendix for additional information on the method of equal proportions and other methods proposed or used in previous apportionments. The President then transmits a statement to Congress showing (1) "the whole number of persons in each State," as determined by the decennial census and certain administrative records; and (2) the resulting number of Representatives each state would be entitled to under an apportionment, given the existing number of Representatives and using the method of equal proportions. The President submits this statement to Congress within the first week of the first regular session of the next Congress (typically, early January of a year ending in "1"). Within 15 calendar days of receiving the President's statement, the Clerk of the House sends each state governor a certificate indicating the number of Representatives the state is entitled to. Each state receives the number of Representatives noted in the President's statement for its House delegation, beginning at the start of the next session of Congress (typically, early January of a year ending in "3"). States may then engage in their own redistricting processes, which vary based on state laws. Federal law contains requirements for how apportionment changes will apply to states in the event that any congressional elections occur between a reapportionment and the completion of a state's redistricting process. In these instances, states with the same number of House seats would use the existing congressional districts to elect Representatives; states with more seats than districts would elect a Representative for the "new" seat through an at-large election and use existing districts for the other seats; and states with fewer seats than districts would elect all Representatives through an at-large election. <3. Redistricting Process23> Congressional redistricting involves creating or redrawing geographic boundaries for U.S. House districts within a state. Redistricting procedures are largely determined by state law and vary across states, but states must comply with certain parameters established by federal statute and court decisions. In general, there is variation among states regarding the practice of drawing districts and which decisionmakers are involved in the process. Across states, there are some common standards and criteria for districts, some of which reflect values that are commonly thought of as traditional districting practices. Districting criteria may result either from shared expectations and precedent regarding what districts should be like, or they may result from certain standards established by current federal statute and court decisions. These criteria typically reflect a goal of enabling "fair" representation for all residents, rather than allowing arbitrary, or discriminatory, map lines. Redistricting efforts intended to unfairly favor one group's interests over another's are commonly referred to as gerrymandering . Packing and cracking are two common terms that describe such districts, but there are various ways in which district boundaries might be designed to advantage or disadvantage certain groups of voters. Packing describes district boundaries that are drawn to concentrate individuals who are thought to share similar voting behaviors into certain districts. Concentrating prospective voters with shared preferences can result in a large number of "wasted votes" for these districts, as their Representatives will often be elected by a supermajority that far exceeds the number of votes required for a candidate to win. Cracking may be thought of as the opposite of packing, and occurs when individuals who are thought to share similar voting preferences are deliberately dispersed across a number of districts. This approach dilutes the voting strength of a group and can prevent its preferred candidates from receiving a majority of the vote in any district. For some states, redistricting following an apportionment may be necessary to account for House seats gained or lost based on the most recent census population count. Generally, however, states with multiple congressional districts engage in redistricting following an apportionment in order to ensure that the population size of each district remains approximately equal under the equality standard or "one person, one vote" principle (discussed under " Population Equality " below). Some states might make additional changes to district boundaries in the years following an initial redistricting; in some instances, such changes are required by legal decisions finding that the initial districts were improperly drawn. <3.1. Federal Requirements/Guidelines for Redistricting: History and Current Policy> From time to time, Congress considers legislation that would affect apportionment and redistricting processes. The Constitution requires the apportionment of House seats across states based on population size, but it does not specify how those seats are to be distributed within each state. Most redistricting practices are determined by state constitutions or statutes, although some parts of the redistricting process are affected by federal statute or judicial interpretations. The current system of single-member districts (rather than a general ticket system, where voters could select a slate of Representatives for an entire state) is provided by 2 U.S.C. 2c. In addition to requiring single-member districts, Congress has, at times, passed legislation addressing House district characteristics. For example, in the 1800s and early 1900s, some federal apportionment statutes included other standards for congressional districts, such as population equality or geographic compactness. None of these criteria is expressly contained in the current statute addressing federal apportionment. Many of the other federal parameters for congressional redistricting have resulted from judicial decisions. It is not uncommon for states to face legal challenges regarding elements of their redistricting plans. One analysis of the 2010 redistricting cycle, for example, found that redistricting lawsuits had been filed in 38 states, and legal challenges to congressional districts in several states continued into 2019. This report is not intended to be a legal analysis. For additional information on redistricting law, see CRS Report R44199, Congressional Redistricting: Legal and Constitutional Issues , and CRS Report R44798, Congressional Redistricting Law: Background and Recent Court Rulings . <3.1.1. Population Equality> One area of redistricting addressed by federal standards is population equality across districts. Legislative provisions, requiring that congressional districts "[contain] as nearly as practicable an equal number of inhabitants," were found in federal apportionment acts between 1872 and 1911. The U.S. Supreme Court has also addressed population size variance among congressional districts within a state, or malapportionment . Under what is known as the "equality standard" or "one person, one vote" principle, the Court has found congressional districts within a state should be drawn to approximately equal population sizes. Mathematically, there are several ways in which the population difference across districts (or deviation from an ideal district size) may be expressed. These equal population standards apply only to districts within a state, not to districts across states. To illustrate how district population sizes can vary across states, Table 3 provides Census Bureau estimates from 1910 to 2010 for the average district population size nationwide, as well as estimates for which states had the largest and smallest average district population sizes. Wide variations in state populations and the U.S. Constitution's requirement of at least one House seat per state make it difficult to ensure equal district sizes across states, particularly if the size of the House is fixed. The expectation that districts in a state will have equal population sizes reinforces the long-standing practice that states redraw district boundaries following each U.S. Census, in order to account for the sizable population shifts that can occur within a 10-year span. To assist states in drawing districts that have equal population sizes, the Census Bureau provides population tabulations for certain geographic areas identified by state officials, if requested, under the Census Redistricting Data Program, created by P.L. 94-171 in 1975. Under the program, the Census Bureau is required to provide total population counts for small geographic areas; in practice, the Bureau also typically provides additional demographic information, such as race, ethnicity, and voting age population, to states. <3.1.2. Racial/Language Minority Protections42> The Voting Rights Act of 1965 (VRA) also affects how congressional districts are drawn. One key statutory requirement for congressional districts comes from Section 2 of the VRA, as amended, which prohibits states or their political subdivisions from imposing any voting qualification, practice, or procedure that results in denial or abridgement of the right to vote based on race, color, or membership in a language minority. Under the VRA, states cannot draw district maps that have the effect of reducing, or diluting, minority voting strength. <3.2. Other Redistricting Considerations> In addition to requirements of population equality and compliance with the VRA, several other redistricting criteria are common across many states today, including compactness, contiguity, and observing political boundaries. Some of the common redistricting criteria specified by states are presented in Table 4 . These factors are sometimes referred to as traditional districting principles and are often related to geography. The placement of district boundaries, for example, might reflect natural features of the state's land; how the population is distributed across a certain land area; and efforts to preserve existing subdivisions or communities (such as town boundaries or neighborhood areas). Redistricting laws in many states currently include such criteria, but they are not explicitly addressed in current federal statute. Previous federal apportionment statutes, however, sometimes contained similar provisions. <3.2.1. Compactness and Contiguity> As a districting criterion, compactness reflects the idea that a congressional district should represent a geographically consolidated area. Compactness of congressional districts is a requirement in 30 states, but often, state laws do not specify precise measures of compactness. Generally, a compact district would tend to have smoother boundaries and might resemble a standard geometric shape more than a less compact district. In some conceptualizations, a compact district would have an identifiable "center" that seems reasonably equidistant from any of its boundaries. Federal apportionment acts between 1842 and 1911 contained a provision requiring that congressional districts be of "contiguous territory," and most states have included similar language in their current redistricting laws. For a district to be contiguous, it generally must be possible to travel from any point in the district to any other place in the district without crossing into a different district. <3.2.2. Preserving Political Subdivisions> Most states require that redistricting practitioners take into account existing political boundaries, such as towns, cities, or counties. In many instances, districts may not be able to be drawn in ways that encompass entire political subdivisions, given other districting standards, like population equality, that could take precedence. Maintaining political subdivisions can also help simplify election administration by ensuring that a local election jurisdiction is not split among multiple congressional districts. Some state laws direct redistricting authorities to preserve the "core" of existing congressional districts; other states prohibit drawing district boundaries that would create electoral contests between incumbent House Members. <3.2.3. Preserving Communities of Interest> Some states include the preservation of communities of interest as a criterion in their redistricting laws. People within a community of interest generally have a shared background or common interests that may be relevant to their legislative representation. These recognized similarities may be due to shared social, cultural, historical, racial, ethnic, partisan, or economic factors. In some instances, communities of interest may naturally be preserved by following other redistricting criteria, such as compactness or preserving political subdivisions. <3.2.4. Promoting Political Competition; Considering Existing District or Incumbent> Some states include measures providing that districts cannot be drawn to unduly favor a particular candidate or political party. The term gerrymander originated to describe districts drawn to favor a particular political party, and it is often used in this context today. Redistricting has traditionally been viewed as an inherently political process, where authorities have used partisan considerations in drawing district boundaries. Districts generally may be drawn in a way that is politically advantageous to certain candidates or political parties, unless prohibited by state law. Some states, for example, expressly allow the use of party identification information in the redistricting process, whereas others prohibit it; similarly, some states may allow for practices to protect an incumbent or maintain the "core" of an existing district, whereas other states prohibit any practices that would favor or disfavor an incumbent or candidate. <3.3. State Processes for Redistricting> Redistricting processes are fundamentally the responsibility of state governments under current law and practice. Among the 43 states with multiple House districts, a variety of approaches are taken, but generally, states either allow their state legislatures or a separate redistricting commission to determine congressional district boundaries. The map in Figure 3 displays the redistricting methods currently used across states. Historically, and in the majority of states today, congressional district boundaries are primarily determined by state legislatures. Currently, 37 states authorize their state legislatures to establish congressional district boundaries. Most of these states enable the governor to veto a redistricting plan created by the legislature; Connecticut and North Carolina do not allow a gubernatorial veto. Other states, in recent years, have begun to use redistricting commissions, which may be more removed from state legislative politics. In eight states that currently have multiple congressional districts (Arizona, California, Colorado, Hawaii, Idaho, Michigan, New Jersey, and Washington), redistricting commissions are primarily responsible for redrawing congressional districts; Montana's state constitution provides for an independent redistricting commission to draw congressional district boundaries, if reapportionment results in multiple seats for the state. In five other states (Maine, New York, Rhode Island, Utah, and Virginia), a commission serves in an advisory capacity during the redistricting process. Commissions may also be used as a "backup" or alternate means of redistricting if the legislature's plan is not enacted, such as in Connecticut, Indiana, and Ohio. The composition of congressional redistricting commissions can also vary; many include members of the public selected by a method intended to be nonpartisan or bipartisan, whereas other commissions may include political appointees or elected officials, such as in Hawaii and New Jersey. A commission's membership, the authority granted to it, its relationship to other state government entities, and other features may affect whether a commission is perceived to be undertaking an objective process or a more politicized one. Some proponents of redistricting commissions believe that using independent redistricting commissions can prevent opportunities for partisan gerrymandering and may create more competitive and representative districts. Others, however, believe that political considerations can remain in commission decisionmaking processes, and that the effect of redistricting methods on electoral competitiveness is overstated. For more information on redistricting commissions, see CRS Insight IN11053, Redistricting Commissions for Congressional Districts . The timeline for redistricting also varies across states, and can be affected by state or federal requirements regarding the redistricting process; the efficiency of the legislature, commission, or other entities involved in drawing a state's districts; and, potentially, by legal or political challenges made to a drafted or enacted redistricting plan. In general, the redistricting process would usually begin early in a year ending in "1," once each state has learned how many seats it is entitled to under the apportionment following the decennial census. Many states complete the process within the next year. After the 2010 reapportionment, for example, Iowa was the first state to complete its initial congressional redistricting plan on March 31, 2011, and 31 other states completed their initial plans by the end of 2011. The remaining 11 states with multiple congressional districts completed their initial redistricting plans by the middle of 2012, with Kansas becoming the final state to complete its initial plan on June 7, 2012. Some states may redistrict multiple times between apportionments, if allowed under state law or required by a legal challenge to the preliminary redistricting. <3.4. Congressional Options Regarding Redistricting> Although redistricting processes in practice today are largely governed by state law, Congress has, at times, considered an expanded federal government role, which could serve to standardize certain elements of the redistricting process across states. Given the historically limited role the federal government has played in the redistricting process, concerns about federalism may arise in the context of certain congressional efforts addressing redistricting. The types of legislative proposals briefly introduced in this section reflect some common examples of redistricting bills introduced in recent Congresses; they are not meant to be an exhaustive list of all the options Congress has considered or could consider related to redistricting. Some legislative proposals in recent Congresses would establish criteria for districts, such as population equality, compactness, contiguity, or preservation of existing political subdivisions. Bills have also been introduced that would require states to use independent redistricting commissions and/or maintain certain standards of public input and transparency regarding the redistricting process. Some congressional bills include provisions to prevent states from redistricting more than once following an apportionment, which is a practice sometimes referred to as "mid-decade redistricting." Other bills would expand oversight by the Department of Justice under certain circumstances related to existing requirements of, or proposed amendments to, the VRA. Most of these bills have been referred to committee but not passed by either chamber. In the 116 th Congress, H.R. 1 served as a subject of multiple committee hearings and was passed by the House. H.R. 1 is a multifaceted bill that addresses multiple areas of election administration, among other topics; with respect to redistricting, it would require states to use independent redistricting commissions, adopt certain redistricting criteria, and prohibit mid-decade redistricting. <4. Concluding Observations> Apportionment and redistricting address fundamental elements of representational democracy. Determining how many elected representatives should serve in the House, and how many people should be in each congressional district, are central questions for those who are concerned with how responsive the House can be to the interests of the American public. During earlier eras in the United States, the number of seats in the House of Representatives generally increased as the American population increased, and district sizes could be kept more equal over time and across states. The House size, however, has been set at 435 seats throughout the last century, while the national population has continued to grow and concentrate in certain geographic areas, leading to larger constituencies across all House districts over time and disparate district sizes across states. Certain elements of the apportionment process are established by the U.S. Constitution. This includes the requirement for representation in the House based on state population size; the reallocation of House seats every 10 years upon the completion of a national population count; and the requirements that each state receives at least one Representative and that there can be no more than one Representative for every 30,000 persons. Other elements of the process are addressed through congressional legislation, such as the overall number of House seats or method of distributing seats among the states. Congress more regularly legislated in this area prior to the mid-20 th century, passing decennial acts to address upcoming censuses and apportionments, rather than creating bills intended to apply for all future reapportionment cycles. Whereas apportionment is a process largely governed by federal statute, redistricting is a process, in practice, largely governed by state law. Certain federal standards apply to House districts, generally in the interest of preserving equal access to representation, but the method and timeline by which those districts are created is largely determined by state law. In states with multiple congressional districts, there are a multitude of ways in which district boundaries can be drawn, depending upon the criteria used to create the districts. There is often an expectation that congressional districts will be drawn in a way that ensures "fair" representation, but "fairness" can be a somewhat subjective determination. Many lawmakers and members of the public may agree on some of the more basic representational principles embedded in apportionment and redistricting law, but can find it difficult to apply those principles in practice. The criteria commonly used for redistricting today reflect a combination of state and federal statutes, judicial interpretations, and practices from past redistricting cycles that may require trade-offs between one consideration and another. Ensuring equal population size across all congressional districts, for example, may be an agreeable goal for many individuals. In practice, however, the geographic and demographic distribution of residents within and across states, coupled with requirements to observe state boundaries, provide all states with at least one Representative, and maintain a constant number of House seats, make this goal more difficult to achieve. Although mapmaking software today can design districts with increasing precision with respect to geographic boundaries and population characteristics, this technological capacity has not necessarily simplified the overall task of redistricting. A majority of states faced legal challenges to congressional district maps drawn following the 2010 census, and several cases remained pending in 2019, reflecting differing perspectives on fairness, representational access, and how competing redistricting criteria should be weighted. <4.1. Appendix. Determining an Apportionment Method> Congress is a bicameral legislature, in which each state receives equal representation in the Senate and each state's representation in the House is based upon its population. Essentially, any method of apportionment for the House must consider three key variables: (1) the number of House seats; (2) the number of U.S. states; and (3) the apportionment population of each state. A mathematical decision must also be made regarding how fractions of seats are addressed, since House seats must be allocated as whole numbers, and simple division methods are unlikely to produce this outcome for all (or any) states. Because the Constitution does not specify a particular method for apportionment, several options have been considered and utilized throughout history. When determining apportionment, parameters could be set for the number of seats in the House, the population size of a district, or both. The Constitution, to an extent, addresses House size and district size by requiring that each state receives at least one House seat and requiring that there can be no more than one Representative per every 30,000 persons. Yet these provisions provide little practical guidance for what the size of the House or the size of a district should be. Based on the number of states and U.S. apportionment population from the 2010 Census, for example, the House could range from a minimum of 50 seats to a maximum size of over 10,000 seats. As a general principle, House size and district size are inversely related: a larger number of House seats means smaller population sizes for districts, and a smaller number of House seats means larger population sizes for districts. Attempts by the Framers and various Congresses to address apportionment reveal a number of perspectives on how best to create a representative legislature, along with political and logistical considerations related to changes in the size of the House. Prioritizing Equal-Sized Districts or Preserving a Fixed House Size An apportionment method prioritizing relatively equal district population size would establish a representation ratio, where there would be one Representative per x number of persons. If the ratio remains the same across apportionment cycles, increases or decreases in the U.S. apportionment population would result in corresponding increases or decreases to the total number of House seats. The representation ratio could also be adjusted to create larger or smaller districts, in order to limit the magnitude of changes to the overall size of the House. If states receive fractional allocations of House seats and there is no constraint on the size of the House, a simple rounding rule could be utilized to arrive at a whole number of seats for the House overall. A general example of an apportionment approach prioritizing relatively equal district size follows: 1. determine an ideal district population size, d ; 2. divide each state's apportionment population, p s1 , p s2 p s50, by d to determine how many House seats a state would be entitled to (its "quota" of seats), q ; and 3. determine a rounding rule to apply for states in which q is not a whole number. Until the early 20 th century, the size of the House generally increased with each apportionment, due to the addition of new states and population growth, but today, the number of House seats is set at 435 by federal statute. Arguments to expand the House have included expanding the range of interests that House Members would represent and ensuring that Members remained knowledgeable about local issues. Yet concerns have also been raised that it would not be feasible to increase the House size apace with national population growth. To be sure that a particular apportionment conforms to a specified size of the House, each state must receive a whole number of seats, and the sum of all states' seats must equal the desired total House size. Many apportionment approaches vary on how to address fractional seats, as remainders will often result when calculating state seat quotas. A general example of an apportionment approach to reach a certain House size follows: 1. a set number of House seats, H , is agreed upon; 2. divide the national apportionment population, p USA , by H to determine an "ideal" or average district population size, d , also known as the "initial divisor"; 3. divide each state's apportionment population, p s1 , p s2 p s50, by d to determine how many House seats a state would be entitled to (its "quota" of seats), q ; 4. determine a rounding rule to apply to any q values that are not whole numbers (to represent actual House seats, which cannot be divided); and 5. add these rounded (or adjusted), q values; if this sum does not equal H , determine a method to adjust state quotas so that the sum of the resulting q values equals H . The following discussions provide an introduction to several methods that have been used for congressional apportionment in the United States. To illustrate how these methods work, for each method an imaginary example is provided in the accompanying table, in which the size of the House is fixed at 20 Members and the seats are divided among four states (states A, B, C, and D) with the populations specified in the tables. Hamilton/Vinton Method (Ranking Fractional Remainders) Congress considered various methods of apportionment after the first census of 1790 and passed an initial apportionment bill in 1792 that would have utilized what is now known as the Hamilton/Vinton method. President George Washington, however, exercised his first veto on the measure, in part, because the resulting apportionment calculations would have violated the requirement of at least 30,000 persons per district for multiple states. Representative Samuel Vinton later introduced legislation proposing this method, which was enacted, and this apportionment method was first used in 1850 and continued to inform apportionment considerations throughout the rest of the 19 th century, in conjunction with the Webster method (discussed below). The Hamilton/Vinton method is based on a fixed House size, H . Each state receives the whole number of seats in its quota, q , of seats. The remainders from q are rank-ordered from largest to smallest, and any additional House seats are apportioned to the states with the largest remainders. Jefferson Method (Largest Divisors) Following the presidential veto of the Hamilton method, Congress adopted the Jefferson method of apportionment, which was used from 1792 to 1832. The Jefferson method for apportionment is based on a fixed House size, H , and each state's quota of seats, q , is rounded down to the nearest whole number. Often, the sum of the rounded-down q values is less than H . When this occurs, divisor values smaller than d are tested until an adjusted divisor, d adj , is found that results in a set of q values which, when rounded down, sum to H . Webster Method (Major Fractions) Some believed that the Jefferson method favored large states, and the Webster method was an approach first used for apportionment in 1842 and last used for apportionment following the 1930 census. The Webster method is similar to the Hamilton/Vinton method but differs in how it addresses remainders of seats. Each state receives the whole number of seats in its quota, q ; then, q remainders greater than or equal to 0.5 are rounded up to the next whole number, and those states receive an additional seat. The example provided in Table A-3 happens to result in the same number of House seats as the other examples in this appendix, which treat the House size, H , as fixed at 20 seats, but performing these initial calculations under the Webster method could result in a subsequent adjustment to the number of House seats. If the House size remains fixed, and the initial sum of seats produced by the Webster method does not equal the desired number of seats, an adjusted divisor, d adj , can be used to calculate q values that, when rounded and summed, result in a specific House size. Huntington-Hill Method (Method of Equal Proportions) In addition to treating large and small states similarly, some have also believed that an apportionment method should minimize percentage differences in district population sizes (across states) as much as possible. The method of equal proportions, also known as the Huntington-Hill method, seeks to achieve this objective, and has been used for all House apportionments since 1941. This method differs from the Webster method by rounding up remainders for a state's quota, q , at the geometric mean, G , rather than at the arithmetic mean. The geometric mean is found by multiplying two successive numbers together, then taking the square root of their product; here, the successive numbers represent a state's q rounded down to the nearest whole number (its "lower" quota) and a state's q rounded up to the nearest whole number (its "upper" quota). Each state receives its "lower" quota of seats and then may receive an additional seat if its quota, q , is greater than or equal to its geometric mean, G . The initial calculation for a state's quota, q , under the method of equal proportions, is made by using the "ideal" district size, d , as the divisor. Table A-4 provides a sample apportionment in which the sum of the rounded geometric means happens to result in the desired House size, H , of 20 seats, but, in practice, this often does not occur. If the sum of the rounded geometric means for each state does not result in the desired number of House seats, there is an additional step: seats can be apportioned using a priority list , which essentially ranks each state's claim to the "next" House seat apportioned (i.e., the 51 st -435 th seats), after each state receives the one seat it is constitutionally entitled to. To generate a priority list, each state's apportionment population is multiplied by a series of multiplier values. The multiplier values are created using the reciprocal of the geometric mean associated with each potential successive seat number for the state (above its constitutionally mandated first seat). For example, the multiplier value for a second House seat in any state would be 1/ (1 x 2) or 0.707, the multiplier for a third House seat would be (2 x 3) or 0.408, and so on. The products that result from multiplying these values by each state's apportionment population are ranked from largest to smallest to create the priority list, and seats are distributed until H number of seats (currently 385, the number needed to get to a total of 435 seats once each of the 50 states receives its constitutionally required seat) have been apportioned.

The census, apportionment, and redistricting are interrelated activities that affect representation in the U.S. House of Representatives. Congressional apportionment (or reapportionment) is the process of dividing seats for the House among the 50 states following the decennial census. Redistricting refers to the process that follows, in which states create new congressional districts or redraw existing district boundaries to adjust for population changes and/or changes in the number of House seats for the state. At times, Congress has passed or considered legislation addressing apportionment and redistricting processes under its broad authority to make law affecting House elections under Article I, Section 4, of the U.S. Constitution. These processes are all rooted in provisions in Article I, Section 2 (as amended by Section 2 of the Fourteenth Amendment). Seats for the House of Representatives are constitutionally required to be divided among the states, based on the population size of each state. To determine how many Representatives each state is entitled to, the Constitution requires the national population to be counted every 10 years, which is done through the census. The Constitution also limits the number of Representatives to no more than one for every 30,000 persons, provided that each state receives at least one Representative. Additional parameters for the census and for apportionment have been established through federal statutes, including timelines for these processes; the number of seats in the House; and the method by which House seats are divided among states. Congress began creating more permanent legislation by the early 20 th century to provide recurring procedures for the census and apportionment, rather than passing measures each decade to address an upcoming reapportionment cycle. Federal law related to the census process is found in Title 13 of the U.S. Code , and two key statutes affecting apportionment today are the Permanent Apportionment Act of 1929 and the Apportionment Act of 1941. April 1 of a year ending in "0" marks the decennial census date and the start of the apportionment population counting process; the Secretary of Commerce must report the apportionment population of each state to the President by the end of that year. Within the first week of the first regular session of the next Congress, the President transmits a statement to the House relaying state population information and the number of Representatives each state is entitled to. Each state receives one Representative, as required by the Constitution, and the remaining seats are distributed using a mathematical approach known as the method of equal proportions, as established by the Apportionment Act of 1941. Essentially, a ranked "priority list" is created that indicates which states will receive the 51 st -435 th House seats, based on a calculation involving the population size of each state and the number of additional seats a state has received. The U.S. apportionment population from the 2010 census was 309,183,463, reflecting a 9.9% increase since 2000, and 12 House seats were reapportioned among 18 states. After a census and apportionment are completed, state officials receive updated population information from the U.S. Census Bureau and the state's allocation of House seats from the Clerk of the House. Single-member House districts are required by 2 U.S.C. §2c, and certain other redistricting standards, largely related to the composition of districts, have been established by federal statute and various legal decisions. Current federal parameters related to redistricting criteria generally address population equality and protections against discrimination for racial and language minority groups under the Voting Rights Act of 1965 (VRA), as amended. Previous federal apportionment statutes have, at times, included other district criteria, such as geographic compactness or contiguity, and these standards have sometimes been referred to in U.S. Supreme Court cases, but they are not included in the current federal statutes that address the apportionment process. These redistricting principles and others, such as considering existing political boundaries, preserving communities of interest, and promoting political competition, have been commonly used across states, and many are reflected in state laws today. The procedural elements of redistricting are generally governed by state laws, and state redistricting practices can vary regarding the methods used for drawing districts, timeline for redistricting, and which actors (e.g., elected officials, designated redistricting commissioners, and/or members of the public) are involved in the process. Mapmakers must often make trade-offs between one redistricting consideration and others, and making these trade-offs can add an additional challenge to an already complicated task of ensuring "fair" representation for district residents. Despite technological advances that make it easier to design districts with increasing geographic and demographic precision, the overall task of redistricting remains complex and, in many instances, can be controversial. A majority of states, for example, faced legal challenges to congressional district maps drawn following the 2010 census, and several cases remained pending in 2019—less than a year before the next decennial census date.

crs_R45260

crs_R45260_0

<1. Overview> Ghana, a country of 28 million people on West Africa's Atlantic coast, faces diverse development challenges, but has built a robust democracy notable for consistent peaceful turnovers of executive power since a transition to multiparty rule in the early 1990s. The country also has made progress toward many of the socioeconomic outcomes that successive U.S. administrations have sought to foster in Africa, and U.S. policymakers have tended to view Ghana as a stable U.S. partner in an often-volatile region. Substantial U.S. bilateral aid has both been premised on and arguably contributed to Ghana's generally positive development trajectory. Amicable relations between the United States and Ghana, a former British colony, have persisted since 1957, when Ghana became the first colonized sub-Saharan African country to gain independence. In 2008, then-President George W. Bush visited Ghana to showcase U.S. aid programs on trade, entrepreneurship, health, education, and Ghana's first Millennium Challenge Corporation (MCC) compact. In 2009, then-President Barack Obama traveled to Ghana to highlight the nation as a democratic model for other African countries. The Trump Administration has signaled support for continued close cooperation, although there has been some recent tension over reported Ghanaian noncooperation with U.S. immigration law enforcement proceedings. The Administration also has proposed sharp cuts in bilateral aid as part of its overall emphasis on reducing foreign assistance, which could affect relations. During the Obama Administration, U.S. aid to Ghana was provided primarily under U.S. Agency for International Development (USAID)-administered global presidential development initiatives. These included Feed the Future (FTF, a global food security effort), the Global Health Initiative (GHI), the Global Climate Change Initiative (GCCI), and several Africa-specific initiatives: Power Africa, Trade Africa, and the Young African Leaders Initiative (YALI). In 2014 Ghana signed a second MCC compact focused on the electrical power sector. Ghana was also selected to join the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP) and its Security Governance Initiative (SGI), both launched in 2014. Ghana is a key international peacekeeping troop contributor in Africa, and engages in regular joint military training exercises and other security cooperation with the United States. Ghana has also played an active and constructive role in regional affairs. It has been a leader in various regional interventions to address political and security crises in West Africa and has hosted refugees fleeing conflict. The Ghanaian government is currently helping to mediate long-standing government-opposition political tensions in neighboring Togo. It also hosted a regional hub that supported United Nations (U.N.) operations to counter the 2014-2015 Ebola outbreak in nearby countries. Ghanaians have played leadership roles in regional and multilateral organizations. Ghana supports Economic Community of West African States and African Union efforts to foster regional and continental economic integration. At a global level, Ghana seeks to sustain positive donor relations, aid, and investment, and contribute to multilateral policymaking relating to peace, stability, development, and scientific cooperation, while also expanding its foreign export markets. <2. Politics and Governance> The predecessor of Ghana's incumbent president Nana Addo Dankwa Akufo-Addo was John Dramani Mahama, who came to office in July 2012 as the constitutional successor of President John Atta Mills, who died in office of natural causes earlier that month. Mahama then won election in polls held in late 2012. Ghana's most recent general elections, held on December 7, 2016, were generally regarded as free and fair, despite tensions and isolated incidents of political violence. The presidential race featured a rematch between Mahama, of the National Democratic Congress (NDC), and Akufo-Addo, of the New Patriotic Party (NPP). These two parties dominate national politics to such an extent that Ghana effectively has a two-party system. Akufo-Addo won 53.7% of votes exceeding the 50-percent-plus-one threshold necessary to preclude a runoff vote against 44.5% for Mahama. Akufo-Addo took office in January 2017. The NPP also won 171 of 275 legislative seats and the NDC 104. The strength of Akufo-Addo's first-round win was noteworthy, as he had lost two prior presidential runoffs by razor-thin margins. Despite moderate economic improvements in 2016, widespread frustration over poor economic performance under Mahama likely clinched his electoral defeat. During Mahama's tenure, multiple downward economic trends converged, spurring repeated protests over unemployment and socioeconomic challenges. <2.1. Government Policy Priorities> For two decades, control of Ghana's executive and legislative branches has alternated between the NDC, which has generally supported a social-democratic vision and a key economic role for the state, and the NPP, which has emphasized a more free-market, private-sector-centered approach. Despite these different ideological outlooks, the parties' election platforms and policy records have been broadly similar. Both have tried to foster private-sector-driven growth and foreign investment, while also supporting state investments in industrialization and infrastructure, and both have emphasized the importance of social services and welfare programs. President Akufo-Addo is the scion of a well-known political family and a former member of parliament who served as Foreign Affairs Minister and Justice Minister under the NPP government of former President John Kufuor. A major goal of the Akufo-Addo administration as set out in the NPP's 2016 election platform, presidential speeches, and government policy documents is to improve the economy. Notable emphases include efforts to increase access to commercial credit, reduce business costs, and support private-sector-led economic expansion and job growth. Priorities include industrialization, economic diversification, state investment in infrastructure, and tax incentives targeting manufacturing in selected sectors (e.g., light industries, pharmaceuticals, petrochemicals, and garments and textiles). In July 2019, the government launched a $320 million initiative called the Infrastructure for Poverty Eradication Programme, under which each of 275 constituencies are to be given $1 million to invest in infrastructure chosen by local stakeholders. Some funding for preexisting commitments is also included. The Akufo-Addo administration also seeks to strengthen public social service and safety net programs, with a focus on health, education, and housing. In September 2017, it launched the Free Senior High School program, under which universal senior high school (SHS, i.e., post-ninth-grade) education is entirely publicly funded. Previously, there were a limited number of SHS institutions, admission was competitive, and students had to pay fees. The SHS program has reportedly created challenges with respect to accommodating a large influx of students. In May 2019, the government launched a Social and Partnership Council, which is to manage a partnership between the government, organized labor, and employers aimed at increasing economic competitiveness and growth and ensuring constructive labor-business relations. The Akufo-Addo administration also has pledged to create a series of regional development authorities, build public institutional capacities, combat corruption, and enhance governance and accountability. The government seeks to accomplish all of these goals while also reining in public spending, running a balanced budget, and stabilizing the currency. In official remarks, President Akufo-Addo has placed high priority on reducing Ghana's reliance on foreign assistance, noting a need to "discard a mindset of dependency and living on handouts" and "to build an economy that is not dependent on charity and handouts a Ghana beyond aid." In July 2019, Akufo-Addo reiterated his call for self-reliance and African-driven regional development. <2.2. Law Enforcement and the Rule of Law> Public sector corruption in Ghana has been a chronic challenge. In July 2019, Transparency International and Afrobarometer, a survey organization, released data indicating that roughly a third of Ghanaians reported having paid a public service bribe in the last 12 months, believing that corruption had increased during that period, and thinking that the government is doing a bad job of countering corruption. A majority, 60%, also reported believing that ordinary citizens could make a difference in the fight against corruption. In recent years there have been several high-profile bribery scandals involving top officials, including a major one in 2015-2016 that forced many judges from office. Although both NDC- and NPP-led governments have taken steps to combat corruption, new cases have regularly emerged during the administrations of both parties. Akufo-Addo has pledged to tackle the corruption issue, including by strengthening the asset declaration system for officials and ensuring nonpartisan prosecution of public corruption. In early 2018, the government created an Office of the Special Prosecutor to address state corruption. Akufo-Addo's nomination of former Mahama administration Justice Minister and Attorney General (AG) Martin Amidu to fill the post generated some controversy. Amidu had been dismissed as AG under Mahama after accusing multiple colleagues in the then-ruling NDC of fraud, and later pursued corruption cases through private litigation. In May 2017, Akufo-Addo announced the arrest of customs officials implicated in $276 million in revenue losses in an under-invoicing import collusion case. He also ordered an investigation into the president of Ghana Football Association (GFA) for corruption-related offenses, and later dissolved the GFA. The matter drew intense local public attention. Akufo-Addo and the NPP have faced criticism for failing to rein in allegedly criminal acts of intimidation by NPP youth supporters, notably the Delta Force, a pro-NPP political vigilante group. These acts appears linked to unmet demands for patronage or jobs by NPP youth loyalists who helped secure the NPP's 2016 electoral victories. In early 2017, Delta Force members committed acts of assault and rioting, leading to criminal cases against several, and group members later disrupted court proceedings in these cases. Although Akufo-Addo condemned the group, those prosecuted were fined rather than imprisoned. Drug traffickers use Ghana as a hub for the transshipment of cocaine from Latin America and heroin from southwest Asia. These drugs are typically shipped onward to markets in Europe, South Africa, and North America, and Ghanaian drug mules are regularly arrested at airports abroad, although Ghana also is a destination point. There is close U.S.-Ghanaian cooperation to fight drug trafficking. The U.S. Drug Enforcement Administration (DEA) opened an office in Ghana in 2009 and in 2010 helped set up a specially vetted police unit, which the DEA later designated a Sensitive Investigative Unit (SIU), one of a few in Africa. In cooperation with Ghana, the DEA has carried out several extraditions and other law enforcement operations. Since 2012, Ghana also has hosted a State Department International Law Enforcement Academy Regional Training Center. The center trains law enforcement officials from across West Africa. <2.2.1. A Threat of Terrorism?> Ghana has not faced Islamist terrorist attacks on its soil, but could, given a rise in violent Islamist extremist attacks and insurgencies in recent years in West Africa, notably including the Sahel, which abuts Ghana's northern border. C te d'Ivoire and Burkina Faso, which neighbor Ghana, have both faced mass-casualty extremist attacks in urban areas in recent years. Ghana's contribution of troops to the U.N. Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) could also potentially spur extremists to target Ghana. There are few, if any, overt signs of widespread radicalization among Ghana's Muslims, who in 2010 comprised nearly 18% of the population and were concentrated primarily in the Northern and Ashanti regions. Ghanaian Islamic practices primarily draw on Sufi traditions (which emphasize personal human-divine spiritual relations) and the Ahmadiyya movement (a global sect with historical origins in India). There are some indications that radicalization of Ghanaians by foreigners or by Ghanaians drawing on foreign extremist ideologies may be occurring, though likely on a limited basis. A Libyan government report on the Islamic State (IS) in Libya that spurred parliamentary debate in October 2017 reportedly suggested that between 50 and 100 Ghanaians may have joined that group. Some local analysts believe there may be a significantly higher number of radicalized Ghanaians with IS links. In early 2018, several individuals in possession of grenades, one with suspected IS ties, were arrested in Ghana. A separate matter that has caused some local controversy was the Mahama government's 2016 agreement to host two Yemenis who had been imprisoned for 14 years as U.S. enemy combatants in Guantanamo Bay, Cuba. Despite controversy in the case including a legal suit over the agreement's legality and NPP criticism of the NDC government's original acceptance of the men the Akufo-Addo government allowed them to remain in the country as refugees after the agreement expired in early 2018. <2.3. Human Rights> Ghana has a free and active press and a generally positive record on upholding individual rights and freedoms. Nevertheless, the State Department's 2018 Country Reports on Human Rights Practices documents a range of serious human rights challenges, including arbitrary or unlawful killings by the government or its agents; harsh and life-threatening prison conditions; corruption in all branches of government; lack of accountability in cases of violence against women and children, including female genital mutilation/cutting; infanticide of children with disabilities; criminalization of same-sex sexual conduct, although rarely enforced; and exploitative child labor, including forced child labor. Trafficking in persons (TIP) activities are a notable challenge. In 2015, Ghana signed the first U.S. bilateral Child Protection Compact Partnership, a multi-year plan to address child sex trafficking and forced labor. Notwithstanding this initiative, the State Department rates Ghana's anti-TIP efforts as poor and ranked Ghana on the Tier 2 Watch List in 2015, 2016, and 2017. This ranking placed Ghana at risk of losing certain types of U.S. aid under the Trafficking Victims Protection Act of 2000 (TVPA, P.L. 106-386 , as amended). In 2018, Ghana's TIP ranking improved to Tier 2, a determination indicating that the government does not fully meet minimum anti-TIP standards set out in the TVPA, but is making significant efforts to do so. Ghana remained a Tier 2 country in 2019. As in 2018, the 2019 report states that Ghana is a source, transit, and destination for men, women, and children subjected to forced labor in a range of domestic industries, as well as to sex work. According to the report, child labor in the fisheries sector is particularly widespread. Child labor in the cocoa sector has also been a particular concern of U.S. policy-makers for many years. A range of public-private U.S. Department of Labor-monitored programs to end such child labor are in place, as provided for under the 2001 Harkin-Engel Protocol and several follow-up agreements. <3. Economy> Ghana has largely recovered from a period of low growth under former President Mahama. The value of Ghana's GDP reached an estimated $65 billion in 2018, up from an annual average of $55.8 billion from 2013 through 2017, while GDP grew by 5.6% in 2018 an arguably healthy rate, but one lower than the 8.1% rate achieved in 2017. The International Monetary Fund (IMF) projects that the growth rate will rise to 8.8% in 2019 before slowing to an average of 3.7% over the next five years. In the aggregate, however, that growth would be significant; the IMF anticipates that GDP will be worth $97 billion in 2024. Increases in the prices of Ghana's key commodity exports have helped spur the post-Mahama recovery. Historically, Ghana's most important exports have been cocoa and gold. Crude oil has become a third major commodity export since 2010, when production from newly discovered oil fields began. The oil and gas sector is expected to rapidly expand following a period of weak oil prices and a number of technical production challenges. Ghana's domestic economy is more diverse and dynamic than the economies of many of its West African peers. The services sector, which includes a small stock market, a nascent call- and information-processing sector, and a mobile money market worth $35 billion, has grown particularly rapidly since the mid-2000s. Services, which are centered in cities, where about 56% of Ghanaians live, contributed an estimated 42% of GDP in 2017. Agriculture's share of GDP has declined over the past decade, from 36% in 1997 to 20% in 2017, but the sector remains an economic keystone; it employed 34% of the labor force in 2017. Compared with much of West Africa, Ghana has fairly effective public goods and service provision capacities, and relatively high cell phone usage and electricity access rates, which underpin production, digital trade, and financial transactions. Access to reliable power is projected to increase as multiple new power plant projects come online though in the meantime, power generation and transmission capacities remain unreliable and costly. Ghana is also continuing to expand natural gas production and related transport and storage infrastructure, primarily for use in electricity production, but also for applications in other sectors (e.g., for fertilizer production). A multi-year slide in the exchange value of Ghana's Cedi currency that began under Mahama has continued under Akufo-Addo, hurting the trade balance and hindering economic activity, due to a heavy reliance on imported goods. Despite the NPP's strong criticism of the Mahama government's deficit spending and other aspects of its economic policy record, including its high deficit spending, the Akufo-Addo administration has continued to borrow heavily to fund its policy agenda. It sold $2 billion worth of Eurobonds in May 2018 and another $3 billion in March 2019, after issuing roughly $1.2 billion in state-backed bonds to finance state-owned enterprise energy sector debts earlier in the Akufo Addo administration. Public debt climbed from 57.1% of GDP in 2016, Mahama's final year in office, to 59.6% of GDP in early 2018 (latest data). Debt payments and efforts to fulfill the NPP's campaign pledges have helped drive such spending. To help Ghana address fiscal imbalances, external account deficits, exchange rate-linked rises in inflation, and power shortages, in 2015 the IMF began a $925 million, policy-conditioned Extended Credit Facility (ECF) loan program. The Akufo-Addo government maintained the program, while requesting and receiving waivers allowing deviations from some ECF targets. The program was extended into early 2019. The IMF has generally praised the government's economic performance, notably regarding revenue collection efforts, public debt audits aimed at identifying invalid claims, and accountability measures (e.g., the creation of a Special Prosecutor post (see above) and a proposed Public Financial Management Act). It has also called new government credit commitments "justified," while also warning that the national debt loads remain "at high risk of distress." Annual foreign direct investment (FDI) has generally grown in recent years, especially in the energy sector. According to the U.N. Conference on Trade and Development, FDI flows into Ghana averaged $3.3 billion annually between 2014 and 2016, while FDI stock averaged $26.5 billion. The World Bank's 2019 Doing Business Report ranks Ghana 114 th out of 190 countries surveyed. This is far below its 2012 ranking of 63 rd among 183 countries, yet still placed Ghana in the top-performing quarter of African countries. Under Mahama, Ghana created an Investment Promotion Center to oversee FDI and streamline investment procedures. While in its 2019 Investment Climate Statement for Ghana the State Department reported that Ghana has "one of the more open" investment climates in Africa, it also cited a number of "troubling" foreign investment policy in recent years. <4. U.S. Relations> The Trump Administration has not announced any major changes in U.S. policy toward Ghana, but has proposed a sharp reduction to USAID and State Department-administered aid for Ghana, which could affect bilateral relations. According to the State Department, the United States and Ghana "share a long history promoting democracy, human rights, and the rule of law," and Ghana is a model for its peers throughout Africa "in promoting resilient democratic institutions, transparent and peaceful transitions of power and regional stability." There have also been robust "people-to-people" relations since the late 1950s, notably in the form of learning exchange visits and cooperation among educational and scientific institutions, and thousands of Ghanaians have been educated in the United States. There are close cultural ties, notably between Ghanaians and African-Americans; there is a substantial African-American expatriate community in Ghana. Despite generally amicable bilateral relations, the U.S. Department of Homeland Security (DHS) in coordination with the Department of State imposed visa sanctions on Ghana in January 2019, citing a "lack of cooperation in accepting their nationals ordered removed from the United States" an issue of particular salience for the Trump Administration. The restrictions affect tourist and business visitor visas for certain government officials and, in some cases, their families and attendants. The United States had earlier warned that it might take such an action: in June 2018, the United States alleged that Ghana's government was insufficiently cooperating with U.S. deportation orders by not interviewing or providing travel documents to Ghanaians being deported from the United States. In such cases, the United States pays for charter flights to effect removals. <4.1. Bilateral Cooperation and U.S. Assistance> Bilateral cooperation is diverse, ranging from security matters to development assistance programs to professional development and learning exchanges. A flagship exchange program is the Young African Leaders Initiative (YALI), for which Ghana hosts a Regional Leadership Center. YALI, launched by the Obama Administration in 2010, fosters the development of emergent young African business, civic, and public management leaders through U.S. exchange -based fellowships and follow-up learning and networking in Africa. Another notable initiative is Power Africa, also begun by the Obama Administration, which supports increased access to electricity. The Trump Administration has maintained both programs, but requested less funding for them than did the Obama Administration. Ghana also hosts a USAID West Africa regional mission and is a beneficiary of its programs, such as the West Africa Trade Hub, which helps build regional trade and investment capacities and seeks to increase AGOA exports. About 139 Peace Corps volunteers, who are part of a program that has been operational since 1961, work in the areas of education, agriculture, and health. Ghana periodically receives additional assistance under State Department and USAID regional programs, periodic short-term programs by other U.S. agencies, and special regional or global initiatives, such as the African Peacekeeping Rapid Response Partnership. Bilateral State Department and USAID-administered assistance totaled $143 million in FY2018, and funded programs related to health ($75 million), agriculture ($35 million) and education ($20 million), among other sectors. Health aid in FY2018 focused on nutrition, family planning, and reproductive, child, and maternal health programs, as well as efforts to combat HIV/AIDS and malaria. The Trump Administration has requested $62.8 million for FY2020 a 56% decrease from actual FY2018 levels. Proposed health sector assistance would comprise $42 million, nearly 67% of the FY2020 request, while agriculture programs would constitute much of the balance. <4.2. MCC Compact> In 2012, Ghana completed a five-year $536 million Millennium Challenge Corporation (MCC) compact focused on improving the agricultural economy, roads and ferry investments, and rural banks, as well as education, water, sanitation, and power service delivery. In 2014, Ghana signed a second five-year MCC compact, a $498 million set of projects, matched by $37.4 million in Ghanaian public funding. Focused entirely on private- and public-sector electrical system capacity building, it is designed to meet current and future power demand, spur growth, and reduce poverty. A key goal is to improve the service quality and reliability of the Electricity Company of Ghana (ECG), the main national power utility, through technical and governance capacity building, and to bring in a private-sector operator, possibly a U.S. firm, to partially privatize ECG and enhance its commercial viability. This element of the compact has spurred labor opposition and is contingent on ECG clearing much of its legacy debt (a factor in the government's previously discussed recent $1.2 billion bond offering). The compact provides technical aid for the northern region's power utility and supports efforts to improve power sector regulatory capacities, reform electricity tariff structures, and attract power sector investment. It also seeks to improve energy supply and demand management and energy use efficiency, and provides limited support for distributed, off-grid, solar-power systems and increased access to power connections by small businesses. Gas sector commercialization, the implementation of a national-gas-to-power plan, and the operationalization of an independent electricity producer framework are other areas of compact activity. In 2018, the MCC Board of Directors selected Ghana as one of five West African countries eligible for a concurrent MCC compact that would focus on promoting "cross-border economic integration, trade, and collaboration" a new authority granted by Congress under the AGOA and MCA Modernization Act of 2018 ( P.L. 115-167 ). Consideration of Ghana's suitability for a concurrent compact is ongoing. <4.3. Security Cooperation> U.S. and Ghanaian interests in addressing regional political and security crises have often aligned, and Ghana has won international plaudits for its steady contribution of troops to international peacekeeping operations in Africa and elsewhere. For years, Ghana's military has received U.S. training in support of such activities, and Ghana has periodically provided the U.S. military with access to its military facilities, in support of both military exercises and crisis response actions (e.g., emergency embassy evacuations). It also hosts a U.S. military Exercise Reception Facility used to expedite U.S. and Ghanaian troop deployments in West Africa. U.S.-Ghanaian security cooperation is rooted in bilateral defense agreements dating back to 1972. In early 2018, the two countries signed an updated Status of Forces Agreements (SOFA, a type of agreement governing bilateral defense cooperation and the rights and privileges of U.S. troops stationed in partner countries). The State Department described the agreement as a routine update of the terms governing U.S.-Ghanaian defense cooperation, and as supporting planned joint exercises and the U.S. provision of up to $20 million in military equipment to Ghana. Most of this equipment is being provided primarily under the African Peacekeeping Rapid Response Partnership (APRRP), a U.S. initiative that supports partner military peacekeeping training, with a focus on logistics, troop deployment, and interoperability capacity-building. Ghana has also long participated in the U.S. International Military Education and Training (IMET) program. Ratification of the SOFA by Ghana's parliament, however, proved controversial. It was preceded by press accounts suggesting that the United States wanted to establish one or more military bases in Ghana, an allegation that the State Department refuted. Opposition members of parliament boycotted the vote, citing national sovereignty concerns. While ostensibly a protest against U.S-Ghanaian cooperation, their action appears likely to have been primarily motivated by NPP-NDC partisan rivalry. The Mahama/NDC administration had itself pursued robust security cooperation with the United States. Ghana is a partner of the North Dakota National Guard under the State Partnership Program, which pairs U.S. state National Guard units with foreign partner nations in support of U.S. security cooperation goals. Ghana has also hosted and benefitted from various U.S. Africa Command (AFRICOM) activities centered on regional crisis-response and maritime security. Ghana has also received Department of Defense (DOD) counternarcotics capacity-building assistance in some years, including aid that ranged between $1 million in FY2017 and $3.5 million in FY2015. DOD has also provided ship traffic monitoring equipment and patrol boats, administered training, and pursued maritime cooperation, in part to boost Ghana's capacity to counter maritime piracy. In the first half of the 2010s, Ghana received some bilateral Foreign Military Financing, as well as periodic Nonproliferation, Antiterrorism, Demining and Related Programs-Export Control and Related Border Security assistance (NADR-EXBS, last provided in FY2015 at a level of $200,000). FMF supported Ghana's capacity to deploy trained, equipped international peacekeeping troops. NADR aid supported efforts to increase internal and regional security by targeting small arms trafficking. Other U.S. security sector assistance has been provided under the State Department's West Africa Regional Security Initiative (WARSI). WARSI supports increased access to justice, rule of law capacity-building, security sector reform, and efforts to bolster partner nations' capacity to counter transnational threats, including illicit drug trafficking. <5. Outlook> Despite periodic challenges, a long history of positive U.S.-Ghanaian relations suggests that bilateral cooperation relating to development, trade, and security is likely to endure. President Akufo-Addo's stated goal of decreasing and ultimately ending Ghana's need for foreign aid, and his embrace of private-sector-led growth models, are likely to be received positively by most U.S. policymakers. His message of economic self-reliance may resonate, in particular, with the Trump Administration, given President Trump's contention that leaders of all countries should prioritize their own nations' economic interests. If Ghana is able to become more self-sufficient and boost its economic production and trade capacity, diversify its economy, and reduce poverty, it could also become a more significant U.S. trade partner.

Ghana, a country of 28 million people on West Africa's Atlantic coast, faces diverse development challenges, but has built a robust democracy notable for consistent peaceful turnovers of executive power since a transition to multiparty rule in the early 1990s. The country also has made progress toward many of the socioeconomic outcomes that successive U.S. administrations have sought to foster in Africa, and U.S. policymakers have tended to view Ghana as a stable U.S. partner in an often volatile region. Substantial U.S. bilateral aid has both been premised on and arguably contributed to Ghana's generally positive development trajectory. Amicable relations between the United States and Ghana, a former British colony, have persisted since 1957, when Ghana became the first colonized sub-Saharan African country to gain independence. In 2008, then-President George W. Bush visited Ghana to showcase U.S. aid programs on trade, entrepreneurship, health, education, and Ghana's first Millennium Challenge Corporation (MCC) compact. In 2009, then-President Barack Obama traveled to Ghana to highlight the nation as a democratic model for other African countries. The Trump Administration has not pursued any major policy shifts toward Ghana, but bilateral ties have recently come under strain with imposition, in early 2019, of selected visa sanctions on Ghanaian nationals by the U.S. Department of Homeland Security. In practice, the sanctions—imposed in response to reported noncooperation with U.S. immigration law enforcement proceedings and deportation orders—mean that U.S. consular officials are restricting the issuance of certain U.S. visas to Ghanaian citizens. The Administration also has proposed sharp cuts in bilateral aid as part of its emphasis on reducing foreign assistance, which could affect relations. During the Obama Administration, U.S. aid to Ghana was provided primarily under U.S. Agency for International Development (USAID)-administered global presidential development initiatives. These included Feed the Future (FTF, a global food security effort), the Global Health Initiative (GHI), the Global Climate Change Initiative (GCCI), and several Africa-specific initiatives: Power Africa, Trade Africa, and the Young African Leaders Initiative (YALI). In 2014 Ghana signed a second MCC compact focused on the electrical power sector. Ghana was also selected to join the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP) and its Security Governance Initiative (SGI), both launched in 2014. Ghana is a key international peacekeeping troop contributor in Africa, and engages in regular joint military training exercises and other security cooperation with the United States. According to a March 2019 State Department fact sheet on U.S.-Ghana relations, the United States and Ghana "share a long history promoting democracy, human rights, and the rule of law," and Ghana is a model for other African countries "in promoting resilient democratic institutions, transparent and peaceful transitions of power and regional stability." There have also been robust "people-to-people" relations since the late 1950s, notably in the form of learning exchange visits and cooperation among educational and scientific institutions, and thousands of Ghanaians have been educated in the United States. There are close cultural ties, notably between Ghanaians and African-Americans; there is a substantial African-American expatriate community in Ghana.

crs_R45820

crs_R45820_0

<1. About the U.S. Department of Health and Human Services (HHS)> The mission of HHS is to "enhance the health and well-being of Americans by providing for effective health and human services and by fostering sound, sustained advances in the sciences underlying medicine, public health, and social services." HHS is currently organized into 11 main agencies, called "operating divisions" (listed below), which are responsible for administering a wide variety of health and human services programs, and conducting related research. In addition, HHS has a number of "staff divisions" within the Office of the Secretary (OS). These staff divisions fulfill a broad array of management, research, oversight, and emergency preparedness functions in support of the entire department. HHS Operating Divisions Eight of the HHS operating divisions are part of the U.S. Public Health Service (PHS). PHS agencies have diverse missions in support of public health, including the provision of health care services and supports (e.g., IHS, HRSA, SAMHSA); the advancement of health care quality and medical research (e.g., AHRQ, NIH); the prevention and control of disease, injury, and environmental health hazards (e.g., CDC, ATSDR); and the regulation of food and drugs (e.g., FDA). The three remaining HHS operating divisions ACF, ACL, and CMS are not PHS agencies. ACF and ACL largely administer human services programs focused on the well-being of vulnerable children, families, older Americans, and individuals with disabilities. CMS which accounts for the largest share of the HHS budget by far is responsible for administering Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP), in addition to some aspects of the private health insurance market. (For a summary of each operating division's mission and links to agency resources related to the FY2020 budget request, see the Appendix .) <2. Context for the FY2020 President's Budget Request> The initial President's budget request for FY2020 was submitted to Congress on March 11, 2019, about five weeks after the statutory deadline. (Additional components of the FY2020 request were released in subsequent weeks.) The delay in the budget submission was attributable, in part, to protracted negotiations over seven of the FY2019 annual appropriations acts, which resulted in a five-week partial government shutdown. (Five of the 12 annual appropriations acts had already received full-year appropriations for FY2019 when the shutdown commenced.) At HHS, the FY2019 shutdown primarily affected FDA, IHS, and ATSDR. The remaining HHS operating and staff divisions generally had already received full-year FY2019 funding prior to the start of the fiscal year (Division B of P.L. 115-245 ). Full-year appropriations for FDA, IHS, and ATSDR were ultimately enacted on February 15, 2019, almost five months after the start of the fiscal year ( P.L. 116-6 ). In light of this delay, the source of the FY2019 numbers contained in the FY2020 President's budget materials varies by HHS agency. In the case of FDA, IHS, and ATSDR, amounts shown for FY2019 were estimated based on annualized funding levels under the FY2019 continuing resolution (Division C of P.L. 115-245 , as amended), not final full-year enacted levels. By contrast, amounts shown for the remaining HHS agencies generally reflect enacted full-year appropriations provided in Division B of P.L. 115-245 . <3. Overview of the FY2020 HHS Budget Request> Under the President's budget request, HHS would spend an estimated $1.286 trillion in outlays in FY2020 (see Table 1 ). This is $56 billion (+5%) more than estimated HHS spending in FY2019 and about $166 billion (+15%) more than actual HHS spending in FY2018. Historical estimates by the Office of Management and Budget (OMB) indicate that HHS has accounted for at least 20% of all federal outlays in each year since FY1995. Most recently, OMB estimated that HHS accounted for 27% of all federal outlays in FY2018. Figure 1 displays proposed FY2020 HHS outlays by major program or spending category in the President's request. As this figure shows, mandatory spending typically accounts for the vast majority of the HHS budget. In fact, two programs Medicare and Medicaid are expected to account for 86% of all estimated HHS spending in FY2020. Medicare and Medicaid are "entitlement" programs, meaning the federal government is required to make mandatory payments to individuals, states, or other entities based on criteria established in authorizing law. This figure also shows that discretionary spending accounts for about 8% of estimated FY2020 HHS outlays in the President's request. Although discretionary spending represents a relatively small share of total HHS spending, the department nevertheless receives more discretionary money than most federal departments. According to OMB data, HHS accounted for 7% of all discretionary budget authority across the government in FY2018, the same as the Department of Homeland Security. The Department of Defense was the only federal agency to account for a larger share of all discretionary budget authority in that year (47%). <3.1. Budgetary Resources Versus Appropriations> Readers should be aware that the HHS budget includes a broader set of budgetary resources than the amounts provided to HHS through the annual appropriations process. As a result, certain amounts shown in FY2020 HHS budget materials (including amounts for prior years) will not match amounts provided to HHS by annual appropriations acts and displayed in accompanying congressional documents. There are several reasons for this: M andatory spending makes up a large portion of the HHS budget, and much of that spending is provided directly by authorizing laws, not through appropriations acts. All discretionary spending is controlled and provided through the annual appropriations process. By contrast, all mandatory spending is controlled by the program's authorizing statute. In most cases, that authorizing statute also provides the funding for the program. However, the budget authority for some mandatory programs (including Medicaid), while controlled by criteria in the authorizing statute, must still be provided through the annual appropriations process; such programs are commonly referred to as "appropriated entitlements" or "appropriated mandatories." The HHS budget request takes into account the department as a whole, while the appropriations process divides HHS funding across three different appropriations bills. Most of the discretionary funding for the department is provided through the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) Appropriations Act. However, funding for certain HHS agencies and activities is appropriated in two other bills the Departments of the Interior, Environment, and Related Agencies Appropriations Act (INT) and the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act (AG). Table 2 lists HHS agencies by appropriations bill. The Administration may choose to follow different conventions than those of congressional scorekeepers for its estimates of HHS programs. For example, certain transfers of funding between HHS agencies (or from HHS to other federal agencies) that occurred in prior fiscal years, or are expected to occur in the current fiscal year, may be accounted for in the Administration's estimates but not necessarily in the congressional documents. HHS budget materials include two different estimates for mandatory spending programs in FY2019 when appropriate: proposed law and current law . Proposed law estimates take into account changes in mandatory spending proposed in the FY2020 HHS budget request. Such proposals would need to be enacted into law to affect the budgetary resources ultimately available to the mandatory spending program. HHS materials may also show a current law or current services estimate for mandatory spending programs. These estimates assume that no changes will be made to existing policies, and instead estimate mandatory spending for programs based on criteria established in current authorizing law. The HHS budget estimates in this report reflect the proposed law estimates for mandatory spending programs, but readers should be aware that other HHS, OMB, or congressional estimates might reflect current law instead. In some cases, agencies within HHS have the authority to expend user fees and other types of collections that effectively supplement their appropriations. In addition, agencies may receive transfers of budgetary resources from other sources, such as from the Public Health Service Evaluation Set-Aside (also referred to as the PHS Tap) or one of the mandatory funds established by the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended). Budgetary totals that account for these sorts of resources in the Administration estimates are referred to as being at the "program level." HHS agencies that have historically had notable differences between the amounts in the appropriations bills and their program level include FDA (due to user fees) and AHRQ (due to transfers). The program level for each agency is listed in the table entitled "Composition of the HHS Budget Discretionary Programs" in the HHS FY2020 Budget in Brief. <4. HHS Budget by Operating Division> Figure 2 provides a breakdown of the FY2020 HHS budget request by operating division. When taking into account both mandatory and discretionary budget authority (i.e., total budget authority shown in Figure 2 ), CMS accounts for the largest share of the request (nearly $1.17 trillion). The majority of the CMS budget request would go toward mandatory spending programs, such as Medicare and Medicaid. When looking exclusively at discretionary budget authority, funding for CMS is comparatively smaller, accounting for just $3.6 billion of the HHS discretionary request. The largest share of the discretionary request would go to the PHS agencies (roughly $59.4 billion in combined funding for FDA, HRSA, IHS, CDC, ATSDR, NIH, and SAMHSA; no funds would go to AHRQ under the request ). NIH would receive the largest amount ($33.5 billion) of discretionary budget authority of any HHS operating division, and ACF would receive the second-largest amount ($18.3 billion). Table 3 puts the FY2020 request for each HHS operating division and the Office of the Secretary into context, displaying it along with estimates of funding provided over the three prior fiscal years (FY2017-FY2019). These totals are inclusive of both mandatory and discretionary funding. The amounts in this table are shown in terms of budget authority (BA) and outlays. BA is the authority provided by federal law to enter into contracts or other financial obligations that will result in immediate or future expenditures involving federal government funds. Outlays occur when funds are actually expended from the Treasury; they could be the result of either new budget authority enacted in the current fiscal year or unexpended budget authority that was enacted in previous fiscal years. As a consequence, the BA and outlays in this table represent two different ways of accounting for the funding that is provided to each HHS agency through the federal budget process. For example, Table 3 shows $0 in FY2020 BA for AHRQ because the President's budget proposes to eliminate this agency; however, the table shows an estimated $299 million in FY2020 AHRQ outlays, reflecting the expected expenditure of funds previously provided to the agency. <4.1. Appendix. HHS Operating Divisions: Missions and FY2020 Budget Resources> This appendix provides for each operating division a brief summary of its mission, the applicable appropriations bill, the FY2020 budget request level, and links to additional resources related to that request. Food and Drug Administration (FDA) The FDA mission is focused on regulating the safety, efficacy, and security of human foods, dietary supplements, cosmetics, and animal foods; and the safety and effectiveness of human drugs, biological products (e.g., vaccines), medical devices, radiation-emitting products, and animal drugs. It also regulates the manufacture, marketing, and sale of tobacco products. Relevant Appropriations Bill: AG FY2020 Request: BA: $3.329 billion Outlays: $2.837 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 15), https://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/Reports/BudgetReports/UCM633738.pdf . BIB chapter (p. 21), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=25 . Health Resources and Services Administration (HRSA) The HRSA mission is focused on "improving health care to people who are geographically isolated, economically or medically vulnerable." Among its many programs and activities, HRSA supports health care workforce training; the National Health Service Corps; and the federal health centers program, which provides grants to nonprofit entities that provide primary care services to people who experience financial, geographic, cultural, or other barriers to health care. Relevant Appropriations Bill: LHHS FY2020 Request: BA: $11.004 billion Outlays: $11.864 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 16), https://www.hrsa.gov/sites/default/files/hrsa/about/budget/budget-justification-fy2020.pdf . BIB chapter (p. 29), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=33 . Indian Health Service (IHS) The IHS mission is to provide "a comprehensive health service delivery system for American Indians and Alaska Natives" and "raise the physical, mental, social, and spiritual health of American Indians and Alaska Natives to the highest level." IHS provides health care for approximately 2.2 million eligible American Indians and Alaska Natives through a system of programs and facilities located on or near Indian reservations, and through contractors in certain urban areas. Relevant Appropriations Bill: INT FY2020 Request: BA: $6.104 billion Outlays: $5.970 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 7), https://www.ihs.gov/sites/budgetformulation/themes/responsive2017/display_objects/documents/FY2020CongressionalJustification.pdf BIB chapter (p. 36), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=40 . Centers for Disease Control and Prevention (CDC) and Agency for Toxic Substances and Disease Registry (ATSDR) The CDC mission is focused on "disease prevention and control, environmental health, and health promotion and health education." CDC is organized into a number of centers, institutes, and offices, some focused on specific public health challenges (e.g., 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. For that reason, the ATSDR budget is often shown within CDC. Following the conventions of the FY2020 HHS BIB, ATSDR's budget request is included in the CDC totals shown in this report. ATSDR's work is focused on preventing or mitigating adverse effects resulting from exposure to hazardous substances in the environment. Relevant Appropriations Bills: LHHS (CDC) INT (ATSDR) FY2020 Request (CDC and ATSDR combined): BA: $6.767 billion Outlays: $7.877 billion Additional Resources Related to the FY2020 Request: CDC Congressional Justification (all-purpose table on p. 23), https://www.cdc.gov/budget/documents/fy2020/fy-2020-cdc-congressional-justification.pdf . ATSDR Congressional Justification, https://www.cdc.gov/budget/documents/fy2020/fy-2020-atsdr.pdf . BIB chapter (p. 43), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=47 . National Institutes of Health (NIH) The NIH mission is focused on conducting and supporting research "in causes, diagnosis, prevention, and cure of human diseases" and "in directing programs for the collection, dissemination, and exchange of information in medicine and health." NIH is organized into 27 research institutes and centers, headed by the NIH Director. (The FY2020 President's budget assumes that AHRQ's functions will be consolidated within NIH, in the new National Institute for Research on Safety and Quality (NIRSQ). This assumption is reflected in the figures below. ) Relevant Appropriations Bill: LHHS FY2020 Request: BA: $33.669 billion Outlays: $36.652 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 18), available at https://officeofbudget.od.nih.gov/pdfs/FY20/br/Overview-Volume-FY-2020-CJ.pdf . BIB chapter (p. 52), available at https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=56 . Substance Abuse and Mental Health Services Administration (SAMHSA) The SAMHSA mission is focused on reducing the "impact of substance abuse and mental illness on America's communities." SAMHSA coordinates behavioral health surveillance to improve understanding of the impact of substance abuse and mental illness on children, individuals, and families, and the costs associated with treatment. Relevant Appropriations Bill: LHHS FY2020 Request: BA: $5.535 billion Outlays: $5.684 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 8), https://www.samhsa.gov/sites/default/files/samhsa-fy-2020-congressional-justification.pdf . BIB chapter (p. 60), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=64 . Agency for Healthcare Research and Quality (AHRQ) The AHRQ mission is focused on research to make health care "safer, higher quality, more accessible, equitable, and affordable." Specific AHRQ 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. The FY2020 President's budget proposes eliminating AHRQ and consolidating certain key AHRQ functions within NIH, in the new National Institute for Research on Safety and Quality (NIRSQ). Relevant Appropriations Bill: LHHS FY2020 Request: BA: $0 Outlays: $0.299 billion Additional Resources Related to the FY2020 Request: Congressional Justification for the proposed National Institute for Research on Safety and Quality, https://www.ahrq.gov/sites/default/files/wysiwyg/cpi/about/mission/budget/2020/FY_2020_CJ_-NIRSQ.pdf . There is no FY2020 BIB chapter for AHRQ. Centers for Medicare & Medicaid Services (CMS) The CMS mission is focused on supporting "innovative approaches to improve quality, accessibility, and affordability" of Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), and private insurance, and on supporting private insurance market reform programs. The President's budget estimates that in FY2020, "over 145 million Americans will rely on the programs CMS administers including Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and the [Health Insurance] Exchanges." Relevant Appropriations Bill: LHHS FY2020 Request: BA: $1,169.091 billion Outlays: $1,156.333 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 9), https://www.cms.gov/About-CMS/Agency-Information/PerformanceBudget/FY2020-CJ-Final.pdf . BIB chapter (p. 65), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=69 . Administration for Children and Families (ACF) The ACF mission is focused on promoting the "economic and social well-being of children, youth, families, and communities." ACF administers a wide array of human services programs, including Temporary Assistance for Needy Families (TANF), Head Start, child care, the Social Services Block Grant (SSBG), and various child welfare programs. Relevant Appropriations Bill: LHHS FY2020 Request: BA: $52.121 billion Outlays: $53.208 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 6), https://www.acf.hhs.gov/sites/default/files/olab/acf_congressional_budget_justification_2020.pdf . BIB chapter (p. 122), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=126 . Administration for Community Living (ACL) The ACL mission is focused on maximizing the "independence, well-being, and health of older adults, people with disabilities across the lifespan, and their families and caregivers." ACL administers a number of programs targeted at older Americans and the disabled, including Home and Community-Based Supportive Services and State Councils on Developmental Disabilities. Relevant Appropriations Bill: LHHS FY2020 Request: BA: $1.997 billion Outlays: $2.238 billion Additional Resources Related to the FY2020 Request: Congressional Justification (all-purpose table on p. 13), https://acl.gov/sites/default/files/about-acl/2019-04/FY2020%20ACL%20CJ%20508.pdf . BIB chapter (p. 136), https://www.hhs.gov/sites/default/files/fy-2020-budget-in-brief.pdf#page=140 .

Historically, the U.S. Department of Health and Human Services (HHS) has been one of the larger federal departments in terms of budgetary resources. Estimates by the Office of Management and Budget (OMB) indicate that HHS has accounted for at least 20% of all federal outlays in each year since FY1995. Most recently, HHS is estimated to have accounted for 27% of all federal outlays in FY2018. Final FY2019 appropriations had not been enacted for a few HHS operating divisions and accounts prior to the development of the FY2020 President's budget request. As a result, the FY2019 estimates contained in FY2020 President's budget materials (and this report) are based on annualized amounts provided in the FY2019 continuing resolution for this subset of HHS accounts. The remainder of the HHS estimates for FY2019 are based on enacted full-year appropriations contained in Division B of P.L. 115-245 , along with current services estimates for mandatory spending. Under the FY2020 President's budget request, HHS would spend an estimated $1.286 trillion in outlays in FY2020. This is $56 billion (+5%) more than estimated HHS spending in FY2019 and $166 billion (+15%) more than actual HHS spending in FY2018. Mandatory spending typically comprises the majority of the HHS budget. Two programs—Medicare and Medicaid—are expected to account for 86% of all estimated HHS spending in FY2020, according to the President's budget request. Medicare and Medicaid are "entitlement" programs, meaning the federal government is required to make mandatory payments to individuals, states, or other entities based on criteria established in authorizing law. Discretionary spending accounts for about 8% of HHS outlays in the FY2020 President's budget request. Although discretionary spending represents a relatively small share of total HHS spending, the department nevertheless receives more discretionary money than most federal departments. According to OMB data, HHS accounted for 7% of all discretionary budget authority across the government in FY2018. This report provides information about the FY2020 HHS budget request. It begins with a review of the department's mission and structure. Next, the report provides some context for the FY2020 President's budget request. It then discusses the concept of the HHS budget as a whole, in comparison to how funding is provided to HHS through the annual appropriations process. The report continues with a breakdown of the HHS request by operating division. An appendix summarizes the mission of each HHS operating division and identifies additional agency-level resources related to the FY2020 budget request.

crs_R45977

crs_R45977_0

<1. Introduction> The primary source of federal aid to elementary and secondary education is the Elementary and Secondary Education Act (ESEA) particularly its Title I-A program, which authorizes federal aid for the education of disadvantaged students. The ESEA was initially enacted in 1965 (P.L. 89-10) "to strengthen and improve educational quality and educational opportunities in the Nation's elementary and secondary schools." It was most recently comprehensively amended and reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95 ), which was enacted "to ensure that every child achieves." The ESSA authorized appropriations for ESEA programs through FY2020. FY2019 appropriation for ESEA programs are $25.2 billion. Under Title I-A, the ESEA as amended by the ESSA continues to require states and public schools systems to focus on educational accountability as a condition for the receipt of grant funds. Public school systems and individual public schools are held accountable for monitoring and improving achievement outcomes for students and closing achievement gaps, sustaining a focus that was initiated by amendments to the ESEA made by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ) but modified under the ESSA. While states were given more latitude to develop their educational accountability systems under the ESSA provisions, as a condition for receiving Title I-A funds each state must continue to have content and academic achievement standards and aligned assessments in reading/language arts (RLA), mathematics, and science for specific grade levels. States must now have an accountability system that incorporates (1) long-term and interim performance goals for specified measures; (2) weighted indicators based, in part, on these goals; and (3) an annual system for meaningful differentiation that is used to identify schools that need additional support to improve student achievement. Beyond Title I-A, other authorized ESEA programs provide, for example, grants to support: the education of migratory students; recruitment and professional development of teachers; language instruction for English learners (ELs); well-rounded education, safe and healthy students, and technology initiatives; after-school instruction and care programs; expansion of charter schools and other forms of public school choice; education services for Native American, Native Hawaiian, and Alaska Native students; Impact Aid to compensate local educational agencies (LEAs) for taxes forgone due to certain federal activities; and innovative educational approaches or instruction to meet particular student needs. In order to receive funds under Title I-A and several other formula grant programs authorized by the ESEA, each state educational agency (SEA) must submit a state plan to the U.S. Department of Education (ED). These plans can be submitted for individual formula grant programs or, if permitted by the Secretary of Education (hereinafter referred to as the Secretary), the SEA may submit a consolidated state plan based on requirements established by the Secretary. Following the enactment of the ESSA, all SEAs submitted consolidated state plans. The Secretary has approved these plans for all 50 states, the District of Columbia, and Puerto Rico. This report provides a brief overview of major provisions of the ESEA. It is organized by title and part of the act. Annual appropriations for ESEA programs are provided through the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) Appropriations Act, and are shown in this report based on the most recent data available from the U.S. Department of Education, Budget Service for FY2017 through FY2019. Table 2 provides ESEA appropriations for FY2016 and FY2017 to depict the transition from the ESEA as amended by the NCLB to the ESEA as amended by the ESSA. Table 3 provides authorizations of appropriations included in the ESEA as amended by the ESSA. The Appendix provides a list of selected acronyms used in the report. <2. Title I: Improving the Academic Achievement of the Disadvantaged> The introductory text for ESEA Title I includes the purpose of Title I and authorizations of appropriations for FY2017 through FY2020 for each part of the title. The purpose of Title I is "to provide all children significant opportunity to receive a fair, equitable, and high-quality education, and to close educational achievement gaps." The introductory text prior to Title I-A also requires states to reserve funds provided under Title I-A for school improvement activities and allows them to reserve Title I-A funds for direct students services. As such, while these reservations of funds appear before Title I-A in the ESEA, they are examined following the Title I-A discussion to provide greater context. The introductory text prior to Title I-A also provides authority for states to reserve funds for state administration for Title I-A, Title I-C, and Title I-D. <2.1. Administration (Section 1004)> Section 1004 permits states to reserve funds under Title I-A, Title I-C, and Title I-D for administration. Under this provision, a state may reserve 1% of the amount received under parts A, C, and D, or $400,000 (whichever is greater) for state administration. <2.2. Part A: Grants to Local Educational Agencies6> Title I-A authorizes federal aid to LEAs for the education of disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families, as well as eligible students who live in the areas served by these public schools but attend private schools. Title I-A is also a vehicle to which a number of requirements affecting broad aspects of public elementary and secondary education for all students have been attached as conditions for receiving these grants. <2.2.1. Calculation of Title I-A Grants> Title I-A grants are calculated by ED at the LEA level. The funds are then provided to SEAs, which are required to reserve funds for school improvement activities and may reserve funds for administration and direct student services. SEAs also adjust grant amounts for LEAs for which ED is unable to determine grant amounts, such as newly created LEAs or charter schools that are their own LEAs. In calculating Title I-A grant amounts, ED determines grant amounts under four different formulas Basic, Concentration, Targeted, and Education Finance Incentive Grants (EFIG) although funds allocated under all of these formulas are combined and used for the same purposes by recipient LEAs. While the allocation formulas have several distinctive elements, the primary factor used in all four is the estimated number of children aged 5-17 in families in poverty. Other factors included in one or more formulas include a state expenditure factor based on average per pupil expenditures for public elementary and secondary education, weighting schemes designed to increase aid to LEAs with the highest concentrations of poverty, and a factor to increase grants to states with high levels of expenditure equity among their LEAs. Each formula also has an LEA hold harmless provision and a state minimum grant provision. While there are several rules related to school selection, LEAs must generally rank their public schools by their percentages of students from low-income families, and serve them in rank order. This must be done without regard to grade span for any eligible school attendance area in which the concentration of children from low-income families exceeds 75%. An LEA also has the option of serving all high schools in rank order in which the concentration of children from low-income families is 50% or greater. Below these benchmarks, an LEA can choose to serve schools in rank order at specific grade levels (e.g., only serve elementary schools in order of their percentages of children from low-income families) or continue to serve schools at all grade levels in rank order. Once schools are selected, Title I-A funds are allocated among them on the basis of their number of students from low-income families. LEAs are not required to allocate the same amount of Title I-A funds per low-income child to each school. They may provide higher grants per low-income child at schools with high rates of these children than are allocated per low-income child to schools with lower rates of these children. <2.2.2. Types of Title I-A Programs> There are two basic types of Title I-A programs. Schoolwide programs are authorized if the percentage of low-income students served by a school is 40% or higher. In schoolwide programs, Title I-A funds may be used to improve the performance of all students in a school. For example, funds might be used to provide professional development services to all of a school's teachers, upgrade instructional technology, or implement new curricula. The other basic type of Title I-A school service model is the targeted assistance program (TAP). Under TAPs, Title I-A-funded services are generally limited to the lowest-achieving students in the school. For example, students may receive additional instruction in an after-school program, or funds may be used to hire a teacher's aide who provides additional assistance to low-achieving students in their regular classroom. In general, schools have substantial latitude in how they use Title I-A funds, provided the funds are used to improve student academic achievement. <2.2.3. Standards, Assessments, and Accountability Requirements (Section 1111)> As previously mentioned, each SEA must submit a state plan to ED to receive funds under Title I-A and several other state formula grant programs authorized under the ESEA. For Title I-A purposes, the plan requires the SEA to provide information or assurances related to its standards, assessments, and accountability system. Requirements related to each of these areas are discussed below. <2.2.3.1. Standards> In its state plan, each SEA receiving Title I-A funds is required to provide an assurance that it has adopted challenging academic content standards and aligned academic achievement standards (hereinafter collectively referred to as academic standards) in RLA, mathematics, and science (and any other subject selected by the state). The academic standards must include at least three levels of achievement (e.g., basic, proficient, and advanced). In addition, states are required to demonstrate that these academic standards are aligned with entrance requirements for credit-bearing coursework in the state's system of public higher education and relevant state career and technical education standards. A state is permitted to adopt alternate academic achievement standards for students with the most significant cognitive disabilities provided, among other requirements, that the standards are aligned with the state's challenging academic content standards. The state is also required to demonstrate that it has adopted English language proficiency standards that are derived from the domains of speaking, listening, reading, and writing; address the different proficiency levels of English learners; and align the English language proficiency standards with the challenging state academic standards. The ESEA explicitly maintains that a state is not required to submit any of the aforementioned standards to the Secretary of Education (the Secretary) for review or approval. Also, the Secretary does not have the authority "to mandate, direct, control, coerce, or exercise any direction or supervision over any of the challenging State academic standards adopted or implemented by a State." <2.2.3.2. Assessments> Each state plan must demonstrate that the SEA, in consultation with LEAs, has implemented assessments in RLA, mathematics, and science. The mathematics and RLA assessments must be administered in each of grades 3-8 and once during high school. The science assessment must be administered once in grades 3-5, grades 6-9, and grades 10-12. Thus, each state must administer 17 assessments each school year, but no individual student will take more than 3 of these assessments in a given school year. The assessments must be aligned with the state academic standards. A state may implement alternate assessments aligned with state academic standards and alternate academic achievement standards for students with the most significant cognitive disabilities. However, for each subject tested no more than 1% of all students tested may take the alternate assessment. Each state plan must also demonstrate that the LEAs in the state will administer an annual assessment of English proficiency for all English learners that is aligned with the state's English language proficiency standards. In addition to state assessments, each state receiving Title I-A funds must also agree to participate in the National Assessment of Educational Progress (NAEP) assessments of 4 th and 8 th grade students in reading and math every two years. <2.2.3.3. Accountability System> In its state plan, each SEA is required to describe its academic accountability system. The system must include state established long-term goals (and measures of interim progress) for all students and separately for each focal subgroup of students for academic achievement as measured by proficiency on the state RLA and mathematics assessments and high school graduation rates. In addition, the goals for subgroups of students who are behind on any of these measures must take into account the improvement needed to close statewide achievement gaps. Also, the system must include long-term goals (and measures of interim progress) for increases in the percentage of English learners making progress in achieving English proficiency, as defined by the state. The state must then use a set of indicators that are based, in part, on the long-term goals it established to measure annually the performance of all students and each subgroup of students to evaluate public schools. These indicators must include the following: 1. public school student performance on the RLA and mathematics assessments as measured by student proficiency, and for high schools this may also include a measure of student growth on such assessments; 2. for public elementary and secondary schools that are not high schools, a measure of student growth or another indicator that allows for "meaningful differentiation" in school performance; 3. for public high schools, graduation rates; 4. for all public schools in the state, progress in achieving English language proficiency ; and 5. for all public schools in the state, at least one indicator of school quality or student success (e.g., a measure of student engagement, postsecondary readiness, or school climate). Based on these indicators, the SEA must establish a system for annually "meaningfully differentiating" all public schools that gives substantial weight to each indicator but in the aggregate provides greater weight to the first four than to the school quality and student success indicators. The system must also identify any school in which any subgroup of students is "consistently underperforming," as determined by the state. Based on the state's system for annual meaningful differentiation, each SEA must establish a state-determined methodology to identify for comprehensive support and improvement (CSI): (1) at least the lowest-performing 5% of all schools receiving Title I-A funds, (2) all public high schools failing to graduate 67% or more of their students, (3) schools required to implement additional targeted support (see below) that have not improved in a state-determined number of years, and (4) additional statewide categories of schools, at the state's discretion. The LEAs in which schools are identified for CSI are required to work with stakeholders to develop a school improvement plan that, among other requirements, must include evidence-based interventions, be based on a school-level needs assessment, and identify resource inequities. An LEA may also offer students enrolled in a school identified for CSI the option to transfer to another public school in the LEA. If a school does not improve within a state-determined number of years (no more than four years), the school must be subject to more rigorous state-determined actions. States are required to identify for targeted support and improvement (TSI) any school in which one or more subgroups of students are consistently underperforming as determined by the state. Each of these schools is required to develop and implement a plan to improve student outcomes that includes evidence-based interventions. If a school fails to improve within a number of years determined by the LEA, additional actions must be taken. For a school in which one or more subgroups are performing at a level that if reflective of an entire school's performance would result in its identification for CSI, the school must be identified for additional targeted support and improvement (ATSI) activities, which must include an identification of resource inequities. If a school identified as meeting the criteria for ATSI does not improve within a state-determined number of years, the state is required to identify the school for CSI. In its state plan, the SEA must also provide an explanation of how the state will factor into its accountability system the requirement that 95% of all students and each subgroup of students participate in the required assessments. <2.2.4. Teacher Requirements> Any teacher or paraprofessional working in a program supported with Title I-A funds must meet applicable state certification and licensure requirements. In addition, states participating in Title I-A must describe in their state plans how low-income and minority children enrolled in Title I-A schools are not served at disproportionate rates by "ineffective, out-of-field, or inexperienced teachers." The state must also describe the measures that will be used to assess and evaluate the state's success in this area. <2.3. School Improvement (Section 1003)> To serve schools that are identified for comprehensive support and improvement or targeted support and improvement under Title I-A, SEAs are required to reserve the greater of (1) 7% of the total amount the state receives under Title I-A or (2) the sum of the amount that the state reserved for school improvement in FY2016 and received under the School Improvement Grant (SIG) program for FY2016. Beginning in FY2018, an SEA is only permitted to reserve the full amount of funds for school improvement if no LEA receives a smaller Title I-A grant than it did during the prior fiscal year due to the implementation of this provision. Of the funds reserved for school improvement, states are required under ESSA provisions to provide at least 95% to LEAs through formula or competitive grants to serve schools that are implementing comprehensive support and improvement activities or targeted support and improvement activities. <2.4. Direct Student Services (Section 1003A)> In addition to the required reservation of Title I-A funds for school improvement, SEAs have the option of reserving up to 3% of the Title I-A funds they receive for direct student services. This optional reservation of funds was not included in the law prior to the ESSA. Of the funds reserved, states must distribute 99% to geographically diverse LEAs using a competitive grant process that prioritizes grants to LEAs that serve the highest percentages of schools identified for comprehensive support and improvement or that are implementing targeted support and improvement plans. Funds for direct student services may be reserved without regard to how the reservation of funds may affect LEA grant amounts. Funds may be used by LEAs for a variety of purposes, including to pay the costs associated with the enrollment and participation of students in academic courses not otherwise available at the students' school; credit recovery and academic acceleration courses that lead to a regular high school diploma; activities that lead to the successful completion of postsecondary level instruction and examinations that are accepted for credit at institutions of higher education (IHEs), including reimbursing low-income students for the costs of these examinations; and public school choice if an LEA does not reserve funds for this purpose under Section 1111. <2.5. Part B: Grants for State Assessment and Enhanced Assessment Instruments> Title I-B authorizes the State Assessment Grant program to support the development of the state standards and assessments required under Title I-A; the administration of those assessments; and related activities, such as improving assessments for English learners. Two funding mechanisms are authorized: (1) formula grants to states for the development and administration of the state standards and assessments required under Title I-A, and (2) competitive grants to states to carry out related activities beyond the minimum assessment requirements. The allocation of funds depends on a statutorily established "trigger amount" of $369.1 million. For annual appropriations at or below the trigger amount, the entire appropriation is used to award formula grants to states. Under the formula grant program, the Secretary then provides each state with a minimum grant of $3 million. Any remaining funds are subsequently allocated to states in proportion to their number of students ages 5 to 17. For an annual appropriation above the trigger amount, the difference between the appropriation and trigger amount is used to award competitive grants to states. <2.5.1. Assessment System Audit (Section 1202)> The ESEA as amended by the ESSA permits the Secretary to reserve up to 20% of the funds appropriated for the State Assessment Grant program to make grants to states to conduct assessment system audits. From the funds reserved for this purpose, the Secretary is required to make an annual grant to the state of not less than $1.5 million to conduct a statewide assessment system audit and provide subgrants to LEAs to conduct assessment audits at the LEA level. <2.5.2. Innovative Assessment and Accountability Demonstration Authority (Section 1204)> The ESEA as amended by the ESSA includes a new demonstration authority for the development and use of an "innovative assessment system." A state, or a consortium of states, may apply for the demonstration authority to develop an innovative assessment system that "may include competency-based assessments, instructionally embedded assessments, interim assessments, cumulative year-end assessments, or performance based assessments that combine into an annual summative determination for each student" and "assessments that validate when students are ready to demonstrate mastery or proficiency and allow for differentiated student support based on individual learning needs." During the first three years in which the Secretary grants demonstration authority, not more than seven SEAs may have their applications for the authority approved. Separate funding is not provided under the demonstration authority; however, states may use a portion of the formula and competitive grant funding provided through the State Assessment Grant program discussed above to carry out this demonstration authority. <2.6. Part C: Education of Migratory Children> Title I-C authorizes grants to SEAs for the education of migratory children and youth. A migratory child or youth is one who made a qualifying move in the preceding 36 months as a migratory agricultural worker or migratory fisher or moved with or to join a parent or spouse who is a migratory agricultural worker or migratory fisher. Among other purposes, the program assists states in supporting high-quality, comprehensive educational programs and services during the school year, summer, and intersession periods that address the unique needs of migratory children. Funds are allocated by formula on the basis of each state's number of migratory children and youth aged 3-21 and Title I-A state expenditure factor (discussed above). ED may also make grants for the coordination of services and transfer of educational records for migratory students. <2.7. Part D: Prevention and Intervention Programs for Children and Youth Who Are Neglected, Delinquent, or At Risk> Title I-D authorizes a pair of programs intended to improve education for students who are neglected, delinquent, or at risk of dropping out of school. Subpart 1 authorizes grants for the education of children and youth in state institutions for the neglected or delinquent, including community day programs and adult correctional institutions. Funds are allocated to SEAs on the basis of the number of such children and youth and the Title I-A state expenditure factor. A portion of each SEA's grant is to be used to provide transition services to children and youth transferring to regular public schools. Under Subpart 2, Title I-A funds are provided to each SEA based on the number of children and youth residing in local correctional facilities or attending community day programs for delinquent children and youth. These Title I-A funds are used to make grants to LEAs with high numbers or percentages of children and youth in locally operated correctional facilities for children and youth. These children and youth are then served in accordance with Title I-D provisions. Funds are used, for example, to provide transition programs, dropout prevention programs, special programs to meet the unique academic needs of participating children and youth, and mentoring and peer mediation. <2.8. Part E: Flexibility for Equitable Per-Pupil Funding> ESEA Title I-E provides the Secretary with the authority to enter into demonstration agreements that provide flexibility to LEAs to deliver equitable per-pupil funding. The weighted per-pupil funding system must allocate substantially more funding to students from low-income families, English learners, and students with other characteristics associated with educational disadvantage selected by the LEA than is allocated to other students. Prior to the 2019-2020 school year, up to 50 LEAs were permitted to apply for the flexibility to consolidate eligible federal funds and state and local funds to create a single school funding system based on weighted per-pupil allocations (using weights or allocations to provide funding to schools). Beginning with the 2019-2020 school year, the number of LEAs permitted to participate under Title I-E is not capped provided a "substantial majority" of the LEAs participating in previous years have met program requirements. <2.9. Part F: General Provisions> Title I-F provides for the development of federal regulations for Title I programs and state administration of these programs. Part F also prohibits federal control of the "specific instructional content, academic achievement standards and assessments, curriculum or program of instruction" of states, LEAs, or schools, and clarifies that nothing in Title I is to be "construed to mandate equalized spending per pupil for a State, local educational agency, or school." <3. Title II: Preparing, Training, and Recruiting High-Quality Teachers, Principals, and Other School Leaders> Title II includes programs centered on teachers, school leaders (e.g., principals), literacy, and American history and civics education. Programs focused on teachers and school leaders support activities and initiatives such as professional development, staff recruitment and retention, performance-based compensation systems, and the establishment of a statewide science, technology, engineering, and mathematics (STEM) master teacher corps. Other Title II programs focus on literacy education, providing grants to support literacy efforts from birth through grade 12 and supporting school library programs, early literacy services, and the provision of high-quality books to children and adolescents. Title II also includes American history and civic education programs that provide academies for teachers and students to learn more about these topics and authorizes national activities related to American history and civics education. Title II's introductory text includes the purpose of the title, several definitions, and authorizations of appropriations for FY2017 through FY2020 for the programs authorized in Title II. <3.1. Part A: Supporting Effective Instruction> Part A authorizes a program of state grants that may be used for a variety of purposes related to preparation, training, recruitment, retention, and professional development of elementary and secondary education teachers and school leaders. The formula grants are allocated to SEAs based on student population and poverty counts, as well as a base guarantee determined by the amount each state received in FY2001 under antecedent programs. The base guarantee is being phased out through FY2022. SEAs may reserve a share of funds for administration and statewide services, such as teacher or principal support programs; preparation academies; licensing or certification reform; improving equitable access to effective teachers; reforming or improving teacher and principal preparation programs; training teachers in the use of student data; and technical assistance to LEAs. SEAs are required to suballocate at least 95% of grants to LEAs. Grants to LEAs are made based on student population and poverty counts. However, states are authorized to reserve up to 3% of the amount otherwise reserved for subgrants for LEAs for state-level activities focused on school leaders. Funds received by LEAs may be used for a variety of purposes including recruiting, hiring, and retaining effective teachers; teacher and school leader evaluation and support systems; professional development activities for teachers and principals; and class-size reduction. <3.2. Part B: National Activities> Subpart 1 authorizes the Teacher and School Leader Incentive Fund. This program provides competitive grants to LEAs, SEAs or other state agencies, the Bureau of Indian Education, or a partnership of one of these entities with one or more nonprofit or for-profit entities to develop, implement, improve, or expand performance-based teacher and principal compensation systems or human capital management systems for teachers, principals, and other school leaders in high-needs schools. Subpart 2 authorizes Literacy Education for All, Results for the Nation to improve student academic achievement in reading and writing from early education through grade 12. Under Subpart 2, competitive Comprehensive Literacy State Development Grants (Section 2222) are provided to SEAs. SEAs subsequently provide competitive subgrants to one or more eligible LEAs for the development and implementation of a comprehensive literacy instruction plan, professional development, and other activities. SEAs may also award competitive subgrants for early literacy services to one or more eligible early childhood education programs. In addition, SEAs may use funds to develop or enhance comprehensive literacy instruction plans. SEAs must ensure that at least 15% of funds are used to serve children from birth through age 5, 40% to serve children in kindergarten to grade 5, and 40% to serve children in grades 6 through 12. Funds reserved under Section 2222 for evaluation purposes must be used to conduct a national evaluation of the grant and subgrant programs authorized under Subpart 2 (Section 2225). Under the Innovative Approaches to Literacy program (Section 2226), the Secretary may award grants, contracts, or cooperative agreements to eligible entities to promote literacy programs that support the development of literacy skills in low-income communities through school library programs, early literacy services, and programs to provide high-quality books regularly to children from low-income communities. Subpart 3 authorizes American History and Civics Education programs. Section 2232 authorizes the Presidential and Congressional Academies for American History and Civics. Presidential Academies offer professional development opportunities for teachers of American history and civics. Congressional Academies provide a seminar or institute for outstanding students of American history and civics. Section 2233 authorizes national activities that provide competitive grants to promote new and existing evidence-based strategies to encourage innovative American history, civics and government, and geography instruction and learning strategies, and professional development for teachers and school leaders. Subpart 4 authorizes several programs related to educators, school leaders, technical assistance, and evaluation. Section 2242 authorizes the Supporting Effective Educator Development (SEED) program, which provides competitive grants to support nontraditional teacher certification or preparation routes, evidence-based professional development, professional development to support dual or concurrent enrollment, and professional enhancement activities that may lead to an advanced credential. Section 2243 authorizes the School Leader Recruitment and Support program, which provides competitive grants to improve the recruitment, placement, support, and retention of principals and other school leaders in high-need schools. Section 2244 authorizes a comprehensive center focused on students at risk of not attaining full literacy skills due to a disability. Funds may also be used to provide technical assistance or evaluate state and LEA activities under Title II-B. Section 2245 authorizes the STEM Master Teacher Corps program, which provides competitive grants to support the development of a statewide STEM master teacher corps or to support the implementation, replication, or expansion of effective STEM professional development programs. <3.3. Part C: General Provisions> Part C includes a supplement, not supplant provision that applies to funds provided under Title II. It also states that nothing in Title II authorizes the Secretary or any federal employee to mandate, direct, or control specific aspects of a state's, LEA's, or school's educational program, including, for example, instructional content, curricula, academic standards, academic assessments, staff evaluation systems, specific definitions of staff effectiveness, professional standards, licensing, or certification. Title II also states that none of the provisions in the title shall be construed to affect collective bargaining or other such agreements between school or district employees and their employers. <4. Title III: Language Instruction for English Learners and Immigrant Students> Title III authorizes programs that are focused on improving the academic attainment of ELs, including immigrant students. Under the Title III-A state grants program, funds are used at the state level to support activities such as consultation to develop statewide standardized entrance and exit procedures. Funds are used by LEAs for activities such as effective language instructional programs, professional development, and supplemental activities. Title III also authorizes two national programs, a professional development project and a clearinghouse related to the education of ELs. The introductory text to Title III authorizes appropriations for FY2017 through FY2020. <4.1. Part A: English Language Acquisition, Language Enhancement, and Academic Achievement Act> The English Language Acquisition program was designed to help ensure that ELs, including immigrant students, attain English proficiency, develop high levels of academic attainment in English, and meet the same challenging state academic standards that all students are expected to meet. The program was also designed to assist educators, SEAs, and LEAs in developing and implementing effective language instruction educational programs to assist in teaching ELs and developing and enhancing their capacity to provide effective instructional programs to prepare ELs to enter all-English settings. Title III-A also promotes parental, family, and community participation in language instruction educational programs for the parents, families, and communities of ELs. Formula grant allocations are made to SEAs based on the proportion of EL students and immigrant students in each state relative to all states. These amounts are weighted by 80% and 20%, respectively. SEAs may reserve not more than 5% of the funds received for working with LEAs to establish standardized statewide entrance and exit procedures, providing effective teacher and principal preparation and professional development activities, and planning evaluation, administration, and interagency coordination. SEAs are required to make subgrants to eligible entities based on the relative number of EL students in schools served by those entities. SEAs are also required to reserve not more than 15% of the state allocation to make grants to eligible entities that have experienced a significant increase in the percentage or number of immigrant students enrolled in schools in the geographic area served by the entity. Eligible entities receiving subgrants are required to use funds for three activities. First, funds must be used to increase the English language proficiency of ELs by providing effective language instructional programs that demonstrate the program is successfully increasing English language proficiency and student academic achievement. Second, funds must be used to provide effective professional development to school staff or community-based personnel. Third, funds must be used to provide and implement other "effective activities or strategies that enhance or supplement language instruction educational programs for ELs," including parent, family, and community engagement activities. Eligible entities receiving grants from the funds reserved specifically for immigrant students are required to use these funds to support activities that "provide enhanced instructional opportunities" for immigrant students. While Title III-A focuses on the education of ELs, Title I-A also contains provisions that specifically apply to this student population, as noted previously. For example, Title I-A requires that states establish English language proficiency standards that are derived from the domains of speaking, listening, reading, and writing and are aligned with challenging state academic standards. Under Title I-A, LEAs are required to assess English language proficiency annually using assessments aligned with the state English language proficiency standards. <4.1.1. National Programs (Sections 3131 and 3202)> A portion of Title III-A funds are reserved to support two specific national programs: (1) the National Professional Development Project (Section 3131), and (2) the National Clearinghouse for English Language Acquisition and Language Instruction Educational Programs (Section 3202). Under the National Professional Development Project, grants are awarded on a competitive basis for a period of up to five years to IHEs or public or private entities with relevant experience and capacity working in consortia with SEAs or LEAs to provide for professional development activities that will improve classroom instruction for ELs and help personnel working with these students to meet professional standards. The National Clearinghouse is responsible for collecting, analyzing, synthesizing, and disseminating information about language instruction educational programs for ELs and related programs. <4.2. Part B: General Provisions> Part B includes definitions relevant to Title III, statutory provisions authorizing the National Clearinghouse (discussed above), and the development of regulations for Title III. <5. Title IV: 21st Century Schools> Title IV authorizes a range of programs and activities including a block grant program, a program to support learning opportunities during non-school hours, programs to support charter schools and magnet schools, a family engagement program, an innovation and research program, programs to provide community support for student success, national activities for school safety, and programs focused on arts education, video programming for preschool and elementary school children, and gifted and talented education. <5.1. Part A: Student Support and Academic Enrichment (SSAE) Grants> Title IV-A authorizes SSAE grants to improve students' academic achievement by increasing the capacity of states, LEAs, schools, and local communities to (1) provide all students with access to a well-rounded education, (2) improve school conditions for student learning, and (3) improve the use of technology in order to increase the academic achievement and digital learning of all students. Formula grants are made to states based on their Title I-A funding from the prior year. States then make formula subgrants to LEAs. LEAs must use SSAE funds for three broad categories of activities: (1) supporting well-rounded educational opportunities, (2) supporting safe and healthy students, and (3) supporting the effective use of technology. If an LEA receives a grant of $30,000 or more, it must provide assurances that it will use at least 20% for activities to support a well-rounded education, at least 20% for activities to support safe and healthy students, and at least some of its funds to support the effective use of technology. If an LEA receives a grant of less than $30,000, it is only required to provide an assurance regarding the use of funds for at least one of the three categories. <5.2. Part B: 21st Century Community Learning Centers> Title IV-B supports activities provided during non-school hours that offer learning opportunities for school-aged children. Formula grants are made to SEAs based on their Title I-A funding from the prior year. States subsequently award grants to local entities (e.g., LEAs, community-based organizations) on a competitive basis for a period of three to five years. In awarding subgrants, SEAs are required to give priority to applicants proposing to target services to students who attend schools implementing CSI or TSI activities or other schools identified by the LEA in need of intervention support to improve student academic achievement and other outcomes; enroll students who may be at risk for academic failure, dropping out, or involvement with criminal or delinquent activities, or who lack "strong positive role models"; or target the families of such students. Local entities may use funds for activities that improve student academic achievement and support student success, such as academic enrichment learning programs, mentoring, tutoring, well-rounded education activities, programs to support a healthy and active lifestyle, technology education, expanded library service hours, parenting skills programs, drug and violence prevention programs, counseling programs, STEM programs, and programs that build career competencies and career readiness. <5.3. Part C: Enhancing Opportunity Through Quality Charter Schools> The Charter Schools Program (CSP) supports the startup of new charter schools and the replication and expansion of high-quality charter schools (Section 4303). It also assists charter schools in accessing credit to acquire and renovate facilities and includes a competitive grant program that provides per-pupil facilities aid (Section 4304). The CSP also provides funding for national activities to support the startup, replication, and expansion of charter schools; the dissemination of best practices; program evaluation; and stronger charter authorizing practices (Section 4305). Of the funds appropriated for Title I-C, 65% is provided for the startup, replication, and expansion of charter schools; 22.5% for national activities; and 12.5% for facilities financing. <5.4. Part D: Magnet Schools Assistance Program> Title IV-D provides grants to LEAs to plan and operate magnet schools public schools of choice designed to encourage voluntary enrollment by students of different racial backgrounds. LEAs that are operating under a court-ordered desegregation plan or have voluntarily adopted a federally approved desegregation plan are eligible to receive grants to establish and operate magnet schools. In awarding grants, the Secretary is required to give priority to LEAs that demonstrate the greatest need for assistance, based on the expense or difficulty of effectively carrying out approved desegregation plans and the magnet school program; propose to implement a new or revise an existing magnet school program based on evidence-based methods and practices or replicate an existing magnet school with a demonstrated track record of success; plan to admit students by methods other than academic examinations, such as a lottery; and propose to increase racial integration by taking into account socioeconomic diversity in the design and implementation of the magnet school program. <5.5. Part E: Family Engagement in Education Programs> Title IV-E provides competitive grants to statewide organizations to establish family engagement centers. These centers promote parent education and family engagement in education programs and provide comprehensive training and technical assistance to SEAs, LEAs, and schools identified by SEAs and LEAs; organizations that support family-school partnerships; and other organizations that carry out such programs. <5.6. Part F: National Activities> Title IV-F authorizes a range of programs. Each is discussed briefly below. Subpart F-1 authorizes the Education Innovation and Research (EIR) program, which provides competitive grants to eligible entities to create, develop, implement, replicate, or take-to-scale entrepreneurial, evidence-based, field-initiated innovations to improve achievement and attainment for high-need students. Three types of grants (early phase, mid-phase, and expansion grants) are awarded primarily based on the past demonstrated success of the grantee in meeting these goals. Subpart F-2 authorizes the Promise Neighborhoods program (Section 4624) and the Full-Service Community Schools (FSCS) program (Section 4625). They were authorized by the ESEA prior to the enactment of the ESSA using authority previously available in Title V-D-1 to create programs of national significance. Both programs are designed to provide pipeline services, which deliver a "continuum of coordinated supports, services, and opportunities," to children in distressed communities. More specifically, the Promise Neighborhoods program provides a comprehensive, effective continuum of coordinated services in neighborhoods with high concentrations of low-income individuals, multiple signs of distress (e.g., high rates of poverty, academic failure, and juvenile delinquency), and schools implementing comprehensive or targeted support and improvement activities under Title I-A. The FSCS program provides grants to public elementary and secondary schools to participate in a community-based effort to coordinate and integrate educational, developmental, family, health, and other comprehensive services through community-based organizations and public and private partnerships. Access to such services is provided in schools to students, families, and the community. Subpart F-3 authorizes National Activities for School Safety. A portion of funds appropriated for these activities must be used for the Project School Emergency Response to Violence (Project SERV). Project SERV provides grants to LEAs, IHEs, and the Bureau of Indian Education (BIE) for BIE schools where the learning environment has been disrupted due to a violent or traumatic crisis. Funds for National Activities for School Safety that are not used for Project SERV may be used for other activities to improve student well-being during or after the school day. Subpart F-4 authorizes three programs focused on academic enrichment. Section 4642 authorizes competitive grants for arts education under the Assistance for Arts Education Program. Section 4643 authorizes grants to support educational and instructional video programming, accompanying support materials, and digital content to promote school readiness for preschool and elementary school children and their families through the Ready to Learn Programming program. Section 4644 authorizes the Javits Gifted and Talented Students Education Program, which provides grants to enhance the ability of elementary and secondary schools to identify gifted and talented students, including low-income and at-risk students, and meet their special educational needs. The section also supports the National Research Center for the Education of Gifted and Talented Children and Youth. <6. Title V: Flexibility and Accountability> Title V includes both funding transferability authority and programs to support rural education. Funding transferability authority allows states and LEAs to transfer federal funds from certain ESEA programs to other ESEA programs to enable them to address their particular needs. The Rural Education Assistance Program (REAP) provides additional resources to rural LEAs that might lack the resources to compete effectively for federal grants or might receive formula grant allocations that are too small to meet their intended purposes. The two rural education programs included in Title V provide LEAs with substantial flexibility in how they use their grant funds. <6.1. Part A: Funding Transferability for State and Local Educational Agencies> Funding transferability for states and LEAs is included under Title V-A to provide states and LEAs with the "flexibility to target Federal funds to the programs and activities that most effectively address" their "unique needs." In general, states are able to transfer funds from three formula grants programs that focus on teachers and school leaders, provide block grants, and provide after-school programming to formula grant programs focused on special populations (i.e., disadvantaged students, migratory students, neglected and delinquent students, and ELs). More specifically, states are permitted to transfer up to 100% of the funds allotted to them for state-level activities under Title II-A, Title IV-A, or Title IV-B to Title I-A, Title I-C, Title I-D, Title III-A, and one other ESEA program. Similarly, LEAs are also permitted to transfer funds from formula grant programs that focus on teachers and school leaders or provide block grants to formula grant programs focused on special populations. More specifically, LEAs are permitted to transfer 100% of the funds received under Title II-A or Title IV-A to Title I-A, Title I-C, Title I-D, Title III-A, and one other ESEA program. SEAs and LEAs are prohibited from transferring funds from Title I-A, Title I-C, Title I-D, Title III-A, and one other ESEA program to any other program. <6.2. Part B: Rural Education Initiative> Title V-B authorizes the Rural Education Achievement Program (REAP), which is designed to assist rural LEAs that may lack the resources to compete effectively for competitive grants and that may receive grants under other ESEA programs that are too small to be effective in meeting their specified purposes. Subpart 1 authorizes the Small, Rural School Achievement (SRSA) program, which (1) provides eligible rural LEAs with the flexibility to use funds received under Title II-A and Title IV-A to carry out local activities authorized under certain ESEA programs, and (2) authorizes a formula grant program for rural LEAs under which funds received may be used under several other ESEA programs. Eligibility for both the flexibility authority and the grant program is based on criteria such as average daily attendance or population density and locale codes. Subpart 2 authorizes the Rural and Low-Income School (RLIS) program, which provides formula grants to states. SEAs then make subgrants to eligible LEAs by formula or competition as determined by the SEA. LEA eligibility criteria include a school-age child poverty rate of 20% or more and meeting certain locale requirements. Similar to the SRSA grants, RLIS grants may be used under several other ESEA programs or for parent involvement activities. LEAs cannot receive both an SRSA grant and a RLIS grant. An LEA that is eligible for grants under both the SRSA and RLIS programs must select the grant program under which it will receive funds. <6.3. Part C: General Provisions> Part C contains several prohibitions against federal control of educational curricula, academic standards and assessments, or programs of instruction as a condition of receipt of funds under Title V. It also states that nothing in Title V shall be construed to mandate equalized spending per pupil for a state, LEA, or school. <7. Title VI: Indian, Native Hawaiian, and Alaska Native Education> Title VI provides funds specifically for the education of Indian, Native Hawaiian, and Alaska Native children. With respect to Indian education, the ESEA authorizes formula grants to LEAs, Indian tribes and organizations, BIE schools, and other entities to support elementary and secondary school programs that meet the unique cultural, language, and educational needs of Indian children. Funds are also provided for competitive grants to examine the effectiveness of services for Indian children and to provide support and training for Indian individuals to work in various capacities in the education system. Title VI also authorizes competitive grants to organizations with experience in operating Native Hawaiian programs to provide services to improve Native Hawaiian education. A Native Hawaiian Education Council is also authorized under Title VI. In addition, Title VI authorizes competitive grants for activities and services intended to improve education for Alaska Natives, such as the development of curricular materials and professional development. <7.1. Part A: Indian Education> Subpart 1 authorizes formula grants to eligible LEAs, Indian tribes and organizations, BIE schools, and other entities to support the development of elementary and secondary school programs for Indian students that are designed to meet the unique cultural, language, and educational needs of such students and ensure that all students meet their state's challenging academic standards. Grant allocations are determined based on the number of eligible Indian children served by the eligible entity and state average per pupil expenditures. Subpart 2, Special Programs and Projects to Improve Educational Opportunities for Indian Children, authorizes two competitive grant programs: (1) Improvement of Educational Opportunities for Indian Children and Youth (Section 6121) and (2) Professional Development for Teachers and Education Professionals (Section 6122). The former supports projects to develop, examine, and demonstrate the effectiveness of services and programs to improve educational opportunities and achievement of Indian children and youth. The latter focuses on efforts such as providing support and training to qualified Indian individuals to become effective teachers, school leaders, and administrators. Subpart 3, National Activities, authorizes funds for a variety of purposes including research, evaluation, and data collection and analysis. It also authorizes Grants to Tribes for Education Administrative Planning, Development, and Coordination (Section 6132), as well as for Native American and Alaska Native Language Immersion Schools and Programs (Section 6133). Subpart 4 establishes the National Advisory Council on Indian Education (NACIE; Section 6141) and authorizes a preference for Indian entities under programs authorized by Subparts 2 and 3. <7.2. Part B: Native Hawaiian Education> Part B authorizes competitive grants to Native Hawaiian educational or community-based organizations, charter schools, or other public or private nonprofit organizations with experience in operating Native Hawaiian programs, or consortia of these entities, to provide a wide variety of services intended to improve education for Native Hawaiians. In the awarding of grants, priority is to be given to activities that are intended to improve reading skills for Native Hawaiian students in grades K-3, meet the needs of at-risk children and youth, increase participation by Native Hawaiians in fields or disciplines in which they are underemployed, or increase the use of the Hawaiian language in instruction. Specifically authorized activities include early childhood education and care, services for Native Hawaiian students with disabilities, and professional development for educators. Title VI-B also establishes a Native Hawaiian Education Council, which provides coordination activities, technical assistance, and community consultations related to the educational needs of Native Hawaiians. <7.3. Part C: Alaska Native Education> Part C authorizes competitive grants for a variety of activities and services intended to improve education for Alaska Natives. Eligible grantees include Alaska Native organizations with relevant experience, Alaska Native organizations that lack relevant experience and partner with an SEA, LEA, or Alaska Native organization operating relevant programs; or an entity located in Alaska that is predominantly governed by Alaska Natives and meets other specified criteria. Authorized uses of funds include, for example, the development of curriculum materials that address the special needs of Alaska Native students, training and professional development, early childhood and parenting activities, and career preparation activities. <8. Title VII: Impact Aid> Title VII compensates LEAs for the "substantial and continuing financial burden" resulting from federal activities. These activities include federal ownership of certain lands, as well as the enrollments in LEAs of children of parents who work and/or live on federal land (e.g., children of parents in the military and children living on Indian lands). The federal government provides compensation via Impact Aid for lost tax revenue because these activities deprive LEAs of the ability to collect property or other taxes from these individuals (e.g., members of the Armed Forces living on military bases) even though the LEAs are obligated to provide free public education to their children. Title VII authorizes several types of Impact Aid payments. These include payments under Section 7002, Section 7003, Section 7007, and Section 7008, which are discussed briefly below. Payments Relating to Federal Acquisition of Real Property ( Section 7 002 ) . Section 7002 compensates LEAs for the federal ownership of certain property. To qualify for compensation, the federal government must have acquired the property, in general, after 1938 and the assessed value of the land at the time it was acquired must have represented at least 10% of the assessed value of all real property within an LEA's area of service. Payments for Eligible Federally Connected Children (Basic Support Payments, Section 7 003 ) . Section 7003 compensates LEAs for enrolling "federally connected" children. These are children who reside with a parent who is a member of the uniformed services living on or off federal property, reside with a parent who is an accredited foreign military officer living on or off federal property, reside on Indian lands, reside in low-rent public housing, or reside with a parent who is a civilian working and/or living on federal land. Two payments are made under Section 7003. Section 7003(b) authorizes "basic support payments" for federally connected children. Basic support payments are allocated directly to LEAs by ED based on a formula that uses weights assigned to different categories of federally connected children and cost factors to determine maximum payment amounts. Section 7003(d) authorizes additional payments to LEAs based on the number of certain children with disabilities who are eligible to receive services under the Individuals with Disabilities Education Act (IDEA). Payments are limited to IDEA-eligible children whose parents are members of the uniformed services (residing on or off federal property) and those residing on Indian lands. Construction ( Section 7 007 ) . Section 7007 provides funds for construction and facilities upgrading to certain LEAs with high percentages of children living on Indian lands or children of military parents. These funds are used to make formula and competitive grants. Facilities Maintenance ( Section 7 008 ) . Section 7008 provides funds for emergency repairs and comprehensive capital improvements at schools that ED currently owns but LEAs use to serve federally connected military dependent children. <9. Title VIII: General Provisions> <9.1. Part A: Definitions> Part A (Section 8101) provides definitions of a variety of terms used frequently throughout the ESEA, such as "local educational agency," "state educational agency," "evidence-based," "four-year adjusted cohort graduation rate," "professional development," "state," and "well-rounded education." <9.2. Part B: Flexibility in the Use of Administrative and Other Funds> Part B authorizes SEAs and LEAs to consolidate and jointly use funds available for administration under multiple ESEA programs. In order to qualify for this flexibility, SEAs must demonstrate that a majority of their resources are provided from nonfederal sources. LEAs need SEA approval to consolidate their funds. Part B also authorizes the consolidation of funds set aside for the Department of the Interior under various ESEA programs and the McKinney-Vento Homeless Education program. <9.3. Part C: Coordination of Programs, Consolidated State and Local Plans and Applications> Part C authorizes SEAs and LEAs to prepare single, consolidated plans and reports for all "covered" ESEA programs. In general, the covered programs are the ESEA formula grant programs administered via SEAs. <9.4. Part D: Waivers> Under this provision, the Secretary is authorized to waive most statutory and regulatory requirements associated with any program authorized by the ESEA, if specifically requested by an SEA or Indian tribe. LEAs may submit waiver requests through their SEA. The SEA may then submit the request to the Secretary if it approves the waiver. Schools must submit their waiver requests to their LEAs, which in turn submit those requests to the SEA. <9.5. Part E: Approval and Disapproval of State Plans and Local Applications> Part E includes provisions related to secretarial approval of state ESEA plans and SEA approval of LEA plans. In both cases, the Secretary and the SEA, respectively, have 120 days from the day the plan was submitted to make a written determination that the submitted plan does not comply with relevant requirements. If such a determination is made, among other actions, the state or LEA must be notified immediately of the determination, provided with a detailed description of the specific plan provisions that failed to meet the requirements, offered an opportunity to revise and resubmit the plan within 45 days of the determination being made, provided technical assistance upon request (from the Secretary or SEA, respectively), and provided with a hearing within 30 days of the plans resubmission. <9.6. Part F: Uniform Provisions> Subpart 1 contains provisions for the participation of private school students and staff in those ESEA programs where such participation is authorized. Under the relevant ESEA programs, services provided to private school students or staff are to be equitable in relation to the number of such students or staff eligible for each program; secular, neutral, and non-ideological, with no funds to be used for religious worship or instruction; and developed through consultation between public and private school officials. Provision is made for bypassing SEAs and LEAs that cannot or have not provided equitable services to private school students or staff, and serving private school students and staff in these areas through neutral, third-party organizations. Provision is also made for the submission of complaints regarding implementation of these requirements. Subpart 1 also prohibits federal control of private or homeschools, or the application of any ESEA requirement to any private school that does not receive funds or services under any ESEA program. It also states that no ESEA provisions apply to homeschools. Subpart 2 contains a wide range of provisions, including the following: a general definition of "maintenance of effort," as applied in several ESEA programs (Section 8521); a requirement that ED publish guidance on prayer in public schools, and a requirement that LEAs receiving ESEA funds certify to their SEAs that they do not limit the exercise of "constitutionally protected prayer" in public schools (Section 8524); a requirement that recipient SEAs, LEAs, and public schools have a "designated open forum" to provide equal access to the Boy Scouts (Section 8525); a prohibition on the use of ESEA funds to "promote or encourage sexual activity (Section 8526)"; a prohibition on federal control of educational curricula, content or achievement standards, building standards, or allocation of resources (Section 8526A and Section 8527); a requirement that LEAs receiving funds under any ED program provide to the armed services access to directory information on secondary school students, unless students or their parents request that such information not be released (Section 8528); a prohibition on federally sponsored testing of students or teachers, with some exceptions (Section 8529); an "Unsafe School Choice Option" under which students in states receiving ESEA funds who attend a "persistently dangerous" public school, or who are victims of violent crime at school, are to be offered the opportunity to transfer to a "safe" public school (Section 8532); a requirement related to the transfer of school disciplinary records (Section 8537); a requirement related to consultation between LEAs and Indian tribes and tribal organizations (Section 8538); a requirement that ED provide outreach and technical assistance to rural LEAs (Section 8539); and a prohibition related to the aiding and abetting of sex abuse (Section 8546). Subpart 3 includes teacher liability protection. This subpart provides limitations on liability for teachers in school for harm caused by an act or omission of the teacher on behalf of the school if certain conditions (e.g., the teacher was acting within the scope of his or her employment) are met. Subpart 4 contains gun-free requirements. Each state receiving funds under the ESEA must have a state law that requires LEAs to expel for at least one year any student who is determined to have brought a firearm to a school or possessed a firearm at a school under the jurisdiction of an LEA in the state. The chief administering officer of the LEA may modify this requirement on a case-by-case basis. In addition, no LEA may receive funds unless it has a policy requiring that any student who brings a firearm or weapon to a school served by the LEA is referred to the criminal justice or juvenile delinquency system. Subpart 5 prohibits smoking within indoor facilities providing kindergarten, elementary, or secondary education or library services to children, if the services are funded directly or indirectly by the federal government, or the facility is constructed, operated, or maintained using federal funds. <9.7. Part G: Evaluations> Part G authorizes ED to reserve 0.5% of the funds appropriated for ESEA programs, other than Titles I, for program evaluations if funds for this purpose are not separately authorized. <10. Appropriations and Authorizations of Appropriations for Programs Authorized by the ESEA> Appropriations included in Table 1 are based on the most recent data available from ED's Budget Service Office. The amounts shown reflect any reprogramming or transfers of funds done by ED as of the time this table was prepared to provide the actual level of funding allocated to each program/activity. This list of "programs/activities" does not take into account the number of programs, projects, or activities that may be funded under a single line-item appropriation, so the actual number of ESEA programs, projects, or activities being supported through appropriations is not shown. It should be noted that ED considers all of the funds provided in an appropriations act for a given fiscal year, including advance appropriations provided for the following fiscal year, to be appropriations for the given fiscal year. For example, for the purposes of appropriations, ED considers all of the funds provided in the FY2019 appropriations act, including advance appropriations provided in FY2020, to be FY2019 appropriations. Table 2 provides ESEA appropriations for FY2016 and FY2017 to depict the transition from the ESEA as amended by the NCLB to the ESEA as amended by the ESSA. Programs authorized under the ESEA as amended by either the NCLB or the ESSA are included. Programs and activities are referred to by their names in the ESEA as amended by the ESSA if a program was in both the ESEA as amended by the ESSA and by the NCLB. If the program had a different name in the ESEA as amended by the NCLB, the name is included in parentheses. Programs are listed in the order in which they appear in the ESEA as amended by the ESSA if they also appeared in the ESEA as amended by the NCLB. For programs that appear in only the ESEA as amended by either the ESSA or the NCLB, programs are listed in the order they appear or appeared in law. For some programs that were funded in FY2016 but not in FY2017, it is possible that another program authorized in FY2017 provided funding for similar purposes. For example, the Elementary and Secondary School Counseling program was funded in FY2016 but not in FY2017. School counseling activities are an allowable use of funds under the SSAE program created under the ESSA. The same methodology as discussed above was used in determining appropriations amounts for each program. Table 3 provides the authorized level of appropriations for each program included in the ESEA that has a specified authorization of appropriations. The ESEA includes authorizations of appropriations for FY2017 through FY2020. <10.1. Appendix. Glossary of Acronyms>

The primary source of federal aid for elementary and secondary education is the Elementary and Secondary Education Act (ESEA)—particularly its Title I-A program, which authorizes federal aid for the education of disadvantaged students. The ESEA was initially enacted in 1965 (P.L. 89-10), and was most recently comprehensively amended and reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95 ). Under Title I-A, the ESEA as amended by the ESSA continues to require states and public schools systems to focus on educational accountability as a condition for the receipt of grant funds. Public school systems and individual public schools are held accountable for monitoring and improving achievement outcomes for students and closing achievement gaps, sustaining a focus that was initiated by amendments to the ESEA made by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ) but modified under the ESSA. While states were given more latitude to develop their accountability systems under the ESSA provisions, as a condition of receiving Title I-A funds each state must continue to have content and academic achievement standards and aligned assessments in reading/language arts (RLA), mathematics, and science for specific grade levels. States must now have an accountability system that incorporates (1) long-term and interim performance goals for specified measures; (2) weighted indicators based, in part, on these goals; and (3) an annual system for meaningful differentiation that is used to identify schools that need additional support to improve student achievement. Beyond Title I-A, other ESEA programs provide grants and contracts for a variety of educational purposes. ESEA programs and general provisions are included in eight titles, which collectively received appropriations of $25.2 billion in FY2019. The ESEA's titles are as follows: Title I: Programs for disadvantaged students, student assessment, migratory students, and neglected and delinquent students. Title II: Programs for teachers, principals, and school leaders; literacy; and American history and civics education. Title III: Programs to support English language acquisition for English learners. Title IV: Programs to support a well-rounded education, safe and healthy students, and technology; after-school instruction and care; charter schools; magnet schools; family engagement in education; and various national activities. Title V: Programs to support rural education. Title VI: Programs for Indian education, Native Hawaiian education, and Alaska Native education. Title VII: Impact Aid programs. Title VIII: General provisions. This report provides an overview of major provisions of the ESEA. It also includes a table showing annual appropriations for ESEA programs for FY2017 through FY2019, as well as a table showing the transition in authorized programs and related appropriations from FY2016, when NCLB provisions were still in effect, to FY2017, when ESSA provisions took effect. Finally, a table detailing authorizations of appropriations under current law is also included. The ESSA authorized appropriations for ESEA programs through FY2020.

crs_R45927

crs_R45927_0

This report examines technological innovation in payment systems generally and particular policy issues as a result of retail (i.e., point of sale) payment innovation. The report also discusses wholesale payment, clearing, and settlement systems that send payment messages between banks and transfer funds, including the "real-time payments" service being introduced by the Federal Reserve. This report includes an Appendix that describes interbank payment, clearing, and settlement systems related to U.S. payments. <1. Background on Payments> The U.S. financial system processes millions of transactions each day to facilitate purchases and payments. In general terms, a payment system consists of the means for transferring money between suppliers and users of funds through the use of cash substitutes, such as checks, drafts, and electronic funds transfers. The Committee on Payment and Settlement Systems (CPSS), consisting of representatives from several international regulatory authorities, has developed generally accepted definitions of standard payment system terminology. As defined by the CPSS, a payment system is a system that consists of a set of instruments, banking procedures, and, typically, interbank funds transfer systems that ensure the circulation of money. These systems allow for the processing and completion of financial transactions. From the typical consumer's perspective, making a payment is simple. A person swipes a card, clicks a button, or taps a mobile device and the payment is approved within seconds. However, the infrastructure and technology underlying the payment systems are substantial and complex. To simplify, a payment system has three parts (see Figure 1 ). First, the sender (i.e., the person making the payment) initiates the payment through an end-user service , such as an online payment service or mobile app, instructing the payer's bank to make a payment to the recipient. The payer and recipient interact only with end-user services, which comprise the "retail" portion of payments. Second, the payer's bank sends a payment message containing payment details to the recipient's bank through a payment system (sometimes called a clearing service ). Third, the payment is completed (or settled) when the two banks transfer funds through a settlement system. Different systems can perform each of these parts, and systems' developers and operators compete with each other to provide payment and settlement services to consumers, businesses, and banks. These final two inter-bank steps are the "wholesale" portion of payments. End-user services, which are operated by the private sector, facilitate a consumer's ability to purchase goods and services, pay bills, obtain cash through withdrawals and advances, and make person-to-person payments. Retail payments tend to generate a large number of transactions that have relatively small value per transaction. Retail payment services can be accessed through many consumer financial products, including credit and debit cards and checking accounts. The most common methods of payment are debit cards, cash, credit cards, direct debits and credits via an automated clearing house (ACH), checks, and prepaid debit cards (see Figure 2 ). In the United States, the Federal Reserve (Fed) operates some of the key bank-to-bank payment, clearing, and settlement (PCS) systems that process retail or wholesale transactions, and private-sector organizations operate other systems that clear and settle bank-to-bank payment, including those described in the Appendix . <2. Payment Systems and Financial Technology> Technological advances in digitization and data processing and storage have greatly increased the availability and convenience of electronic payments. In recent years, the use of electronic payments has risen rapidly, whereas the use of cash and checks has declined (see Figure 2 ). According the Federal Reserve's most recent triennial payment study (released in 2016), the number of transactions of three electronic payment methods debit card, credit card, and ACH grew at annual rates of 7.1%, 8.0%, and 4.9%, respectively. Together, they totaled more than 144 billion transactions with a value of almost $178 trillion in 2015. Meanwhile, check payments declined by an annual rate of 4.4% during that period, and totaled 17.3 billion transactions worth almost $27 trillion in 2015. Less data are available on cash usage and the value of cash transaction in part because they are person-to-person and do not involve a digital record, but a Fed survey estimates that between 2012 and 2015, the share of transactions made in cash fell from 40.7% of all transactions to 32.5%. This trend is probably due, at least in part, to various new technological products and services that offer fast, convenient payments for individuals and businesses. Payment apps linked to bank accounts and payment cards can be downloaded onto mobile devices that allow individuals to send payments to each other or to merchants. These services include Venmo (owned by PayPal), Zelle (owned by a consortium of large U.S. banks), and Cash App (owned by Square). Other companies provide hardware and software products that allow individuals and small businesses to accept debit and credit card payments, online or in person. These companies include PayPal, Square, and Stripe. Another advance in payments is allowing consumers to make payments using a mobile device, wherein debit card, credit card, or bank account information is stored in a "digital wallet" and sensitive information is protected by transmitting surrogate data (a process called tokenization ) at the point of sale. This service includes Apple Pay, Google Pay, and Samsung Pay. These services are generally layered on top of traditional electronic payment systems. To use these services, the consumer or business often must link them to a bank account, debit card, or credit card. The payments are still ultimately settled when the money from the payer's account is deposited in the recipient's account. An exception are payments made by cryptocurrencies, discussed in the text box. <3. Faster Retail Payments: Policy Issues> Although faster and potentially less costly payment systems benefit consumers and businesses, the use of new technology in existing and new payment systems raise questions about whether existing regulation adequately addresses issues related to cybersecurity and data privacy, industry competition, and consumer access and protection. <3.1. Regulatory Framework> How payments are federally regulated depends, in part, on whether they are being provided by banks. Banks are subject to a variety of prudential regulation, enforcement, and supervision by federal bank regulators. Nonbank payment processors are subject to similar regulation and supervision (but not enforcement) by bank regulators if they are a service provider to a bank, but otherwise are not. Nonbank companies that do not provide services to banks may be regulated as money transmitters at the state level by state agencies and as money service businesses at the federal level by the Department of the Treasury's Financial Crimes Enforcement Network and subject to applicable laws and regulations. These services are subject to federal consumer protection regulation under the Electronic Fund Transfer Act ( P.L. 95-630 ); anti-money laundering requirements under the Bank Secrecy Act (P.L. 91-508); and various state licensing, safety and soundness, anti-money laundering, and consumer protection requirements. A broad issue that permeates many of the specific issues examined in this report is the debate over whether the various companies providing retail payment services are effectively and efficiently regulated. Nonbank money transmission is largely regulated at the state level. Some observers have argued that this state-by-state regulatory regime, designed to protect against risks presented by traditional money transmitters such as Western Union, is overly onerous and ill-suited when applied to new, technology-focused payment companies. State regulators assert they are best positioned to regulate these companies, noting their experience and recent efforts to coordinate and streamline state regulation. A greater federal role in payment regulation could impose more or less stringent standards (with federal preemption of state regulation, in the latter case) than any given state's current standards. One potential solution for concerns that the current system is too fragmented and overly burdensome could be to allow certain nonbank payment companies to enter the bank regulatory regime. Two potential mechanisms are under consideration that could allow a technology-focused payment company to be federally regulated the Office of the Comptroller of the Currency (OCC) special purpose national bank charter and a state-level industrial loan company (ILC) charter with Federal Deposit Insurance Corporation (FDIC) insurance. Both could be particularly desirable for payment firms if they provide an avenue to directly access Fed wholesale payment systems. However, both mechanisms are controversial and subject to contentious debate. The OCC and proponents of the special purpose charter generally view the charter as a way to free companies from what they assert is the unnecessarily onerous regulatory burden of being subject to numerous state regulatory regimes while not overly relaxing regulations under the special purpose charter, the companies would become subject to the OCC's national bank regulatory regime. Opponents generally assert that the OCC does not have the authority to charter these types of companies and that doing so would inappropriately allow fintech firms offering fast payment services to circumvent important state-level consumer protections. State regulators have filed lawsuits to block the granting of such charters. To date, no companies have applied for such a charter, although ongoing legal uncertainty is likely a discouraging factor. ILC charters are controversial because they allow commercial firms such as retailers, manufacturers, or technology companies to own banks. The United States has historically adopted policies to separate commerce and banking, and the FDIC has not approved deposit insurance for a new ILC since 2006. Opponents of ILC charters argue that by creating an avenue for a commercial firm to own a depository institution, they blur the line between commerce and banking, exposing the U.S. economy to related risks such as creating possible incentives for imprudent underwriting, inappropriately exposing taxpayers to losses through federal deposit insurance, and leading to entities that can exercise market power. Proponents of ILC charters assert these concerns are overstated. They cite the potential benefits of mixed arrangement (e.g., economies of scale, risk diversification, information efficiencies, customer convenience and savings) and note that certain other stable developed countries allow more blending of banking and commerce than the United States with, they argue, no or little ill effect. Recently, three fintech companies submitted applications to the FDIC for ILC deposit insurance. Two companies, however, have since withdrawn their applications, and the company with a pending application, Square, is a payment system provider. <3.2. Cybersecurity> All payment methods expose users to some risks, including money theft or fraudulent payments made using their accounts or identities. In general, improving technology reduces one type of risk but may expose users to new risks. For example, if a pickpocket steals a person's cash, the victim has little recourse. If instead, the pickpocket steals a payment card, the victim can cancel the card and generally would not be held liable for fraudulent purchases. However, identity thieves can steal card information using card reader skimmers, allowing thieves to open and use lines of credit in victims' names without their knowledge. Similarly, new payment technologies reduce certain risks but create others. For example, digital wallets on mobile devices can eliminate the need to carry physical cards that can be lost or stolen and can protect sensitive information at the point of sale through tokenization. However, the device itself can be compromised by software designed to gain unauthorized access to devices, called malware, which may lead to fraudulent charges. In addition, storing payment information on multiple websites, apps, and devices creates more opportunities for hackers to steal it than if the information existed only on the card itself. Recent breaches at various financial and nonfinancial companies in which people's sensitive information were compromised illustrate the potential risk and have raised questions over whether policymakers should implement stricter cybersecurity requirements. Some possible policy responses include enacting a federal breach notification law, creating federal cybersecurity standards, or increasing federal authority to penalize companies that fail to adequately protect consumer data. <3.3. Data Privacy> Payment systems necessarily collect detailed consumer information on transactions, including the retail stores a consumer shops at, the businesses and individuals the consumer pays, and the dates, times, and amounts of each transaction. Through analysis, this data have the potential to reveal a lot of information about individual consumers, including where they live and their gender, age, race, ethnicity, and approximate income. Such data are valuable from a business perspective; for example, for targeting product marketing to consumers. In addition, scammers could use this data to facilitate fraud. Electronic payments have resulted in a proliferation in the availability and use of personal information, which has raised policy concerns about how companies use the data, whether consumers understand how their data will be used, and whether consumers should have more control over its use. Payment data has the potential to improve consumer outcomes. For example, personal financial management apps or other digital tools could help consumers more easily track payments, automate saving and budgeting, and more efficiently shop for financial products that meet their personal needs. Consumers could also in the future share this data with financial institutions to apply for loans or other banking products. Given these benefits, as well as possible privacy concerns, the question becomes how much access should companies have to individuals' information. Privacy policy disclosures to consumers is another important element of privacy policy that might be more difficult as payments become faster using new technology. For example, according to the Bureau of Consumer Financial Protection (CFPB), stakeholders suggest that "providing disclosures that are clear and sufficient for consumers to make informed decisions is difficult" in the mobile environment due to small screens, which may make it difficult to read long, technical disclosure documents. These stakeholders indicate that clear privacy policies and more consumer control over the use of consumer data may be important considerations in this new digital environment. <3.4. Consumer Protection> When developing a new or faster retail payment system, consumer protection is an important consideration. Although new technology offers consumers many potential benefits, it raises issues of concern, such as consumer liability for fraudulent payment and consumer error or nonreceipt of goods resolution. The Electronic Fund Transfer Act, currently implemented by the CFPB through Regulation E, is the most relevant consumer protection law applying to financial payments. Regulation E protects individual consumers who engage in electronic fund transfers. It mandates consumer disclosures, limits consumer liability for unauthorized transfers, and maintains procedures for resolving errors. Other regulations may also be relevant to a new faster payment system, depending on its structure. For example, the Expedited Funds Availability Act ( P.L. 100-86 ), currently implemented by the Federal Reserve as Regulation CC, prescribes how quickly banks must make funds available to customers. When developing a new faster payment system, Congress and federal regulators may consider how a new system should comply with relevant regulations, such as Regulation E. Depending on the structure of the new system, regulators might decide to update these regulations to tailor them as appropriate. For example, current consumer protection rules might not cover all aspects of the system, leaving consumers at risk of financial loss, without clear recourse for some payment-related disputes, or other negative impacts. In this spirit, in 2015, the CFPB released nine consumer protection principles for new faster payments systems, including consumer control over payments, fraud and error resolution protections, and disclosed and clear costs. The CFPB has not acted on these principles through rulemaking or other initiatives since their release in 2015. Financial education might be another consumer protection policy option. As new technology is introduced into financial products, consumers may need to learn new skills, sometimes referred to as digital financial literacy , which includes "knowing how to use devices to safely access financial products and services via digital channels in ways that help consumers achieve their financial goals, protect against financial harm and enhance ability to know where to get help." This type of financial education might be particularly important to ensure that lower-income and older consumers are included in a new faster payment system. <3.5. Financial Access and Underserved Groups> Innovations in the payment system may benefit some consumers and fail to reach others. New retail payment options that are linked to bank accounts, internet-based, or require mobile devices could disadvantage consumers who rely on cash payments, do not have easy internet or mobile access, or do not feel comfortable using this new technology. As long as payments remain based on the banking system, the unbanked and underbanked may encounter participation limits to faster payments. In contrast, innovation in technology may help marginalized groups gain access to the financial system. The ability to access digital channels using cash may be particularly important for including underserved consumers, leading to the development of new payment products such as pre-paid cards and services that allow cash to be placed in an account that can be used to make online payments. The cost of internet and mobile data plans might limit the ability of underserved consumers to access a faster payment system that is internet- or mobile-based. However, as internet access and mobile devices continue to proliferate and decline in cost, barriers to accessing those technologies may decline. For example, most consumers, including unbanked and underbanked consumers, have access to mobile phones and smartphones, and the use of these technologies is growing. According to a national survey, in 2017, 83% of underbanked and 50% of unbanked consumers had access to a smart phone. The survey noted that underbanked consumers were more likely to use mobile banking services than the rest of the U.S. population. A faster payment system may provide certain other benefits besides access for low-income or liquidity-constrained consumers (colloquially, those living "paycheck to paycheck") who may more often need access to their funds quickly. In particular, many lower-income consumers say that they use alternative financial services, such as check cashing services and payday loans, because they need immediate access to funds. Faster payments may also help some consumers avoid checking account overdraft fees. Note, however, that some payments that households make would also be cleared faster debiting their accounts more quickly than the current system, which could be harmful to some underserved households. <3.6. Market Concentration> Traditional payment systems generally are characterized by strong economies of scale and are subject to network effects , wherein the more widespread a payment method's use and acceptance becomes the more incentive additional consumers and businesses have to adopt it. These economic characteristics may mean payment industries naturally become highly concentrated, because a small number of widely used systems are more efficient than many narrowly used systems. For instance, established payment systems currently have high market concentrations. Debit card payment processing networks are dominated by Visa and Mastercard, and credit card processing networks are mostly operated by Visa, Mastercard, American Express, and Discover. Some observers are concerned that market concentration will also be a feature in new payment systems. Others argue that new payment systems based on the internet may avoid similar concentration observed in traditional systems, because they do not require new entrants to make large initial investments in infrastructure. To date, the entry of multiple new services and companies into the market for end-user payment systems has supported competition and consumer choice. Whether the industry will eventually consolidate remains to be seen. Creating additional concentration concerns is the entrance of some of the largest global technology companies into the payment industry, including U.S. companies such as Google (Google Pay), Apple (Apple Pay), Amazon (Amazon Pay) and Facebook (Facebook Pay and the Libra proposal). Such companies already have large market shares in various technology-related industries and collect huge amounts of consumer data, which could increase as they now seek to expand their scope into the payment industry. Were they to dominate electronic payments, it could pose competition concerns in the payment industry, as well as increase their dominance in their core industries. In addition, these developments raise concerns discussed above (see the " Regulatory Framework " section), relating to the implications of mixing commerce with what has traditionally been a core banking activity. <4. Wholesale Payment Systems and Real-Time Payments> Payments between two parties who are both members of the same end-user service a closed loop paymen t can occur in real time because the service can instantly communicate between the two parties, verifying that the payer has sufficient funds in the account to make the payment. However, a payment in which one party is outside of a single end-user service typically travels through the banking system, and thus cannot occur in real time unless real-time messaging, clearing, and settlement of the payment is available through wholesale payment systems. For example, a debit or credit card payment to a merchant needs to transfer funds from the sender's bank (in the case of a credit card, the card-issuing bank) and send them to the recipient's bank. Real-time payment can only occur in this scenario if settlement occurs in real-time or if payment occurs before settlement (putting the recipient's bank at risk that the transfer never occurs). Even within an end-user service that would provide real-time payment, if the transfer were made between two members entirely using existing balances within the service, delivery of funds could be delayed if the payer needs to add funds to their account to make payment (via direct debit or credit card transfer, for example) or if the recipient wishes to withdraw funds from the payment service to deposit in its bank account. Thus, the speed of many existing end-user services are ultimately limited by what happens with wholesale payment systems. On August 5, 2019, the Fed announced plans to create a wholesale real-time payment (RTP) system. This section discusses the history of the Fed's role in the payment system; compares recent RTP initiatives by the Fed, the private sector, and abroad; and analyzes policy issues raised by these initiatives. <4.1. History of the Fed's Role in the Payment System> The Fed was originally created as a "banker's bank" to improve the functioning of a national banking system that was dominated at the time by small, local banks. To that end, providing bank-to-bank check-clearing services was one of the Fed's original, primary functions. Problems with private clearinghouses were one of the central issues in the financial panic that led to the Fed's creation. As other payment methods have emerged over time, the Fed has also provided other types of bank-to-bank payment and settlement systems. The Fed provides these services by linking the accounts that all banks maintain at the Fed to comply with reserve requirements. Throughout the Fed's history, the private sector has operated competing payment and settlement systems that the Fed has regulated (see Appendix for more details). For example, the Fed and the private-sector Electronic Payments Network (owned by The Clearing House , an association of large banks ) currently operate competing automated clearinghouse (ACH) systems, which are payment systems that allow banks (and certain other financial institutions) to send direct debit and credit messages that initiate fund transfers. The Fed also operates two wholesale settlement systems for payments, Fedwire Funds Service and the National Settlement Service. The Clearing House Interbank Payment System (CHIPS) is a competing private-sector gross settlement system. (The Fed does not operate any end-user service directly accessed by individuals or nonfinancial businesses.) <4.2. Real-Time Payments Initiatives> A typical bank-to-bank electronic payment is currently settled on the same or next business day. The Fed plans to introduce an RTP system called FedNow in 2023 or 2024. FedNow would be "a new interbank 24x7x365 real-time gross settlement service with integrated clearing functionality to support faster payments in the United States," that "would process individual payments within seconds ... (and) would incorporate clearing functionality with messages containing information required to complete end-to-end payments, such as account information for the sender and receiver, in addition to interbank settlement information." According to the Fed, FedNow will be available to all banks with a reserve account at the Fed. It will require banks using FedNow to make funds transferred over it available to their customers immediately after being notified of settlement. In a November 2018 proposal, the Fed also sought comment on the possibility of the Fed creating "a liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis to support services for real-time interbank settlement of faster payments, whether those services are provided by the private sector or Federal Reserve Banks." The purpose of this tool would be to accommodate the need for banks to move funds between their accounts at the Fed continuously, including outside of business hours in real-time settlement. In the August notice, the Fed stated it was exploring whether this goal could be accomplished by expanding Fedwire Funds Service and the National Settlement Service to permit 24x7x365 real-time gross settlement. Previously, the Fed proposed expanding same-day payment settlements on Fedwire and the National Settlement Service. Several private-sector initiatives are also underway to implement faster payments, some of which would make funds available to the recipient in real time (with deferred settlement) and some of which would provide real-time settlement. Notably, the Clearing House introduced its RTP network (with real-time settlement) in November 2017; according to the Clearing House, it currently "reaches 50% of U.S. transaction accounts, and is on track to reach nearly all U.S. accounts in the next several years." In addition, both the Fed and private-sector companies can set joint standards, rules, and a governance framework to facilitate the adoption of faster payments, whether those systems are operated by the Fed or the private sector, and promote interoperability between systems. The Fed convened the Faster Payments Task Force, composed of more than 300 stakeholders, which has issued a number of recommendations to facilitate the adoption of faster payments. <4.3. Policy Issues> Other countries have already introduced or are in the process of introducing RTP. According to Fed Chair Jerome Powell, "the United States is far behind other countries in terms of having real-time payments available to the general public." Businesses and consumers would benefit from the ability to receive funds more quickly, particularly as a greater share of payments are made online or using mobile technology. Some have argued that RTP would be especially beneficial to low-income, liquidity-constrained individuals as described in the " Financial Access " section above. The main policy issue regarding the Federal Reserve and RTP is whether Fed entry in this market is desirable. The Fed bases decisions on whether to introduce new payment systems or system features on three principles: "The Federal Reserve must expect to achieve full recovery of costs over the long run. The Federal Reserve must expect that its providing the service will yield a clear public benefit, including, for example, promoting the integrity of the payments system, improving the effectiveness of financial markets, reducing the risk associated with payments and securities-transfer services, or improving the efficiency of the payments system. The service should be one that other providers alone cannot be expected to provide with reasonable effectiveness, scope, and equity." Stakeholders are divided over the introduction of FedNow. Some question whether, in light of these principles, the Fed can justify creating a RTP system in the presence of competing private systems. Some fear that FedNow will hold back or crowd out private-sector initiatives already underway and could be a duplicative use of resources. The Treasury Department supports Fed involvement on the grounds that it will help private-sector initiatives at the retail level. Others, including many small banks , fear that aspects of payment and settlement systems exhibit some features of a natural monopoly (because of network effects), and, in the absence of FedNow, private-sector solutions could result in monopoly profits or anticompetitive behavior, to the detriment of financial institutions accessing RTPs and their customers (merchants and consumers). In 2017, the Justice Department sent the Clearing House a letter stating that it did not plan to challenge the Clearing House's RTP system on antitrust grounds, based on the Clearing House's plans at that time. From a societal perspective, it is unclear whether it is optimal to have a single provider or multiple providers in the case of a natural monopoly, particularly when one of those competitors is governmental. Multiple providers could spur competition that might drive down user costs, but more resources are likely to be spent on duplicative infrastructure. RTP competition between the Fed and the private sector also has mixed implications for other policy goals: Innovation. Competition typically fosters innovation, but the Fed's unique cost structure could potentially undermine the private sector's success, limiting the latter's willingness to invest in innovations. Ubiquity. The Fed argues that RTP ubiquity is more likely with its involvement because it has existing relationships with all banks and because no single payment system has ever achieved ubiquity historically. However, the Fed's entry into RTP could delay the achievement of universal RTP in the next few years if banks decide to wait until FedNow is available instead of joining the Clearing House's network. Interoperability. Interoperability (the ability to make payments across different systems) is more difficult to achieve with competing firms, but the Fed argues that if no single RTP system is ubiquitous, the ability of any two given institutions to exchange funds is improved if competing systems increase ubiquity. The ability to make payments across ACH networks is an example of how interoperability has currently been achieved between competing Fed and Clearing House systems. However, the technology involved in RTP may make interoperability more difficult. In its proposal, the Fed did not commit to ensure interoperability, but stated that it was a desirable goal. Equity. The Clearing House has attempted to assuage equity concerns by pledging access to its system on equal terms to all banks, regardless of size, but these terms could change, and small banks have raised concerns that they may since the system is owned by large banks. The Clearing House has pointed to the Fed's volume discounts for existing payment systems as evidence that FedNow may not be equitable, however. Security. Security across competing systems could be difficult to coordinate, but systems might also attempt to compete by providing better security features. The Fed argues that competing RTP systems reduces operational and systemic risks because a system with only one provider has a "single point of failure." Repeated data breaches at large financial institutions also point to the difficulty of monitoring cybersecurity in private systems, although government has also proven to be vulnerable to data breaches as well. The Fed states that "participating banks would continue to serve as a primary line of defense against fraudulent transactions, as they do today ... " under FedNow. The Fed, and by extension the taxpayer, is exposed to default risk because of its provision of intraday and overnight credit (some of which is uncollateralized) when banks use its payment and settlement systems. Currently, when banks use Fed payment and settlement systems, the time lag between payment and settlement can cause mismatches in the amounts due and the amounts available in their accounts. As a result, the Fed extends intraday credit for a fee (if uncollateralized) to avoid settlement failures. Daily overdrafts have been relatively low in recent years, but peaked at $186 billion during the 2007-2009 financial crisis. Introducing real-time payments with deferred settlement could increase the use of intraday credit. The Fed does not state in its final rule whether it expects the level of intraday credit to be affected under FedNow, although it notes that it might need to extend the availability of intraday credit to off-hours. Note that the Fed provides this credit to reduce systemic risk to the banking system, so eliminating intraday credit has the potential to reduce financial stability. <4.4. Regulation> RTPs offered by the private sector could fit into the existing regulatory framework. The Fed already regulates and supervises private payment systems for risk management and transparency, but not pricing. RTP could potentially alleviate some existing risks (e.g., if settlement is in real time, credit risk is reduced for the recipient institution) while posing new risks (e.g., RTP requires more active liquidity management). Any RTP system and regulation would need to account for these changing risks. To address systemic risk concerns, a private RTP system could be designated as a systemically important Financial Market Utility (FMU) under Title VIII of the Dodd-Frank Act ( P.L. 111-203 ). The Dodd-Frank Act allows the Financial Stability Oversight Council , a council of financial regulators led by the Treasury Secretary, to designate a payment, clearing, or settlement system as systemically important on the grounds that "the failure of or a disruption to the functioning of the FMU could create or increase the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the U.S. financial system." FMUs, currently including the Clearing House Interbank Payments System, are subject to heightened regulation, and the Fed has supervisory and enforcement powers to ensure those standards are met. Policymakers could consider whether systemic risk concerns are better addressed through Fed operation of payment and settlement systems or Fed regulation of private systems. <4.4.1. Appendix. Selected Interbank Payment, Clearing, and Settlement Systems Involved in U.S. Payments>

Technological advances in digitization and data processing and storage have greatly increased the availability and convenience of electronic payments. New products and services offer faster, more convenient payment for individuals and businesses, and the numerous options on offer foster competition and innovation among end-user service providers. Currently, many new payment services are layered on top of existing electronic payment systems, which may limit their speed. Most payments flow through both retail and wholesale payment systems before they are completed. Consumers access retail payment systems to purchase goods and services, pay bills, obtain cash through withdrawals and advances, and make person-to-person transfers. Consumers' financial institutions access wholesale systems to complete the payment. In the United States, systems accessed by consumers are operated by the private sector, whereas systems accessed by banks to complete those transactions are operated by the Federal Reserve (Fed) or the private sector. Regulation of retail payment systems is dispersed across multiple state and federal regulators. For example, payment systems are subject to federal consumer protection regulation under the Electronic Fund Transfer Act ( P.L. 95-630 ), anti-money laundering requirements under the Bank Secrecy Act (P.L. 91-508), and various state licensing, safety and soundness, anti-money laundering, and consumer protection requirements. Private wholesale payment systems are regulated by the Fed, and if they are systemically important, they can be designated as "financial market utilities" and subject to heightened oversight. Although faster and potentially less costly payment systems may benefit consumers and businesses, the use of new technology in existing and new payment systems raise a number of questions for policymakers. Some observers have argued that certain innovative financial technology, or fintech, payment companies would be more effectively regulated through the federal banking regulatory framework, whereas opponents of this idea assert it would result in the preemption of important state-level consumer protections and in an inappropriate combination of banking and commercial activities. The increased prevalence of data generation, collection, and analysis in payment systems has caused observers to question whether existing regulation adequately addresses issues related to data privacy and cybersecurity. Although the traditional high-levels of industry concentration and the recent entry by technology giants have raised concerns over market power and industry competition, competition to date has been robust and certain analysts argue that internet-based payments that do not require a large investment in infrastructure will prevent the market concentration that exists in older payment services. What effect technological innovation in payments will have on consumer access and whether consumers are adequately protected against potential problems, such as fraudulent or erroneous transactions, are also subjects of debate. In August 2019, the Fed announced plans to create an interbank real-time payments (RTP) system by 2023 or 2024. The Fed stated that the new system will be available to all banks with a reserve account at the Fed, and it will require banks using this new system to make those funds available to their customers immediately after being notified of settlement. In addition, several private-sector initiatives are also underway to implement faster payments, some of which would make funds available to the recipient in real time (with deferred settlement) and some of which would provide real-time settlement. Businesses and consumers would benefit from the ability to receive funds more quickly, particularly as a greater share of payments are made online or using mobile technology. The main policy issue regarding the Federal Reserve and RTP is whether Fed entry in this market is desirable, given similar private-sector developments are already underway. There is debate about whether competition from the Fed would be beneficial in terms of cost, efficiency, safety, innovation, ubiquity, and financial stability. In the 116 th Congress, H.R. 3951 and S. 2243 , among other bills, would require the Fed to create a RTP system and would require banks to make payments to account holders in real time.

crs_R45987

crs_R45987_0

<1. Introduction> This report provides background on Department of Defense's legacy Electronic Health Record (EHR) systems, reviews previous EHR modernization efforts, and describes DOD's process to acquire and implement a new EHR system known as MHS Genesis . DOD's new EHR system presents several potential issu es for Congress, including how to conduct oversight on a program that spans three federal departments, how to ensure an adequate governance structure for the program, and how to monitor the program's cost and effectiveness. Although this report mentions EHR modernization efforts by the Department of Veterans Affairs (VA) and U.S. Coast Guard (USCG), as well as DOD's Joint Operational Medical Information System (JOMIS); it does not provide an in-depth discussion of these programs. Appendix A provides a list of acronyms used throughout this report. <2. Background> For decades, the Department of Defense (DOD) has developed, procured, and sustained a variety of electronic systems to document the health care services delivered to servicemembers, military retirees, and their family members. DOD currently operates a number of legacy EHR systems and is, at the direction of Congress, in the process of implementing a new EHR called MHS Genesis. DOD's new EHR system is to be integrated with other EHR systems utilized by the VA, USCG, and civilian health care providers. DOD operates a Military Health System (MHS) that delivers to military personnel, retirees, and their families certain health entitlements under chapter 55 of Title 10, U.S. Code. The MHS administers the TRICARE program, which offers health care services worldwide to over 9.5 million beneficiaries in DOD hospitals and clinics also known as military treatment facilities (MTFs) or through participating civilian health care providers (i.e., TRICARE providers). There are currently 723 MTFs located in the United States and overseas that provide a range of clinical services depending on size, mission, and level of capabilities. Health care services delivered in MTFs or by TRICARE providers are documented in at least one of the following components of the DOD health record: service treatment record (STR) documentation of all medical and dental care received by a servicemember through their military career; nonservice treatment record (NSTR) documentation of all medical and dental care received by a nonservicemember beneficiary (i.e., military retiree, family member); and occupational health civilian employee treatment record (OHTR) documentation of all occupational-related care provided by DOD (typically to DOD civilian or contractor employees). DOD maintains numerous legacy EHR systems that allow health care providers to input, share, and archive all documentation required to be in a beneficiary's health record. MTF or TRICARE providers can document medical and dental care directly in a DOD legacy EHR system, or can scan and upload paper records. Servicemembers and their families frequently change duty stations; the DOD health record can be accessed at most MTFs. However, sometimes beneficiaries are relocated to an area that lacks access to DOD's legacy EHR systems. In such cases, beneficiaries are required to maintain a paper copy of the health record. <2.1. Brief History of DOD's Electronic Health Record (EHR)> Since 1968, DOD has used various electronic medical information systems that automate and share patient data across its MTFs. Between 1976 and 1984, DOD invested $222 million to "acquire, implement, and operate various stand-alone and integrated health-care computer systems." Over the next three decades, DOD continued to invest and to implement numerous electronic medical information systems to allow health care providers to input and review patient data across all MTFs, regardless of military service or geographic location. In 1998, DOD began to incorporate a series of efforts to increase interoperability with the VA's EHR systems (see Figure 1 ). <2.2. DOD Legacy EHR Systems> DOD operates numerous legacy EHR systems as described below. Together, health care data documented and archived in the legacy EHR systems contribute to a beneficiary's overall medical and dental record, also known as the DOD health record. MHS Genesis is intended to replace these legacy systems and produce one comprehensive EHR. <2.2.1. Composite Health Care System (CHCS)> CHCS is a medical information system that has been in operation since 1993. CHCS primarily functions as the outpatient component of the EHR, with additional capabilities to order, record, and archive data for laboratory, radiology, and pharmacy services. Administrative functions such as patient appointment and scheduling, medical records tracking, and quality assurance checks, were also incorporated into CHCS. In March 1988, DOD awarded Science Applications International Corporation (SAIC) a contract to "design, develop, deploy, and maintain CHCS." SAIC continues to provide ongoing sustainment and technical support for CHCS. The estimated life-cycle cost of CHCS is $2.8 billion. <2.2.2. Armed Forces Health Longitudinal Technology Application (AHLTA)> After deploying CHCS, DOD identified a need for integrated health care data that could be portable and accessible at any MTF. CHCS was developed as a facility-specific system that archived its data using regional network servers. However, accessing data across each server became a "time- and resource-intensive activity." In 1997, DOD began planning for a new "comprehensive, lifelong, computer-based health care record for every servicemember and their beneficiaries." The program would be known as CHCS II, later renamed the Armed Forces Health Longitudinal Technology Application (AHLTA). DOD intended to replace CHCS with AHLTA and initially planned to deploy the new system in 1999. However, the program sustained several delays resulting from "failure to meet initial performance requirements" and changes to technical and functional requirements. The implementation plan was later revised to reflect AHTLA deployment from July 2003 to September 2007. In 2010, the Government Accountability Office (GAO) reported that DOD's AHLTA life-cycle cost estimate through 2017 would be $3.8 billion. <2.2.3. Essentris> Essentris is the inpatient component of the current EHR that has been used in certain military hospitals since 1987. As a commercial-off-the-shelf (COTS) product developed by CliniComp International, Inc. (CliniComp), Essentris allows health care providers to document clinical care, procedures, and patient assessments occurring in the inpatient setting, as well as in emergency departments. In 2009, DOD selected CliniComp to deploy Essentris at all military hospitals. This deployment was completed in June 2011. DOD maintains an ongoing contract with CliniComp and LOUi Consulting Group, Inc. to provide sustainment, technical and customer support, training, and ongoing updates for Essentris. <2.2.4. Corporate Dental System (CDS)> CDS, formerly named the Corporate Dental Application, is a web-based application that serves as DOD's current electronic dental record system. CDS allows DOD dental providers to document, review, and archive clinical information. The system also serves several administrative functions, such as tracking dental readiness of servicemembers, patient appointments and scheduling, and data reporting. CDS was initially developed as the Army's alternative dental solution to the AHLTA dental module. In 2000, all Army dental clinics implemented CDS. By 2016, Navy and Air Force dental clinics also transitioned to CDS as their electronic dental record system. In the same year, DOD awarded a four-year, $30 million contract to the Harris Corporation to sustain CDS. <2.2.5. Paper Medical Records> Paper medical records are another component of the DOD health record. While certain health care data are recorded and archived electronically, some administrative processes and clinical documentation exist only on paper forms. For example, clinical documentation from TRICARE providers, accession medical records, or medical evacuation records are usually in paper form. In such cases, DOD policy requires the scanning and archiving of paper medical records in an electronic repository called the Health Artifact and Image Management Solution (HAIMS). After being digitized, certain paper medical records are submitted to the National Archives and Records Administration while other documents are disposed of locally. Other DOD legacy systems document and archive various administrative and clinical data, such as: Referral Management System (RMS). An administrative information system that allows MTF staff to create and track referrals between health care providers. HAIMS. An electronic repository that stores DOD health care data, including digitally transmitted or scanned medical documentation. Data housed in HAIMS is also incorporated into a servicemember's official service treatment record , which is accessible to the VA. Medical Readiness Tracking Systems. Each military department utilizes an electronic information system that documents and tracks certain medical and dental readiness requirements, such as periodic health assessments, immunizations, dental exams, and laboratory tests. Theater Medical Information Program Joint (TMIP-J). A suite of electronic systems, including modules for health care documentation and review, patient movement, and medical intelligence used in deployed or austere environments. Joint Legacy Viewer (JLV). A web-based, read-only application that allows DOD and VA health care providers to review certain real-time medical data housed in each department's EHR systems. Armed Forces Billing and Collection Utilization Solution (ABACUS). A web-based electronic system that allows MTFs to bill and track debt collection for health care services provided to certain beneficiaries. <3. Developing an EHR Modernization Solution> After Operation Desert Storm concluded in 1991, concern about deficient interoperability between DOD and VA health record systems began to grow. A number of committees and commissions issued reports highlighting the need for DOD and VA to standardize record-keeping; to improve health data sharing; and to develop a comprehensive, life-long medical record for servicemembers. Table 1 summarizes their recommendations. Between 1998 and 2009, DOD and VA established various methods to exchange limited patient health information across both departments, including: Federal Health Information Exchange (FHIE). Completed in 2004, the FHIE enables monthly data transmissions from DOD to VA comprised of patient demographics, laboratory/radiology results, outpatient pharmacy, allergies, and hospital admission data. Bidirectional Health Information Exchange (BHIE). Completed in 2004, the BHIE enables real-time, two-way data transmissions (DOD-to-VA and VA-to-DOD) comprised of FHIE information, additional patient history and assessments, theater clinical data, and additional inpatient data. Clinical Data Repository/Health Data Repository (CHDR). Completed in 2006, CHDR enables real-time, two-way data transmissions comprised of pharmacy and drug allergy information and a capability to add information to the patient's permanent medical record in the other department's repository. Virtual Lifetime Electronic Record (VLER). Initiated in 2009, the VLER enables real-time, health information exchange between DOD and VA, as well as certain civilian health care providers. While these information exchange systems enable DOD and VA health care providers to view or modify limited health care data, both departments continue to operate separate, disparate health record systems. <3.1. Congress Mandates Interoperability> In 2008, Congress began legislating mandates for DOD and VA to establish fully interoperable EHR systems that would allow for health care data sharing across departments. Section 1635 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2008 ( P.L. 110-181 ) directed DOD and VA to jointly: (1) "develop and implement electronic health record systems or capabilities that allow for full interoperability of personal health care information," and (2) "accelerate the exchange of health care information" between both departments. Additionally, Congress directed the establishment of an interagency program office (IPO) that would serve as a "single point of accountability" for rapid development and implementation of EHR systems or capabilities to exchange health care information. The FY2008 NDAA also directed the IPO to implement the following, no later than September 30, 2009: " electronic health record systems or capabilities that allow for full interoperability of personal health care information between the Department of Defense and Department of Veterans Affairs, which health records shall comply with applicable interoperability standards, implementation specifications, and certification criteria (including for the reporting quality measures) of the Federal Government." In the conference report accompanying the Department of Defense Appropriations Act, 2008 ( H.Rept. 110-434 , P.L. 110-116 ), Congress also directed DOD and VA to "issue a joint report" by March 3, 2008, that describes the "actions being taken by each department to achieve an interoperable electronic medical record (EMR)." On April 17, 2008, the IPO was established with temporary staff from DOD and VA. On December 30, 2008, the Deputy Secretary of Defense delegated oversight authority for the IPO to the Under Secretary of Defense for Personnel and Readiness (USD[P&R]). The FY2008 NDAA also directed the Secretary of Defense (SECDEF) to appoint the IPO Director, with concurrence of the Secretary of Veterans Affairs (SECVA); and the SECVA to appoint the IPO Deputy Director, with concurrence of the SECDEF. <3.1.1. Establishing Interoperability Goals> To meet Congress's mandate on interoperability, the IPO established a mutual definition of interoperability. They posited it as the "ability of users to equally interpret (understand) unstructured or structured information which is shared (exchanged) between them in electronic form." Shortly after, both departments identified and adopted six areas of interoperability capabilities intended to meet the requirements and deadline established by Congress: Expand Essentris implementation across DOD. Demonstrate the operation of the Partnership Gateways in support of joint DOD and VA health information sharing. Enhance sharing of DOD-captured social history with VA. Demonstrate an initial capability for DOD to scan medical documents into the DOD EHR and forward those documents electronically to VA. Provide all servicemembers' health assessment data stored in the DOD EHR to the VA in such a fashion that questions are associated with the responses. Provide initial capability to share with the VA electronic access to separation physical exam information captured in the DOD EHR. As a result of each department's work on interoperable capabilities, DOD and VA reported to Congress in 2010 that all requirements for "full" interoperability were met. <3.2. The Integrated EHR Initiative> DOD and VA continued to work on integrating their respective EHR systems through individual initiatives, while considering a larger EHR modernization strategy. Three strategy options were considered: 1. develop a new, joint EHR; 2. upgrade and adopt an existing legacy system across both departments (i.e., AHLTA or VistA); or 3. pursue separate solutions that would have "common infrastructure with data interoperability." In March 2011, the SECDEF and SECVA agreed to work cooperatively to develop an integrated electronic health record (called the iEHR ) that would eventually replace each department's legacy systems. The IPO was assigned the oversight role for the iEHR initiative, which was then set to begin implementation no later than 2017. In February 2013, SECDEF and SECVA announced that they would no longer pursue the iEHR initiative. In making this decision, DOD and VA determined that the initial cost estimates for implementing the iEHR would be "significant," given the "constrained Federal Budget environment." After reevaluating their approach and considering alternatives, both departments decided to pursue other ongoing efforts to "improve data interoperability" and to preserve and develop separate EHR systems with a core set of capabilities that would allow for integrated sharing of health care data between DOD, VA, and private sector providers. <3.3. Congressional Mandate for an EHR> After DOD and VA announced their change to the iEHR strategy in 2013, Congress expressed its sense that both departments had "failed to implement a solution that allows for seamless electronic sharing of medical health care data." Given some Members' apparent frustration, Congress established a new deadline for both departments to deploy a new EHR solution. Section 713(b) of the NDAA for FY2014 ( P.L. 113-66 ) directed DOD and VA to implement an interoperable EHR with an "integrated display of data, or a single electronic health record" by December 31, 2016 (see text box below). The law also required DOD and VA to "jointly establish an executive committee" to support development of systems requirements, integration standards, and programmatic assessments to ensure compliance with Congress's direction outlined in Section 713(b). <4. MHS Genesis> Given Congress's new mandate for both departments to implement an interoperable EHR, DOD conducted a 30-day review of the iEHR program in order to "determine the best approach" to meeting the law. While conducting its review, DOD identified two EHR modernization options that would support healthcare data interoperability with the VA: (1) adopt VistA and (2) acquire a commercial EHR system. <4.1. DOD Acquisition Strategy> On May 21, 2013, the Secretary of Defense issued a memorandum directing the department's pursuit of "a full and open competition for a core set of capabilities for EHR modernization." The directive also delegated certain EHR responsibilities to various DOD leaders. Under Secretary of Defense for Acquisition, Technology, and Logistics (USD[AT&L]), whose office was later reorganized as the Under Secretary of Defense for Acquisition and Sustainment (USD[A&S]). Responsible for exercising milestone decision authority (MDA) and also holds technical and acquisition responsibilities for health records interoperability and related modernization programs; Under Secretary of Defense for Personnel and Readiness (USD[P&R]). Lead coordinator on DOD health care interactions with the VA. Assistant Secretary of Defense for Health Affairs (ASD[HA]). Responsible for functional capabilities of the EHR. Given the significant investments required to modernize DOD's EHR, MHS Genesis is a designated Defense B usiness S ystem (DBS). Because it is a DBS, certain decision reviews and milestones are required as part of the overall acquisition process. DBS programs are subject to significant departmental and congressional oversight activities. <4.1.1. Requirements Development and Solicitation> From June 2013 to June 2014, USD(AT&L) directed the Defense Healthcare Management Systems Modernization Program Management Office (DHMSM PMO) to oversee the EHR requirements development process, draft an acquisition strategy and request for proposal (RFP), and conduct activities required by DOD policy for DBS acquisitions. The ASD(HA) directed the Defense Health Agency (DHA) to establish various working groups to identify and develop the clinical and nonclinical functional requirements for the new EHR. The DHA led each working group, which included representatives from each military service medical department. Keeping in alignment with DOD's guiding principles for EHR modernization (see Figure 2 ), the working groups identified approximately 60 overarching capabilities to be required of a new EHR. An initial draft RFP incorporated functional capability requirements with certain technical requirements for interoperability, information security, and suitability with DOD infrastructure. The DHMSM PMO published three draft RFPs between January and June 2014 for interested contractors to review, provide comments, and submit questions for clarification on functional requirements. Additionally, the DHMSM PMO hosted four industry days that allowed interested contractors to "enhance their understanding of the DHMSM requirement," gain insight on DOD's requirements development process, and provide feedback on particular aspects of the draft RFP. These activities also allowed the DHMSM PMO to conduct market research that would inform further revision of MHS Genesis functional requirements or its overall acquisition strategy. Between June 2014 and August 2014, DOD leaders certified that certain acquisition milestones had been achieved, allowing DOD to proceed with the solicitation process, including finalizing and approving all user-validated function requirements, approving the overall acquisition strategy, and issuing an authority to proceed . On August 25, 2014, DOD issued its official solicitation for proposals. The solicitation period concluded on October 9, 2014. <4.1.2. Source Selection Process> The source selection process took place from October 2014 to July 2015. DOD reportedly had received five proposals during the solicitation period. Most of the proposals were from partnered vendors consisting of health information management, electronic medical records, information technology, and program management organizations. These partnerships included: Allscripts, Computer Sciences Corporation, and Hewlett-Packard; IBM and Epic Systems; Cerner, Leidos, and Accenture Federal; PricewaterhouseCoopers, General Dynamics, DSS, Inc., MedSphere; and InterSystems. Consistent with DOD source selection procedures, DOD experts were assigned to review and apply the evaluation criteria published in the RFP, to each proposal. Figure 3 illustrates a general overview of the evaluation and source selection process. <4.2. Contract Award> On July 29, 2015, DOD awarded the MHS Genesis contract to Leidos Partnership for Defense Health (LPDH) to replace its legacy EHR systems with a commercial-off-the-shelf (COTS) EHR system. The contract has a potential 10-year ordering period that includes a two-year base period, two three-year optional ordering periods, and an award term period of up to two years. The initial total award ceiling for MHS Genesis was $4.3 billion. On June 15, 2018, DOD approved a contract modification to increase the award ceiling by $1.2 billion. According to the Justification and Approval for Other than Full and Open Competition documentation, the purpose of this increase was to "support the incorporation of the United States Coast Guard (USCG) into the [DOD] MHS Genesis Electronic Health Record (EHR) implementation" and "establish a common standardized EHR baseline with the USCG and the [VA]." The current award ceiling for MHS Genesis is more than $5.5 billion. <4.2.1. Leidos Partnership for Defense Health (LPDH)> Leidos leads LPDH with its core partners: Accenture Federal Services, Cerner, and Henry Schein One. The full partnership, through sub-contracts of the core partners, is comprised of over 34 businesses (see Figure 4 ). <4.3. Capabilities> According to a redacted version of DOD's contract award documents, LPDH is required to meet the following overarching contract requirements: "unify and increase accessibility of integrated, evidence-based healthcare delivery and decision making"; "support the availability of longitudinal medical records for 9.6 million DoD beneficiaries and approximately 153,000+ MHS personnel globally"; "enable the application of standardized workflows, integrated healthcare delivery, and data standards for improved and secure electronic exchange of medical and patient data between the DoD and its external partners, including the [VA] and other Federal and private sector healthcare providers"; and "leverage data exchange capabilities in alignment with the [IPO] for standards-based health data interoperability and secure information sharing with external partners to include the VA." Additionally, there are over 95 specific capability requirements across four concepts of operations (i.e., health service delivery, health system support, health readiness, and force health protection) that MHS Genesis must support (see Appendix B ). <4.4. Governance> Ultimately, the Secretary of Defense is accountable for MHS Genesis. Various DOD entities, described below, have assigned responsibilities for MHS Genesis oversight, implementation, and sustainment (see Figure 5 ). While each entity has a separate chain of command, DOD chartered numerous governance groups to synchronize efforts across the department, delegate certain decisionmaking authorities, and provide direction on implementation and use of MHS Genesis. <4.4.1. Program Executive Office, Defense Healthcare Management Systems (PEO DHMS)> PEO DHMS was established in 2013. Its mission is to "transform the delivery of healthcare and advance data sharing through a modernized electronic health record for service members, veterans, and their families." It responsible for implementing MHS Genesis as the assigned acquisition authority and currently reports to the Under Secretary of Defense for Acquisition and Sustainment (USD[A&S]). Under the PEO DHMS, three program management offices (PMOs) are tasked with modernizing DOD's EHR system and ensuring health data interoperability with the VA. DOD Healthcare Management System Moderniza tion (DHMSM) PMO. "Oversees the deployment of MHS Genesis and the operations and sustain of the Joint Legacy Viewer." DOD/VA Interagency Program Office (IPO). "Oversees the efforts of the DOD and VA to implement national health data standards for interoperability." Joint Operational Medicine Information Systems (JOMIS) PMO. "Develops, deploys, and sustains MHS Genesis and other integrated operational medicine information systems to deployed forces." <4.4.2. Defense Health Agency (DHA)> In 2013, the Secretary of Defense established the DHA to manage the TRICARE program; execute appropriations for the Defense Health Program; coordinate management of certain multi-service health care markets and MTFs in the National Capital Region; exercise management responsibility for shared services, functions, and activities within the Military Health System; and support DOD's medical mission. DHA is a designated Combat Support Agency that is scheduled to soon administer and manage all MTFs. DHA serves as the lead entity for MHS Genesis requirements development, in coordination with the military service medical departments, and currently reports to the ASD(HA). <4.4.3. Military Service Medical Departments> The military service medical departments are established under each respective military department to organize, train, and equip military medical personnel, maintain medical readiness of the Armed Forces, and administer, manage and provide health care in MTFs. The medical departments are led by a Surgeon General, who also functions as the principal advisor to their respective military service secretary and service chief for all health and medical matters. The three service medical departments are the Army Medical Command (MEDCOM), the Navy Bureau of Medicine and Surgery (BUMED), and the Air Force Medical Service (AFMS). Each service medical department provides subject-matter expertise, functional support, and consultation to the DHMSM PMO. <4.4.4. Senior Stakeholders Group (SSG) and the Configuration Steering Board (CSB)> The SSG and the CSB are DOD-chartered working groups established to provide oversight, recommendations, and "direction on health-related acquisition programs," including those within PEO DHMS. The SSG is chaired by the USD(A&S) and is responsible for receiving updates on DHMS acquisition programs, ensuring adherence to DOD's EHR guiding principles, and providing recommendations and feedback on key EHR and interoperability decisions. The CSB is co-chaired by the USD(A&S) and the USD(P&R) and is specifically responsible for oversight on DHMSM and JOMIS programs. Figure 6 outlines the membership of each group. <4.4.5. Executive Steering Board (ESB)> The ESB, previously named the Functional Champion Leadership Group (FLCG), is a governance body led by the DHA's Chief Health Informatics Officer with representation from each service medical department. The ESB's role is to: consider changes to standardized clinical, business, or technical processes; serve as a forum to validate, prioritize, and recommend modifications or new functional requirements for MHS Genesis; and oversee numerous working groups of subject matter experts and end-users. <4.4.6. Office of the Chief Health Informatics Officer (OCHIO)> The OCHIO represents the "voice of the customer" to PEO DHMS. The office solicits input and recommendations from the ESB and coordinates with PEO DHMS to revise or modify MHS Genesis contract requirements. OCHIO is also responsible for "change management, early adoption activities, standardization of functional workflows, functional collaboration with the [VA], management of configuration changes to MHS Genesis, adjudication of functional trouble tickets, sustainment training, current state workflow assessments, and coordination of DHA policy to support the use of MHS Genesis." <4.5. Deployment> DOD is using a phased implementation strategy to deploy MHS Genesis. Deployment began with its initial operational capability (IOC) sites in 2017. After the IOC sites, MHS Genesis is to be deployed at over 600 medical and dental facilities, grouped geographically into 23 waves (see Appendix F ). DOD anticipates "full operational capability" and implementation of MHS Genesis at all MTFs by the end of 2024. <4.5.1. Pre-Deployment Activities> During the approximately 17 months between the July 2015 contract award date and Congress's December 2016 deadline to implement a new EHR system, DOD conducted certain pre-deployment activities (e.g., systems engineering, systems integration, and testing prior to deploying MHS Genesis). DOD acquisition policies and certain contract requirements mandate these activities. Some of the initial requirements include: contractor site visits to "analyze operations, infrastructure, and detailed information for EHR System design and testing"; gap analyses between existing site infrastructure, system requirements, and the contractor's system architecture; development of solutions to fill identified infrastructure gaps; testing interoperability with legacy systems; delivering various contractor plans to the government (e.g., integrated master plan, risk management plan, data management plan, disaster recovery plan, and cybersecurity vulnerability management plan); EHR system testing in government approved labs, including those conducted by the contractor, government independent testing and evaluation teams, and operational test agencies; and receiving authorization to proceed (ATP) with limited fielding at the IOC sites and to conduct an Initial Operational Test and Evaluation (IOT&E). Concurrently, the DOD Inspector General (DODIG) conducted a performance audit on the DHMSM PMO. The purpose of the audit was to determine if DOD had approved system requirements and if the MHS Genesis acquisition strategy was "properly approved and documented." The audit was conducted from June 2015 through January 2016, with a final report issued on May 31, 2016. Overall, the DODIG found that the MHS Genesis requirements and acquisition strategy were properly approved and documented. However, the report raised concerns about the program's execution schedule (i.e., implementation timeline) not being "realistic" to meet Congress's deadline. The DODIG recommended that the PEO DHMS conduct a "schedule analysis" to determine if IOC would be achievable by December 2016, and to continue monitoring program risks and report progress to Congress quarterly. In response to the DODIG's recommendation, the PEO DHMS asserted, "we remain confident we will achieve [IOC] later this year in accordance with the NDAA." <4.5.2. Initial Deployment> As part of the implementation strategy, DOD selected MTFs in the Pacific Northwest as its IOC sites (see Table 2 ). On February 9, 2017, MTFs at Fairchild Air Force Base, Washington, were the first sites to transition to MHS Genesis. The purpose of fielding MHS Genesis at the IOC sites before full deployment was to observe, evaluate, and document lessons-learned on whether the new EHR was usable, interoperable, secure, and stable. DOD used several evaluation methods to measure MHS Genesis success at the IOC sites, including the Health Information Management Systems Society's (HIMSS) Electronic Medical Record Adoption Models (EMRAM) and the DOD IOT&E. The results of these assessments would later inform PEO DHMS in its decision to proceed with further deployments. <4.5.2.1. EMRAM Findings> The EMRAM includes two commercially developed assessment tools that health systems and facilities can use to measure adoption of an electronic medical record (EMR) system. The general EMRAM is for inpatient facilities and O-EMRAM is for outpatient facilities. Both tools consist of a self-administered survey, which is then analyzed by HIMSS to produce an EMRAM score. The score, ranging from Stage 0 to Stage 7, describes the level of adoption and utilization of an EMR within a health care organization (see Appendix C ). Generally, Stage 0 indicates minimal or no EMR adoption in a health care facility or clinic, whereas Stage 7 indicates complete EMR adoption, including demonstrated data sharing capabilities and eliminated use of paper charts. Prior to the go-live dates at the IOC sites and while using its legacy systems, DOD's average score was 1.59 for the EMRAM and 2.38 for the O-EMRAM. After all IOC sites transitioned to MHS Genesis, DOD reassessed each IOC site and observed increased EMRAM scores (see Figure 7 and Figure 8 ). MTFs at Fairchild Air Force Base received a score of 6.13 on the O-EMRAM, whereas all other IOC sites scored 5.04. In comparison to U.S. civilian hospitals, the IOC sites scored higher than the national average for the EMRAM (2.00) and O-EMRAM (3.00). However, media reports on EMRAM scoring trends at the end of 2017 note that 66.7% of U.S. hospitals participating in the EMRAM reached "either Stage 5 or Stage 6." For the O-EMRAM, most participating outpatient facilities remained at Stage 1. <4.5.2.2. IOT&E Findings> DOD policy requires DBS programs to undergo an IOT&E to determine program or systems effectiveness and suitability. IOT&E findings provide the USD(A&S) and relevant acquisition or functional leadership with recommendations on whether a program, generally those with total contract values exceeding certain thresholds, should proceed with further implementation. Between September 2017 and December 2017, the Joint Interoperability Test Command (JITC) conducted an IOT&E at each IOC site, with the exception of Madigan Army Medical Center (MAMC). PEO DHMS postponed the MAMC IOT&E to 2018 in order to resolve issues identified at the other IOC sites. While at each site, the JITC conducted initial cybersecurity testing, evaluated interoperability data, observed MTF staff performing day-to-day tasks using MHS Genesis, and administered user surveys on performance and suitability. The Director of Operational Test and Evaluation (DOT&E) reviewed JITC's IOT&E findings and applied them to the following criteria: Does MHS Genesis provide the capabilities to manage and document health-related services? Do MHS Genesis interfaces support or enable accomplishment of mission activities and tasks? Does MHS Genesis usability, training, support, and sustainment ensure continuous operations? On April 30, 2018, DOT&E issued a partial IOT&E report asserting that MHS Genesis was "neither operationally effective nor operationally suitable." DOT&E found that: MHS Genesis is not operationally effective because it does not demonstrate enough workable functionality to manage and document patient care. Users successfully performed only 56 percent of the 197 tasks used as Measures of Performance. MHS Genesis is not operationally suitable because of poor system usability, insufficient training, and inadequate help desk support. Survivability is undetermined because cybersecurity testing is ongoing. See Appendix D for IOT&E summary results by measure of effectiveness and measure of performance evaluation. Based on these preliminary findings, DOT&E recommended to the USD(A&S) a delay in further deployment of MHS Genesis until a full IOT&E was completed and the DHMSM PMO corrected "outstanding deficiencies." Additional recommendations for the DHMSM PMO included: "Fix all Priority 1 and 2 [incident reports] with particular attention given to those that users identified as potential patient safety concerns, and verify fixes through operational testing. Improve training and system documentation for both users and Adoption Coaches. Increase the number of Adoption Coaches and leave them on site until users are more comfortable with the new processes. Complete cybersecurity operational testing and continue to fix known deficiencies. Work with users to document, reduce, and standardize operational workarounds. Improve interoperability, focusing on interfaces identified as problematic during IOT&E. Monitor reliability and availability throughout the system lifecycle. Work with the Defense Health Agency and DISA to isolate network communications problems and reduce latency. Conduct operational testing at MAMC to evaluate untested functionality and corrective actions taken by the [DHMSM] PMO. Conduct follow-on operational testing at the next fielding site to evaluate revised training and Go-Live process improvements." On November 30, 2018, DOT&E issued a final IOT&E report, incorporating results from delayed testing at MAMC. DOD has not made the final report publicly available. DOT&E acknowledges ongoing improvements, but maintains that MHS Genesis is "not yet effective or operationally suitable." A summary of the IOT&E released by the department describes several ongoing issue themes previously identified and described in the partial IOT&E report (e.g., continued incident reports, staff training, change management, and workflow adoption). With regard to cybersecurity, DOT&E described MHS Genesis as "not survivable in a cyber-contested environment." In conjunction with the IOT&E, DOD "successfully executed" three cyberspace test attacks against MHS Genesis, highlighting potential security gaps and vulnerabilities with the new EHR system. Notwithstanding DOT&E's findings and recommendations, the DOD Chief Information Officer issued a conditional Authorization to Operate , valid for 12 months. Additionally, PEO DHMS concurred with DOT&E's recommendation for a follow-on operational test and evaluation "at the next fielding to evaluate corrective actions and revised training, to inform future fielding decisions." <4.5.3. Selected Initial Deployment Issues> Since February 2017, DOD has documented numerous issues requiring mitigation strategies prior to deploying the first wave. Selected issues reported by various DOD entities, LPDH, MHS Genesis users, and media outlets are summarized below. <4.5.3.1. Trouble Ticket Backlog> During the initial deployment, DHMSM PMO established a single process for all IOC sites to identify, document, and report MHS Genesis issues. Users encountering system inconsistencies, technical errors, or clinical inaccuracies must submit a "trouble ticket" to a global service center (GSC). Users can also submit recommendations for changes to current workflows or system configurations to the GSC, as well as through their chain of command. The GSC is a contracted service that reviews, sorts, and assigns technical trouble tickets to LDPH or its sub-contractors for resolution. The GSC also assigns trouble tickets relating to functional capabilities, requirements, or workflows to DHMSM PMO or DHA for further review and adjudication. In April 2018, PEO DHMS reported that 1,000 of approximately 7,000 total trouble tickets generated by users throughout all IOC sites from January 2018 to that point had been resolved. Of the remaining trouble tickets, DHMSM PMO approved 2,000 for "work by the Leidos Partnership," while 2,500 were in review for further adjudication. CRS is unable to ascertain the status of the remaining 1,500 trouble tickets and the timeline in which they may have been resolved. In December 2018, PEO DHMS estimated that 3,607 open trouble tickets remained for resolution. As of October 14, 2019, PEO DHMS estimated 3,238 open trouble tickets from the IOC sites and 787 open trouble tickets from the first wave sites remained for resolution. <4.5.3.2. Lengthy Issue Resolution Process> MHS Genesis users at IOC sites described the issue resolution process as lengthy and lacking transparency. User concerns included: (1) tickets submitted to the GSC were resolved in a period of time that was "not acceptable for all issues"; (2) the length of time for decisionmakers to determine a solution; and (3) discovering that a solution had been implemented during a periodic system update, rather than being notified by DHMSM PMO, DHA, or LPDH. Unlike DOD's legacy systems, MHS Genesis is to be a standardized EHR platform across all military treatment facilities and is not customizable for each site. Technical or functional changes to MHS Genesis require DHA-led working groups and DHMSM PMO to review and approve such changes before directing LPDH to implement a solution. Changes exceeding the scope of the MHS Genesis contract require additional review, resourcing, and approval by the acquisition authority. <4.5.3.3. Inadequate Staff Training> Users reported that initial training provided four months prior to go-live was inadequate and did not allow super users to "absorb/fully grasp one role before being introduced to the next role." Staff members were required to complete computer-based training, followed by instructor-led courses. Course curricula varied by user roles (e.g., clinician, clinical support, administrative staff). Users reported that the LPDH training focused primarily on navigating the various modules and features of MHS Genesis and did not include training on clinical or administrative workflows. For example, primary care clinic nurses were trained on the applicable MHS Genesis modules that would likely be found in the primary care setting. They said they were not trained on accessing other modules that would typically be used outside of the primary care setting, as part of a patient assessment or development of a treatment plan. <4.5.3.4. Capability Gaps and Limitations> Users reported having little or no ability to track military medical and dental readiness requirements in MHS Genesis. Pre-built reports to monitor certain health care quality and access metrics were available to MTF staff. Users defaulted to developing local, "home-grown" work-around tools in Microsoft Office products in order to meet specific DOD and military service requirements for tracking medical and dental readiness. For example, certain dental data documented in MHS Genesis were not available for data-mining or viewing in legacy dental readiness reporting systems. To compensate for this, dental clinic staff at each IOC site transcribed or manually maintained dental readiness reports by reviewing dental data in both Dentrix (MHS Genesis' dental module) and CDS (the legacy dental system). <4.5.4. Future Deployments> In reviewing the experience and challenges documented during MHS Genesis deployment at the IOC sites, DOD noted that they "captured lessons learned, collaborated with our stakeholders, and optimized the system to enhance user adoption. Specific areas of improvement include network optimization, change management, and training enhancements." As such, DOD commenced the first wave of MHS Genesis deployments in September 2019. The deployment began with four MTFs in California and Idaho. Each wave is to last 18 months and is to include three major phases: pre-deployment planning with each MTF (3 months), deployment activities (12 months), and post go-live activities (3 months). As outlined in DOD's deployment schedule (see Appendix F ), a new wave is to begin every three months at designated MTFs through late 2022, with wave 23 scheduled to conclude in 2024. <5. Issues for Congress> <5.1. Congressional Oversight> Since mid-1980s, Congress has kept abreast of DOD's efforts to implement, sustain, or modernize its EHR systems. Previous congressional oversight activities have primarily focused on (1) understanding DOD's EHR modernization strategy and how the strategy would integrate interoperability and improve coordination with the VA, or (2) describing certain barriers that delayed previous modernization initiatives. Currently, 12 congressional committees may exercise oversight authority of the broader EHR modernization efforts taking place in DOD, VA and USCG. The committees include: House Appropriations Committee. House Armed Services Committee. House Committee on Oversight and Reform. House Committee on Transportation and Infrastructure. House Veterans Affairs Committee. Senate Appropriations Committee. Senate Armed Services Committee. Senate Committee on Commerce, Science, and Transportation. Senate Committee on Homeland Security and Governmental Affairs. Given the complexity, size, and timeline of DOD's EHR modernization effort, as well as parallel efforts by the USCG and VA, a coordinated oversight strategy may be necessary. Such a strategy could allow Congress to conduct a wide range of oversight activities without creating redundancies for committee staff and executive branch officials and could facilitate information-sharing among congressional stakeholders. Since the initial deployment of MHS Genesis, there have been no congressional oversight hearings held solely on DOD's EHR modernization effort. On June 20, 2018, the House Committee on Veterans' Affairs established the Subcommittee on Technology Modernization. The role of the new subcommittee is to "focus on conducting oversight of the EHR Modernization program and other major technology projects at the Department of Veterans Affairs." Both DOD and VA officials testified before the subcommittee at its June 2019 oversight hearing. <5.2. Interagency Governance> In September 2018, then-SECDEF James Mattis and current SECVA Robert Wilkie signed a joint statement (see Appendix G ) that outlined each department's commitment to "implementing a single, seamlessly integrated [EHR] that will accurately and efficiently share health data and ensure health record interoperability with our networks of supporting community healthcare providers." On April 3, 2019, DOD announced plans to re-charter the IPO into the "Federal Electronic Health Record Modernization (FEHRM)" program office. The new office would serve as an interagency governance group that provides oversight on DOD and VA's EHR modernization efforts and would have the "authority to direct each Department to execute joint decisions for technical, programmatic, and functional functions." DOD stated that the FEHRM Director and Deputy Director will be appointed positions and will report to both the Deputy SECDEF and Deputy SECVA. While Congress directed the creation of the IPO in 2008, neither DOD nor VA has indicated if additional authorities, funding, or changes to current law are required to sustain the FEHRM program office. Congress may also examine the relationships between existing interagency governance groups (e.g., Joint Executive Committee), PEO DHMS, VA EHR Modernization Office, and the newly established FEHRM program office. <5.3. Limited Competition in Future Procurement> Because MHS Genesis is being deployed across all MTFs and all USCG sites, as well as VA sites transitioning to a Cerner-based EHR system, observers have noted that this is the "largest EHR undertaking in the country." Implementing a single EHR platform across three federal departments can produce certain economies of scale and standardization. However, the scale of these efforts can also result in future acquisition challenges particularly with conducting a full and open competition to procuring new requirements, or with follow-on contracts to sustain each EHR system. Congress may seek to understand how DOD and VA exercised their statutory authorities, provided through the Competition in Contracting Act of 1984 ( P.L. 98-369 ), to procure their EHR systems, as well as the possible impact of limited competition in future procurement activities needed to sustain both MHS Genesis and the VA's new EHR system. Generally, all federal departments procuring property, goods, or services are required to employ an acquisition process that allows for full and open competition. This process permits all potential vendors to "submit sealed bids or competitive proposals on the procurement." For MHS Genesis, DOD's initial acquisition process included full and open competition. However, the process was not employed for subsequent requirements that were discovered after the initial award to LPDH. These additional requirements included upgrading DOD network infrastructure; incorporating USCG-specific requirements and clinic sites; and establishing common standards among DOD, VA, and USCG. The estimated value of the additional requirements was over $1.2 billion. DOD exercised its statutory authority to award a sole source contract modification to LPDH, citing that contracting with any other vendor would potentially "create significant redundancies, inefficiencies, and other issues." DOD's acquisition strategy anticipates "one or more competitive follow-on contracts to sustain the EHR solution, for which the Government owns a perpetual license, at the conclusion of the performance of the basic contract." However, Cerner declined DOD's request to enter into negotiations regarding the rights of its intellectual property. If DOD does not retain certain intellectual property rights on MHS Genesis, the Department may be limited in what EHR vendors it can consider when it becomes necessary to solicit for an MHS Genesis sustainment contract. Appendix A. Acronyms Appendix B. MHS Genesis Functional Capability Requirements Appendix C. Stages of Electronic Medical Record Adoption and Utilization Appendix D. IOT&E Summary Results Appendix E. Methodology for CRS Focus Groups on MHS Genesis Background On July 8-13, 2018, analysts from the Congressional Research Service (CRS) participated in a congressional staff delegation visit to various DOD facilities in the Puget Sound area of Washington State. DOD facilities visited were Madigan Army Medical Center, Naval Hospital Bremerton, and the Puyallup Community Medical Home. The purpose of the visit was to: review milestones, achievements, and challenges associated with the implementation of MHS Genesis; and understand implementation and continuous improvement processes utilized at initial operational capability sites. Methodology At each site, CRS conducted numerous focus groups comprised of various MTF staff members. Each focus group was comprised of 5 15 staff members selected by the MTF commander or his/her designee. Madigan Army Medical Center Focus Group #1: Patient Administration Division, Managed Care and Scheduling, and Patient Satisfaction Department representatives Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Nurses Naval Hospital Bremerton Focus Group #1: Nurses Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Enlisted personnel Focus Group #4: Patient Administration, Referral Management, and Patient Relations representatives Puyallup Community Medical Home Focus Group #1: Health care providers, nurses, health care administrators, enlisted personnel Prior to each site visit, CRS provided each MTF with questions for discussion during each focus group. CRS documented the themes and responses to each of the following questions: What challenges have you experienced with implementing MHS Genesis? How have you locally mitigated these issues? Are the mitigation processes in place working? Have these challenges impacted force readiness, access to care, quality of care, cost of care, or patient experience? Appendix F. MHS Genesis Deployment Schedule Appendix G. DOD and VA EHR Joint Commitment Statement Background On July 8-13, 2018, analysts from the Congressional Research Service (CRS) participated in a congressional staff delegation visit to various DOD facilities in the Puget Sound area of Washington State. DOD facilities visited were Madigan Army Medical Center, Naval Hospital Bremerton, and the Puyallup Community Medical Home. The purpose of the visit was to: review milestones, achievements, and challenges associated with the implementation of MHS Genesis; and understand implementation and continuous improvement processes utilized at initial operational capability sites. Methodology At each site, CRS conducted numerous focus groups comprised of various MTF staff members. Each focus group was comprised of 5 15 staff members selected by the MTF commander or his/her designee. Madigan Army Medical Center Focus Group #1: Patient Administration Division, Managed Care and Scheduling, and Patient Satisfaction Department representatives Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Nurses Naval Hospital Bremerton Focus Group #1: Nurses Focus Group #2: Health care providers (e.g., physicians, dentists, psychologists, physicians assistants) Focus Group #3: Enlisted personnel Focus Group #4: Patient Administration, Referral Management, and Patient Relations representatives Puyallup Community Medical Home Focus Group #1: Health care providers, nurses, health care administrators, enlisted personnel Prior to each site visit, CRS provided each MTF with questions for discussion during each focus group. CRS documented the themes and responses to each of the following questions: What challenges have you experienced with implementing MHS Genesis? How have you locally mitigated these issues? Are the mitigation processes in place working? Have these challenges impacted force readiness, access to care, quality of care, cost of care, or patient experience?

Since 1968, the Department of Defense (DOD) has developed, procured, and sustained a variety of electronic systems to document the health care services delivered to servicemembers, military retirees, and their family members. DOD currently operates a number of legacy electronic health record (EHR) systems. Each system has separate capabilities and functions as a result of new or changing requirements over the past five decades. The primary legacy systems include the Composite Health Care System (CHCS), Armed Forces Health Longitudinal Technology Application (AHLTA), Essentris, and the Corporate Dental System. DOD also still uses paper medical records that are later scanned and digitally archived. Currently, only certain components of DOD's health records are accessible to the Department of Veterans Affairs (VA). In the early 1990s, concern grew about deficient interoperability between DOD and VA. This led to recommendations by various commissions on military and veterans health care calling for greater coordination and data sharing efforts between the two departments. Between 1998 and 2008, DOD and VA developed several capabilities to exchange patient health information across each department's EHR systems. However, Congress did not view these systems as an adequately integrated approach. This led to several congressional mandates being issued between 2008 and 2014, including for the development of an interoperable EHR (including a deadline to implement such system), for certain capability requirements, and for the creation of an interagency program office. After several strategy changes to meet Congress's mandates, DOD opted to acquire a commercial-off-the-shelf EHR product to replace its legacy EHR systems. The new system would be called MHS Genesis. In July 2015, DOD awarded the MHS Genesis contract to Leidos Partnership for Defense Health (LPDH). The contract includes a potential 10-year ordering period and an initial total award ceiling of $4.3 billion. DOD selected several MTFs in Washington to serve as Initial Operational Capability (IOC) sites and began fielding MHS Genesis in 2017. The designated IOC sites included: Madigan Army Medical Center, Fairchild Air Force Base, Naval Hospital Bremerton, and Naval Health Clinic Oak Harbor. The purpose of fielding MHS Genesis at the IOC sites before full deployment was to observe, evaluate, and document lessons-learned on whether the new EHR was usable, interoperable, secure, and stable. During initial deployment, DOD evaluators and IOC site personnel identified numerous functional and technical challenges. In particular, the Defense Department's Director of Operational Testing and Evaluation found that MHS Genesis was "not yet effective or operationally suitable." Technical challenges included cybersecurity vulnerabilities, network latency, and delayed equipment upgrades and operational testing. Functional challenges included lengthy issue resolution processes, inadequate staff training, and capability gaps and limitations. DOD acknowledged these issues, implemented follow-on testing ongoing corrective actions, and revised its training approach for future fielding. DOD plans to implement MHS Genesis at all military treatment facilities (MTFs) in 23 waves through 2024. Each wave spans 18 months, with a new wave commencing every three months at designated MTFs. The first deployment wave began in September 2019 at MTFs in California, Oregon, and Idaho. As DOD moves to fully implement MHS Genesis, Congress may choose to address various issues including: how oversight can be conducted on a program that spans three federal departments; what kind of interdepartmental governance structure is needed to implement the program; and how to ensure fair and open competition in future procurement decisions.

crs_R46274

crs_R46274_0

<1. Introduction and Issues for Congress> This report provides background information and analysis on two amendments to the Anti-Terrorism Act (ATA, 18 U.S.C. 2331 et seq. ): the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ), which became law in October 2018; and the Promoting Security and Justice for Victims of Terrorism Act of 2019 (PSJVTA, 903 of P.L. 116-94 ), which became law in December 2019. The report focuses on the impact of this legislation on the following key issues: U.S. aid to the Palestinians. Whether federal courts have personal jurisdiction over the Palestinian Authority (PA) and Palestine Liberation Organization (PLO) for terrorism-related offenses. <2. Amendments to Anti-Terrorism Act> The ATA generally prohibits acts of international terrorism, including the material support of terrorist acts or organizations. It also provides a civil cause of action through which Americans injured by such acts can sue responsible persons or entities for treble damages. Prior to ATCA, the ATA did not dictate personal jurisdiction. <2.1. Anti-Terrorism Clarification Act of 2018> Congress passed ATCA in the wake of a U.S. federal lawsuit (known in various incarnations as Waldman v. PLO and Sokolow v. PLO ) that an appeals court dismissed in 2016. The plaintiffs were eleven American families who had members killed or wounded in various attacks against Israeli targets during the second Palestinian intifada (or uprising, which took place between 2000 and 2005). The trial court found that the PA and PLO were liable for the attacks because they provid ed material support to the perpetrators. 6 The jury awarded damages of $218.5 million, an amount trebled automatically under the ATA , bringing the total award to $655.5 million. On appeal, however, the U.S. Court of Appeals for the Second Circuit (Second Circuit) dismissed the suit for lack of personal jurisdiction. Discussed in more detail below, personal jurisdiction is the principle that defendants in U.S. courts must have "minimum contacts" to the forum for the court to adjudicate the dispute. In Waldman/ Sokolow , the Second Circuit conclude d that the terrorist attacks, "as heinous as they were, were not sufficiently connected to the United States" to create personal jurisdiction in U.S. federal courts. ATCA amended ATA (at 18 U.S.C. 2334) by, among other things, stating that a defendant consented to personal jurisdiction in U.S. federal court for lawsuits related to international terrorism if the defendant accepted U.S. foreign aid from any of the following three accounts after the law had been in effect for 120 days : Economic Support Fund (ESF); International Narcotics Control and Law Enforcement (INCLE); or Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR). Although ATCA's terms do not specifically cite the PA/PLO, ATCA's reference to the three accounts from which U.S. bilateral aid to the Palestinians has traditionally flowed (see " U.S. Aid to Palestinians " below) suggests that ATCA was responding to the appellate ruling in the Waldman/Sokolow cases on personal jurisdiction. In December 2018, then-PA Prime Minister Rami Hamdallah wrote to Secretary of State Michael Pompeo that the PA would not accept aid that subjected it to U.S. federal court jurisdiction. Consequently, U.S. bilateral aid to the Palestinians ended on January 31, 2019. <2.2. Promoting Security and Justice for Victims of Terrorism Act of 2019> In December 2019, Congress passed PSJVTA as 903 of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 . PSJVTA changes the legal framework by replacing certain provisions in ATCA that triggered consent to personal jurisdiction for terrorism-related offenses. These changes include eliminating ATCA's provision triggering consent when a defendant accepts U.S. foreign aid. In place of that provision, PSJVTA provides that the following three actions trigger consent to personal jurisdiction: Making payments to individuals imprisoned for terrorist acts against Americans or to families of individuals who died while committing terrorist acts against Americans; Maintaining or establishing any PA/PLO office, headquarters, premises, or other facilities or establishments in the United States; or Conducting any activity (other than some specified exceptions) on behalf of the PA or PLO while physically present in the United States. Unlike ATCA, which did not mention specific Palestinian entities by name, PSJVTA expressly applies its new jurisdictional triggers exclusively to the PA and PLO. The prospect of ending PA/PLO payments that could activate the first trigger may encounter strong opposition among Palestinians. Similar payments to Palestinians in connection with alleged terrorist acts continued even after they led to a legal suspension of significant ESF funding for the PA under the Taylor Force Act (Title X of P.L. 115-141 ) when it became effective in March 2018. By partly reversing ATCA with respect to the acceptance of aid, PSJVTA could facilitate the resumption of various types of aid, but would still provide for conditions that are reasonably likely to trigger PA/PLO consent to personal jurisdiction, subject to the question of constitutionality. PSJVTA also directs the State Department to create a claims process for U.S. nationals harmed by terrorist attacks that they attribute to the PA or PLO. Under PSJVTA, the Secretary of State, in consultation with the Attorney General, has 30 days from the date of enactment (December 20, 2019) to "develop and initiate a comprehensive process for the Department of State to facilitate the resolution and settlement of covered claims." Covered claims are defined to mean pending and successfully completed civil actions against the PA or PLO under the ATA, as well as those lawsuits previously dismissed for lack of personal jurisdiction. The Secretary of State has 120 days after enactment to begin meetings with claimants to discuss the state of lawsuits and settlement efforts. The Secretary of State has 180 days after enactment to begin negotiations with the PA and PLO to settle covered claims. There is no provision withdrawing pending cases from court, however, and jurisdictional provisions applicable before PSJVTA continue to apply to such cases if consent to jurisdiction existed under them. The settlement mechanism will apparently operate in tandem with court proceedings. President Trump stated in a signing statement that the claims process provision in PSJVTA could interfere with the exercise of his "constitutional authorities to articulate the position of the United States in international negotiations or fora." He further stated that his Administration would "treat each of these provisions consistent with the President's constitutional authorities with respect to foreign relations, including the President's role as the sole representative of the Nation in foreign affairs." To date, CRS does not have information about whether the executive branch has taken steps to create a claims process under PSJVTA. <3. Implications for U.S. Policy and Law> The end of U.S. security assistance and existing economic assistance projects for Palestinians in January 2019, in light of ATCA, has had implications for U.S. policy. The enactment of PSJVTA in December 2019 to partly reverse ATCA and otherwise amend ATA also has policy and legal implications related to U.S. aid and personal jurisdiction over Palestinian entities (see timeline at Figure 1 ). <3.1. U.S. Aid to Palestinians> <3.1.1. After ATCA> While the Administration made drastic reductions to aid for the Palestinians during 2018 , the ongoing use of prior-year funding meant that the changes had not affected aid for the PA security forces or existing economic aid projects at the time ATCA took effect. Some sources suggested that the Administration and Congress belatedly realized ATCA's possible impact, and subsequently began considering how to reduce or reverse some of its consequences. The end of bilateral aid has halted U.S.-funded programs that began in 1975 with a focus on economic and humanitarian needs, and expanded starting in 1994 (in the context of the Israeli-Palestinian peace process) to assist the newly formed PA with security and Palestinian self-governance. The following are changes in status to key aid streams. Economic assistance. Although the Trump Administration decided in September 2018 to reprogram all of the FY2017 ESF aid from the West Bank and Gaza to other recipients, some aid projects continued in the West Bank and Gaza using prior-year funding. These projects shut down in January 2019. ESF appropriations for the West Bank and Gaza from FY1975 to FY2016 have totaled some $5.26 billion. Security assistance. After the Administration reprogrammed or discontinued various funding streams for the Palestinians during 2018, the main U.S. aid category remaining was the INCLE account. This security assistance account supported nonlethal train-and-equip programs for PA West Bank security forces (PASF). INCLE assistance, along with $1 million per year in NADR assistance, also ended in January 2019 due to ATCA. INCLE appropriations for the PASF from FY2008 to FY2019 have totaled some $919.6 million. The office of the U.S. Security Coordinator for Israel and the Palestinian Authority (USSC, see textbox below) continues to conduct a "security cooperation-only mission" that does not involve funding support, but still facilitates Israel-PA security coordination. After ATCA's enactment, the Administration reportedly favored amending ATCA to allow security assistance to continue because of the priority U.S. officials place on Israel-PA security cooperation, which many in Israel also highly value. In an October 29, 2019, hearing before the House Foreign Affairs Subcommittee on the Middle East, North Africa, and International Terrorism, Assistant Secretary of State for Near Eastern Affairs David Schenker said that the Administration was willing to "engage with Congress on every level" to consider ways to revisit or "fix" ATCA to allow the resumption of certain types of aid to Palestinians. Israeli officials have strongly supported U.S. security assistance as a way to improve PA security capabilities and encourage the PA to coordinate more closely with Israeli security forces. Before U.S. bilateral aid to the Palestinians had ceased, other sources suggested that Israeli officials had reached out to the Administration and Members of Congress in hopes that some arrangement would be able to ensure that U.S. security assistance could continue while also maintaining recourse in U.S. courts against the PA/PLO for past alleged acts of terror . It is unclear to what extent the stop to U.S. security assistance for the PA has affected Israel-PA security cooperation and could affect it in the future. One analyst wrote in January 2019 that even without U.S. aid, the PA would have a strong interest in coordinating security with its Israeli counterparts. Media reports have routinely suggested that Israel and the PA share a core objective in countering Hamas in the West Bank. However, the same analyst wrote that over the long term, "termination of [U.S.-funded programs] in areas like training, logistics, human resources, and equipment provision will undoubtedly have a negative impact on the PASF's overall capabilities and professionalism." Another analyst said that without U.S. security aid, the PA will have fewer incentives to continue security cooperation with Israel. A spokesman for PA President Mahmoud Abbas responded to the halt in aid by saying it would "have a negative impact on all, create a negative atmosphere and increase instability." <3.1.2. After PSJVTA> Even though PSJVTA removed acceptance of U.S. bilateral aid as a trigger of PA/PLO consent to personal jurisdiction, the actual resumption of U.S. aid may depend on political decisions by Congress and the Administration, as well as cooperation from the PA. The conference report for the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94 ), enacted in December 2019, provided the following earmarks: $75 million in INCLE for security assistance in the West Bank for the PA; $75 million in ESF for the "humanitarian and development needs of the Palestinian people in the West Bank and Gaza." The conference report said that these funds "shall be made available if the Anti-Terrorism Clarification Act of 2018 is amended to allow for their obligation." The inclusion of PSJVTA in P.L. 116-94 may satisfy that condition. It is unclear whether the executive branch will implement the aid provisions. The Trump Administration had previously suggested that restarting U.S. aid for Palestinians could depend on a resumption of PA/PLO diplomatic contacts with the Administration. Such a resumption of diplomacy may be unlikely in the current U.S.-Israel-Palestinian political climate, particularly following the January 2020 release of a U.S. peace plan that the PA/PLO strongly opposes. Additionally, under its terms, the Taylor Force Act would preclude any ESF deemed to directly benefit the PA. The Administration's omission of any bilateral assistance security or economic for the West Bank and Gaza in its FY2021 budget request, along with its proposal in the request for a $200 million Diplomatic Progress Fund ($25 million in security assistance and $175 million in economic) to support future diplomatic efforts, may potentially convey some intent by the Administration to condition aid to Palestinians on PA/PLO political engagement with the U.S. peace plan. Additionally, it is unclear whether the PA would cooperate with a U.S. effort to provide aid to Palestinians given U.S.-Palestinian political tensions and the way that PSJVTA amended ATA. Even if accepting aid would no longer potentially trigger PA/PLO liability in U.S. courts, it is possible that given PA concerns about national dignity the PA might not accept aid if doing so could be perceived domestically as giving in to U.S. political demands on the peace plan, or as tacitly agreeing to the new triggers of potential PA/PLO liability in PSJVTA (see " Promoting Security and Justice for Victims of Terrorism Act of 2019 " above). If the executive branch and the PA agree on the resumption of aid, it is unclear how the economic portion of aid would specifically address humanitarian and development needs in the West Bank and Gaza. In the October 29, 2019, committee hearing mentioned above, U.S. Agency for International Development (USAID) Assistant Administrator for Middle East Affairs Michael Harvey was asked what type of aid should be given priority. Harvey said that, without prejudging, if the political decision were made to resume ESF assistance, water and wastewater projects have historically been key objectives, and thus could be places to start. <3.2. Personal Jurisdiction> One of the aims of the amendments to ATA described above is to enhance personal jurisdiction over defendants accused of carrying out terrorist attacks that injure U.S. nationals. To try any civil case, U.S. courts must have both subject matter jurisdiction and personal jurisdiction over the defendant. ATA provides for subject matter jurisdiction by providing a cause of action for U.S. nationals injured by applicable acts of terrorism. However, for a court to exercise personal jurisdiction over the defendant, the Due Process Clause of the Fifth or Fourteenth Amendment must be satisfied. Due process requires that the defendant have sufficient "minimum contacts" in the forum adjudicating the lawsuit such that the maintenance of the suit there does not offend "traditional notions of fair play and substantial justice." Foreign entities, including foreign political but non-sovereign entities such as the PA and PLO, are entitled to due process and can challenge a court's jurisdiction based on a lack of personal jurisdiction. Under the doctrine of general personal jurisdiction, a foreign entity can be sued for virtually any matter without regard to the nature of its contacts with the forum state. The Supreme Court has held that, for courts to exercise general personal jurisdiction, a defendant entity must have enough operations in that state to be essentially "at home" there. When general jurisdiction is not available, maintenance of a lawsuit against a foreign defendant requires specific personal jurisdiction. Specific jurisdiction exists where there is a significant relationship among the defendant, the forum, and the subject matter of the litigation. Based on this test, ATA lawsuits against the PA and PLO have failed for want of specific personal jurisdiction. Personal jurisdiction can be waived and litigants can consent to personal jurisdiction that might otherwise be lacking. But the extent to which Congress can provide by statute that a foreign entity is deemed to consent to personal jurisdiction by making payments or through the maintenance of facilities in the United States appears to be untested. Plaintiffs' efforts to obtain personal jurisdiction over the PA and PLO based on the criteria provided in ATCA, including acceptance of foreign aid and the maintenance of facilities in the United States, failed because plaintiffs could not prove that any of the criteria had been met, obviating the need for the courts to address ATCA's constitutionality. The new deemed consent provisions in PSJVTA may encounter challenges in court on the basis that they could constitute an unconstitutional condition on permission to operate in the United States. A condition attached to government benefits is unconstitutional if it forces the recipient to relinquish a constitutional right that is not reasonably related to the purpose of the benefit. If this concept applies to personal jurisdiction, a reviewing court may need to determine whether submission to such jurisdiction is either voluntary or has a rational relationship with PA/PLO payments or other PA/PLO activities, including maintenance of facilities in the United States. On the other hand, because ATA is a federal foreign affairs-related statute, Congress may have greater leeway to establish jurisdiction based on deemed consent. <4. Looking Ahead: Questions> Responses to the following questions could have important implications for U.S. policy and law. Given that acceptance of aid no longer triggers consent to personal jurisdiction, will the PA cooperate with the implementation of U.S. security and economic aid that Congress appropriated in December 2019 for FY2020 for the West Bank and Gaza? Will the Trump Administration provide the appropriated FY2020 security and economic aid to Palestinians? If so, when? What are the effects of the cutoff since January 2019 of U.S. aid to the West Bank and Gaza? Depending on the timing and other circumstances surrounding a possible resumption of aid, what effects could an aid resumption have? Will the PA/PLO stop payments to prisoners accused of terrorist acts against Americans (or payments to the prisoners' families) in order to avoid being deemed to consent to personal jurisdiction under PSJVTA? If PSJVTA's provisions on PA/PLO consent to personal jurisdiction are challenged in court, will they be upheld as constitutional? Will the Trump Administration comply with the requirement in PSJVTA for the State Department to establish a process for resolving and settling claims against the PA/PLO under ATA? If so, what would the process look like and what outcomes would it produce?

Two recent amendments to the Anti-Terrorism Act (ATA, 18 U.S.C. §§ 2331 et seq. ) have significant implications for U.S. aid to the Palestinians and U.S. courts' ability to exercise jurisdiction over Palestinian entities. They are the Anti-Terrorism Clarification Act of 2018 (ATCA, P.L. 115-253 ) and the Promoting Security and Justice for Victims of Terrorism Act of 2019 (PSJVTA, § 903 of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 ). Congress passed ATCA after a U.S. federal lawsuit (known in various incarnations as Waldman v. PLO and Sokolow v. PLO ) against the Palestinian Authority (PA) and Palestine Liberation Organization (PLO) that an appeals court dismissed in 2016. The trial court had found that the PA and PLO were responsible under ATA (at 18 U.S.C. § 2333) for various terrorist attacks by providing material support to the perpetrators. However, the U.S. Court of Appeals for the Second Circuit ruled that the attacks, "as heinous as they were, were not sufficiently connected to the United States to provide specific personal jurisdiction" in U.S. federal courts. Amendments to ATA . ATCA provided that a defendant consents to personal jurisdiction in U.S. federal court for lawsuits related to international terrorism if the defendant accepts U.S. foreign aid from any of the three accounts from which U.S. bilateral aid to the Palestinians has traditionally flowed. In December 2018, the PA informed the United States that it would not accept aid that subjected it to federal court jurisdiction. Consequently, all bilateral aid ended on January 31, 2019. PSJVTA eliminated a defendant's acceptance of U.S. foreign aid as a trigger of consent to personal jurisdiction—thus partly reversing ATCA—and instead provides that PA/PLO payments related to a terrorist act that kills or injures a U.S. national act as a trigger of consent to personal jurisdiction. The PA/PLO may face strong Palestinian domestic opposition to discontinuing such payments. PSJVTA also directs the State Department to establish a mechanism for resolving and settling plaintiff claims against the PA/PLO. President Trump stated in a signing statement that this provision could interfere with the exercise of his "constitutional authorities to articulate the position of the United States in international negotiations or fora." Implications of stopping U.S. aid and prospects for resumption . It is unclear to what extent the stop to U.S. security assistance for the PA has affected Israel-PA security cooperation and could affect it in the future. The U.S. Security Coordinator for Israel and the Palestinian Authority (USSC) said in December 2019 that the suspension of aid had not significantly affected Israel-PA security cooperation, but that the disruption of initiatives aimed at facilitating cooperation and helping reform the PA security sector had some impact on PA acquiescence to USSC requests aimed at reform and greater professionalization. Even though PSJVTA removed acceptance of U.S. bilateral aid as a trigger for personal jurisdiction, the actual resumption of U.S. aid may depend on political decisions by Congress and the Administration, as well as cooperation from the PA. For FY2020, Congress has appropriated $75 million in PA security assistance for the West Bank and $75 million in economic assistance for the "humanitarian and development needs of the Palestinian people in the West Bank and Gaza." However, the Trump Administration had previously suggested that restarting U.S. aid for Palestinians could depend on a resumption of PA/PLO diplomatic contacts with the Administration, which may be unlikely in the current U.S.-Israel-Palestinian political climate. Additionally, it is possible that the PA might not accept aid if doing so could be perceived domestically as giving in to U.S. political demands on the peace plan, or as tacitly agreeing to the new triggers of potential PA/PLO liability in PSJVTA. Implications for p ersonal jurisdiction . The extent to which Congress can provide by statute—such as through ATA—that a foreign entity (in this case, the PA/PLO) is deemed to consent to personal jurisdiction appears to be untested in court. The deemed consent provision in ATA may encounter legal challenges on the basis that it could constitute an unconstitutional condition. A condition attached to government benefits is unconstitutional if it forces the recipient to relinquish a constitutional right that is not reasonably related to the purpose of the benefit. If this concept applies to personal jurisdiction, a reviewing court may need to determine whether submission to jurisdiction has a rational relationship with PA/PLO payments or other PA/PLO activities, such as maintenance of facilities in the United States.